Tag Archives: opportunity cost

3 Things Wealthy People Tell Themselves

There are a lot of things that define success. Some value family, others experiences, still others put popularity and fame above everything else. But here in the U.S.(and I’m sure other countries) people emphasize wealth in the tier of importance.

When it comes to making wealth, building wealth and keeping wealth, there are certain activities and habits that set certain people apart from others. One of the biggest habits is internal dialogue. What we tell ourselves, and thus act upon, is the biggest factor that determines where we end up in life.

If you keep telling yourself that your opinion doesn’t matter or that no one will ever listen to you, this will probably come true for you. If, however, you optimistically believe, deep in your heart, that you deserve to be listened to by others, there’s a good chance more people will listen.

In the same way, what you tell yourself about money will probably, for the most part, become a self-fulfilling prophecy. So be careful. Here are three things that I have seen firsthand from a couple millionaires I have had the pleasure of meeting:

  1. You deserve the opportunity to be wealthy (if you put in the work)

Notice I didn’t say you deserve to be wealthy. This isn’t an entitlement mentality. It’s more of a self-worth manifestation. If you truly believe that you are worth it – you will put in the work. If you don’t think that you deserve a shot at becoming wealthy, you are less likely to put the work that goes into making that happen.

2.  Becoming wealthy isn’t luck, it’s a combination of work, smarts, perseverance, and time

One thing that the millionaires I have met, read from, and learned from have all had in common is a true belief in cause and effect. They never thought luck was something to lean on or be expected. While they did get lucky at certain points, they recognized that the luck was more a consequence of years of hard work, and less a result of blind chance.

3.  I don’t have to be like everyone else.

It’s true. Some people think that being like everyone else is just a given. If people sleep in to 10am, eat crappy food, and watch youtube in their free time, that doesn’t mean you have to. The truth is that most people in the U.S. as well as the world, haven’t made the true commitment to excellence in every area of their lives that millionaires have. You can be different.

These three things are just a start. Not only is it in the realm of possibility to become a millionaire, it is becoming easier than ever. Granted, it isn’t going to be easy.

Why Students Should Work In College

I can tell you why you’re not working hard enough. There are a lot of people who know how to work intelligently, with both work and life in general. They only engage in activities that are precisely planned and efficiently organized. These are often the well-educated people, those who know the best, smartest use of time. But often they spend a lot of it relaxing or enjoying fun activities.

Then there are the hard workers. They’re the people who do the heavy lifting. They end each day both physically and mentally exhausted. These are the people who work 60+ hours per week, striving for some piece of the American dream.

Lastly, but by far the rarest group of them all is the smart-hard worker. This person is someone who not only engages in thoughtful planning, meaningful self-improvement and learning, but also in the daily “grind”, the discipline-filled early mornings, the continuous extension of energy.

By far the last group can achieve the most. Not only do they have the advantages of planning and efficiency, they also spend enough time working that they can begin to get a better grasp of their tasks and gain a larger force of momentum behind them as they get into the swing of things.

One of the best times to make strides towards this happy medium of efficiency (thoughtfulness, planning) and force (work, discipline) is being a student with a job.

Now before you go off and start dismissing this idea as both impractical and stupid, please take this journey with me through my thought process and how I worked 40 to 50 hours per week while going to school full-time (and still spending a little time with family and getting a 3.8 GPA).

First, why work in school? One of the reasons most students work is to both pay for school, and gain valuable work experience in college. I want to add one more reason: better grades. Better grades? Yeah. According to a cnbc.com article there is a correlation between students who work part-time and those who get better grades. The reason this makes sense is that having a job creates a sense of greater responsibility in your life. You not only have a different perspective, but you also have less time to goof off, which makes it easier to get down to business.

I would recommend most students seriously consider working at least 20 hours per week during the semester. Not only will you most likely get better grades, you can also start to see more money coming in to pay expenses.

My challenge: get a job while you’re in school. You might find that you have more confidence, job experience and money.

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.

Get Rid of Your Money

Most Americans don’t have very much in savings. Those that do try to protect the amount they have, whether that’s $1,000 or $100,000. But I have a challenge to everyone who thinks stashing money will make you more secure. What if you got rid of your money, what would you do?

If you had $3,246 in the bank one day and $25.47 in the bank the next you’d probably go into panic mode. Your instincts would start kicking in. You’d figure out how to cut spending, eliminate waste from your life, and earn more income to make the difference. In other words, you’d wake up.

What happens when we have chunks of money sitting in the bank is that we convince ourselves that we’re making it, or that we’re safe. This is dangerous.

Instead, realize that the little money you have in the bank, be it $45 or $45,000 still makes you broke. I know to a lot of people $45,000 is a lot of money, but if you want to change the way you think about money, it starts here. Instead of thinking of what you could buy with $45,000, think of what you’d like to buy.

As soon as you realize that the $36,000 car, $5,000 vacation, and the 25 year retirement are on your list, $45,000 doesn’t seem like very much does it?

I personally have a little over $6K in the bank. Currently I’m gearing up for another year of college. With 2.5 to 3 years left I’m beginning to realize that it’s going to be difficult to get through college with no debt, even with lower costs than most, on just $6K. It’s time to up my game.

I’m going to have to start stashing away for college next year, both by working over the summer, taking odd jobs, and even working during the semester. Having perspective on that $6,000 helps me realize that it’s really not a lot of money – that reaching my goals will require a change in mindset.

For everyone who’s out of college and not saving for something that’s just around the corner, consider getting rid of your money. Now I don’t mean you should go and buy a newer car or travel to Europe. But it’s possible that some day you can do those things if you do what I’m going to suggest you do with the money: invest it.

Investing the money you have other than an emergency fund is a great move. Make sure you have enough money for 3 to 6 months of expenses and everything over that needs to get out of there. Put it into retirement accounts, buy real estate, pick an investment that you feel comfortable with and are ready to pull the trigger on. (just make sure to do your research)

So next time you get a $3,000 bonus, inheritance or gift, consider getting rid of it by paying off debts, securing an emergency fund, and finally putting everything else out the door into the world of investing.

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.

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.

Should You Cut Your Grass?

I’ve never seen this question as a header in a financial blog. Maybe its because cutting your grass is extremely boring. Or maybe it has seemingly nothing to do with personal finance. Whatever the reason you’re probably wondering why I would open with lawn care(which I have nothing against btw). What’s so important about lawn care?

To be honest, I could have chosen a host of other reoccurring costs most people expend on a regular basis. The point is to use it as an example.

There are three general angles of thought when it comes to money. The first, and probably the most common is that of indifference. “It’s just $5,” people tell themselves. “I deserve this cheeseburger.”

The second perspective is that of scarcity. A lot of extreme savers live this reality. This mentality makes me think of Ebenezer Scrooge. It’s the though process that says, “I need to save as much as possible so that someday I can have a big pile of money.” This mentality values dollar cost over time cost.

For example if you decide to cut your grass instead of having someone else do it. While it might cost $70 to have someone mow your lawn it could free up a couple hours of your time. What if you value your time more than $35 per hour. In that case you’re probably better off paying someone else to mow the lawn.

The third and most logical view is that money is to be spent with priority. You have to know what you value and then spend your money accordingly. This view is the most wholistic because it not only recognizes the dollar costs of buying something but the time costs that you could be saving or losing depending on which option choose.

My point isn’t that you should hire people to do everything for you. On the contrary, my point is to weigh the costs of your decisions and factor in more than just the price tag. Sometimes paying someone to mow your grass might just make sense.