You’re not afraid of emergencies. Between life insurance and your fully stocked emergency fund, you and your family are prepared for the financial ups and downs of life.
You’re not afraid of losing your job. You have enough saved for retirement already that you don’t depend on your paycheck. Besides, you may even have a side source of income (or three) to help make ends meet!
You certainly aren’t afraid to splurge on yourself. That’s right—you can spend your discretionary funds on the things you love and care about, footloose and fancy free.
You’re not afraid of your future. Why? Because you have a strategy in place, and you’re sticking to it. And you’re on track to retire with wealth instead of want.
Sure, there are metrics and benchmarks and numbers you should be concerned with. Ask a financial professional about what those would look like for you and your situation. They’re different for each person.
But the feeling is always the same—the end of fear, and a sense of peace. You’re ready to focus on the people and things that matter most.
Are you financially free? What steps have you taken to eliminate fear of emergencies, losing your job, treating yourself, and preparing for your future?
It makes sense. Life is hectic. Schedules are full. Sometimes, you feel like you hardly have a second to brush your teeth, much less have time to sit down and enjoy a heart-to-heart conversation with a friend. And so important decisions get pushed further and further into the future.
That’s fine in some cases. Do you need to decide how to organize your garage right now, at this very moment? No, probably not.
But with something like your finances, procrastination can cause disaster. Why? Because time is the secret ingredient for building wealth. The sooner you start saving, the greater your money’s growth potential. Likewise, the sooner you get your debt under control, the more manageable it becomes.
And with your money, the stakes couldn’t be higher. After all, it’s your future prosperity and well-being that could be at risk. Procrastination is downright dangerous.
That urgency, however, doesn’t make it easier to start saving. In fact, you may have noticed that finances suffer more from procrastination than anything else.
There’s a very good reason for that. Procrastination is driven, above all else, by perfectionism. Failing feels awful, especially when you know the stakes are high. Your brain sees the discomfort of trying to master your finances and failing, and decides that it would feel safer to not try at all.
It’s a critical miscalculation. Making an attempt to master your finances can at least help move you closer to your goals. Procrastinating never does.
Think of it like this—50% success is better than 0% success.
The key to beating procrastinating, then, is to conquer the perfectionist mindset and fear of failure. It’s no small feat. Those habits of mind are often deeply ingrained. They won’t vanish overnight. But there are some simple steps you can take, like…
Break big goals down into small steps. This relieves the overwhelm that many feel when facing important tasks. As you knock out those small steps, you’ll feel empowered to keep moving forward.
Don’t go it alone. Procrastination thrives in isolation. Seek out a friend, loved one, or co-worker to help hold you accountable and share the load—even if it’s just a weekly check-in to see how each other are doing.
Work in short, uninterrupted bursts. Set a timer. Put down the phone. Work. After about 15 minutes, you’ll notice something strange happening. Time starts to either speed up or slow down. Distracting thoughts vanish. The lines between you, your focus, and the task at hand start to evaporate. You feel awesome. This is called a flow state, and it’s the key to productivity. Make it your friend, and you’ll probably notice that procrastination becomes rarer and rarer.
Now that you know the cause of procrastination, try these tips for yourself. Set a 30 minute timer. Then, break your finances into tiny action steps like checking your bank account, automating saving, and budgeting. Work on each item in a quick burst until you’ve made some progress. Then, talk to a friend about your results!
Just like that, you’ve made serious headway towards beating procrastination and building wealth. Look at you go!
“But what exactly is passive income?” they asked. A simple Google search revealed thousands of articles with a common theme—passive income is money you make while you sleep!
But is passive income really possible, or does it just live in the dreams of people looking for a way to make money without working?
To answer that question, let’s look at what passive income is (and isn’t). Then you can see if it will work for you!
Passive income, generally speaking, is a product or service that requires an upfront investment of time, effort, or wealth to create.
- Rental properties that require wealth to purchase, and are cared for by a property manager while creating rental income - Books, music, and courses that required time and creativity to create and now generate income without regular upkeep - Investing wealth in a business as a silent partner and taking a slice of their revenue
Can those income sources generate cash flow while you sleep? Of course! But notice that all of those opportunities require either work or resources that can only be acquired by work.
Does that mean you shouldn’t prioritize passive income sources? No! They can sometimes provide the financial stability you need.
Just don’t expect a passive income stream to effortlessly appear in your lap.
Remember, there is no such thing as free money. All wealth building opportunities require time, effort, and energy to reach their full potential.
If you want to learn more about creating passive income sources, contact me. We can review your talents, your situation, and your dreams to determine smart strategies for developing passive income.
If you’re a parent, you have the power to influence your kids more than anyone or anything else. Your child’s response to conflict, their career, their relationships, their hobbies, their values, their politics, the core of who they are can all be shaped by you, the parent.
The same is true of your mindset towards money. The way you deal with your finances can have a profound impact on how your children deal with theirs.
Research has shown that most people start learning about money by age 3. By age 7, their attitudes about money are set.¹
What do you remember between ages 3 and 7? Probably very little on the conscious level. But you may carry some of their habits around with you…
You probably remember if your parents had frugal or flippant attitudes about money.
You probably remember if your parents fought about money.
You probably remember trying to persuade your parents to buy you things… or if your words fell on deaf ears.
On some level, you probably feel all those things now when money comes up in conversation. When your stress vanishes after buying a new toy. Or your heart sinks when you check your bank account. Or you get a head rush of discomfort when your coworker starts talking about the size of their investment portfolio.
Here’s another fact—almost no one is happy with the financial education they got growing up. 83% of parents wish they had learned more about money when they were kids.²They’re eager to avoid mistakes from their own childhood. But there’s just one problem…
Do they actually know how money works?
It’s unlikely. A 2020 global survey revealed that only 15% of young adults were financially literate.1 Translation—85% of adults, through no fault of their own, are poised to repeat their own parents’ mistakes.
That’s why reaching families with financial education is foundational to our mission. If parents get a financial education, their children are far better positioned to build wealth. And if families can learn how money works together, they can remove emotional obstacles and grow closer together, as well.
That’s why financial education is central to my mission. Because once families know how money works, they’re far less likely to be taken advantage of. They start making decisions that favor their futures, not someone else’s.
And when that happens to enough families, the financial industry will never be the same.
But by definition, your job ceases to become your source of income once you retire.
Instead, you’ll need to tap into new forms of cash flow that, most likely, will need to be prepared beforehand.
Here are the most common sources of retirement income. Take note, because they could be critical to your retirement strategy.
It’s simple—you pay into social security via your taxes, and you’re entitled to a monthly check from Uncle Sam once you retire. It’s no wonder why it’s the most commonly utilized source of retirement income.
Just know that social security alone may not afford you the retirement lifestyle you desire—the average monthly payment is only $1,543.¹ Fortunately, it’s far from your only option.
These types of accounts might be via your employer or you might have one independently. They are also popular options because they can benefit from the power of compound interest. The assumption is that when you retire, you’ll have grown enough wealth to live on for the rest of your life.
But they aren’t retirement silver bullets. They often are exposed to risk, meaning you can lose money as well as earn it. They also might be subject to different tax scenarios that aren’t necessarily favorable.
If you have a retirement savings account of any kind, meet with a licensed and qualified financial professional. They can evaluate how it fits into your overarching financial strategy.
Although they are riskier and more complex, these assets can also be powerful retirement tools.
If you own a business or real estate, it’s possible that they can sustain the income generated by their revenue and rents, respectively, through retirement. Best of all, they may only require minimal upkeep on your part!
Again, starting a business and buying properties for income carry considerable risks. It’s wise to consult with a financial professional and find experienced mentorship before relying on them for retirement cash flow.
Like it or not, some people will have to find opportunities to sustain their lifestyle through retirement. It’s not an ideal solution, but it may be necessary, depending on your financial situation.
You may even discover that post-retirement work becomes an opportunity to pursue other hobbies, passions, or interests. Retirement can be about altering the way you live, not just having less to do.
You can’t prepare for retirement if you don’t know what to prepare for. And that means knowing and understanding your options for creating a sustainable retirement income. If unsure of how you’ll accomplish that feat, sit down with your financial professional. They can help you evaluate your position and create a realistic strategy that can truly prepare you for retirement.
This article is for informational purposes only and is not intended to promote any certain products, plans, or policies that may be available to you. Any examples used in this article are hypothetical. Before enacting a savings or retirement strategy, or purchasing a life insurance policy, seek the advice of a licensed and qualified financial professional, accountant, and/or tax expert to discuss your options.
¹ “How much Social Security will I get?” AARP, https://www.aarp.org/retirement/social-security/questions-answers/how-much-social-security-will-i-get.html
Ask a friend this question—“what would you do with $1 million?”
Your friend will pause, look at the ceiling for a moment, repeat the question to themselves, and then say something like…
“Well, the first thing I would do is plan a trip to Europe. I’ve always wanted to go, but I’ve never been able to afford it.”
“Down payment on a new house. Definitely. We’ve outgrown our place and we’re ready for the forever home.”
Or, if they’re really savvy…
“First, I’d knock out all my debt. Then, I’d use half of what’s left to generate compound interest. Then, I’d see about a condo down in Florida.”
These responses are well and good. But they show that your friend is no entrepreneur.
An entrepreneur would instantly respond…
“I’d use it for the business.”
Translation—they’d use the money to make more money.
Maybe they’d use the money to hire an ad agency to run a marketing campaign, driving revenue through the roof.
Maybe they’d use the money to hire more workers, exponentially increasing their ability to serve clients.
Maybe they’d use the money to purchase software or hire a third party to streamline their workflow, boosting their efficiency.
Everyone views money as a tool. It solves problems. Living in a house that’s too small? That’s a big problem. And money can easily solve it.
But entrepreneurs see money as a tool to earn even more money.
To start thinking like an entrepreneur, ask yourself this question—how can I use my money to start making more money? There are only a few answers to that question, and the right one will lead you down the path of starting your own business.
And best of all (for them), they use YOUR money to make it happen.
Here’s how it works…
You deposit money at a bank. In return, they pay you interest. It’s just above nothing—the average bank account interest rate is currently 0.06%.¹
But your money doesn’t just sit in the vault. The bank takes your money and loans it out in the form of mortgages, auto loans, credit cards, etc..
And make no mistake, they charge far greater interest than they give. The average interest rate for a mortgage is 3.56%.² That’s a 5,833% increase from what they give you for banking with them! And that’s nothing compared to what they charge for credit cards and personal loans.
So it should be no surprise that financial institutions are doing everything they can to convince you to borrow more money than perhaps you can afford.
First, they’re counting on the fact that you never learned how money works. Why? Because if you know something like the Rule of 72, you realize that banks are taking advantage of you. They use your money to build their fortunes and give you almost nothing in return.
Second, they manipulate your insecurities. They show you images and advertisements of bigger houses, faster cars, better vacations. And they strongly imply that if you don’t have these, you’re falling behind. You’re a failure. And you may hear it so much that you start to believe it.
Third, they lock you in a cycle of debt. Those hefty car loan and mortgage payments dry up your cash flow, making it harder to make ends meet. And that forces you to turn to other loans like credit cards. It’s just a matter of time before you’re spending all your money servicing debt rather than saving for the future.
So if you feel stuck or burdened by your debt, show yourself some grace. Chances are you’ve been groomed into this position by an industry that sees you as a source of income, not a human.
And take heart. Countless people have stuck it to the financial industry and achieved debt freedom. It just takes a willingness to learn and the courage to change your habits.
¹ “What is the average interest rate for savings accounts?” Matthew Goldberg, Bankrate, Feb 3, 2022 https://www.bankrate.com/banking/savings/average-savings-interest-rates/#:~:text=The%20national%20average%20interest%20rate,higher%20than%20the%20national%20average.
² “Mortgage rates hit 22-month high — here’s how you can get a low rate,” Brett Holzhauer, CNBC Select, Jan 24 2022, https://www.cnbc.com/select/mortgage-rates-hit-high-how-to-lock-a-low-rate/
Whether you’re new to the world of budgets or you just want some help, this article will get you started on the right foot. There’s no one way that works for everyone, but these different methods can give you an idea of where to begin.
First, write down your total monthly take home pay. Next, break down your monthly spending into categories and write down how much you spend on each. Add those numbers together. Then, subtract that number from your take home pay.
The advantage of this method is that it’s rewarding. You get to see your budget grow from the ground up. It connects you to your money like few other projects will.
It can, however, be frustrating. You’ll run into snags, miscalculations, and old fashioned human error. And that can nip your budget in the bud.
This is an easy way to create a customized budget. There are countless templates from Google Drive, Microsoft Office, the Federal Trade Commission, Nerdwallet, and more!
Unfortunately, they still require some legwork. You may need to customize your budget to your specific needs. And they don’t sync with your bank account, meaning you’ll need to manually input your monthly spending.
They come in a variety of different flavors, but they all serve a common purpose—make budgeting as simple as possible.
Typically, these apps handle the categorizing and all the math. You simply enter your monthly income, log your spending into categories, and let the app work its magic.
Not all budgeting apps are the same. Some require you to manually enter your spending, while others sync with your bank accounts. Some are free. Some cost money.
Here are a few of the most popular budgeting apps to investigate…
Mint - most popular
YNAB (You Need a Budget) - syncs with accounts, costs $84/year
PocketGuard - designed for overspenders
Honeydue - designed for couples
There’s not one particular way to begin budgeting. It all depends on your personal needs and what you’re comfortable with.
With so many options, you should be able to find the perfect method for you.
What do you think? Do you have a simple budget? How did you start it?
And it’s true. Knowledge is power because it shows you how to act. The more informed your actions, the more likely they are to be fruitful and effective.
Here’s another quote you’ve probably heard a few times—“Know thyself.”
Why? Because there’s no greater power than power over yourself. The more you know yourself, the more capable you’ll be to shape your actions, your habits, and your destiny.
This couldn’t be more relevant than when it comes to money matters. The more you know about your financial habits and tendencies, the better equipped you’ll be to control your financial future.
Here are some ways to know thy financial self.
Like any other part of your life, emotions can affect money. They’re especially important to be aware of because they can cause you to act in ways that are counterproductive financially.
For example, have you ever felt anxious about checking your bank account?
Or felt a craving to blow some money to de-stress?
Or swelled with pride when you see how much you’ve saved?
Those are all emotions, and they’re all related to money.
So the next time you’re spending money, or checking your bank account, or pinching pennies, take a moment. Breathe. Notice how you’re feeling. Those emotions can give you valuable information that can help you make better financial decisions in the future.
Feelings almost always lead to thoughts. For instance, anxiety about looking at your bank account could lead to an internal conversation like this…
“Can I afford that? Oh, I bet I can’t. I WAY overspent the other day at… whatever, I never have enough money. I keep meaning to spend less, but I just can’t stop myself. Why do I even bother?”
See what happened? A feeling of anxiety led to a negative thought—that you can’t control your finances.
So what do you think about money? And that doesn’t mean your “opinions” about the economy, your take on billionaires going into space, or the NFTs are the fine art of the future] you share when you’re chatting with friends. It means the thoughts that flow through your mind whenever you encounter money in daily life.
Take a few moments right now and notice those thoughts. Are they positive? Are they negative? Are they neutral?
Just like a feeling almost always leads to a thought, so does a thought almost always lead to an action.
Those actions might be to ignore, or repress, or give in. But one way or another, thoughts will result in actions.
This is where budgeting helps. It’s like creating a journal of your actions, which are a window into your thoughts, your feelings, and who you are.
Notice lots of new shoes, designer handbags, or suddenly having more blingy watches than days of the week? These can reveal a facet of your financial self—maybe you think that taking advantage of every sale at the mall (i.e., buying things you don’t really need) will relieve feelings of anxiety.
Or maybe you’re penny-pinching so much that you’re surviving on peanut butter sandwiches and hating every bite. That could reveal either a hearty resourcefulness in lean times, or an unfounded worry about going without.
Or maybe you’re mindlessly wasting your dollars with nothing to show for it. Think hundreds spent on games on your phone, getting food delivered every night, or joining that fancy wine club all your friends are in. Perhaps this reveals that you are actually afraid of your finances, so afraid, in fact, that you can’t face reality.
The more you know about your financial self, the better equipped you’ll be to control your finances. You’ll see habits that you need to curb, and habits you need to cultivate.
Simple advice, but it goes a long way. Knowledge is power!
It’s more important than a business plan (though you need a business plan).
It’s more important than mentorship (though you DEFINITELY need mentorship).
It’s more critical to success than killer products, funding, or even skill.
All of those things are important pieces of the puzzle—but without a problem to solve, none of them matter.
Why? Because if there is no demand for your product or service, you’re guaranteed to fail.
In order to have demand, someone has to have a need that’s not being met. That’s why you need a problem.
Even the most outlandish luxury items solve problems—they make customers feel a certain way about themselves. They make people laugh, or feel successful, or feel wanted. And for many, they’ll pay a premium to achieve that.
Some businesses solve problems that people don’t even know they have. Did anyone before July 1994 think that going to a bookstore was a massive hassle? No! Well, except one person—Jeff Bezos. But it turns out his hunch was right. He solved a problem that no one was aware of, and has profited handsomely for it!
It doesn’t matter if you’re starting a side hustle on the weekends or launching a million dollar startup. You must solve a problem. And the more demand your solution creates, the higher likelihood of success you’ll have.
So what should an entrepreneur do first? Find a problem! Ask yourself—or better yet, ask people around you—what kind of problems they have. What kind of pain in their lives do they wish would just go away? Is there a way to solve that problem with your skills and talents?
If so, congratulations—you’ve found a viable business opportunity.
It’s a common mindset, and it keeps many from reaching their financial goals. But the truth is, you don’t have to be born into money or have some special talent to create wealth. It all comes down to making a commitment to start building your fortune today.
So why do so many people put off working to create wealth until later in life? There are many reasons, but chief among them is fear.
What if you save your money in the wrong place and lose everything?
What if you can’t access money when you need it?
What if you confirm a deep-seated suspicion that you don’t really know what you’re doing?
But here’s the truth—you’re better positioned to start building wealth today than you ever will be again. That’s because your money has more time to grow and compound today than it will in the future.
That’s especially true in your 20’s and 30’s. But it’s also true if you’re 45 or 55. The best time to build wealth is right now, this very moment.
So what can you do? How can you leverage time to start building wealth? Here are a few simple financial concepts you can use right away.
Create an emergency fund. I know it seems counterintuitive, especially if your credit is in shambles or you have a lot of debt to pay off. But the truth is, building an emergency fund is one of the best ways to begin building wealth because it gives you a margin of safety. If you have money set aside for a rainy day, you won’t have to turn to credit cards or high interest loans when life throws you a curveball. Instead, you can take care of things with your own savings and move on.
Automate saving right now. The best way to start building wealth is to put something away every month. Forget about how much you’re putting away or your interest rate. For now, just put something away, even if it’s just $5. You can work with a financial professional to boost those numbers later on. The important thing is to start now.
If you want to learn more about how to start building wealth today, let’s chat. I’d love to help you set some goals and create a plan for getting there. We all deserve financial security, regardless of our age or income level. So let’s find out how you can get started today.
Whether you’re in your 20’s and paying off student loans or in your 40’s and trying to save for retirement, financial decisions can be complicated.
The good news? There are steps you can take to avoid mistakes and help your peace of mind when it comes to money management. Here are some of the most common financial blunders people make, and tips on how to avoid them.
This may be the tough love you need to hear. No one judges what you drive. Or the watch on your wrist. Or the size of your home. And the one-in-a-million person who does? They’re probably someone with WAY bigger problems than your 2006 economy car that still gets great gas mileage.
But that fear is powerful for a reason. It’s been carefully nurtured by TV commercials and Instagram accounts with a singular goal—to make you buy things you don’t really need.
Know this—you’ll gain far more respect by attending to your own financial situation than by desperately trying to keep up appearances.
Let’s face it—mastering your finances is symbolic of becoming an adult. You’re supposed to know how to run a budget, save for retirement, and somehow have enough left over for a nice summer vacation. There’s tremendous internal pressure to act like you know what you’re doing.
But were you ever taught how money works? Did any teacher, professor, or mentor sit you down and explain the Rule of 72, the Power of Compound Interest, or the Time Value of Money? If you’re like most, the answer is no. It’s a cruel double-bind—to feel good about yourself, you must master skills no one has ever taught you.
This keeps you from asking for help. You get caught in shame, denial, and confusion. It’s hard to admit that you don’t know something that seems so basic, so essential.
But rest assured—you’re not the only one. And the right mentor or financial professional will listen to your story without judgment and seek to help you.
There are few things more daunting than staring at a pile of bills, an empty bank account, or an intimidating stack of paperwork. You know what you have to do. But it doesn’t happen because you’re so overwhelmed by the task ahead. And it’s especially daunting if you’ve never been taught how money works—you don’t even know where to start!
But nothing causes financial pain quite like procrastination. That’s because it causes exponential damage. Your bills pile up. Your interest rates rise. Your savings fall drastically behind, and you must save far more to catch up.
The antidote? Break tasks down into smaller, manageable steps. Maybe that means signing up for an online budget app or working with a financial professional. It might mean automating $15 per month into an emergency fund, or cooking one dinner at home each week.
It doesn’t matter how small the task is, as long as it helps put money back in your pocket and stops the scourge of procrastination.
In conclusion, making financial mistakes is something that can happen to anyone. By knowing some of the most common financial mistakes people make and what you can do to avoid them, you’ll probably have more peace of mind when it comes to money management.
Think about any business. It could be a lemonade stand. It could be Amazon.
Each of those businesses solves a problem.
The lemonade stand solves the problem of feeling dehydrated on a hot summer day. How? With a refreshing mix of sugar, citrus, and cold water. One sip, and you’re a new person. It’s a feeling people will pay 50 cents, or even a dollar, to achieve.
Amazon solved a problem people didn’t even realize existed—the inconvenience of shopping in brick-and-mortar stores. It turns out that driving from location to location was a time-consuming hassle, and there was no guarantee the store would have what you needed. Amazon eliminated those problems entirely with an all-encompassing online marketplace. And they’ve been richly rewarded—just look at Jeff Bezos’s net worth!
Your current job is likely solving a problem for your boss. You have skills that your boss needs for their business to run, but that they don’t have the time to develop or apply themselves. And in return for solving that problem for 40 hours per week, they give you a salary.
The takeaway? Don’t just develop skills—identify problems. Once you see obstacles, you can leverage your skills to overcome them. That’s where money comes from.
If you want to maintain a budget and save money, then you need a plan. The first step is understanding the basics—what is a budget? How does it work? What are the benefits of having one?
To effectively manage your monthly budget, you must take certain steps from day one. This article will provide some helpful tips and tricks on how to get started and keep going strong until payday rolls around!
A budget is a plan. It helps you set limits for your spending, so that you can track your income and expenses. Maintaining a budget keeps you aware of when you are spending too much or if there are areas where your money could be saved.
It can also help you understand your spending habits as well as identify problems, such as giving in to too many sales or buying expensive lattes every day. With a clear understanding of how you spend money every month, you may be able to reduce expenses and even start saving for luxuries or emergencies. You can’t have a goal of saving for your next summer vacation if you don’t know how much money you’re spending now.
The first step is to set goals for yourself for income and spending. When it comes to income, you need to consider all the ways you get paid. What is your salary—after taxes and any other contributions you make, like to a 401(k)? Is your employer cutting back your hours? Do you have another source of income such as a side job or freelance work?
Be completely honest with yourself about how much money you have coming in. Once this figure is known, you can assess your spending and determine how much of your income goes towards them every month.
Next, make a list of all fixed monthly bills, such as rent or loan repayments. Then make a list of variable expenses, such as groceries or gas. Lastly, make a list of all your monthly discretionary spending, or ‘fun money’.
If you struggle with this last step, look at your bank statements. It’s the easiest way to find a complete record of your spending. This will help you pinpoint the areas that you could cut down on or even eliminate.
Now that you have your budget, you can take action. You can save money by leveraging your budget to meet your monthly goals.
The first way is to leverage your income. If you have a job, talk to your employer about working extra hours, or ask for a raise. This will give you more money right out of the gate.
Beyond the extra income from a job, there are many other ways to add to your budget.
You can start small and pick up some side work—babysitting, dog walking, delivering pizzas, etc. If you can turn your free time into money, go for it! This all depends on your financial situation and what you feel comfortable with, so take the time to plan accordingly.
You can also think about reducing your expenses. Cutting back on luxury items can save money every month without having to work an extra job. Just think of all the things you could do with the money that’s currently going towards cable TV or eating out every day for lunch!
Don’t forget to have some fun every once in a while. Just find creative ways to have it on a budget. Plan more outings with friends like playing tennis or frisbee in the park, rather than going to the club every evening. Your community is bound to have some free local events going on, especially in warmer weather.
A budget is a way for you to track your expenses and income each month. You can leverage your budget in a number of ways, by increasing income or decreasing expenses—or both! With this knowledge, you’ll be able to save more and plan for the future.
It’s a concept pioneered by Robert Kiyosaki of Rich Dad Poor Dad fame. And it’s one of the best explanations of creating income around.
The employee and freelancer trade their time for money.
The entrepreneur and investor create or purchase income generating assets.
Think about what an employee does. They show up, punch in, and work for a set number of hours. In exchange, they either get paid by the hour or a set annual salary.
If they’re extra conscientious and prove their worth to their employer, they may get a raise or bonus as a reward. But their income is entirely dependent on the good graces and success of their boss. They never directly enjoy the fruits of their labor.
The same is true for the freelancer. Sure, they may enjoy greater independence than an employee, but they’re still trading their time for money. Think of them as a mercenary rather than a soldier.
Compare that with the entrepreneur. The difference is that the entrepreneur creates a system for delivering a service that’s duplicatable.
Let’s say you start a lemonade stand. You put up a few bucks to buy some lemons, sugar, cups, a cooler, and stand. It’s a risk—there’s no guarantee you’ll have any customers.
Fortunately, it’s a hit—the neighbors line up to enjoy your refreshing beverage!
After a few days, you’re swimming in cash. In fact, you earn enough to open another lemonade stand. So you buy the same supplies, and hire a friend to run the new location. Just like that, you’ve scaled your lemonade business.
Eventually, you have so many lemonade stands that you don’t have to manage one yourself. Instead, through initiative and upfront commitment, you’ve created an income stream. That’s how entrepreneurship works.
But now suppose that a friend comes along. She’s been eyeing your success and wants in. She’ll put up the cash to open another ten lemonade stands across the neighborhood (it’s a BIG neighborhood).
In exchange, she gets a slice of the profits from all the stands. She takes on some risk by giving you money in exchange for some income. In other words, she’s an investor. She’s using her money to earn more money.
There are two critical points to notice about the entrepreneur and the investor.
1. They take risks. Being an employee is relatively predictable—if your employer continues to do well, you’ll give X amount of time, and you’ll get X amount of money. But starting a business is a risk. Giving money to an entrepreneur is a risk. Entrepreneurs and investors commit resources to projects with no guarantee of success.
2. They have far greater potential. There are only so many hours you can trade for money. When successful, entrepreneurs and investors have far more resources at their disposal to trade for money.
Simply put, entrepreneurs and investors face greater risks, and greater potential rewards.
Which quadrant generates most of your income? Is there a quadrant you would like to explore further?
You’re done with the 9-to-5, and ready to transition from employee to entrepreneur.
But there’s one last hurdle—how will you pay for it?
Starting a business requires resources. Whether it’s a laptop, store front, circular saw, or musical instrument, you’ll need tools to ply your trade. You’ll also need to consider the cost of hiring employees as your business grows!
There are three common strategies entrepreneurs leverage to raise money for starting a business…
1. Raise capital. Trade ownership of your business for money.
2. Borrow money. Pay interest for money.
3. Self-fund. Cover business expenses yourself.
There’s no right way to fund your business. But there are clear pros and cons to each approach. Let’s explore them further so you can have a better idea of which may be best for you!
1. Raise capital. This strategy involves scouting out wealthy individuals and institutions to give you money to fund your business. But it’s no free lunch. In exchange for funding, investors want a slice of your company. As your business grows, so does their profit.
That gives them a powerful say in the management of your business. If you raise capital this way, you may find these stakeholders calling the shots and pulling the strings instead of you.
Plus, raising capital simply is out of reach for most entrepreneurs. Unless you’re disrupting a major industry and have extensive experience, the risk-reward situation may not make sense for potential investors.
2. Borrow money. It’s straightforward—you ask a lending institution or friend for money that you’ll pay back with interest. Both parties take a calculated risk that your business will increase its value enough to repay the loan. It’s a simple, time-tested strategy for funding a new business.
The advantage of getting a business loan is that it keeps you in full control of your business. No board of directors or controlling shareholders!
But business loans require planning to manage. Your business will need to consistently make payments, meaning you’ll need to consistently earn profit. That’s rarely a surefire proposition when you’re first starting out.
So while debt can help your business expand and hire new talent, it’s typically wise to hold off on borrowing until later.
3. Self-fund. This is far and away the most realistic strategy for most entrepreneurs. It’s exactly what it sounds like—pay the upfront costs of starting a business yourself.
No debt. No working for someone else. You’re completely free to run your business. You’re also completely financially responsible for the outcome.
Will you be able to buy a storefront outright? Or start a competitive car manufacturer? Probably not. But there are dozens, if not hundreds, of opportunities that require far less capital.
Look around. You may have the tools you need to start a business at your fingertips! In fact, if you’re reading this article on a laptop or desktop, you’re positioned to start an online business right now. All you need is a service to provide clients.
The takeaway? The funding your business needs will depend on your situation. Challenging an established industry with a revolutionary approach? Then you may need outside funding. But if you’re like many, you have all the tools and resources you need to start your business.
That’s not just your morning alarm, set for 6:15am each and every darn weekday.
It’s a starter’s pistol. The rat race has begun.
The rat race is a behavior experiment. Scientists condition rats to run races, solve puzzles, complete mazes, do tricks, reproduce, not reproduce, and a host of other feats.
How? By dangling a treat in front of them. Perform the tasks. Get the reward.
Many are caught in a human rat race. They’re told that to be an adult they need a credit card, a car, a mortgage, and a 9 to 5 job.
So they jump through the hoops, solve the puzzles, and perform the tasks to get that treat—their paycheck.
That paycheck gets consumed by their basic needs, their payment plans, and their lifestyle.
And the cycle continues. Jump through hoops. Get paid. Spend. Jump through more hoops. Ad infinitum.
Bigger “treats” help—like a bonus or a raise—but only for a little while. Eventually, they get consumed by increasingly extravagant spending. It’s why people with high incomes stay trapped in the rat race.
The result? You keep running a pointless and repetitive race that leads nowhere.
Is it any surprise, then, that there’s a “great resignation” happening? Or that businesses can’t find employees?
Maybe it’s because people are finally waking up to the truth—they’ve been playing someone else’s game. They’ve been making someone else rich. And now they’re ready for a new and better opportunity.
That’s right—with the magic of the internet, you can be in debt to faceless strangers instead of faceless institutions.
One moment while I get my tongue out of my cheek…
But seriously, peer-to-peer lending—or P2P—is exploding. It’s grown from a $3.5 billion market in 2013 to a $67.93 billion market in 2019.¹
Why? Because P2P lending seems like a decentralized alternative to traditional banks and credit unions.
P2P lending platforms serve as a meeting point for borrowers and lenders.
Lenders give the platform cash that gets loaned out at interest.
Borrowers apply for loans to cover a variety of expenses.
Lenders earn money as borrowers pay back their debt.
No middleman. Just straightforward lending and borrowing.
Think of it as crowdfunding, but for debt.
And make no mistake—there’s a P2P lending platform for every loan type under the sun, including…
▪ Wedding loans ▪ Car loans ▪ Business loans ▪ Consolidation loans
But here’s the catch—debt is debt.
The IRS. A bookie. A banker. Your neighbor. It doesn’t matter who you owe (unless they’re criminals). What matters is how much of your cash flow is being consumed by debt.
Can P2P lending platforms offer competitive interest rates? Sure! But they can also offer ridiculous interest rates, just like everywhere else.
Can P2P lending platforms offer lenders opportunities to earn compound interest? Of course! But they also come with risks.
In other words, P2P lending is not a revolution in the financial system. In fact, two leading P2P platforms have actually become banks.²
Rather, they’re simply options for borrowing and lending to consider with your financial professional.
¹ “19 P2P Investing Statistics You Need to Know for 2021,” Swaper, Feb 22, 2021 https://swaper.com/blog/p2p-investing-statistics/
² “Peer-to-peer lending’s demise is cautionary tale,” Liam Proud, Reuters, Dec 13, 2021 https://www.reuters.com/markets/asia/peer-to-peer-lendings-demise-is-cautionary-tale-2021-12-13/
If something unexpected were to happen, do you have enough savings to get you and your family through it and back to solid ground again?
If you’re not sure you have enough set aside, being blindsided with an emergency might leave you in the awkward position of asking family or friends for a loan to tide you over. Or would you need to rack up credit card debt to get through a crisis? Dealing with a financial emergency can be stressful enough – like an unexpected hospital visit, car repairs, or even a sudden loss of employment. But having an established Emergency Fund in place before something happens can help you focus on what you need to do to get on the other side of it.
As you begin to save money to build your Emergency Fund, use these 5 rules to grow and protect your “I did not see THAT coming” stash:
1) Separate your Emergency Fund from your primary spending account. How often does the amount of money in your primary spending account fluctuate? Trips to the grocery store, direct deposit, automatic withdrawals, spontaneous splurges – the ebb and flow in your main household account can make it hard to keep track of the actual emergency money you have available. Open a separate account for your Emergency Fund so you can avoid any doubt about whether or not you can replace the water heater that decided to break right before your in-laws are scheduled to arrive.
2) Do NOT touch this account. Even though this is listed here as Rule #2, it’s really Rule #1. Once you begin setting aside money in your Emergency Fund, “fugettaboutit”… unless there actually is an emergency! Best case scenario, that money is going to sit and wait for a long time until it’s needed. However, just because it’s an “out of sight, out of mind” situation, doesn’t mean that there aren’t some important features that need to be considered for your Emergency Fund account:
You definitely don’t want this money to be locked up and/or potentially lose value over time. Although these two qualities might prevent any significant gain to your account, that’s not the goal with these funds. Pressure’s off!
3) Know your number. You may hear a lot about making sure you’re saving enough for retirement and that you should never miss a life insurance premium. Solid advice. But don’t pause either of these important pieces of your financial plan to build your Emergency Fund. Instead, tack building your Emergency Fund onto your existing plan. The same way you know what amount you need to save each month for your retirement and the premium you need to pay for your life insurance policy, know how much you need to set aside regularly so you can build a comfortable Emergency Fund. A goal of at least $1,000 to three months of your income or more is recommended. Three months worth of your salary may sound high, but if you were to lose your job, you’d have at least three full months of breathing room to get back on track.
4) Avoid bank fees. These are Emergency Fund Public Enemy No. 1. Putting extra money aside can be challenging – maybe you’ve finally come to terms with giving up the daily latte from your local coffee shop. But if that precious money you’re sacrificing to save is being whittled away by bank fees – that’s downright tragic! Avoid feeling like you’re paying twice for an emergency (once for the emergency itself and second for the fees) by using an account that doesn’t charge fees and preferably doesn’t have a minimum account balance requirement or has a low one that’s easy to maintain. You should be able to find out what you’re in for on your bank’s website or by talking to an employee.
5) Get started immediately. There’s no better way to grow your Emergency Fund than to get started!
There’s always going to be something. That’s just life. You can avoid that dreaded phone call to your parents (or your children). There’s no need to apply for another credit card (or two). Start growing and protecting your own Emergency Fund today, and give yourself the gift of being prepared for the unexpected.
¹ “50% of Americans Have Under $500 in Emergency Savings. Here’s How to Build a Safety Net ASAP,” Maurie Backman, The Ascent, Dec 2, 2022, https://www.fool.com/the-ascent/personal-finance/articles/50-of-americans-have-under-500-in-emergency-savings-heres-how-to-build-a-safety-net-asap/
If your family’s quality of life were suddenly threatened, you’d step in, wouldn’t you? Of course you would!
Having a well-thought-out, tailored-to-you life insurance policy is a way to preemptively and proactively protect your family’s quality of life.
Here’s an eyebrow raiser: 31% of people surveyed said they were more likely to buy life insurance in 2022, but the gap between the protection they need and what they have has reached an all time high.¹ Despite people’s good intentions, people are more financially vulnerable than ever.
Here’s an eyebrow lowerer: Life insurance can be thought of as a financial safety net. One that gives your family the time and space to recover and rebuild in the event of trying financial circumstances.
Odds are, you already think life insurance is a good idea. But waiting until tragedy or a sudden loss of income strikes is waiting too long to consider the benefits of life insurance.
Give me a call or shoot me an email, and together we can take your unique circumstances into consideration and put together a life insurance policy that fits your needs.
“2022 Insurance Barometer Study Reveals the Secret to Financial Security is Owning Life Insurance,” LIMRA, Apr 25, 2022, https://www.limra.com/en/newsroom/news-releases/2020/2020-insurance-barometer-study-reveals-a-significant-decline-in-life-insurance-ownership-over-the-past-decade/