1. Why Do It At All?
Find your motivation. No-one will ever care as much about your financial well being as you do. Just think about how it would feel to work because you want to, making confident financial decisions, never having to answer to anyone again? Listen to the news knowing that you are unlikely to be affected by redundancy, be able to make life choices based on other criteria than just money. Feel strong and supported with a financial cushion behind you. Give back to your community in some way or work in the third world. In the words of the bank, there is another way and you can create it.
ACTION STEP:
Write down how you would like to be living your life, on a Tuesday in two years time and another Tuesday in ten years time. Write down where you are, who you are with, what you are doing from the moment you get up to the moment you go to bed. If you carry on as you are, are you likely to be able to live that life? No? Is this compelling enough yet? If not, go back and make it more so.
WARNING: This is the first hurdle that most people fall at. If you think that this step is pie in the sky and can be bypassed, be warned. If you can't be bothered to do this properly, you will probably never be able to create financial abundance for yourself - successful people take the time to create powerful visions for themselves. It makes the goal setting so much more fun and takes away the need for "self-discipline".
2: Discover the 4 Lanes of The Wealth Highway
The greatest relief of all is that there are only four ways to create real, lasting, sustainable wealth. I'll be going into the four lanes of the wealth highway in more detail in later articles but, for the moment, think to yourself, Phew! that's not too overwhelming - I can learn about just four things! Those four lanes are Property Investment, the Stockmarket, Minding Your Own Business and Profiting From Your Passion. Each has a myriad of vehicles to ride in - perhaps a pushbike will suit you better than a juggernaught initially. Perhaps you will want more than one vehicle in each lane!
ACTION STEP:
Decide if you are a pushbike person or a Ferrari person. Both will get you there but one will be faster. Think about which lane of the motorway you are going to drive down first - and no, you don't have to get a vehicle on all of them to start with, but if you can be aware that the more vehicles you have on each lane, the faster you will get to your destination.
3: Give up Self Discipline for Simplicity
I mentioned self-discipline briefly earlier. I don't actually believe in self-discipline. I believe in creating a compelling vision, setting chunked-down goals and timelines, setting things up so that they are as easy to achieve as possible and designing environments and support systems to ensure your success.
We have talked a bit about the compelling vision and the second part of the puzzle is simplicity. The secret to financial success is KISS (keep it simple, stupid!). I have tried every accounting package under the sun (Microsoft Money worked for a while) but they are all just too complicated. You don't need all that stuff! A simple Excel spreadsheet that tracks your bank account and feeds into a 12 month cashflow forecast will do the job nicely.
ACTION STEP: Learn how to use Excel fast. Nothing fancy, just a few simple basics.
4: Pull It All Together
The oil that lubricates your vehicles is information. How can you make good decisions if you don't have all the information you need at your fingertips? Here is where we gather everything you will need into one place. Don't worry! You don't have to do anything with it just yet.
ACTION STEPS:
First of all, The Equipment. You will need a ring binder or two, some coloured file dividers (minimum of 5), plastic wallets to keep small items and loose sheets in, a hole punch and a stapler. Three pens, black, red and blue or green. Gather everything together first, because if you need to get up from your seat for anything, you will get distracted by the kettle, the washing, the cat, and you will lose the momentum.
Next, gather The Information. Recent bank statements, credit card statements, wage slips or sales invoices (if you are self employed). Tax stuff, put it in a separate pile. File the bank statements at the front section, in date order, oldest at the back. Credit card statements similarly. Next the "money in" section, wage slips or invoices. Then the "money out" section.
Receipts or invoices for things you buy. How much you divide each section up is entirely up to you - again, keep it simple to start with. Get a printout from the bank of all current direct
debits or standing orders.
5: Can I Have A Receipt Please?
Receipts fill in the knowledge gaps between your bank and credit card statements - especially if you make a lot of cash withdrawals. Try to get into the habit of paying by switch - it lists the shop name on your bank statement and helps you figure out what you spent where (unless you are trying to stick to a budget by taking out a fixed amount of cash per week and living on that!).
ACTION STEPS:
Get into the habit of asking for a receipt for every purchase you make. It's easier to ask for a receipt every time, than trying to remember what you need receipts for (or not). Tuck them
immediately inside your purse, an envelope in your bag, or a plastic wallet in your filofax. Once a week, empty them out into one of the plastic wallets in your lever arch file. Label the wallet "Receipts - w/e 31/12/03".
6: I'll Just Get The File Out
Mark Forster, best selling author on Time Management, says that when you tend to procrastinateabout doing essential tasks, the best thing to say to yourself is "I'll just get the file out". I will go one further step back here, and ask you to think to yourself, "when, each week, is the best time for me to just get the file out"? Unless you schedule some regular time to look at your finances, you will never get round to it, the receipts will pile up and it will swiftly become a psychologically insurmountable task.
ACTION STEPS:
Start slowly Don't expect to be able to change the habits of a lifetime overnight. If you can just get into the habit of collecting the information you need and keeping it tidy, you have all the tools at your fingertips for when you are ready to move to the next stage. Well done! Make Time If you schedule some time each week, you should be able to do everything required to become a financial whiz kid in about 2 hours maximum. Sunday or Monday mornings are good, so are Monday evenings. Perhaps you want to take a day off to get started? Or use that dead week between Christmas and New Year. So when ARE you going to "just get the file out"? Get support You could talk to your partner, spouse, etc. and tell them how you want to get a
handle on your money, and tell them the time you have set aside to do it. Ask for their support, by not distracting you or tempting you with offers of "more exciting" things to do. I promise, as your financial intelligence increases, as you take more action, as your wealth creation gathers pace, this will swiftly become one of those "more exciting" things - that allows you to do even more "more exciting" things.
7: Saving v Investing
I never understood the point of saving. What did you save for? Things you were going to buy later. Why not have them now then? I didn't understand the difference between saving and investing. And the interest rates were so pathetic what was the point? I totally didn't get the power of compounding. Nobody told me that what counted was not what you earned but what you kept. Nobody said that the reason wealthy people are wealthy is because they are taught to put an extra step in between "earning" and "spending". That extra step is investing. Investing in assets that produce income themselves.
Then about three years ago I saw a drawing that changed my life. Here it is. The blue line is your income, the red your outgoings, the black arrow being the difference between the two (what you keep) and the green line the interest your savings can earn you taking into account the power of compounding. When the green line crosses the red line - you are financially free. Blew my mind.
ACTION STEPS:
Visit http://viralurl.com/moneygym/richdad and watch a short fun animated flash movie that explains these concepts in more detail. Brought to you by Robert Kiyosaki, author of "Rich Dad, Poor Dad" the greatest book on financial intelligence on the planet. Brace yourself for the strong American accent, by the way. Then buy that book and read it from cover to cover.
8: Take Your Financial Driving Test
You wouldn't expect to get in a car, never having driven before, blindfolded, no seatbelt, hanging your legs out of the window, drinking champagne, driving the wrong way up the motorway in the wrong lane and not end up in a car crash, would you? Well, so many people take their first excursion into wealth creation with no skills, no training, no advice, no mentor or coach, no wonder they come a cropper!
How many folk do you know, who buy a share on the stockmarket based on a hot tip from a bloke in the pub, then wonder why they end up losing money. How many people leave their job and start a business doing something they loved to do as a hobby, then wonder why they end up as one of the 85% whose business fails in the first year? How may people invest in "buy to let" then wonder why their "hot property" sits empty or worse, ends up being "squatted" by a bad tenant?
ACTION STEPS:
Decide which lane of the wealth motorway you are going to tackle first. Get a book, take some training, find a mentor - get started - by all means as quickly and inexpensively as possible, but get help! I recently went on a property investment course that cost £1880. Expensive? I learnt two things that made me a minimum of £40,000. Starting to look cheap now! You CAN learn this stuff and you should be ready to invest in training in the same way you paid for your driving lessons. And if you are finding yourself resisting that idea, think about the hot tips from the
bloke in the pub. How good is "free advice" really? Usually the reason it's free is because it's worthless!
9: Create A Wealth Team
But there are people worth listening to. Find a great bank manager - usually a business bank manager rather than a personal manager. Imagine how many businesses they see per week - they see the good and the bad, the ones who are successful despite themselves and the ones that fail even thought the idea is good. A good accountant can help you set things up well for you before you even start.
A great solicitor will help you avoid legal problems you may not even know about. I have two or three wealth "buddies" - people who are more successful than I am and who love to talk about what they are up to. Inspirational, knowledgeable, supportive, aspirational, and they love to share what they know. In the same way, avoid people who are negative about everything or who are "energy vampires". They will come out of the woodwork as you become more interested in wealth creation and finance and it always amazes me how much energy they will put into trying
to discredit what you are learning about or trying to do, rather than improving their own lives!
ACTION STEPS:
Make a list of all of the people you spend significant amounts of time with. Work colleagues, friends, family and anyone else you may network with. Put a tick next to their name if they are positive, supportive and successful in their own right. Use your own definition of success here. Start to identify who could be in your Wealth Team and begin to ask some searching questions. If you want to get involved in Property Investment for example, then ask everyone you meet (and particularly everyone you are thinking of including in your Wealth Team) these kind of
questions. Are you a Property Investor? How many properties do you have? What is your
investment strategy (or plan)? If you are interested in starting your own business, ask they if they have any other businesses on the side, what they are, what the plan is for that business? If they answer in the negative, go and find people who are involved and already active in what you want to do. Surround yourself in action orientated people. Why would they talk to you and tell you their business? Because successful people have an abundance mentality, they love to share what they know, and learn from other people. For all they know, you may be able to teach them something new! And you will, one day.
10: No Magic Wands
So sorry there are no magic wands. Sorry that you will have to take action. Sorry that there are no knights in shining armour. But remember, doing something 30 times makes it a habit. If you just ask for a receipt 30 times it will become second nature. If you just get the file out 30 times, you will be in the habit of sitting down to spend some time on your money. Don't give up if it seems overwhelming, get help.
ACTION STEPS:
Make it fun - play games with things like debt busting! Draw a grid for each debt with a square for every repayment you will make on each debt and colour each square in every time a standing order goes off. Get the Cashflow 101 (see http://viralurl.com/moneygym/richdad ) and practice wealth creation on a boardgame first! The more fun this is, the more likely you are to take action. Find a buddy who is into this wealth creation mularky as much as you are, and get your partner/spouse on your side and excited about the possibilities of financial freedom for them too. Find a mentor or get a coach, one who actually does the things you aspire to do. But whatever you do, do something!
I know you can.
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