5 Remarkable Steps to Reach Your Financial Goals Faster
While we are all human, we are not all the same in the way of desire and expectation. With that being said, we all have financial goals that are unique to us — serving our own unique desires. There are some of us who have immensely extreme financial goals that include a private jet, owning an island and multiple vacation homes in exotic places. Others have more modest goals that are the ones that matter most to them, such as never having to be concerned about having enough money to pay the basic bills and household expenses. There are even others who would simply love to have enough extra money to take the family on an annual European vacation.
At the end of the day, it is my belief that everyone should have financial goals that at least ensure that they are financially independent — having enough money to not only cover all of the day-to-day expenses for life, but enough to enjoy some of the pleasures of life that make it worth living. After all, we are not here simply to survive, we are here to live and thrive.
The point is to make the game of financial achievement and success a winnable one. It does not matter if you are just getting started on your financial goals, or whether you have been working on your financial dream for a while, there are some actionable steps that you can take that will fast track the process.
While most people are aware of one of the most important steps in the pursuit of financial freedom, far too many fail to activate it. In order to take control of your financial destiny, one of the first things that you must do is transition from the position of consumer to that of business owner and investor. You must be able to produce, own and sell a product or service that continually adds to your net worth. If you are completely new to the idea of building wealth, you may not have an understanding of what net worth means. In its simplest form, the term “net worth” is the representation of your total worth, including all liquid and hard assets, after your debt has been subtracted.
If you are going to build wealth and become financially independent, then you are going to have to become an owner and an investor. In fact, you should start investing immediately, no matter how small the amount, because this will allow you to tap into the power of compounding growth. If you are like most people that come to me on a limited income, you are probably saying that I don’t have any discretionary income to invest. This is because you are still in need of an adjustment in how you think toward and view money. The truth is that you do have the money to invest; you are just spending it on other things that you have currently placed a higher value on.
Allow me to give you an example of how changing your spending priorities can help you build your wealth with much less upfront capital than you think. If you eat out once a week, spending an average of $50 per week. Try ordering pizza on that night and splitting the cost among the group that you eat out with. This could result in a savings of $40 per week or approximately $2,000 per year. That $2,000 savings invested in products that produce an 8 percent compound return over forty years will produce $581,944. And, the exciting news is that there are actually index funds that produce as high as 9.2 percent consistently over the last 20 years.
How many other activities that are focused on sucking as much out of your bank account now as possible are you currently involved in? Building wealth requires that you are able to look beyond the moment and see into the distant future, where there will be financial needs at a time in which there may not be the physical or mental capacity to produce the required revenue.
Changing your approach to see into the future does not mean that you cannot create a great life for you now. In fact, the more you develop the proper mindset for wealth building, the more you will be prepared to create a lifestyle for yourself in which you can have many of those things you fantasize about, but you have convinced yourself you can never have. A person who has the right mindset does not see giving up nights out and certain forms of entertainment as a sacrifice, they see it as an investment in a better financial future. The quicker you make the change in your thinking, the quicker you will be able to experience the reality of your new thought patterns.
When I begin working with my new clients, whether it is through my Elevation & Empowerment program, my 1-on-1 Coaching program, or any of my other direct engagement programs and services I offer, I make sure that they understand that their current position in life is a direct result of their thinking. There is unyielding truth in the statement, “you are what you think.” If you have not read “As a Man Thinketh” by James Allen, you should do that immediately. It is a very interesting read, and it identifies exactly how your thoughts produce your reality through a series of circumstances. You see, contrary to popular belief, life is not happening to you, it is responding to you. The quicker you gain a lucid perspicacity of this reality, the quicker you will be able to take control of your life and your financial destiny.
Save More and Invest the Difference
Many people will quickly tell me that they do not have the money to save for the purpose of investing, or anything else. For the most part, I am always able to find far more that they initially believed was available. For those individuals that are serious, I challenge them to save at least 10 percent of their net income for the purpose of investing. I personally save 20 percent of all revenue I generate. When people ask me how, I explain that I treat the money like a luxury or investment tax. If the federal government were to increase your taxes by 20 percent today, you would complain, and maybe even scream bloody murder, but at the end of the day, you would pay it and make the necessary adjustments to your lifestyle. What totally blows my mind is that people will so easily acquiesce to giving up their money to another entity that will not return it with any type of interest or growth, but refuse to pay themselves in order to produce a better lifestyle for them and their family.
It is important to abandon the consumer mindset that drives you to spend your money on things that almost immediately depreciate in value, in lieu of investing in things that either increase in value, or at the very least, hold their value.
You must also develop a better understanding of your necessary expenditures, such as the purchase of a home. As of July 2015, the average cost of a home in the United States was $361,000, and that cost has continued to increase as a national inventory shortage is steadily driving prices upward. But even at the 2015 cost, at six percent interest, and 20 percent down, the house will end up costing you an additional $334,000, which is nearly double the value of the home. So, the first thing that you should learn from this is that a home, at least in the initial years of paying for it, is not an asset. It is a liability that counts against your net worth. How you manage your spending now will impact how this liability impacts your long-term financial health. If you manage your spending wisely, and invest wisely, you can end up paying off your home early — saving hundreds of thousands of dollars in compound interest.
Most people see interest as a small percentage of a larger amount, but they fail to take into consideration the impact of compounding. Allow me to show you how powerful having an understanding of how spending your money can immediately change your financial outlook. I am sure that you would love to put $400,000 to $1 million aside for your retirement. Let me show you how easy that can be. In addition to your usual mortgage payments, make small principal-only payments each month and watch your mortgage get cut in half. That is the power of compounding interest. Compounding interest is in direct correspondence to the principal amount, if you reduce the principal, you reduce the interest. This also works in the reverse in wealth building, as you increase your principal holdings, you increase the amount of interest you will be paid in annual compound growth.
There are multitudinous ways to cut back on your spending in order to save more for investing, from paying down the principal on your mortgage to cutting back on your coffee addiction.
Earn More and Invest the Difference
One of the biggest mistakes that people make is that they become conditioned to live at the level of their means, so any time there is an increase in income, they immediately increase their spending. Instead of increasing your cost of living, look for ways to decrease it, and invest the difference in revenue generating ventures.
Most people get stuck here, and that is where I come in. The truth is that your earning potential is virtually unlimited. Before moving forward allow me to explain how you can directly impact your earning potential.
There are three primary components that impact how much you have the capacity to earn, whether you are working for yourself, or working for someone else. It is worth noting that any time that you are working for someone else, you are always leaving money on the table.
Think about it for a moment. No company is going to pay you exactly what you are worth to them. To put it another way, if your employer is making $500,000 as a direct result of the services you provide, they are not going to pay you $500,000. Depending on the industry you are in, you could be paid as little as 20 percent of what you are generating for your employer. This means that you possess the capacity to generate that and more as a contractor or consultant, but we will shelve this for a future conversation.
For now, let’s just look at the three components that directly impact your earning potential.
- Providing a service or product that meets a demand, need or solves an existing problem
- Performing what you do at an exceptional level
- Being so unique and exceptional at what you do that it makes it almost impossible to replace you
Meeting a Need
The first step in creating earning potential is to find what you are naturally good at, and find out how it can meet an existing need or solve an existing problem. While there are demands for things that are not needed or don’t solve a problem, these things are not necessary, and the demand can easily dissipate, but when you are meeting some type of need, you have the foundation for earning money, and you don’t need an employer to do it.
Even if you are the first person to service a particular need in a specific type of way, you must understand that you will have others observing what you are doing and looking to capitalize on your revenue generating channel. That is okay, it is a part of the world of free enterprise. The way that you protect your brand and your position as the leader in the market is by providing the highest level of service and performance as possible. Performance and service are immensely important to creating the type of relationships with your clients that will lead to continuity and customer loyalty.
Find a way to deliver your product and services in a way that is so unique to you and your unique gifting that it makes you irreplaceable. When you become irreplaceable, you can literally set your price and people will pay it.
The key is to always provide more value than the price you charge — leaving your clients with the feeling that they received remarkable value for their spend. As long as your value exceeds your price, and continues to meet a need, you will thrive in your market. Keep your pulse on the needs and impulses of your target audience, in order to stay ahead of the game.
Work harder on yourself than you work on your job. The late, great Jim Rohn used to say that all the time. In fact, Jim Rohn was a personal mentor to Tony Robbins, who is by far the most effective and wealthiest person in the industry of personal development, and that is a direct result of working harder on himself than he did on his job. When he started, he was working as a janitor.
Basically, stop focusing on the things around you that you have no direct control over, and place your energy into controlling those things you do control. When you focus on self-improvement, with specific intent, you automatically increase your value and your earning capacity.
Be Aware of Your Fees and Taxes
This is an area in which so many people surrender a significant portion of their earnings. This is where the average person and the wealthy investor differ. In studying the ultra-wealthy — those with a net worth of $1 billion or more — there are four common denominators that exist.
- The consideration of the potential risk of loss over the potential to earn money
- Asymmetric risk/reward (investing a little to earn a lot)
- An awareness of the fees and taxes associated with a particular investment
- Diversification across assets
By this point in the game, you should have, at least, a limited understanding that it is not what you earn that matters, but what you keep. Do you know what takes the single largest chunk out of your retirement fund? Taxes. Generally speaking, Americans pay more than half of their earned income to some form of tax. Depending on what tax bracket you are in, and the state you reside in, you could easily be paying as high as 52 percent of your income to income, payroll, healthcare, social security and other taxes.
With taxes taking such a large chunk of your income, it is important to develop a mindset of tax efficiency, which is one of the most direct paths to financial health. This is not a suggestion to evade your responsibility to pay taxes, but to find legal and moral ways to reduce your tax liability. One place that you can go to have your current portfolio evaluated for excessive fees, taxes and other risks is Portfolio Checkup. Within minutes you can have your financial and investment portfolio evaluated, as well as receive recommendations on how to improve it.
It is also immensely important to be cognizant of what you are paying in fees to invest in certain assets and funds. Hidden fees are another silent killer of financial dreams, and the quicker you get your fees under control, the greater the long-term benefit.
Generate Better Returns
You may be wondering how in the world can you reduce your risks while generating greater returns. Well, the way that the ultra-wealthy do it is to practice an investment philosophy known as asymmetric risk/reward. Basically, asymmetric risk/reward is a technical way of saying invest a little where there is the potential to earn a lot. While most novice investors are being told that they have to be willing to risk a lot to make a lot, the wealthy practice finding situations in which they can invest a little and gain a lot. The reduced risk protects them from thedownsidee across assets. In other words if they are only investing $10 to make a hundred across 10 different assets, they can literally be wrong nine times out of the 10 and still win. This is much better than investing $100 to gain $15 to $20 dollars, but how many of you have heard that a 15 to 20 percent return is good?
Major players in the market, like Paul Tudor Jones, Ray Dalio, Carl Ichan and Warren Buffet, understand that no matter how much they know about the market, there will still be times that they are wrong, but asymmetric risk/reward allows them to be wrong along the way. While I used a 10:1 risk/reward ration earlier, Paul Tudor Jones says that he always looks for a 5:1 ratio or better. This means he is looking to gain $5 dollars for every $1 he invests. While these types of investment opportunities are more challenging to find, they are out there.
Another way that you can reduce your risk, subsequently increasing your returns is through diversification. While most people who familiar with diversification associate it with risk management, it also can serve to increase returns. So, asset allocation is key to long-term success in the worlds of wealth-building and investing. You see, your financial dreams are not as far away as you believe.
Make Changes to Your Current Lifestyle
While there are many people who never consider any type of radical change in life, even when it could produce a better quality of life, it is something worth considering. For instance, if you currently live in Manhattan, or a number of other areas in New York or in the Bay Area, you can move to any number of cities in Texas of Boulder, Colorado, for that matter and live an awesome life with just what you pay for rent or mortgages in the aforementioned cities. It is amazing how many people feel trapped in an environment that is not providing them with what they desire. Sometimes, a radical change in lifestyle and situations are needed.
Even if you don’t switch cities, switch environments, and find ways to reduce your spending. Also, find positive situations that will support your new-found desire for wealth building. Your financial dreams are within your grasp, but you must be willing to take the necessary actions to achieve them.
For those who are looking for a more direct approach to self-improvement and increased performance, I would love to work with you. Check out some of the resources listed below.
Visionetics Self-Concept Development Course (Reconstructing the self-image, building self-esteem)
Motivational & Inspirational Video Series
Your Mind is the Genesis of Your Destiny
Renewing Your Mind: The Dynamics of Transformation
The Invisible Father: Reversing the Curse of a Fatherless Generation
For More Information Contact:
The Visionetics Institute
LifeChange@rickwallacephd.link or firstname.lastname@example.org