This title does not mean that I switch my blog to be about interior design, it's actually a business concept that is outlined in the book, Good to Great by Jim Collins. The whole book talks about how to turn a good business into a great business by studying companies that made and sustained a great amount of success. Although it talks about businesses we can relate this to our everyday lives... think of yourself as being the CEO of your life.
One of the principles that the research team noticed in the leaders of these companies was this mirror or window phenomenon. They noticed in the Good to Great companies that when things were going well, the leader would look to others in the company to give credit (window) but when things were going poorly they looked to themselves to solve the problem (mirror). With the comparison companies, it was the exact opposite!
So what do you do when things are going poorly in your life and with your finances? Do you look out the window for someone to blame or do you confront the person in the mirror?
Personal accountability is the most important concept you need to integrate into your life. Once you start shifting from "helpless victim" thinking to true personal accountability things start changing for the better. One book that talks about this idea is QBQ! Question behind the question by John Miller. The main point of the book is to start asking the right questions. For instance instead of asking, "Why do we have to go through all this change?" Ask, "How can I adapt to the changing world?" This change in perspective puts the initiative on you instead of someone else.
One of the most memorable lines in the book for me was the "Circle of Blame" that he laid out:
"The CEO blames the vice president, who blames the manager, who blames the employee, who blames the customer, who blames the government, who blames the people, who blames the politicians, who blames the schools, who blames the parents, who blames the teen, who blames the dad, who blames the mom, who blames her manager, who blames the vice president, who blames the CEO, and on and on it goes." p. 45
As can be seen from the silly yet true quote above, blaming accomplishes nothing! The take home point is to look into the mirror and take responsibility for where you are in your life and accept the responsibility to fix it. Once you take back control of your life, only good things will come.
--A Future Millionaire
Friday, January 27, 2012
Monday, January 23, 2012
Net Worth
One of my goals for the new year is too continually track my net worth monthly to see how I am making it grow. I am excited to track it and see how much it is growing by saving and investing while spending less. I eventually want to be what Thomas Stanley calls a Prodigious Accumulator of Wealth (PAW) as opposed to an Under Accumulator of Wealth (UAW). The formula for figuring out which one you are is quite simple and involves your age and salary.
According to the formula your average net worth should be = 0.1*age*pre-tax income from last year (this can be taken from your W-2).
The formula is slightly skewed for those of us who are younger and those who have just achieved a stable salary. However, if you want to know how much you should be worth this is a good approximation. If your actual net worth is higher you would be a PAW and if it's lower you would be classified as an UAW.
I just graduated from college last year and have obviously not had much time to accumulate wealth. The power of compound interest is also not on my side but I am feverishly saving and want to get to the $1 million net worth. I am very far off right now as you may be too but if we keep saving and investing the flywheel will turn faster and faster and our goal will be attainable.
--A Future Millionaire
According to the formula your average net worth should be = 0.1*age*pre-tax income from last year (this can be taken from your W-2).
The formula is slightly skewed for those of us who are younger and those who have just achieved a stable salary. However, if you want to know how much you should be worth this is a good approximation. If your actual net worth is higher you would be a PAW and if it's lower you would be classified as an UAW.
I just graduated from college last year and have obviously not had much time to accumulate wealth. The power of compound interest is also not on my side but I am feverishly saving and want to get to the $1 million net worth. I am very far off right now as you may be too but if we keep saving and investing the flywheel will turn faster and faster and our goal will be attainable.
--A Future Millionaire
Wednesday, January 11, 2012
Happiness
Money can buy us a lot of things but happiness is not one of them. We try to find the next thing to buy that will make us happy but it always falls short. We always want more, thinking that will finally fill the void. We say, "If I only had that new house or car then I would be happy." Dr. Henry Cloud in The Law of Happiness investigates what we really need to be happy by trying to answer the question, "Where does happiness come from?"
First, he breaks down a mathematical makeup of happiness (derived from psychological research):
- Circumstances account for only about 10 percent of our happiness. (This is why the new house, car, boat, job or even spouse will make you happy at first, but it will surely fade if you don't address the other sources of happiness.)
- Our internal makeup (probably composed of genetic, temperament, and constitutional factors) seems to account for 50 percent of our happiness.
- The next 40 percent comes from things that we CAN control such as our behaviors, thoughts and intentional practices in our lives.
Dr. Cloud further breaks down these things we can control into thirteen chapters each corresponding with the thirteen ways of happiness where God and science agree:
1) Happy people are givers - Giving is important not only for others but also for the person who gives. That good feeling we get inside when we give some of our time or money can bring us true happiness.
2) Happy people are not lazy - In order to be happy we must willing to invest our time into things such as building relationships, attending a small group, pursuing goals, serving others and staying healthy.
3) Happy people don't wait for "someday" - If we are always looking for happiness in the future, we will never find it in the present. Find happiness in the now.
4) Happy people pursue goals - Setting worthwhile goals and reaching them gives a sense of accomplishment that is important for attaining happiness. I recently wrote about achieving goals and how to ensure you reach your goals. In the book, Dr. Cloud introduces something similar called SMART goals, meaning you must make them Specific, Measurable, Attainable, Realistic and Timely.
5) Happy people fully engage - Those who really love what they do become fully engaged and "time flies." If we are fully engaged to what we do then we become a happier person.
6) Happy people fully connect - We can't do this alone. We need support systems from friends and family built into our life to make us happy.
7) Happy people don't compare themselves - We are all unique and have different situations. You can't compare yourself to what others are doing especially when you don't know their whole story.
8) Happy people think well - Everyday, happy people are thinking thoughts that help them to be happy, while unhappy people do the opposite. Always think good thoughts and find the silver lining in everything.
9) Happy people are grateful - Be thankful for everything that we have, instead of wallowing over the things that we don't have. If someone is not yet in their dream job they should just be thankful they have a job that can put food on the table. Thank God everyday for everything.
10) Happy people have boundaries - They don't let people walk over them and they remove themselves from negative situations. "When you change yourself, the world around you usually changes as well."
11) Happy people forgive - "The evidence confirms that when you forgive others, you are the biggest beneficiary." Forgiveness allows you to move on with your life and forget about the past hurtful event.
12) Happy people have a calling - When we realize the daily activities that we do are in alignment with what God wants for us, everything has a higher meaning and purpose.
13) Happy people have faith - Having a relationship with God built on trust is important. Knowing that He has a purpose for us will give us a great sense of calm and allow us to get through a lot of hardship.
My goal is to become a millionaire... duh. But if I achieve it at the cost of my happiness and health then the journey was for naught. All the money in the world can't buy happiness and health, so it's important we keep everything in balance on this journey and stay truly happy and healthy while building wealth.
--A Future Millionaire
First, he breaks down a mathematical makeup of happiness (derived from psychological research):
- Circumstances account for only about 10 percent of our happiness. (This is why the new house, car, boat, job or even spouse will make you happy at first, but it will surely fade if you don't address the other sources of happiness.)
- Our internal makeup (probably composed of genetic, temperament, and constitutional factors) seems to account for 50 percent of our happiness.
- The next 40 percent comes from things that we CAN control such as our behaviors, thoughts and intentional practices in our lives.
Dr. Cloud further breaks down these things we can control into thirteen chapters each corresponding with the thirteen ways of happiness where God and science agree:
1) Happy people are givers - Giving is important not only for others but also for the person who gives. That good feeling we get inside when we give some of our time or money can bring us true happiness.
2) Happy people are not lazy - In order to be happy we must willing to invest our time into things such as building relationships, attending a small group, pursuing goals, serving others and staying healthy.
3) Happy people don't wait for "someday" - If we are always looking for happiness in the future, we will never find it in the present. Find happiness in the now.
4) Happy people pursue goals - Setting worthwhile goals and reaching them gives a sense of accomplishment that is important for attaining happiness. I recently wrote about achieving goals and how to ensure you reach your goals. In the book, Dr. Cloud introduces something similar called SMART goals, meaning you must make them Specific, Measurable, Attainable, Realistic and Timely.
5) Happy people fully engage - Those who really love what they do become fully engaged and "time flies." If we are fully engaged to what we do then we become a happier person.
6) Happy people fully connect - We can't do this alone. We need support systems from friends and family built into our life to make us happy.
7) Happy people don't compare themselves - We are all unique and have different situations. You can't compare yourself to what others are doing especially when you don't know their whole story.
8) Happy people think well - Everyday, happy people are thinking thoughts that help them to be happy, while unhappy people do the opposite. Always think good thoughts and find the silver lining in everything.
9) Happy people are grateful - Be thankful for everything that we have, instead of wallowing over the things that we don't have. If someone is not yet in their dream job they should just be thankful they have a job that can put food on the table. Thank God everyday for everything.
10) Happy people have boundaries - They don't let people walk over them and they remove themselves from negative situations. "When you change yourself, the world around you usually changes as well."
11) Happy people forgive - "The evidence confirms that when you forgive others, you are the biggest beneficiary." Forgiveness allows you to move on with your life and forget about the past hurtful event.
12) Happy people have a calling - When we realize the daily activities that we do are in alignment with what God wants for us, everything has a higher meaning and purpose.
13) Happy people have faith - Having a relationship with God built on trust is important. Knowing that He has a purpose for us will give us a great sense of calm and allow us to get through a lot of hardship.
My goal is to become a millionaire... duh. But if I achieve it at the cost of my happiness and health then the journey was for naught. All the money in the world can't buy happiness and health, so it's important we keep everything in balance on this journey and stay truly happy and healthy while building wealth.
--A Future Millionaire
Saturday, January 7, 2012
A Love Affair that's Destroying our Finances
That's right. There is a love affair going on in the homes of many Americans. This affair drains money from each respective home at about $400 a month. In some instances, after 3 years your extra lover just gets up and leaves you, with nothing to show for it except pictures. Your spouse even sees you with the lover and sometimes joins in on the action (or worse) has one of their own! This lover will reciprocate altercations involving financial concerns, and therefore is the #1 cause of divorce in America. Who is this mysterious relationship destroyer? Why do we still allow them to infiltrate our homes?
I'm talking about an automobile. That's right folks, America is obsessed with cars! This may not come as a shock to you because everyone knows this. If someone gets a shiny new car they usually get many accolades like, "Wow! Have you seen Jim's new car? He must be doing well for himself." Since when did cars become the gauge of how successful a person is? Just because someone can afford a lease on a $60,000 car does not make them successful. Even if they can afford to buy the car and make payments, it's just plain stupid. A car is the largest item we buy that decreases in value. It decreases so much that as you drive a new car off the lot, it has lost up to 25% of its original value, continuing to lose 70% of its original value after four years. This sounds like a great investment to me... NOT! Now, I'm not saying that you can never own a nice vehicle. I want you to drive around in a $300,000 Lamborghini but not until you can afford it. There are some rules of thumb if you want to buy a brand new vehicle:
1) Must be able to pay cash.
2) Must have a net worth over $1 million.
3) The total value of all your vehicles (anything with a motor) should be no more than half your income.
If you buy a used car of at least two years old only rules one and three apply. If you follow these basic rules of thumb you will avoid the biggest financial mistake made by most families in America and be on your way to success financially.
--A Future Millionaire
I'm talking about an automobile. That's right folks, America is obsessed with cars! This may not come as a shock to you because everyone knows this. If someone gets a shiny new car they usually get many accolades like, "Wow! Have you seen Jim's new car? He must be doing well for himself." Since when did cars become the gauge of how successful a person is? Just because someone can afford a lease on a $60,000 car does not make them successful. Even if they can afford to buy the car and make payments, it's just plain stupid. A car is the largest item we buy that decreases in value. It decreases so much that as you drive a new car off the lot, it has lost up to 25% of its original value, continuing to lose 70% of its original value after four years. This sounds like a great investment to me... NOT! Now, I'm not saying that you can never own a nice vehicle. I want you to drive around in a $300,000 Lamborghini but not until you can afford it. There are some rules of thumb if you want to buy a brand new vehicle:
1) Must be able to pay cash.
2) Must have a net worth over $1 million.
3) The total value of all your vehicles (anything with a motor) should be no more than half your income.
If you buy a used car of at least two years old only rules one and three apply. If you follow these basic rules of thumb you will avoid the biggest financial mistake made by most families in America and be on your way to success financially.
--A Future Millionaire
Tuesday, January 3, 2012
Goals of the New Year
This is a popular time to make a new years resolution but how many of these actually turn into results? The usual question after someone announces their resolution is: "how long will that last?" Instead we should be asking "how long will it take to complete?" That's why I don't support new years resolutions, they are bound to fail every time. We instead need to make goals that we want to accomplish in the new year. To make goals work they need to encompass 5 qualities, they need to be:
1) Specific
2) Measurable (how much?)
3) Yours (not your wife's, husband's, mother's, brother's or friend's goal for you)
4) Have a time-limit (how long?)
5) In writing
Therefore the standard new years resolutions of "My wife wants me to lose weight", "I want to spend more time with family" or "My family wants me to get out of debt." Will not work! They are bound to fail. We instead need to make them goals and incorporate the 5 characteristics above. You want to get out of debt? Great! How much do you have to pay off? How long are you giving yourself to pay it off? These are the types of questions that need to be asked, answered and written down. Once you do this, your goals can be accomplished and 2012 can be the year your life turns around for good.
--A Future Millionaire
1) Specific
2) Measurable (how much?)
3) Yours (not your wife's, husband's, mother's, brother's or friend's goal for you)
4) Have a time-limit (how long?)
5) In writing
Therefore the standard new years resolutions of "My wife wants me to lose weight", "I want to spend more time with family" or "My family wants me to get out of debt." Will not work! They are bound to fail. We instead need to make them goals and incorporate the 5 characteristics above. You want to get out of debt? Great! How much do you have to pay off? How long are you giving yourself to pay it off? These are the types of questions that need to be asked, answered and written down. Once you do this, your goals can be accomplished and 2012 can be the year your life turns around for good.
--A Future Millionaire
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