Tag Archives: business

3 Things to Value More Than $1M

As the U.S. continuous its decade-long economic improvement, it’s hard for many of the younger folks to remember a time where fear was prevalent and jobs were scarce. While I was much younger in 08 and 09 I remember the feeling and conversation around money during that period.

Not only am I confident that hard times will hit the U.S. economy again, I suspect (based on history) that some sort of crash or drawback isn’t too far away. Simply looking back at the last couple decades of market crashes gives us some picture of how rare the past 10 years have been.

We’ve seen relatively low turmoil in the market, particularly stocks. Except for a few difficult weeks, the U.S. stock markets haven’t experienced a real drawback since the mortgage meltdown. But just 5 or 6 years before that the markets were down in 2002. And just two years before that the markets were down in the technology bubble of 2000.

Consistently throughout history we’ve had market crashes or corrections every six to 10 years. Here we are in 2018, with trade fears on the horizon, wondering if another crash is near. It’s been about a decade.

With all the turmoil, fear, anxiety and uncertainty in the markets, it’s very easy to become focused so much on the world of money that 1) we lose historical perspective on a potential loss, but 2) we lose life perspective on the true importance of money as it relates to our life.

Which matters more, a 50% drop in the Stockmarket (which won’t be a permanent loss unless you panic and sell) or a loss of a close loved one? While most people would value the close relationship above a temporary financial loss, it’s strange that so many of us put more energy worrying about areas of finance we can’t control and less time improving our current relationships.

Don’t get me wrong, money is important. Money has power, both in our life (to buy things and help others we care about) and in politics (to influence people), but there are three big things more important than money we can’t forget:

1) God

2) Close relationships (friends and family)

3) Health (physical and emotional)

Deepening these areas of your life both in depth (deepened commitment and improvement) and in length (time spent improving and investing in) is a great first step in not only improving these three areas but also setting yourself up to improve the 4th area: Money.

Next time you’re planning or prioritizing your life in a way that isn’t consistent with your values, remember in what order your values lie.

The 3 Areas of Personal Finance and How To Master Them

I want to discuss the three factors that determine where you are financially: Inflow, Outflow and Accumulation. Inflow can be regarded as the personal income your household takes in. Outflow, on the other hand, can be broken down into four areas: Living expenses, taxes, optional expenses and giving. Accumulation can be broken down into saving and investing.

Inflow (income):

When most people think of income they think of a job. But this isn’t always the case. Many people have rental income, stock dividends, royalties, and passive income from businesses. Income earned at a job, however, is the most common source of financial inflow.

Outflow:

Outflow is the consequence of living in a monetary society. Everything costs money. Food, storage, shelter, transportation and even water. Being weary of how you spend money as well as prioritizing the things that are important, is a must for anyone wanting to live according to their values.

What’s the best way to decrease unnecessary spending? Getting a B–U–D–G–E–T. I know what you’re thinking. “It can’t make much difference anyway,” you’re telling yourself. “I only spend money on things I need.” The surprising thing is the most people, as soon as they get on a written budget, are able to eliminate expenses they knew they had.

@AfricanSoulGoddess wrote a very insightful post on this topic titled Best budgeting: Personal finance.

Growth and Accumulation:

This is the final aspect of your finances. In this area you are beginning to experience a little success. This is the area in which the Billionaires and Millionaires of the world were made.

As income flows in, most people spend most of it on outflow (whether necessities, optional spending, taxes or giving). While each of these things are part of any healthy financial plan, contributing to a retirement account or other investment account should be coming right off the top of your paycheck!

Not only is setting up an automatic withdraw helpful, but it could mean the difference between retiring at 55 or 65. Don’t believe me? Do that math. If you’re receiving a 10% return on your money your money is doubling every 7.2 years. That means if you postpone or weaken your contributions by even 7 years you’ll be losing out on almost half of what you could’ve had.

In retrospect, most people will look back and regret not contributing more. So for those who have time on their side, now is the time to start preparing for your future.

What Every Single Rich Person Has – And How To Get It

As the years roll by most people find that they continue to need to pay the mortgage or rent, buy food, and pay insurance. But There is a moment in everyone’s life, whether in college, after a life changes, or in old age, when the money coming in is less than the money that needs to go out.

Rich people don’t have this problem. While they certainly have their own financial problems coming in many different directions and flavors, lack of cashflow isn’t one of them.

However, no matter how much wealth, or how deep their pocket book, rich people all have one thing in common. This similarity runs through the tech titans, the real estate tycoons and the financial gurus. What is this key ingredient? Leverage.

Leverage, is actually a general term. There are many contexts in which leverage can be used and what it can mean. This kind of leverage to which I am referring is in the context of effort and resources – not necessarily debt.

In this context we use googles definition. Leverage is to: “use (something) to maximum advantage.”

You’re probably wondering what leverage has to do with Mark Cuban, Donald Bren, or Bill Gates. Mark Zuckerberg, for example, utilized the leverage of personal engagement to bring attention to his platform, in a way never seen before.

Leverage in the context of the rich is the act of utilizing resources in order to maximize and grow the results. The Rich in every industry have learned to use their effort, along with the effort of others to build great companies. Warren Buffet leveraged his money (in a non-debt way) to turn it into something bigger than he could have every achieved on his own by working a regular job.

So, how can you utilize this strategy of leverage? It starts with finding your “niche” or the thing that you believe you can provide the most value to people than any other. Pick thing one thing and begin building your skills and network in this area. As soon as you see some progress begin to leverage other people’s time, money, resources and connections in a way to build your brand.

Don’t make this one-sided. These should be give and take relationships in which you provide as much value or more to the other person. Often leverage involves borrowing each others skills in a net positive way. Begin learning about your area of interest and learn how best to use the power of leverage…

Financial Steps to Take in Every Economic Season

As the US economy continues its steady recovery from the 08 crash, many people have started to worry about the next economic disaster. When will it happen?

To be honest no one, not even the Fed Chair or the Billionaire class, or economists know when a crash will occur. However, simply looking back at history, it wouldn’t be far fetched for a crash to happen sometime in the next few years.

Going back to our Nation’s founding, we’ve experienced all seasons of the economic cycle consistently over and over again. Some cycles have been longer than others, some have been more dramatic, and various sectors and asset classes have experienced the results at slightly different times. But we know a crash is coming – sometime.

The following are the four economic seasons and where we’re at right now:

Spring: A period of time in which business recovery increases, job growth rebounds, home foreclosures slow, and generally consumer confidence and credit stops diminishing.

Summer: A period of months or years in which the economy, stocks, real estate prices, and even consumer confidence grow. This period usually lasts the longest of the four seasons.

Autumn: The season in which consumers are overly, even extremely confident. Disposable incomes are rising, stocks are selling rapidly higher, and home mortgage applications continue to rise. At the end of Autumn a cooling in economic expansion begins. That’s when the temperature starts dropping…

Winter: This period is by far the most difficult on the average consumer and investor. Prices in real estate and stocks drop, consumer confidence plummets, credit dries up and the media starts panicking.

Which season are we in? While it’s difficult to say, we certainly aren’t in Spring or winter, which means we’re either in late summer or early autumn.

How do we deal with change? Is there a way to behave in each economic season?

The answer is that number one you shouldn’t behave in a groupthink mentality. Don’t follow the heard. In fact when everyone is behaving a certain way, consider doing the opposite. When everyone is selling stocks, consider buying. When people are retracting and reacting to the disaster, try to expand.

While this strategy isn’t best 100% of the time, even seeing things through this perspective can open your eyes to which actions are best to take.

Outside of being a contrarian, simply focusing on your life and less on the economy can go a long way. Just because “everyone” is getting laid-off at work that doesn’t mean you won’t find work. You might have to work extra hard, but try to get out of that mindset of thinking that what’s going on in the world has to be true for your life – it doesn’t.

The ultimate outcome of your financial life in both great and horrible times is up to you.

7 Financial Levels – And How To Get To The Top

Here in the US, with higher standards of living than pretty much any other place on earth, Americans have surprising difficulty getting their finances to a healthy point. But here’s the truth: I believe with all my heart that it is possible for anyone who has time, mental health, and true commitment to become a multi-millionaire, and even potentially a deca millionaire within their life.

I have broken down the levels of net worth by category. The numbers I chose are somewhat subjective. But I believe they paint a picture of what true riches look like here in the US.

Before I start the list, I want to clarify what net worth is. Net worth is the value of everything you own, minus what you owe. For this example I have decided to focus solely on financial assets (not clothes, furniture, or cars), which are things like that can be sold at roughly what they’re worth (like houses, stocks, bonds, etc…)

1. Upside-down Wealth – Net worth anything less than $0:

This is a position that many young people, particularly college graduates find themselves in. They get out college with loans, no money and therefore are upside-down with wealth. How can you move up to the next level? Work your way into a job, continue to live like a college student and pay off those loans.

2. Poor (real or fake?) – Net worth between $0 and $10,000:

If you find yourself in this circumstance you have to pick one of two decisions: 1) are you going to stay here forever, or 2) are you going to make the move to the next level? This is a position many people are in. Maybe they have a house, but have only a few thousand dollars of equity. Or maybe they are just starting out in the workplace. Either way, being “poor” should not only be a temporary situation, you should run from it as fast as possible.

You know what you need to do: get a better job, live on less, and begin paying off consumer debts.

3. Currently Broke – Net worth between $10,000 and $50,000:

No one I know wants to be here long. At this point you have enough to feel a little room in your finances, but even just a new roof and a few bad emergencies can wipe you out completely. While stopping by broke on your way up the levels is a necessity, staying here for longer than you need to is too risky.

4. Middle Class – Net worth between $50,000 and $500,000:

The most sought after class of all the classes is the middle class. This is what the “typical” two parent, two kid household is supposed to look like. Maybe you own a home, a couple cars, have a retirement account, yet carry a small credit card balance.

Middle class can feel nice… while you’re working. But what happens when you’re 70 years old and think, “I can’t keep working forever”? You need more wealth to be able to have the flexibility and peace of mind that’s necessary for a happy life. Here you can stand on your two feet financially speaking, but you know there’s something more.

5. Upper-middle Class – Net worth between $500,000 and $1.5M:

Almost everyone knows it – $1M isn’t as much as it used to be. But it definitely isn’t easy to achieve. When you’re net wroth approaches $1M it’s easy to think, “I’ve made it.” But really you haven’t – yet.

The truth is, what happens when you want to help someone else out financially? Or what if you want to explore Europe for a few weeks? Or what if you want to retire a decade early? It’s harder than ever to do those things on $1M.

6. Well-Off – Net worth between $1.5M and $10M:

It is completely feasible for most people in their mid 20’s or 30’s to reach this level in their lifetime. It simply takes hard work, steady contributions to retirement accounts, and a full-blown commitment.

7. Rich – Net worth anything more than $10M.

By now you know what you’re doing. You may not know everything, but you have a skill set that is very useful to say the least. You have discipline. Use this discipline into the future on whatever goals you set for yourself.

I hope this exploration of levels has helped you conceptualize where you’re at and what you can become. It’s never too late or early to start. Right now has never been better.

The Bad Thing About “Following Your Dream”

Whenever I hear someone say they’re trying to live their dream, I wonder, how many people out there have truly reached the point where they can fully pursue their interests?

I know I haven’t fully embraced my passions but over the last two years I’ve certainly gotten better. In two weeks I plan to take the second step towards pursuing “my dream”. The first step I took was this April when I took my 10 day road trip that drove me through Jacksonville, FL.

The second part of this pursuit will take place when I take my second trip there. I plan on leaving in two weeks. The trip will involve a drive from Michigan down to Nashville, TN, then a 2 day visit to Jacksonville, FL. On the way back up I plan on hitting Forsyth Park, Savanna, GA..

The question you might be asking is, why Jacksonville? That’s a very good question. It has more to do with my future than it does with my present. Currently I’m in college. I work nearby and have friends nearby. However somewhere down the road – maybe in 3 years or 10 years – I will move somewhere better.

It’s been a big thing for me to truly feel that the place I’m living in is right for me. I don’t feel most of Michigan is. For starters I like warmer weather. On top of that I’m looking for a city with more social and economic activity – unlike most of Michigan.

Explaining this often takes up a great deal of time. People will criticize my interests and goals. The dream I have certainly isn’t a common one. What should I do then?

What do you think, should I share “my dream” with the world or keep it inside my head?

Do you have a dream that most people around you think is stupid or weird? Feel free to jump into the comments below…

Should I Invest in Small-Cap or Large-Cap Companies?

If you’re a stock investor you’ve probably asked yourself the question before. While there are many different kinds of stocks, that can be broken down into different categories based on a set of seemingly endless criteria, one of the best ways to set them apart is by market capitalization.

Market capitalization is basically what we mean when we multiply the amount of outstanding shares of a company times the price per share. It’s basically the value that the market is placing on the company at any moment in time.

The two biggest companies Apple and Amazon are inching forward towards reaching $1,000,000,000,000 in market capitalization. Meaning if you multiplied the stock price of either company times the amount of shares of that company, you’d end up with a number just shy of $1Trillion.

This has clearly never happened before but is expected as the market experiences inflation and growth.

So which one is best, small-cap stocks or large-cap stocks? Well there are certainly good individual companies in each category. For example even though apple is a large company, it is a solid investment for appreciation even for an already large company.

What happens is that depending on the economic circumstances and if they’re better for large or small companies each of these asset classes will perform accordingly. Thus, you’ll get periods when large-caps outperform small-caps and vice versa. However, generally in our history, small-cap stocks as a whole have outpaced their large-cap counterparts. The reason? Size.

When you think of a tree, whether an oak, maple or redwood, you can think of the different stages in its life. As a little seed and sapling, trees usually experience either rapid growth when they’re little, or they die off.

The reason there’s so many little trees at the bottom of a forest floor is that most of them don’t survive, but the ones that do usually experience rapid growth. The same is true with companies.

When a company is small it’s just trying to pay the bills, grow revenue and establish credibility that will equate to market share. But often these smaller companies can’t outlast the constant bombardment of competition so they die off.

If you look at the small-capitalization indexes they have tended the out-perform the large-cap indexes like the S&P 500 (an index of the 500 largest companies in the U.S.).

If you’re young and can ride the volatility, go with small cap stocks. If you want to mitigate short-term loss and volatility, large-caps are generally better.

Whichever you choose, good luck.

Disclaimer: The information regarding personal finance found in this blog is not a substitute for professional guidance. By following the guidance in this blog you are doing so at your own risk. This blog is simply the option of one person for informational and educational purposes. Please refer to your personal financial advisor in regards to guidance over your specific situation.

Is It Possible to Become a Billionaire?

When most people think of a Billionaire they think of Warren Buffet, Bill Gates, Jeff Bezos, or even Elon Musk. But very few people have heard of Bernard Arnault, Amancio Ortega, or Ma Huateng. These people, not as well known as some of the others, have made their way to the list of top 20 billionaires in recent years.

Bernard Arnault made his money by developing a large company that focuses mostly on luxury items and services. He has a large collection of art and is the richest person in France.

Amancio Ortega built is fortune in fashion. He is the sixth richest person on the globe but likes to keep his personal life private.

Ma Huateng has built his fortune around technology, specifically the internet. He funded Tancent, which is the highest valued company in all of Asia.

Each of these men are relatively unknown by the general U.S. population yet remain powerful, wealthy and esteemed in their area of focus. So the question that comes up is, is it possible to repeat their stories or stories like them?

The answer is yes and no. Each of these people, including the whole Forbes list of billionaires, are remarkably smart, hard working and strategic. Most of them have not only worked hard to get where they are, they have also “sacrificed” basic things that a lot of us feel are regular parts of a typical life like regular free social interaction and time with friends.

For example Elon Must was showering at the YMCA and sleeping in the office at one point.

For for all the self-made billionaires there were times where they were working their butt off. But pretty much everyone has worked their butt off right? True, but these men and women were purposeful about what they worked on, and were smart about being efficient, strategic and passion driven.

So, if it wasn’t necessarily working hard that made these self-made billionaires rich, but a set of internal actions, habits and principles, what does that mean for us? Well first that it’s completely possible, but not likely to reach their level of success in a different area of focus.

Secondly each of these people had some degree of luck, but even with the luck, it’s no surprise that any one of them is where they are today. While each of them had luck they also planted the seeds of success and let the work, perseverance, time and their brains help grow it.

One of the main similarities between all these people is 1) their commitment to improvement, 2) their involvement in business or customer satisfaction, and 3) their intelligent decision making multiplied over many times. If you sprinkle a lot of hard work on the seed you can see how it grew into a large tree. All of these things together equal focus. Being focused on achieving their goals and having a great time doing it seems like a big similarity here too.

So if you’re wondering if there’s a certain industry posed to do the best the answer is probably internet technology or AI or something along those lines. But that’s not the right question to ask. You have to find the one thing that makes you intrigued, and draws you in day after day. If you have a big difficulty even thinking about it each day that’s probably not a good sign.

Bill Gates was into computers. Jeff Bezos was into customer satisfaction and was intrigued and excited for the internet. Elon Must is into science yet balances that intrigue with his drive to make something tangible for the future. It’s not so much the industry you’re in, but the culture you have and surround yourself in of discipline, hard work, passion, improvement, learning, integrity and ultimately intense focus.

How do Most People get Rich?

What if you had to choose one investment vehicle to get you to riches? What would it be? It’s an intriguing question not only because so many people have done it so many different ways, but because the question deals more with the future than looking at the past.

The vast majority on the Forbes billionaires list have gotten there through owning all or part of their own business. The industries range from technology to finance to fashion and even real estate.

Most of the newer billionaires have done it through technology (like Mark Z., Bill Gates, and Jeff Bezos). A good portion of the older billionaires have made it though finance. But even within sectors there is great variation as to how the billionaires made it. For example in the technology sector Jeff Bezos has done it through online retail while Zuckerberg has done it through social media.

Real estate, whether you consider it a business(which it true) or it’s own investment category altogether has also created many wealthy people. One notable difference between billionaires in real estate and millionaires in real estate is that the millionaires have focused primarily on single family and small multifamily homes while the billionaires have purchased scalable, large operation commercial properties. (For example Donald Bren.)

Arguably it’s very difficult to get into these large operations without significant capital. So for the average investor a good place to start is either smaller properties or partnerships. Either way you look at it, real estate as a whole has been a solid investment for both the well-off and the ultra-rich.

If you’re looking to the fastest made billionaires technology businesses are your best bet. If you’re looking for the most stable, predictable, simple and versatile investment, real estate is your best choice. Most of the other investment options including bitcoin, gold, bonds, futures, options and commodities have considerably less stellar track records. However the one similarity between the ultra rich is that they have done so with extreme focus and specialization – becoming experts in their field of influence.

As times change and new technology becomes more mainstream there becomes a great advantage to the person who is willing to pick one thing, just one thing, and focus entirely on it.