Author: The Soaring Eagle

Entrepreneur, Investor, Solution Architect, Award-winning poet, Published author
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Life Without Money!


 

Can Life continue without money? The concept of money is so ancient. Over the ages, it has taken many forms. Nonetheless, the essence has always been the same: An instrument to exchange benefits.

Have we taken money too far? Have we given it a priority it does not deserve?

Let’s entertain the above idea. You walk in a supermarket. You pick all the stuff on your list, and you just leave! How would the owner of that supermarket get the supplies? The same way. His/her suppliers would send their trucks full of goods, unload, and leave!

Apply this to everything. Then the question becomes: Why would people work to produce the goods and services required to sustain a society? Let’s find another motivation. If the household does not need money to survive, then there should be another inclination that would pull  the caregiver of that household off the bed every morning.

What is it? Although money has always been a motivator, yet a nasty one. It’s a negative motivator most of the time. Because of that, a lot of workers fall prey to anxiety and depression in their struggle to make ends meet.

What would be a positive motivator? Something that would make us “want” to work, not “have” to work.

Another example might clear the picture a bit. Here’s a fresh graduate from an engineering school. He went into that career because since he was seven years old, he loved to build “things”. Now he’s got the knowledge under his belt. He “wants” to apply what he’s learned.

Companies do not provide any money. Instead, they offer a top-class work environment, and the chance to work on stimulating and challenging projects. Everyone comes to work to make things happen. Nice, eh?

Now you might ask: How about those lazy workers, who prefer the warmth of the bed over this “great work environment” thing? They end up in a “work boot-camp”. What if they refused to join? I don’t have an answer to that.

The above is food for thought. I may end up writing a book to take this idea to the next stage. For the time being, I’d welcome any comments or suggestions.

 

The Wealth Maker

 

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More on Budgeting


 

We started our discussion about budgeting in the last post. The question we concluded with, was: What is a budget? I like to keep things clear and simple. We could spend pages defining a budget, but that’s not our purpose here.

A budget is a spending plan! That is it. The more you have to spend, the more important having a budget becomes. It could be a simple spreadsheet, or it could be a 500-page volume.

The budget categorizes your spending, so it becomes easier to track. Then based on historical data (the accounting software we talked about earlier is handy here), the budget “allocates” a portion of the expected income to each category.

Now this is all projection. Why is it important? If you went spending without a plan, without some guidelines, you would, most probably, exceed the limits. Even worse, you might spend more on less-important categories than on essential ones.

Let’s have an example. What is more important than your children’s health? Without allocating enough funds to that category, you may end up taking some of that money to cover a less important area, such as eating out.

This leads to a very vital aspect of a good budget: Weights and priorities. Not all spending categories were created equal! Factor that in right from the start. Let your budgeting software know those priorities as it allocates the funds.

The other important element is allocation. How would you decide that, say, groceries would need $2000 this month? The easiest way is to track your spending for a period of time, that is relevant to the budget’s span. Therefore, if you were budgeting month-by-month, then track your spending for a full month, to get an idea how much you would need for the coming months.

Finally, a budget has a lifetime, like everything else! If you were responsible for creating the US government’s budget, then you would need input concerning, at least, the next 10 years, then prepare the current year’s budget accordingly.

Our focus here is personal/small business. In that environment, your budget should take into consideration your overall mission statement (personal, family and/or business), objectives, values and roles. Budget for a year, and have monthly sub-budgets to help you track more effectively.

Always put your investment money aside before you start this process, as if it never existed. We had talked about this before, but it is worth repeating here: Deposit a monthly percentage of your income in a separate account, which is dedicated to investing/growing your wealth.

 

The Wealth Maker

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Wealth Maintenance – Budgeting


The reason you need to know where the money comes from and where it goes to is to plan for the future. That is called budgeting.

In the last article, we touched on the practice of tracking the sources of your income. Similarly, keep track of your spending. This activity is so vital for budgeting. As you know the spending categories, the amounts, the patterns, you start drawing your budget’s draft.

You don’t have to do this with paper and pencil anymore. Invest in a good personal/small business accounting software. They have become so sophisticated and fun to play with.

I’ve had some experience with Quicken. The features are overwhelming: You can track your spending down to the penny, enter your financial institutions’s details, download your transactions from those institutions to the software (so you won’t need to manually enter each spending), create cash flow charts, and most importantly to our discussion here, create budgets!

As the software becomes familiar with your spending patterns, your income, and your liabilities, it helps you create a professional budget very quickly and effectively. Of course, you must be aware of what the software is doing, and guide the processes to your special preferences.

Quicken is not the only software out there. Microsoft has Money, and there are few others. Do not use a 2nd tear software for this task. It’s worth a $70 or so investment.

Once you have your budget in place, you can use it to guide your spending from now on. But what is a budget? That’s what we’ll talk about next time. One important tip before we wrap this up: Always prepare your budget, especially the personal one, with your significant-other. She or he must be involved to avoid conflicts down the road. But more importantly, sharing this is a sign of mutual respect, and hopefully, love 🙂

The Wealth Maker

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Wealth Maintenance


 

In the last 40 articles, we have covered the secrets, concepts, principles, methods and best practices of creating “enlightened” wealth.

Starting from this post, I’m going to shift the focus to the second stretch of the path, which is preserving and maintaining the wealth you have created so far.

Climbing to the top is not easy. Staying up there is even harder! Unless you have a wealthy mind and heart, you could find yourself down at the foothills in no time. There are so many ways to waste a fortune. On the other hand, keeping and growing that fortune takes vision, planning, and above all, discipline.

A wealthy person carries great responsibilities towards himself/herself, his or her family, and the community he or she lives in. Money is not “ours” to hoard! It is a gift that we must use wisely and share generously.

The first step in maintaining your wealth is to know, exactly, where the money is coming from, and how, and where it is being spent, and how.

Why would you need to know “how” the money is generated? To be an enlightened wealthy person, you must generate your money ethically. We have already established that in previous posts. Let’s take an example: While checking your last income statement, you notice an extra 100K. You become carious. You investigate the source of that unexpected sum. Finally, you discover that one of your assistants had been involved in an unethical money-making activity, which is harmful to the society. Whether that was intentional or unintentional is irrelevant now. That money must be returned properly, and the harm must be compensated.

Next, you need to track where the money is going. Depending on the number  of people spending the money, and the variety of activities involved, you may need an accountant to carry out this task. It’s time-consuming, even for an individual with two or three transactions a day. There are plenty of online tools, which you can download to your smart phone, and record every purchase, payment, loan, etc.

In the next article, I’ll expand on the above points a bit further.

Till then, stay safe, make money ethically, and spend wisely!

 

The Wealth Maker

 

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True Wealth!


So far, we have focused on answering two main questions: “What” and “How”. What we want and how to achieve it. If you reviewed most of the articles, you would find a trace, or link, to either one of the two questions.

I feel it is the right time now to ask “Why?” We rather touched on that in the article titled “What is Wealth”. Today I would like to shed the light from a different viewpoint.

Let us assume that by following the concepts, recommendations, and practical methods spread throughout this blog, you have actually become financially abundant. Why did you want to be among the financially elite? Let me ask you the question differently: What is it that you wanted to do with all that wealth?

Wealth accumulation, for its own sake, is futile. There is an old saying that money is like manure; pile it up, and it would ruin the smell of the whole ranch. Spread it around, and you would get a fertile land.

I suggest that your initial intention should address this question. Elaborate on the dreams you would like to fulfill as you reach your financial intention.

A new house, a new car, kids’ education, money set aside for emergencies? Those are the typical candidates, and there is nothing wrong with working on achieving them.

Yet, there are things beyond the self and the close family. Contributions that stay behind when you leave!

Think about that for a moment, or more. How can you contribute to the education, health, and well-being of those in need around the globe?

In my opinion, the two worst enemies of humankind nowadays are ignorance and poverty.

Have a plan of regular contribution to fight those enemies, as much as you can.

You had a plan of saving 10% of your monthly income to create your wealth. Now is the time to adopt a similar plan of paying back, of spreading the benefits of your wealth.

That is the “Why” behind the “What” and the “How”. That is the “spirit” of wealth. Those who commit to such plans report an amazing observation! Every penny they give away to a noble cause comes back multiplied several times, and sometimes more, depending on the sincerity of the giver.

Make your contributions private, except before those who see you as a role model, especially your children. I promise you if you did, you would feel a sense of peace and satisfaction much deeper and richer than what you would feel if you publicize your charitable activities.

Congratulations on reaching this stage in your pursuit of ethical and worthwhile abundance. I am glad our journey together has come to such pleasant conclusion. It is an end of the articles, but not an end to your work on growing and maintaining your wealth on all dimensions. And to your contribution as a responsible wealthy being!

All the Best,

The Wealth Maker

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The Velocity of Wealth Creation


 

What’s the difference between speed and velocity? Speed has only a magnitude, while velocity has a magnitude and a direction. In other words, it’s a “vector” physical/mathematical quantity.

What does velocity have to do with wealth? A lot!

Like it or not, time is an essential variable in the wealth equation. We’ve seen in several places how we could use time to our advantage, as intelligent investors. For example, once you find a “wonderful business”, you don’t pay the “sticker price”. You “wait” till the share price of that business drops low enough to give you a Margin Of Safety (MOS). Please review the first few articles.

The velocity of wealth is the pace and direction at which you move towards achieving your wealth objectives.

There are several factors that affect that pace. Your age, the stage of life you’re currently at (a student, an employee, a family man  a retired person, etc), the geopolitical environment you happen to be in, the influence of your family, friends, co-workers, your upbringing, the level of your self-esteem, the amount and quality of the financial knowledge you have.

At some stages, it’s wise to focus a considerable portion of your time and energy on wealth creation. This would give you the freedom to slow down at other stages, and focus on other priorities.

So your wealth creation velocity changes speed, and sometimes direction, as you move from one stage to another, or as you change any of the factors mentioned above (the list is not inclusive, you could come up with other factors relevant to you).

You could also derive from the above that your financial wealth creation, is but one of your priorities. Hence, it’s essential to have a vision of your life that encompasses all your priorities, values and roles. And a mission statement, which maps out the distribution of all of these elements across your life.

A question may arise here: Can one increase or decrease his/her wealth creation velocity, without negatively affecting other areas of their lives?

Yes they can, but not randomly or abruptly. For example, when your family responsibilities are at their minimum, you can dedicate yourself much more to wealth building (instead of wasting your resources on meaningless activities). This would pay dividends later on, when you don’t have the same amount of free time.

As a rule of thumb, the earlier you start the better. I know people who started investing in their teens. Don’t wait till before retirement to think about your financial future. It would be late, but not impossible. There are always ways to start all over again, and as the saying goes: It’s never too late!

The Wealth Maker

 

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The Wealth Algorithm (10) – Plan B


 

What if you couldn’t secure the necessary funds to start your project, to reach your dream? Would you give up? I don’t think so. Having had a powerful intention, which you believe in; giving up, giving in, failure, whatever, are not part of your vocabulary, even when you talk to yourself (by the way, random, obsessive self-talk is destructive!).

If that was the case, the first step would be to revise your plan, especially the due date. Then, assuming you have a monthly income, before paying the bills, or buying anything, put 10% of that income aside. Open an investment account for that purpose, and deposit 10% of your monthly income in it, before you spend a dime.

Once your savings in that account reach $1000, start investing. Your target is to make 5% a month. Below is an example of how you would manage your investment account:

Month   10%Savings   5% Yield   Monthly Total

1       200.00             0.00           200.00
2       200.00             0.00           400.00
3       200.00             0.00           600.00
4       200.00             0.00           800.00
5       200.00             0.00          1,000.00
6       200.00           50.00          1,250.00
7       200.00           62.50          1,512.50
8       200.00           75.63          1,788.13
9       200.00           89.41          2,077.53
10       200.00         103.88          2,381.41
11       200.00         119.07          2,700.48
12       200.00         135.02          3,035.50
13       200.00         151.78          3,387.28
14       200.00         169.36          3,756.64
15       200.00         187.83          4,144.47
16       200.00         207.22          4,551.70
17       200.00         227.58          4,979.28
18       200.00         248.96          5,428.25
19       200.00         271.41          5,899.66
20       200.00         294.98          6,394.64
21       200.00         319.73          6,914.37
22       200.00         345.72          7,460.09
23       200.00         373.00          8,033.10
24       200.00         401.65          8,634.75
25       200.00         431.74          9,266.49
26       200.00         463.32          9,929.81
27       200.00         496.49          10,626.30
28       200.00         531.32          11,357.62

 

Over a period of 28 months, and because of the power of compounding, your $200 monthly savings, have turned into $11,357.62!

Notice that you haven’t been withdrawing at all. Every month, you add the monthly savings (A), to the 5% yield on the previous month’s total (B), then to the previous month’s total (C). Or: A+B+C=D. The sum, (D), is reinvested again, and so on. Please spend some time studying the above table. As simple as it may look, it’s so powerful and effective.

Another observation is that the increase from one month to the next is exponential, not linear! Although your total is about 11K at the end of the 28th month, you don’t have to wait 2800 months to reach a million. You’re actually pretty close. You could find out by applying the above formula till the monthly total hits one million. If you did that, you would find out that you would need a total of 125 months. Or around 10 years.

The assumptions we made were conservative: A $2,000 monthly income and only 5% return. If either of these (or both) went up a little, the total number of months would decrease dramatically, again, because of the magic of compounding.

Now you have a backup plan to revert back to in case your original plan could not be implemented. As a matter of fact, you could go for plan B, even if plan A did work! Think about that…

The only challenge with plan B is the 5% monthly return. You might ask: How am I going to maintain such yield every month? What kind of investment am I supposed to use? You could either revisit the methods provided in this blog, or do further research. You will find what you’re looking for.

All the best,

The Wealth Maker

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The Wealth Algorithm (9) – Conclusion


 

So far, we’ve covered two out of the four steps mentioned in article (6) of this series. Namely, the business plan and funding options and processes.

One quick note about the funding options presented in the last article. Most of those organizations are based in the US. They offer their “services” to US citizens or US permanent residents only. Before you start working with an online funding entity, please make sure it supports your country. The concept is fairly new. It might not be available everywhere. It’s starting to emerge in Canada as we speak, but it’s more established in the US so far.

Assuming you’ve found the right source of funding for your venture, and prepared your business plan, now you need to work with the funding institution to present the business plan and obtain the funds.

If you went the route of online funding, most of the work would be electronic: Emails, completing online forms and applications, and probably by the end, some phone conversations. Be prepared to answer a wide range of questions, including personal questions. To some extent, this process may be more demanding than job search.

As long as you clearly know what you want (your intention), and how to achieve it (your business plan), you’ve already covered more than half of the distance!

Keep in mind that funding organizations are business-oriented. They want to make sure that by investing in your idea and your plan, both parties would create a profitable business. This insight needs to be clear throughout your presentations. You are not asking for loans or charity. You are a business partner, who is ready to use the offered capital to generate a positive outcome for both parties.

Once a verbal agreement is reached, the details must be documented in an Investment Partnership (TM) Agreement (IPA). The IPA would become the “constitution” of the project. It specifies the objectives, the parties involved, the timelines, rights and responsibilities, the way profit and/or loss are shared, and so on.

Carefully read the agreement in full, and check if you agree on all its provisions, before you make any commitment. If something is ambiguous, or contrary to your original understanding, never hesitate to voice your concern, till you and the funding party reach a mutually agreed-upon formula. This is your right as a business partner..

Next, as you start receiving the funds, you begin executing your business and action plans, day in and day out, till you attain your clearly set intention, and successfully satisfy the terms of the IPA.

I’m not promising you that the road will be rosy all the way. There would be some challenges. Use your capacity and wisdom to convert those challenges into new opportunities. This is easier said than done. Deal with them, one by one, as, and if, they come.

All the best,

The Wealth Maker

 

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The Wealth Algorithm (8) – Funding


 

We covered step one of your tasks in the previous article, which was creating a business plan. The post didn’t write the plan for you. It rather gave you the fundamental building blocks of that activity. The rest is yours to do, following those guidelines. If there was interest to give a full example of a business plan, I’d do that, but I’d need to receive such quires from the readers. You could easily post a comment under any article of this series.

Today I’ll continue to step two: Finding your business partner.

Few articles ago, we excluded friends and family, for obvious reasons, as well as banks. So what’s left? Had this question been raised thirty or more years ago, the answer would have been: None!

However, nowadays, investors and entrepreneurs have almost untapped sources of online funding. With the proliferation of social networking, an era of business financing has been emerging.

Your first stop would be your social networks: Facebook, Twitter or Linked-In. The last is more professional-oriented. If you happened to be a member of Linked-In and have good and trusted connections, you might want to start there. Look for someone with a background in business management, investing, financing, etc. On the other hand, this person is honest and trustworthy. How would you know that? The simplest way would be to visit their profile and see what kind of connections they have. You could do more research and “investigation” till you feel satisfied.

The next stop would be to explore the following new resources of online funding. I’m presenting the three most popular here, but you could find more.

One example is referred to as “Crowd-Funding (CF)”.  Another is “Internet-Assisted angel investing (IAAI). A third is “Accelerator Programs (AP)”

Those are online resources, originally inspired (and to some extent created) by social networking. They are interested in funding new, and potentially profitable, ventures, against some guarantees from the investor.

Below are the definitions of the first two, as given by Wikipedia.org:

(1) “Crowd funding or crowdfunding (alternately crowd financing, equity crowdfunding, social funding or hyper funding) describes the collective effort of individuals who network and pool their resources, usually via the Internet, to support efforts initiated by other people or organizations.[1] Crowd funding is used in support of a wide variety of activities, including disaster relief, citizen journalism, support of artists by fans, political campaigns, startup companyfunding,[2] movie[3] or free software development, and scientific research.[4]

Crowd funding can also refer to the funding of a company by selling small amounts of equity to many investors. This form of crowd funding has recently received attention from policymakers in the United States with direct mention in theJOBS Act; legislation that allows for a wider pool of small investors with fewer restrictions. The Act was signed into law by President Obama on April 5, 2012. The U.S. Securities and Exchange Commission has been given approximately 270 days to set forth specific rules and guidelines that enact this legislation, while also ensuring the protection of investors.[5]“

(2) “An angel investor or angel (also known as a business angel or informal investor) is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity. A small but increasing number of angel investors organize themselves into angel groups or angel networks to share research and pool their investment capital.”

The following website is one of the pioneers in the area of AP: http://globalacceleratornetwork.com. Click on ” about” to get the following definition:

[Note: The definition below is the property of  http://globalacceleratornetwork.com. The author is not promoting or supporting any part of the definition. It’s given here as an example of this kind of online funding. There are other potential options that are worth looking at during your research].

(3) “The Global Accelerator Network consists of independently owned and operated organizations that utilize a mentorship-based startup accelerator model. It provides networking opportunities, training, special perks, and ongoing support for members of the network.

Championed by TechStars, the Global Accelerator Network was created in 2010 under the management of top accelerator programs and alongside the White House’s Startup America Initiative. In the spirit of supporting more entrepreneurs around the world, the Network’s mission is to ensure that 5,000 successful and experienced entrepreneurs and investors will mentor and support 6,000 promising young entrepreneurs. The goal is to increase their success rate tenfold and create 25,000 new jobs by 2015 as well as a sustained engine for growing these figures over time.

Our vision for the Global Accelerator Network is to empower entrepreneurs and accelerators, resulting in an increase in the pace of innovation and the ability for more communities to cultivate entrepreneurial success. We believe the proliferation of this model is very positive for entrepreneurs, investors, and start-up ecosystems. By bringing programs together to create and share best practices, resources and knowledge, we can increase the success of member programs and improve entrepreneurial ecosystems across the globe.

The Global Accelerator Network is a proud supporter and partner of The Startup America Initiative, the White House’s program to celebrate, inspire, and accelerate high-growth entrepreneurship.”

–End of definitions—

The above are only definitions, although they offer a good amount of details to start from. You need to research each one enough to see the full picture, then decide on the one that’s best for you and your selected venture.

Please post your questions and comments below.

All the best,

The Wealth Maker