CREATING YOUR 2010 - FINANCIAL TOOLS

ent, Mental Tools for Creating YOUR 2010, we explained the sequence of creation isBE-DO-HAVE. This is the creative recipe for anything in your life, including financial abundance. In this segment, we share key concepts about Finance and Wealth Creation as it relates to most people. This is a TOOL in the Creating YOUR 2010 series and is meant to work in conjunction with the rest of the series. Whether you feel driven to make a lot of money or not, finances play a role in each of our lives and in turn finances play a role in living a happy life.

“Before a person can achieve the kind of life he wants, he must think, act, walk, talk and conduct himself in all of his affairs as would the person he wishes to become.” – Zig Ziglar

When discussing finances and wealth creation, the first aspect we need to truly delve into isn’t what you might expect. As you are already aware from BE-DO-HAVE, we need to first understand the BE part of finances. So first, and this is perhaps the most important part of this segment, we need to explore the concept of gratitude. Gratitude is a common term but seldom fully understood. Gratitude unlocks the fullness of a happy life.

“Gratitude is not only the greatest of virtues, but the parent of all others.” – Cicero

So, what is gratitude?

It’s often our lack of gratitude that causes most of the stress in our lives. When we move away from gratitude and take for granted ALL of the amazing things that are in our lives, we begin to feel many negative emotions. There are some circumstances that it is reasonable to feel upset, stressed, and angry but these circumstances are NEVER a reason to NOT be GRATEFUL! Take this moment to gain a new perspective on gratitude and if you read nothing more than this section we assure you LIFE is going to get MUCH BETTER.

Gratitude is a positive emotion or attitude in acknowledgment of a benefit that one has received orwill receive. That means we can express gratitude for the benefits that have already expressed themselves in our life as well as the ones that have yet to manifest. If you look at your lives objectively, you have received many things that you can be grateful for. It is easy to fall into the trap of focusing on what we do not have – a specific situation, certain circumstances or some happenstance. However, the single most important factor in manifesting your desires is the ability to focus on what you do have.

EXERCISE:

Take out a piece of paper and a pen. Look at the clock or use the timer on your phone for all you savvy phone users. Spend the next 10 minutes writing out everything you are grateful for. The key to this exercise is that you should NOT STOP WRITING for the entire 10 minutes. You may actually think (for a second) that you couldn’t possibly write for 10 minutes JUST about things you are grateful for, but that is why it is an exercise we included. You are about to have a wonderful experience that transcends just this exercise, but FIRST…. You must complete the exercise. You have plenty of things to express your gratitude about. Here are some helpful topics to reference as you do this exercise:

Being alive, health, family, friends, acquaintances, co-workers, boss/supervisor, your faith, home, food, the ability to think, the ability to read, finances, your teachers/mentors, electricity, water, we live in an age of medical breakthroughs, access to a computer, instant communication with others, music, books, movies, TV shows, laughter, travel, government, the Internet … just to name a few.

Alright, you have some topics, a pen and paper. It is time to get writing and stop reading any further. Remember, wouldn’t the person you want to be complete this exercise?

STOP!

You are back which hopefully means you took the 10 minutes to do this exercise. Success isn’t the result of one big event in life; it is the result of your commitment to do everything that needs to be done, day in and day out – even the little things.

Gratitude – Things We Have Yet To Receive:

So far, we have been talking about expressing gratitude for the things in our life we have alreadyreceived. As we indicated earlier, it is possible to express gratitude for those things we desire but have yet to receive. You may be wondering,

How can I be grateful for something I don’t have?

If you desire something, you can be grateful for it because desire is “Possibility seeking expression in YOUR life.” The Universe is always looking for fuller expansion and expression. When you desire something, you are in harmony with a new possibility for your life seeking to be expressed through you. That means if you desire something … it is possible for you! Some experts today believe that the mere desire to do something is the ultimate proof that it can be done.

“Desire is the starting point of all achievement, not a hope, not a wish, but a keen pulsating desire which transcends everything.” – Napoleon Hill

If you have a desire for something, that desire is the starting point for achievement of that dream and expresses the possibility of that dream’s manifestation in your life. That is something to be grateful for. In addition, when your desire increase, you know that you are in harmony with the Universal plan for greater expression and that is also something to be grateful for. Being in harmony with the Universal plan is a state of BEING, which brings us back to BE-DO-HAVE. If you inspect your desires from the perspective of who you want to BE, you will operate in harmony with the Universe.

You can’t always get what you want. Ever heard that before?

Thanks Mick Jagger, mothers, fathers and grandparents everywhere. We want to take a moment to reframe your understanding of “desire” to help you truly get involved with the changes you are creating. You have heard, and been told growing up, that having outlandish desires is child’s play, silly or just not grown up. In truth it is these very same things that bring PURPOSE to our lives. If you have a true, soulful desire to be, do or have something AND you take steps to BE your desired self and take action towards its creation, then your life is now PURPOSEFUL. It is NO coincidence that DESIRE and PURPOSE are so closely related. Let us try and make this crystal clear. Do you know anyone who is doing something they don’t like when they know what they would like doing? How happy do you think they are? THEY’RE NOT! That is because they have something seeking expression, a desire or PURPOSE but they are doing nothing about it.

Gratitude is a common subject in many Law of Attraction materials. When the Law of Attraction comes up in conversations we have with people, the common belief is you attract your dominating thoughts to yourself. This is NOT true! It is a common misconception that people have. You attract to yourself that which you ARE. This is perhaps the main reason that people fail to activate this powerful Law into their lives for their benefit.

EXERCISE:

A good friend of ours, Tony Bodoh, said, “We live by habit until we choose to sacrifice the habit for a more life-giving behavior.” Read that again and let that sink in as you read this next exercise. Now that you have gained a new perspective on gratitude and the importance of it in your life; gratitude for received benefits and for those yet to be manifested, you can really open up to the possibilities. This exercise is to be done twice daily.

1. In the morning when you wake up – before you do anything else, spend five minutes thinking of all of the benefits in your life you are grateful for (both manifested and not).

2. In the evening before bed – the last thing you do each night, spend five minutes thinking of all of the things that occurred today that you are grateful for.

Keep your thoughts focused and don’t allow your mind to wonder. This time should be a continuous 5 minutes of gratitude. Think of the thoughts occurring in these 5 minutes much like the creation of a river. A river is but moisture in the air at high altitude until it is too heavy for the air. That moisture then drops to earth and gathers even more weight (has a stronger gravitational attraction). It has absolutely no resistance to anything and is happy to take the lowest place. Once there is an abundance of water on the earth it seeks to move even lower meaning it seeks to move “back to the source” to become a raging power carving out the land, unstoppable. That is what your thoughts will become over time with this exercise. It can be done as a quiet thoughtful meditation or as a verbal exercise; that is up to you. As we have implemented this practice in our own lives, amazing things have happened. Our list of benefits seems to grow each day as we learn to perceive the benefits in our lives. Even more importantly, our minds have been trained to look for the benefit in the situation so during our day, we tend to see the positive benefit in each situation more readily. If you do no other suggested action in this entire series, implementing this one exercise can change your life in phenomenal ways.

Keep in mind as you read on that we are laying a lot of foundation and building some structure around the sometimes elusive topic of wealth creation. All of this foundation is purposeful and allows us to assist you in building that skyscraper of wealth you desire!

Financial Success & The Law of Attraction:

“Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.” – Warren Buffett

Financial success is one area that people typically choose to attract into their lives. In fact, financial success may be people’s most common focus in working with the Law of Attraction. Some people have success and some do not. Our mission in this segment is to provide you an insight into what the people who are successful in attracting more financial success know that the others don’t. At this time of year, there are more people focusing on financial success than at any other.

What are common financial goals people make each December?

1. I want to have more money this year.

2. I want to pay off my debts.

3. I want to find a better job.

The common thread for these goals is they are HAVEs or DOs, not BE’s. In Stephen Covey’s book,The 7 Habits of Highly Successful People, one of the habits he suggested was to “begin with the end in mind.” We all understand this concept right? Sure, we do. The “end” is the ultimate goal, the reason why you have a goal. What you really want is not the goals listed above. What you really desire is to BE something more or better than who you currently believe you are.

1. You don’t want more money just to have a pile of paper. You want more money because you believe that it can help you be more, experience more, and live more.

2. You don’t want to pay off your debt because that is such a pleasant thing to do. You want to pay off your debts because you believe that doing so will help you be more, experience more, and live more.

3. You don’t want a better job because you think that sitting at a different desk for 8 hours per day will be fun. You want a different job because you believe that it will enable you to be more, experience more, and live more.

Money and jobs are not the “end” goal. Money is simply a by-product of BEING and a tool to increase your HAVING. You must first know who you want to BE. That will dictate what you DO and what you DO creates what you HAVE. BE-DO-HAVE is the process for creation of financial goals as well as everything else. The Law of Attraction does REQUIRE action but that action comes from who you are, not what you want to have.

Wealth and Financial Freedom:

“Only the man who does not need it, is fit to inherit wealth, the man who would make his fortune no matter where he started.” – Ayn Rand

What is wealth?

Wealth is a relative term which means something different to everyone. The actual definition of wealth implies an abundance of money and financial assets. For the purpose of simplicity, we invite you to look at wealth in a completely new way. Instead of thinking of wealth in terms of an amount of money or assets, think of it in terms of time.

True wealth can be subjectively measured in time. If today, you were to lose all income from any active source (anything you have to “do” to make money), based on your current expenses and obligations, how long could you live the lifestyle you currently have? Here is how you figure that out:

1. Calculate what it costs you to live per month.

2. 2. Add up all of your savings and liquid investments that could be turned into cash this month.Note: stocks that you own outright can be counted. Investments in a retirement account can only be counted if you are able to withdraw them this month. Remember, in a retirement account, it is not the balance of the account you should use, but the net amount after taxes and penalties are applied for early withdraws.

3. Take your total from #2 and divide it by your total from #1.

4. This number represents the number of months wealthy you are.

For all of you accounting enthusiasts, we realize this does not take into account the potential loss of value that saving has over time due to inflation as well as a variety of other factors that could come into play in a minimal way. This is just a rough estimate calculation.

Keep in mind, this measures wealth at your current lifestyle and does not account for any desires to increase that lifestyle. When we look at wealth in terms of time rather than asset value, many people realize that they are not as wealthy as they thought. For some, this calculation shows them they are closer to their goals than they thought. And finally, for some this confirms exactly what they thought – they are not wealthy. No matter where in this spectrum you find yourself, YOU CAN ACHIEVE YOUR DREAMS!

“Being poor is a frame of mind. Being broke is only a temporary situation.” – Mike Todd

This quote is very true. That is why we started with Mental Tools for Creating YOUR 2010. Everything starts in the mind and the physical realities are bound by Universal Law to follow.

Savings VS Creation:

Regardless of your current wealth calculation, everyone wants to improve this. That is natural. In fact, it is in harmony with the Universal Law of Increase. So the question we are most frequently asked is,

How do I become wealthier?

As you ask this question to yourself, some of you are thinking, “I could save on my expenses and get wealthier that way.” This is perhaps true from an accounting standpoint. However, cutting back on your living expenses as your primary vehicle to wealth is not likely to bring you any feeling of satisfaction or accomplishment. More likely, following this plan will attract to you even more lack and limitation. The reason is simple, proceeding with a plan like this violates major principles that our Universe operates through:

1. This action comes from a position of lack and thereby is not in accordance with Universal Law.

2. It assumes that your current income is all that is available.

3. Cutting back on living expenses to become wealthy demonstrates a lack of faith that you can create the abundance you desire.

4. A plan of this nature demonstrates a lack of understanding that the Universe is always seeking fuller expansion and expression.

Think back to our Mental Tools article and recall the GIVING portion of that article. Does ANYTHING about the above REMOTELY fit into the way the universe works? Or is that just what you have been told by “everyone” which is EXACTLY what got you to this point. Making a little sense yet?

“Getting rich is not the result of doing certain things. Getting rich is the result of doing things in a certain way.” – Wallace D. Wattles

That “way” is according to Universal Law. Therefore, the certain way to improve your wealth is through capital creation, not by being frugal. We are NOT saying you should live above your means. We are simply saying that saving on expenses as a primary method of increasing wealth will not bring you what you desire; in fact if it is wealth that you desire then saving will most likely chase it away. When you envision who you want to BE, that person is greater in some capacity than who you currently ARE. This should serve to verify the truth that the Universe is always for fuller expansion and expression. If your desire is to BE more, how does BEING satisfied with not living to the fullest extent possible financially fit into that picture? It doesn’t because saving on expenses as a primary method of achieving wealth is NOT fuller expansion and expression.

Methods of Financial Creation (MFC):

1. Employment – This MFC includes hourly wage earners, salaried positions, performance positions (such as sales), upper management, and bonus receiving positions. Even doctors, lawyers, accountants, and other professionals who do not have their own firm or practice with other professionals working for them are considered to be in this MFC.

This is the method most people generate their income from. Actually almost 97% of all people earn their income by trading time for money. You may be wondering,

Why is it that the majority of people generate their income from this MFC?

The answer is not a simple one and to go into it fully would be an entire segment by itself. However, we will highlight the key points here for you now. Grammar schools, high schools, colleges, and most parents promote this MFC to children. For the most part, children are not taught much about the other two MFCs. Why is that? Most of our parents, teachers, and educators grew up in a completely different era … the industrial age. The industrial age was very different from today for several key reasons:

§ Companies in the industrial age were loyal to their employees.

§ The standard retirement plans were pension plans.

§ In those days, people generally lived for a small number of years after retirement.

§ When the industrial age system was formed, there was no income tax.

§ Early in the industrial age, most major currencies were backed by gold which controlled the currencies value. This meant savings were mostly secure from losing value.

§ This was also the time the education system was built but was efficient for the needs of the day.

Today, in the information age and beyond, the situation is very different. If you don’t think things have changed that much, consider these comparative points:

§ Companies are no longer loyal to their employees. In fact, many times senior and high paid employees are actually targeted for layoffs.

“Growing up, my father provided well for his family. He had a job as a salesman. In my earlier years his job seemed to me like a dream job. He became the #1 salesman in the company. He had time to spend with his family and worked from home whenever he wasn’t making sales calls. When I was older and he was in his mid 50s, things changed. The company was bought by a conglomerate and his “dream job” was shattered. It made no sense to me as they targeted in on him as the highest paid salesman. Wouldn’t you want to keep your number 1 happy? They didn’t. In fact, they had the opposite viewpoint. If he was no longer with the company, they could take his territory, divide it up in smaller parts, and hire 3 young kids out of college to work for a fraction of the cost. Of course, if they laid him off, they would have to contribute to unemployment. The solution they came up with? They made his life and job as hard as possible, hoping he would quit. This happens all the time to people – does that sound like loyalty to you?” – Nick Bogatin

Pension plans are rare and defined contribution plans (401K and similar) rule the day. This means that companies are no longer responsible for their employees’ retirement: The employees are.

§ The average retiree lives at least 10 years past their date of retirement and in many cases, much more.

§ Income taxes are now an accepted standard in most parts of the world. This means fewer dollars available to you for savings.

§ Almost all major currencies are now fiat currencies. This means that they are not based on gold or any other hard asset. Their value is subject to supply, demand, and the trust people put into the issuing government’s ability to repay the debt. This means greater potential fluctuations in the value of savings.

The point to all of this is to clearly show you things have changed. Yet, our educational system and preferred MFC have not. They have not changed because for most people they are deeply engrained habits and are expressed from generation to generation. With that said, we are inviting you to see that relying solely on one MFC because it is what you were taught when you were younger may not be the best thing to do, while being open to other opportunities may create wealth and happiness. Investigate your options. Start by reading the rest of this segment. Just to be clear, we are not suggesting you quit your job.

So what do we advocate?

You must understand that your job is a tool that will enable you to create financial abundance. If your job is a tool that will help you do that, it is an important tool in your life. You may find your job satisfying and desire to continue working in your current field but would also like to increase your financial abundance. On the other hand you may find your job not to your liking and would love to leave but you don’t because you need the money. In either case, the job is not the end goal, simply a means to an end. If you see your job as a tool, a means to an end, then you realize that it doesn’t matter if you love what you do or the people you currently work with or not. It also does not matter how much you currently make at your job. Why? The reason is you already love who you want to BE and the abundance that person enjoys and your job is a tool to get you there. From now on:

§ Work diligently at your job or task no matter what.

§ Be early or, at least, always on time.

§ Stay until your work is finished.

§ Don’t take extended breaks beyond what you are allowed to take.

§ Volunteer to help on projects if they come up.

§ Help your co-workers.

Remember, BE the change you want to see in your life. Give of yourself freely. The easiest and most effective way to receive is to give first. Wouldn’t the person you want to BE act like that? Who knows, you may even get a raise or a promotion. You should also become good at identifying opportunities in and around your current career path. As you show yourself to be a better you, you will start to notice better opportunities all around you. Also, we highly recommend using a good financial management strategy. There are many approaches to this but one simple one is:

1. Save 20% of your net monthly income.

2. Tithe 10% of your net monthly income.

So after our whole section on saving verse creation we go and suggest saving 20% of your net income! Yes, we have read the above section but no, we are not contradicting ourselves. Saving 20% of your net monthly income is part of a financial management strategy to create wealth. It is not the only part as you will soon read. Some of the additional strategies we will be discussing may require small amounts of capital to implement. So in preparation for that possibility we suggest 20% savings as part of your plan. Holy smokes would it irritate you if the perfect opportunity came across your path but you weren’t prepared for it mentally as well as FINANCIALLY!

“Luck is opportunity met with preparation.” – Oprah

What To Do Next:

The next logical question is,

“What do I do next?”

Many people think the solution is getting another job to add income. This is not the answer because it does not increase your wealth necessarily. Remember, if you stop actively working for your income, how long could you live? That is the definition of wealth. It is true that you may be able to save and tithe more but that gain would be offset by a rigorous schedule, lack of time with your family, and worse still, you are in no position to ever stop working the second job. The solution lies in learning how to develop the remaining two MFCs … Business Ownership and Investments.

The reasons that developing Business Ownership and Investments are better options than acquiring an additional job are numerous. Both of these MFCs, if properly set up have an exponentially higher income potential than most jobs.

Have the feelings of resentment, anger or frustration ever came across you as you said things like “Why does that athlete make $10 million a year and I do this and make nothing!?” or “Why does the owner of the company have such a ridiculous salary, bonus and vacation when I am down here in the ditches doing the work?” or “Why do they make so much more than me and I do so much more?” All of these are great questions and we are about to give you the answer that will put everything into perspective.

“You are not paid what you are worth, you are paid by how many you touch” – Michael Bloxton

An athlete entertains MILLIONS of people and therefore is compensated to that scale. A dining server can only help so many tables in a night and therefore they are only compensated as such. Let’s look at businesses. A doctor, who runs his or her own practice with other people on staff, can help a bit more people than a doctor working by himself or herself and they are both compensated rightly. The question you should be asking yourself is “How can I put myself in a position to help the most people possible?”

Income potential is just ONE benefit of Business Ownership and Investments so let’s get back to a few other benefits.

In addition to the income potential, both can be structured to allow little or no time investment after they are started whereas a job requires your time. Finally, a job is subject to the control of a boss but both of these MFCs are in your control. Let’s talk about each one in more detail.

2. Business Ownership – This MFC includes small businesses, large corporations, professional practices (if you are the owner/partner and have other professionals working for you), network marketers (multi-level marketing), financial traders, and Internet marketers who work for themselves.

The income generation potential from this MFC is as diverse as it is staggering. On the upward end of this spectrum are individuals like Bill Gates, Henry Ford, Andrew Carnegie, and Steve Jobs. On the other end of the spectrum are small businesses that we see everyday – the corner pizza place, dry cleaner. Business Ownership is a wide spectrum ranging from these two extremes and every size in between.

The biggest difference in the size of the business is not the amount of time you put in each day. Small business growth primarily relies on the efforts of its owners and a handful of qualified people. It would seem logical then that the larger the business, the larger the effort. However, logical in this case is not true! Successful large businesses owners do not put their efforts into growing the business.

What do they put their time into developing?

They develop systems that will grow and promote further expansion of the business. That is the key difference between small business and large business. How much effort do you think Jeff Bezos, founder of Amazon.com, puts into selling a new book when it is published? NONE. He already built the system to do that for him. How much effort do you think Ray Crock, founder of McDonalds, put into opening the 150^th McDonalds location? NONE. How was he able to do this? Simple. He created systems of franchise duplication that allowed the McDonalds business model to expand without their direct effort. In addition, he had already creates a systematic approach to store operations that made it profitable and attractive so business owners would want to franchise with McDonalds.

Understanding the difference between small and large business is important. It puts the focus of the business owner and support team on development of systems that increase business and revenues. Let’s say you have an idea for a product or service. You believe this product or service can help people in some way. You want to BE the person who brings this benefit to as many people as possible. Now you have 2 options on what to DO that are in line with who you want to BE.

1. You could focus on personally introducing that product or service to as many people as possible in your lifetime. How many people could you talk to? How much service could you provide?

2. You could focus on creating systems that would introduce that product or service to people 24 hours per day, 7 days per week, and 365 days per year. It could even do multiple presentations at once. How many people could a system like this introduce to your beneficial product or service?

It is clear that the system is what creates the success and lifestyle you desire. That is not to say that you have to start a large corporation. The business system concept is still important to small businesses as well. It is this system that creates the ongoing growth that will enable you to leave your job if you so desire. Whether you decide to keep your job or not, the systems that you set up will create the time freedom you desire.

What if I don’t have an idea for a unique product or service?

There was a time; years ago, that this question stopped many would be business owners in their tracks. In those days, you needed to have a unique product or service to start a business. That was then and this is now. Today, there are so many options it is mind boggling. A few businesses that don’t require a unique product and service today are:

1. Franchises

2. Chains

3. Service Based Businesses

4. Network Marketing (MLM)

5. Marketing/promoting existing products.

6. Education Services

7. Direct Sales

8. Information Services

The list could go on and on but the important part in this process is not what is possible but who you want to BE. Whatever you do should line up with who you want to BE.

How do I know if a business is right for me?

What do you love to do? What gets you excited? What is your favorite part of your current job? What do you find yourself looking at on the Internet or in newspapers most often? Does the business you are looking into relate in some way to what you love and what is important to you? Most importantly, do you resonate well with the idea of who you will BE if successful at that potential business?

You don’t have to decide what you are going to do today. Look around, investigate your options. You can take your time making the correct decision for you AS LONG AS YOU ARE INVESTIGATING.

Both of us have attempted several businesses, failed at a few, had mild success at others and have both found great success in still other businesses. Each business was not only a learning process about that business but about what we wanted and we are still creating businesses today!

If you are wondering what to do once you find the right business, the following is a list of steps we advise:

1. Ask yourself how you are going to create a system that will automatically expand your business. This is not to say that your effort will not be required in setting up these systems or even in getting them started but you must begin with the end in mind and that implies business-system implementation.

2. Create a schedule to work on your business. If you currently have a job this can be as little as a few hours per week to start moving your business forward. It can be more as well. The important point here is that you schedule the time because if you don’t, you won’t do it.

“The key is not to prioritize what’s on your schedule but to schedule your priorities.” – Stephen Covey

Staying consistent here is key. You want to create the habit of creating your business. So after you have completed your priorities or if you don’t have any for that time slot do something that would bring you closer to that BEING state even if its reading a book as it relates to your business and the YOU, you are BECOMING.

1. Decide what your short term (1 month, 3 month, 6 month, and 1 year) milestones are and create a plan to achieve them. Again, think with the END in mind then break it down into doable action items. Keep breaking them down until you can take that step.

2. Remember, the more you give, the more you receive!

This is not a sprint, it is a marathon. Consistent, continuous action can open up another entire revenue source for you. If you use systems, your time investment can be minimal and that means you can leverage your time on other projects for the business or even other MFCs. If you have a job, then your income is not decreasing while this process is starting but instead, you are adding to your income with each success the business has. It is an all-win situation.

Finally, often when we talk to people about this topic, we get the question,

What if I don’t know how to do something that the business requires?

There is training and education available on every topic imaginable today. You can take courses on website design, marketing, sales, relationship building, accounting … just about anything. It is not as expensive as you might think. Sometimes the information is free (like at LifeAbundanceInfo.com) and sometimes it is virtually free. We just recently saw an offer for 1 week access to an entire video/audio library of education on Internet marketing and social networking. We are talking about over 12 hours of content. How much did it cost to get access to this information? $1.00! Some education is more expensive than that but good information is everywhere and many times the cost is minimal.

Also, if you have the money now, or once the business has begun to generate some profit, you can hire someone to do all of the things you don’t know how to do or know how to do well. This is a smart way to do business.

And remember this one final thought – knowing what to do is far more important than how to do it. How to do something is easily found now you know what to do to start building this MFC.

3. Investments – This MFC includes investing in equities, bonds, futures, real estate, REITs, and businesses. Investing is by definition, not active. It is passive. Therefore business investors should have no active role in the business for it to be considered an investment. Similarly, active trading of the financial markets is listed under Business Ownership because it is active and requires regular activity. Investing is passive.

You are working at your job (if you have one) and profits begin to accrue from your Business Ownership MFC. As this capital builds up, you have a new challenge of having too much cash. We know what you are thinking … “that’s a challenge I want” and we totally agree with you. The truth is, not having enough capital is a problem for many people. Having too much capital is an adventure that you embark on. The adventure is learning the world of successful investing.

Investing is a scary subject for a lot of people these days. The subprime crises, housing market crisis, correction in the market, and the recession have scared a lot of people. People feel like investing is a form of gambling. Nick Bogatin, co-author of this series, started his career in the financial markets as a trader. He has this to say about investing:

“Investing could not be further from gambling. Gambling at a casino is playing with a certain risk (your money) with a certain reward (the casino’s money). The gambler plays the casino’s game which has the probability of success stacked in favor of the casino, not the gambler. It is no surprise that most gamblers lose. Investing, on the other hand, has a certain defined risk, a certain reward BUT the investor gets to pick only those investments where the probability of success gives him or her the long term expected outcome he or she desires. Another major difference is good investing has nothing to do with emotion, yet gambling often does.”

The subject of investing is a HUGE subject and we could not possibly cover everything here. Our goal is to provide you with some ideas that you can research further on your own. That brings us to our first principle in investing:

1. Investment capital is capital you DO NOT need to pay your bills!

2. Never buy an investment just because a broker or financial advisor says you should. This is your future and your money so YOU need to understand the investment and think that it makes good sense.

3. Beware of anyone who tells you they have a hot tip. If the person telling you this knows intimate details of the company’s future decisions, this is insider trading and is a crime. If you participate, you could be guilty of a crime too. Think … Martha Stewart.

4. Make sure you understand the difference between assets and liabilities. Assets are good investments while liabilities are not. In Rich Dad, Poor Dad, Robert Kiyosaki says, “An asset is something that will feed you; a liability is something that will eat you.” He means that if you had no other income, an asset would put money in your pocket while a liability would take money out of your pocket. Don’t be confused by what banks tell you they count as assets and what real assets are. Can you think of some things that you may have been counting as assets that are really liabilities?

5. Look for ways to make each investment have positive cash flow. This can be done in real estate, businesses, and stocks. Investments that do not have positive cash flow are not investments really, they are speculations. Speculating has a place in your portfolio which you will learn about shortly.

6. Invest wisely.

You are probably wondering what we mean by “Invest wisely.” You need to allocate portions of your capital to different types of investments. Some investments are low return, little to no risk. Some have a limited risk and higher return. Finally, some investments have total risk but huge potential returns. These investments are what we call speculation. We already covered that your investment capital should not be money you need to pay bills. That leaves your investments limited to the available “extra cash” you have. From this “extra cash” you can consider the following allocation:

30-50% of Extra Cash – Low return, little or no risk

30-50% of Extra Cash – Moderate return, limited risk.

We recommend having at least 80%, or more, of your Extra Cash in one of the above types of investments. That leaves:

0-20% of Extra Cash – Speculation

The specifics are up to you based on your needs, tolerances, and length of time to let your investments work for you. You should consult a financial professional to talk about your specific desires and needs.

The beauty of investing is that it is completely passive. The income comes to you whether you are working or not. This is the ability to leverage your money and it is an important component to financial success.

We will leave the topic of investing with one final thought – money is made in investing when you buy, not when you sell. The reason for this is twofold. First, when you look at an investment, your number one focus should be, “Is it profitable now, and is it profitable when I sell?” If the answer to the first question is yes, then you make money when you buy the investment and even if it turns out that you cannot sell for a profit, if you have been making money holding the investment the entire time, you can continue that. If it turns out that you can sell for a profit, then that is extra icing on the cake.

In closing Financial Tools for Creating YOUR 2010 we would like to remind you that this article is a TOOL in the toolbox of the program. We have shared a lot of information that offers a different perspective and a new way to look at many things you have seen and heard your whole life. Using these tools in conjunction with the last article will create the best results.

This segment gives you the Financial Tools you need to begin Creating YOUR 2010. Knowledge is only potential power though. Power comes from acting on the knowledge you have. You will certainly need a greater understanding of these topics as you go BUT the knowledge you now have, will guide you in this process.

NICK BOGATIN & MICHAEL BLOXTON

N.B: Please do post your comments below. Appreciate it!