Moneywise24 Personal Finance

During a discussion with a colleague today, we talked about finance for a bit. He talked a lot about mastering your money . Money mastery… what is that anyway?

It set me thinking. What IS money mastery? Am I doing it right? And how can I genuinely reach a level, where I can say that I am ‘mastering my money’. Yes, I do invest… am I mastering my money when I have 10% annual returns? And what if stocks drop? Am I still mastering my money? What if we get in a 30-year recession, with annual rates of -10%?

To start with, without money there is no Money Mastery. So the first thing you (or I) need in order to reach a specific level of Money Mastery is money. Usually, the first in-flows of money will be either through employment on a regular basis, or by setting up a business. Or the amount may be received one-off. Then, there are specific expenses you will have, like rent or mortgage payments, expenses for living, etc. And finally, what you keep at the end of the month is, let’s say, your profit (or loss for that matter).

Let’s assume a profit. What do I do with it? I can invest it. Stocks? Bonds? Mutual Funds? Some investments react much more volatile on economic changes than others. Some make profits in upwards markets, others make profits in downwards markets. Some have dividend payouts, others do not. And then there is a the classical savings account, with an interest rate currently lower than inflation. But I guess when my bank would go bankrupt in a crisis situation, my money is gone anyway, or at least a large proportion of it.

During our conversation, my colleague talked about Money Mastery being equal to knowing your inflows and outflows. I have to disagree. I feel, true Money Mastery is much more than having your finances visible; it is being able to have a strong focus on your financial goals, and moving your money in a direction in order to reach your financial goals, as well as to anticipate different economic scenarios. I would consider the following steps as absolutely mandatory in order to reach true money mastery:

#1 – Having your finances transparent

The first step to true money mastery means having transparent financials, and knowing exactly what is being earned, spent and saved up each day, month, quarter, and year. Without transparent financials, I can forget about managing my money efficiently.

#2 – Make a profit with all possible assets available

Sure, working hard for a large enterprise is much like business: you are selling your time and expertise to the enterprise in exchange for money. And as long as your expenses are lower than your income, you’re making a profit. But what about the money you have left at the end of the month? By investing that money, you can let that money work for you, and make even more profit, and the money earned with these investments can be re-invested.

Want to buy real-estate? Take into consideration to buy a property and renting it out to generate an extra income stream, which can be used to pay for the mortgage. Or else, you may want to ensure that the property is likely to sell at a higher price in the future.

Depending on how far you want to go, you could even have commercial banners on your car, to cover for some of your automotive costs.

#3 – Prepare for alternative scenarios

What if stock markets crash? What if you become unemployed? What if your bank is about to go bankrupt?

Preparing for alternative scenarios is not easy when you are just starting out. But if you have already gained at least some wealth, it becomes easier to insure yourself against possible scenarios. Do you have a back-up plan if you get unemployed? Perhaps you can already live off some passive income? I read at the Terms and Conditions of the broker Lynx, that they offer an insurance, which protects your seven figure assets should they go bankrupt. And potential recessions can be insured by derivate products, leveling out any, or part of, your losses. There are many people who actually get a lot, and I mean a lot, of profits out of a recession.

#4 – Rigorous expense management

When your money inflows increase, you may want to increase your expenses as well. However, I feel that increase in expenses should always be smaller than the increase in income. In this way, I can make a larger personal profit, readily available to pay off debt or make investments. I want to keep my expense management tight; actually, I want to keep it so tight, so that it does not exceed 80% of one income. This one income is important to me, especially if I have multiple incomes (which I don’t at the moment, but I will in future). Because what would happen if I would lose my second income?

And to recap in one phrase how I would define money mastery:

True money mastery is the ability to build up wealth in different life and economic situations through a transparent income and expense management system.

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If I think about it, I started developing my own personal finance strategy about only 3 years ago, at the age of 30. Although I did study International Business, I had never thought about viewing myself as a business of its own, and I was pretty much stuck in a routine of balancing out income and expenses each month, and avoiding any risk that could eat up my money. However, as I got more and more involved into personal finance, I started to develop a strategy, a vision, which I working towards. I am gaining much more knowledge than previously, since the topic genuinely interests me.

Now that I think about it, personal finance is pretty sexy. And there are three main reasons why I think so:

Being independent is sexy

I have always considered myself to be pretty independent. Still, my actions were very much outward focused, getting oriented by what is normal, or what is supposed to be. I would often buy something, because everyone had it, or often I would feel ‘poor’, since others were doing better in their own way.

Personal Finance has taught me to act from an inner peace of mind; my actions are now not based on my environment, the news, or marketing, but largely on what I want to achieve in my life. I take into account my vision, my goals, and work towards it step by step. This way of thinking gives me a true feeling of being independent… and that is very sexy.

Actively participating in the economy is sexy

Active personal finance management means investing a larger or smaller proportion of your money. And as soon as you invest it, you are participating in the economy. You are taking a slice of your own, call them stocks, call them mutual funds, options, or bonds… in the end you are actively engaged in economic developments, and in society. As opposed to someone who does not invest, but only spends his money… he is basically throwing his money to others, who will invest it on their turn.

Bookkeeping is sexy

I am not a professional bookkeeper, but I do track all my income and expenses each and every day. If I ask some person, I find that few can actually tell me how much they earn (up to the Dollar), or how much they spent last month on food and beverage. How much did they invest? How is their allocation between cash, stocks, and other products?

I know all that, and it makes me feel good. It allows me to identify things that go well, things that don’t go well, but most importantly it allows me to track my progress over time. Seeing my wealth grow on the screen is damn sexy.

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Author: David Beairsto

Becoming Healthy, Wealthy and Wise

Change is essential for anyone wanting to make a difference in this world. Knowing how to prosper, like knowing any process, starts by embracing change as a way of lfie.

Moving from one fixed point to a desired conclusion requires action. Action by definition is the opposite of being fixed or permanent. While our current state and our desired conclusion may be inactive reference points, the process of moving from the beginning to the end is fraught with activity.

You Can’t Win Unless You Finish The Race

Failing never prevents anyone from obtaining their goal. The only reason we don’t win the prize is if we stop trying. Failure is the trophy of endurance to the one who prospers. Failure is also the prize for the one who quits.

Persistence takes failure into account. Like difficulties and obstacles they are expected in the pursuit of success. Persistence holds fast to the plan designed to carry us toward the goal. Persistence is also insistent, that no other goal be substituted for the original. Failure and quitting are not goals to the persistent person.

Not Who I Am But Who I Intend To Be

We learn how to prosper in business by first learning to prosper in personal development. If we aren’t willing to grow and change personally on a consistent basis, it isn’t likely we’ll discover these character traits elsewhere.

The prosperity mindset begins with thoughts intended to change the person. By conditioning our minds to think differently, we in turn act differently. Our behavioral patterns lead us toward a prosperous conclusion as a result of thinking differently.

An honest assessment of our current condition is as necessary as knowing who we intend to become. Without a fixed reference point, we can’t map out an exact route. When we encounter obstacles that change our direction, we need a reference point in order to focus on the goal again.

Don’t Be Afraid To Stop And Ask For Directions

When this practice is applied to our business we already understand the pattern. Regular assessment allows for adjustment in our plan.

We don’t like to get turned around or lost in pursuit of our goal. Whether in personal development or business, retracing our steps is a waste of time.

By first learning to be open and transparent about ourselves, we become willing to allow others to bring fresh insight to our plans. When it is positive in nature, external input can give insight that we might otherwise miss again and again.

As the process becomes more involved, we generate an increasing number of specific plans. Each one has a unique starting point and goal. They all lead us toward our main objective, like adding lanes to a highway increases the speed and flow of traffic.

Stronger Foundations Support Larger Structures

If for instance, I learn to wake up at 6am to focus on reading, but fail to improve my self discipline, I may not use that time consistently. They work together.

I used to coach young children in soccer. They loved to run, but learning ball control disciplines was far more difficult for them. They either ran past the ball, or kicked it too far out in front of them. Only a few were able to do both successfully. Everyone else chased them around the field.

As we learn how to prosper, we begin to detect weakness. With the proper mindset we view weakness as a learning opportunity. We prosper directly by learning to transform weakness into strength; inability into capability.

Like road signs telling us where we are, weakness identifies our current location and helps us decide which way to go. In the same way failure identifies a dead end process as a lesson of value.

On the race toward success we condition ourselves to welcome weakness, failure and difficulty as profitable resources. When we think of them as such, we are able to use them to build a solid foundation.

It Isn’t A Matter Of Luck Or Chance

We can only prosper in proportion to what we’re willing to give in exchange. If I’m willing to read self improvement books from different authors on a consistent basis, I can expect a greater level of personal growth; provided that the knowledge I gain is organized into a plan for self improvement.

If I desire to become a millionaire while working for a set salary I should consider the time it would take to accomplish that goal. My will may keep me from relinquishing the desire to pursue this goal, but time might run out before I get there.

By taking some of my income to invest in the stock market, I increase my potential to become a millionaire. If I choose to exchange my free time for the purpose of learning how to invest my money, that time investment improves my chances.

An even better plan is starting a business. The entrepreneur understands the importance of limitless potential. Beyond the ability to write your own paycheck, is the ability to write an even larger one every day. Prosperity ultimately becomes the process.

One of the greatest assets to learning how to prosper is that we can share both the plans we followed and our experience with others. Living in prosperity is the objective behind the learning process. People who live prosperous lives are an encouragement to anyone who wants to succeed.

Article Source: http://www.articlesbase.com/wealth-building-articles/learning-how-to-prosper-1789070.html

About the Author

David Beairsto, author and owner of http://NetworkFisher.com truly believes that if you give a man a fish you feed him for a day, but if you teach a man to fish you feed him for a lifetime. Knowing how to succeed in business online or offline is a matter of becoming a master marketer and learning how to prosper. Successful businesses are continually defined by their ability to effectively market their product or service. Visit our website at http://DavidBeairsto.com to follow us in our effort to transform ordinary people into successful entrepreneurs, one by one.

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Every healthy person is seeking for personal development; this can be at work, working towards a healthier lifestyle, doing more sport, reducing stress, stop smoking, or taking on some hobbies you always wanted to do. Life is, and should be, dynamic and interesting, and indeed each and every person has the ability to pursue his or her own luck.

Often, the new year kicks off with a lot of good intentions. People promise themselves to quit smoking, to move to another place, to change their jobs, or to do sports three days a week. At the end of the year, many people find themselves back in their own routines, and they promise themselves these same things for the next year.

In order to manage change, and personal development, effectively, there are three important aspects to consider.

Identify your bolts

Many people mistake ‘change’ with something they want to achieve. For example, someone looking for a better job will state he wants to switch jobs. However, the new job is really a goal. The reason why this person has not yet found a better job is probably due to the fact that particular habits prohibit him form succeeding. It is often these habits that need to be changed; they are like little bolts in need for fine-tuning, in order to come one step closer to the goal. If someone has been shouting he wants a new job for over two years already, there is obviously something in his behavior preventing him from having success. This could be:

• lazyness
• procrastination
• a bad cover letter and resume
• or anything else

This can apply to many areas, such as someone wanting to lose weight, or stop smoking.

Kaizen

The Japanese have a term called Kaizen. Kaizen is translated as ‘improvement’, but really refers to small changes, which you can implement in your everyday life. People are often so focussed on the big picture, that they forget the tiny little bolts which hold everything together.

Kaizen is much easier to implement that one large change, since it involves small improvements which do not suddenly and  significantly impact life. Additionally, these improvements are continuous, they never stop; one small improvement is followed by another one, and as such the individual keeps developing.

For example, if you want to quite smoking, try at first to not smoke in the car. Later, you may stop smoking inside your apartment, or on the street. Step by step you are coming closer to your ultimate goal of being a non-smoker, simply by improving your habits a little bit at a time.

The 30-day rule

Most of the things we do every day are habitual. We have grown accustomed to a specific habit, and we do things without thinking about it. In many cases, personal development involves changing habits. Habits are hard-wired in our unconscious mind, meaning we do not think about it when doing it. And due to this hard wiring, it might be very difficult to change a habit.

Luckily, the brain has the possibility to create new connections, bypassing old ones, and therewith creating new habits. But the brain needs time. Usually, the brain will need about 30 days in order to become accustomed to a new habit, provided the habit is consciously and persistently conducted each and every day. After 30 days, the mind has already become accustomed to the new habit.

Still, falling back into old habits is still dangerously easier than keeping up with the new habit. Therefore, still some effort is required to keep up with the new habit. After approximately 90 days, the brain does not differentiate between the old and the new habit; it is just as easy to keep up with the new habit as to fall back into old habits. Only after a year or so, it will be more difficult to fall back into old habits than to keep up with the new habit. The brain has now created the necessary connections in order to execute the habit fully unconsciously.

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Honestly, it costs me quite some effort and perhaps a bit of courage to write this article; finally, after having seen the book quite some times in my local bookstore but having ignored it due to its simple title, I decided to buy Rich Dad, Poor Dad - if it would have been called “an empiric study about the financial development of… ” I would have bought it sooner, in the end I currently live in Germany. I have still not read the entire book, and read through the first two chapters only yesterday. But still, I can say that those first two chapters have pretty much enlighted me. It is a funny thing, because many of what is written I know in some form of the other, but my entire life I have failed living it.

The book Rich Dad, Poor Dad is a story told by Robert T. Kiyosaki, who grew up in Japan. During childhood, he grew up with two ‘dads’: his real dad, a highly educated man with a good job, but constantly struggling with his financials, and the rich dad of his friend Mike, which is much like his second dad. Mike’s dad is a successful entrepreneur, and the main difference is how the two dad look at money, and the goals they pursue in life.

In the first chapter of the book, Robert T. Kiyosaki writes about how people are told during childhood and adolescence to get good grades, perform well through high school and university, in order to get a good job and a good salary. Thus, young adults graduate from college or university, obtain good jobs, and work hard on their career. They get themselves credit cards, they buy a fancy car, and with the first salary raise perhaps a home on a mortgage. People get married, get children, and as life gets more expensive, they work harder and take on second jobs… I do not want to lose myself in Robert Kiyosaki’s words, but the bottom line is that most people live in an illusion; the illusion of having a secure job, building a secure retirement, and that working hard for a large and well-known company is going to make them rich on the long-term. However, in the end these people end up working solely in order to be able to pay their bills and their liabilities.

In order to lead a truly fulfilled life (and I do not mean rich, simply fulfilled), it is necessary to find ways to let money work for you, in stead of the other way around. This means, for example, investing in stocks in order to see them rise in value, and to obtain dividend pay outs. It means investing in other forms of businesses, hire people to let them do the work for you. It means identifying opportunities, entrepreneurial opportunities, and be in charge. The biggest problem, however, is that most people are so caught up in their thinking of “education / good grades / getting a good job”, that these opportunities pass by without them even noticing.

I let the first chapter reflect for a moment yesterday, and the more I thought about it, the more I identified opportunities in the past, which I had let pass by due to my focus on making a career. I still remember vividly, that when I was 19 or so, I got interested in international trade. I bought some books on international trade, and how to become a trade agent, and in a newspaper I saw some offers from manufacturers of cellphones looking for agents. The costs for starting up an agency were extremely low, and it was a time at which cellphones were just starting about to hit the market… but I was discouraged by my family and friends, and unfortunately I listened to their advice, to get a job. One year later the cellphone business started booming for real…

Throughout my entire life, I have been looking for better jobs, better salaries, promotions, and the like. And I believe this will be one of my top priorities for 2010:

I pledge to stop focusing on making a career and losing myself deeper in the treadmill until I cannot get out. In stead, I will be on the outlook for business opportunities, aiming at gaining financial independence. And I will do anything, that is necessary.

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