A Farmer’s Approach to Wealth Making


farming

 

The universe is a perfect example of collaboration and interdependence. Nothing stands alone!

We are members of that system. Our lives exhibit different dimensions that must work together if we aim for harmony and prosperity.

Attaining financial wealth is the result of thoughtful and intuitive groundwork on our part. Just like love, self esteem, happiness. They are all fruits, of healthy roots!

To use farming as a metaphor, a wise farmer decides what he/she wants to grow, picks up good seeds, prepares the land (weeding, leveling, fertilizing, etc), waits for the right season (which takes knowledge), then plants the seeds carefully.

That is the bulk of the work. After that, he or she must keep tending to the land, making sure it’s well-watered, free from insects, and so forth.

The rest is not his/her job! The seeds, given the right environment, know what to do. A farmer can’t speed up or slow down their growth.

Aiming to create and grow wealth is quite similar. It starts with knowing what we want, in as much details as possible, while leaving ample room for creativity and spontaneity.

The next step is finding the right “land”, which is the right business or investment that would translate what we want into actual products and/or services, profitable investments, or both.

The “seeds” are plenty. The challenge is to choose the right ones for you and your dream. It is essential to give this enough thought and soul searching. Sit down, write down, reflect, talk to others, collect and analyze information, release negative emotions, then make your decision(s).

What we seek, seeks us! As strange as it may sound, I’m sure you could find examples from your own life to the truthfulness of this finding. Most of the time we meet halfway, but it won’t come knocking on our doors (it might for a few). We must “move” intelligently towards it, and while moving, we continue to be open to what the road might throw before us. That might be another opportunity we haven’t thought of.

Let’s summarize what we have explored so far:

  • Know what you want.
    • This can’t be emphasized enough. We either know what we want, or not. In the latter case, someone, or something, else would choose for us
    • The farmer, in the above metaphor, knows that he/she wants to grow, say, corn this season. What do you want to “grow”, and how would you know? Go back to the basics. Ask yourself fundamental questions about your life in general. Be as honest as you can when you answer. Let those responses come from “you”, regardless of others’ approval, regardless of your current circumstances, and regardless of past conditioning and limiting self-concepts (this is a tough one. Go through it gently and steadily)
    • The outcome is your vision/mission statement. The constitution of your life! Something that reflects who you truly are. Something that inspires you every time you read it!
    • Derive from that statement your wealth objectives. Write them down as intentions, in the present tense. Avoid woulds and shoulds. And stay away from “wanting”. Here’s an example: “I intend to reach $$ net-worth by end of 20xx
  • Find the seeds
    • Now that you know the destination, look for the vehicle(s) that would take you there. One source that is readily available for you is this blog. Read the articles from the beginning. You’ll find a multitude of concepts, strategies and techniques to help you decide what vehicle you’d like to ride
    • Once you find what seeds you like to grow, look for the right implementation. This is also covered in details throughout the blog. However, you can do your own research using whatever tools that are available to you. The point is to plant those seeds in a good, “fertile” environment
  • Take care of your new farm. Nonetheless, allow it to grow on its own. Give it time and be patient. A farmer wouldn’t wake up every morning, go to the cornfield, and yell at it: Grow, grow! Be watchful at this stage and well-informed, but not willful

Finally, what we set out to achieve in life follows timeless principles. The more we know and understand those changeless facts, the smoother the ride, and the better the outcome would be.

The Wealth Maker

© Image Credit: www.shermanfarmnh.com, From Google Images. © Google Inc.

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

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

 

Investment Strategy


 

So what is an investment strategy? It’s not an action plan, it’s not a mission statement, and it’s not a set of objectives.

Actually, these concepts are organized as follows: You start with a vision, then a mission to reach that vision, then a set of objectives to guide you through your movement towards the vision. Then comes the strategy, which defines “how” you’re going to achieve the objectives, how you’re going to carry out the mission, and how you’re going to reach the vision. Finally, an action plan is the actual set of steps you take to implement all the above within the framework of your intentions. In other words, the action plan is the manifestation of your intentions.

Let’s start with the vision.

A vision is what you see in the future. In the context of investing, it’s what you see yourself achieve, say 10 years from now.

Your vision is tightly related to your self concept. If having a million freaks you out, because you don’t know what to do with it, or because you worry about protecting it, then don’t worry. You won’t reach that amount! Wealth or poverty, both lie within, not without. Do you want a proof? More than 90% of those who hit the jackpot lose all the money within a year. Why? They are poor on the inside. They can’t handle prosperity, it’s too much for them.

On the other hand, truly wealthy people, stay wealthy, even if their bank accounts are clean and shiny :-). How? They have what it takes, on the inside, to create physical wealth again and again, all because they are full of non-physical wealth. Their minds and hearts are rich.

You always need to start with a vision. You actually do start with one even if you don’t notice consciously. “Everything is created twice” (to quote Stephen Covey): First in our minds, then on the ground. The better the first creation, the more robust and successful the second. So instead of delving into a life-changing experience like investing subconsciously, without being fully aware of your final target, I’m inviting you to sit down, grab a pen and paper, and chart some course.

Now along the path, you’ll face challenges and difficulties, or even unexpected success! Have you heard of the “fear of success”? You need to be prepared. And that where objectives come into play. They guide your march towards your vision.

Success is not only achieving “what” you set for to achieve, it’s also “how” you intend to achieve it.

In summary,  an investment strategy is your approach to investing. It’s your vehicle to reaching your vision.

In a following post, I may give some practical examples of the embodiment of a good investment strategy.

Till then, stay healthy, wealthy, and wise…

The Wealth Maker