So we’re now in full flow of 2015 and judging from Facebook, most people seem to have got off on a good start! Which is great! But how long will this last? Moving into February, this is where the New Year Resolutions start wearing off and bad habits slowly creep back in. Now I haven’t the foggiest of what you’ve all promised yourself this year, but if it’s to meaningfully change your financial situation by this time next year, you’re quids in as this is what I’m going to focus on throughout this newsletter.
It’s important to understand that mastering your daily/weekly habits is pivotal to turning your financial life around. Most of us are firmly cemented in bad financial habits and so it’s crucial that we identify some of these, reset them and then religiously stick to better ones. Now for a long time it’s always been said that it takes 3 weeks to start and maintain a new habit. But I’ve recently read that habits actually tend to take 3 months! Well, whatever you believe in, it’s always taken about 2 months to set myself into a sustainable routine so I’m going to base my ‘tips’ upon that grounding. SO…
STEP 1 – Change your view on Money
You need to fully reset your Mindset about money. It is not bad or good, it’s not evil to want it, it’s not unfair if you have lots of it, it’s wrong when people resent others for having it/aiming to acquire it and even if you do have lots of it, it doesn’t necessarily mean that you’re successful. As Shakespeare once said, “Nothing is good nor bad, but thinking makes it so.” Wise words Bill! Money also enhances certain aspects of a person. A sort of magnifier if you will. For example, if someone is naturally a good person to the core, an abundance of money tends to enrich/supercharge that aspect of the person and that person ends up being even more benevolent, charitable and driven to create lasting positive change. However if someone is a real douche…guess what? Helloooo super douche! A good example are some lottery winners, football players and ‘suddenly-famous-for-no-reason-reality-TV-stars’. Whether you agree with me on that or not, one thing is for certain, money is just a means to an end. It’s a conduit to your dreams goals and ambitions and ultimately, money just gives you more time, freedom and options.
Many midlife crises/depressions actually arise in ‘successful middle-aged professionals/business men’ because of the sudden attainment of the wrong goal. This happens because they have revolved their whole adult lives into trying to get as much money as possible as quickly as possible. Their endgame/goal was to get the money…so when they finally get it, they feel empty and lost. A ‘what now?’ feeling engulfs them and eats them from within.
So you need to remember that money is just an enabler to do whatever the hell you’ve always wanted to do, wherever, whenever and with whoever. So get some paper out and actually write down what you want in life, what you want to do, where you want to go and the reasons why you want it. This is absolutely critical in your future success in both a financial and happiness sense. You really REALLY need absolute clarity in your short/medium and long term goals and targets. This way, you can start to put in the realistic short term steps in order to achieve your aims. And I’m not joking when I say that you need to go all the way down into the weeds and have weekly milestones/targets. By doing this you’ll always know whether you’re on course or not. If you’re not hitting your weekly or monthly targets, you’re not going to hit your end of year targets which means you’re swerving away from your ultimate targets. It’s that simple. As I mention in my book, when I left the air force, I stupidly spent over £70k trying to convert my military flying qualifications into commercial licences but then quickly realised I didn’t want to be an airline pilot. So at the age of 25, I was stone cold broke and struggling to decide whether to buy cheese or mayonnaise because I couldn’t afford both. But because I already had the mindset and knowledge pretty much squared away, I created a life plan and promised myself and my fiancée (now wife) that within 5 years, we would never have to work again. My closest friends and family constantly doubted this goal, but I never had any doubt and the reason why I knew I was on track was because I was smashing all of the realistic mini weekly/monthly targets. That’s why 4 years later, we’re now well ahead of schedule and living in a house we thought it would take another 20 years to attain. So remember, plan out your life and/or goals with absolute crystal clear clarity and stick them up on your wall so they’ll stare at you whenever you enter the bedroom or office!
STEP 2 – Change the questions you ask yourself
All too often, people desire something like a new car or a new dress etc but once they see the price tag, they’ll just say to themselves, “No way, that’s way too expensive” or “Oww L Wish I could afford that”. And that’s it! Conversation over. Absolutely zero thinking involved. This of course is so wrong and is totally self-limiting. So the next time you want something that you can’t afford, don’t just give up, you need to attack the problem and brainstorm for solutions. You need to completely re-wire your thoughts so that you get yourself to the point where you naturally question yourself with “Ok, what do I need to do in order to achieve that?” or “What needs to happen for me to walk out with this dress or drive out of the showroom in the car?” Even if there is no apparent and immediate solution, it’s fine. What you’ve just sparked in your brain is an unanswered question/puzzle and our brain naturally loves to solve things. So your subconscious will ponder over this constantly whilst you’re conscious and unconscious. Then remarkable things will start happening to you. Eventually and all of a sudden you’ll find opportunities everywhere. Literally everywhere you go, you’ll identify money-making opportunities. For example, years ago I was on YouTube and saw a crazy video about Bubble Football. Something I had never seen before but looked so fun! I quickly googled where I could play this in the UK and found out that it wasn’t even in the UK. Now most people would have stopped their search there. But because my mind is now naturally always looking for profit making opportunities, within 30 minutes I had found a factory in China that could make these Bubble Footballs and had placed an order for 10 of them. Then within a few days I set up www.ZoccerUK.com – the UK’s first Bubble Football Company.
You see, when you actively try to re-wire your sub-conscious to challenge yourself into figuring out how to ‘get stuff’ you set in motion a positive feedback loop. The longer you live in this new mindset the better you’ll become at identifying viable opportunities to the point that you’re extremely idea rich, but time poor. This is a beautiful place to be in as you can then cherry pick you next venture and if you’re currently employed, well I guarantee you it won’t be long before you start your first part time business. You’ll be surprised how easy it is to generate an extra £200 per month from a part time business and for a lot of families out there at the moment, that’s a life-style changing amount. And when you’ve excelled yourself to the point you’re earning an extra 1% or 10% per month, this will only get easier. This is one of the main reasons why you see a lot of entrepreneurs who hit rocky times nearly always bounce back. In fact I personally know of several millionaires who lost everything, but within years were millionaires again. This money game really is all in the head. And it is a game with money being the score, so it’s definitely worth taking the time to be at least proficient at it! So the take-away tip from this is to constantly ask yourself “How can I afford this widget?” or “What needs to happen to afford this widget?” etc.
STEP 3 – Do you actually know where all of your money goes?
For those of you who know me, you know my stance on ‘Savers’ at the moment. ‘Savers’ that squirrel their money away into a bank account, savings account, Premium Bonds or cash ISAs are single-handedly ruining their family’s financial future. If this is new to you or you are slightly shocked by this, please read previous Insights. But despite my view, the discipline/skill of ‘saving’ and mastering ‘delayed satisfaction’ are crucial if you are to be an effective investor. If you cannot resist the urge to spend every penny you get, your journey to financial independence will be a long and bumpy one, if not unattainable.
So one really effective exercise to master which will enable you to carve a path to independence is ‘Money Tracking’. It’s such a simple idea but remarkably hard to complete for a lot of people. This exercise does exactly as it says, it tracks where you spend all of your money because before you even think about investing in the markets, you first need to know exactly what’s leaving your pocket every month. Most people haven’t got a scooby of where all their money goes. So you need to do 3 things:
- 1.) Create a Spreadsheet with columns of: Day, Outgoing Description, Outgoing Cost and From Which Bank Account. The Day column should go from 1 – 30 and what you need to do is put on this spreadsheet every single standing order or direct debit that leaves you and on what day. So for example, if your rent goes out on the 7th, just put ‘Rent’ in the Description column next to Row 7, with the amount in the Cost column and then the bank account from which it leaves in the Bank Account column. Pretty simple so far right? Well it needs to be. Don’t ty and make a fancy spreadsheet, it needs to be simple and easy to read so that from a quick glance, you’ll know exactly what’s leaving your bank accounts and how much money you need in them to ensure that the payments flow smoothly.
- 2.) Get your mobile out and create a new note called ‘Money Tracking’. So starting right now, you need to note down on your phone every single thing that you buy with cash, cards and things online. You just need to write down what it is and how much it was for. Even if it’s a newspaper, toll road fee or kebab. Jot it down and promise to yourself that you’ll take this seriously. Write everything down and do it for 2 whole months. Do it now!
- 3.) After the 1st month, and after being WOWED at how much you’re giving to Starbucks, identify what you can do without and do another month of Tracking and see if you’ve reduced your spend. I get people whining to me all the time that they would invest etc but they don’t even have a spare penny. My instant (silent) thought is ‘Bollocks. Pure piffle!’ Most people can save at least 10% of their monthly income. Even if they have a family and pets to feed.
If you can’t do it from cutting down your frivolous spends and even your Sky TV, well as my good friend Andy Craig says in his amazing book ‘Own The World’ – move house! Downsize. I guarantee you’ll be able to save a lot more if you’re willing to put in the necessary actions to temporarily downsize. Being able to siphon off at least 10% of your income is an essential starting platform if you want to live the life that you and your family wants. If you’re not prepared to temporarily live like most won’t so that you will one day be able to live like most can’t…well then I can’t help you. But if you’re are able to put aside 10% of your monthly income, congratulations…you’re literally just 5-10 years away from financial independence!
STEP 4 – Time to work on yourself…
Assuming that you’ve done the hard work, you’ve tracked your outgoings and have managed to free up at least 10% per month, this is where the fun begins. As my good friend Graham Rowan often says, you need to open up a ‘Wealth Account’. It’s worth setting up a standing order to automatically transfer your spare 10% into your Wealth Account every month. Now you must only use this account to either invest in assets or to invest in yourself. The latter is the crucial first step here. Yes you can find some ‘hot tips’ from Money Week or other trusted advisors but you do need to develop your knowledge so that you know what you’re doing. Just like if you know a little bit about car mechanics, you’ll know if the mechanic is trying to fleece you at your next MOT etc. The same exactly applies to personal finance/investing. So before you do anything, you need to watch/read the following:
- Buy the book ‘Rich Dad Poor Dad’ by Robert Kiyosaki. This book literally changed my life when I was about 20 years old.
- Then buy the book ‘Own The World’ by Andy Craig. As I said, this book is very good.
- Then go to www.InvestingStarterPack.com to watch a whole bunch of free videos explaining how the world really works. This will tell you the truth about investing/trading and also at the end of these videos you will be able to get a free copy of my book ‘The £15000 Poptart – The 23 Mistakes That 96% of Traders Make and How You Can Avoid Them’. This will show you every mistake you could possibly make if you trade/invest.
So they are the main things to do but don’t stop there, aim to watch every YouTube video by the likes of Peter Schiff, Jim Rogers, Jim Rickards and Robert Kiyosaki. If you follow these simple 4 steps you’ll be far ahead of your peers in knowledge.
STEP 5 – Time to implement…
Enhancing your knowledge is great, but doing all of Step 4 but then not implementing any of your new found information is pointless. So you have to actually do something. Now there are 2 main types of assets, Cash Flowing Assets and Capital Appreciating Assets. A capital appreciating asset is something that you buy low and then sell high down the line so that you make a nice profit. However if you speak to any billionaire, it’s the cash flowing assets that you really need to develop. Cash flowing assets are basically anything that puts money into your pocket every month or every year such as dividends from stocks, rental properties and part time/full time businesses etc. The aim of building up your cash flowing assets is so that you can become financially independent far quicker and more efficiently than any job! What I mean by this is that the moment the cashflow from your assets (ideally residual income) matches or exceeds ALL of your outgoings/liabilities every month, you are then financially free and no longer HAVE TO work your main job/profession. Once you’re at this really enjoyable level, then you can start to scale your wealth and properly work on your fortune as you’ll then have time and options on your side. The best asset class that provides the biggest ROI is Business.
If done correctly you can get staggering returns from your money, however out of all cash flowing assets, it’s one of the riskiest. 9 out of 10 businesses fail within Year 1. Then a further 5 out of 10 of them fail within Year 5. But if you crack it, it’s great. However I’m aware that setting up a part time or full time business isn’t ideal for most people so this leads us to the most overlooked and feared cash flowing asset of all…Trading. Technically the asset is your knowledge/ability to trade successfully and consistently. If you spend the time in learning how to trade properly (which isn’t hard) it will completely change your life for the better but so many people avoid this cash flowing asset as people naturally fear what they don’t understand and instead just focus on all of the horror stories from the 96% of traders that do lose money on a consistent basis! But trust me, I promise that if you stick to a good strategy with proper risk management and risk to reward ratios in place, it’s very hard to lose money! All of my Realistic Trader students would agree and back me up on that one. For example, the method I teach on the my online and 2 day workshop will enable you to grow your money by 20% per year and you can do that even if you lose 6 trades out of 10! Yes you read that correctly, you can lose 60% of the time and still make 20% per year. They are odds that will remain in your favour. But after a while, when you get into the more advanced methods that I personally use, you’ll be able to lose 14 trades out of 15 and still be in profit. Hopefully you can see that this is far from risky or gambling!
So to round things up, make sure you follow these 5 Steps during 2015 and I guarantee that this time next year, your personal financial situation will be vastly improved. If it hasn’t please feel free to contact me and I will sit down with you in person and have a chat about things. I won’t give you advice, (I never will), but I can show you where I think you’re going wrong…
Best wishes for this year and make sure to go to www.InvestingStarterPack.com – you’ll be pleasantly surprised!