Managing Your Money

Managing Your Money:

Until You Demonstrate You Can Handle What You’ve Got,

Your Sub-conscience Won’t Let You Get Any More!

“As a man thinketh in his heart, so is he.”

Many people are perennially poor because deep down inside, they don’t believe that they deserve to be wealthy. They subconsciously believe either that they don’t deserve to be wealthy, because of their background or upbringing, or they believe that being wealthy is evil. Money is not evil. The love of money is evil. Money itself is just a neutral tool to accomplish something. People can use money for righteousness or they can use it for wickedness. That is one reason why we encourage people to be generous instead of selfish.

One of the principles of wealth creation is congruency… you must believe internally that you are worthy of abundance, and you must behave outwardly as if you have abundance. This does not mean that you spend money as if you were Donald Trump. This means that you exercise financial discipline now, including allocating a certain percentage of your money to be given away freely. One way to build this congruency is to practice the discipline of wealth management now, even if others might see you as poor. This may seem odd, but it is true.

Some people say to themselves, “I’ll manage my money as soon as I get caught up,” but that is like an overweight person saying, “I’ll start exercising and eating healthy, right after I lose twenty pounds.” That’s called putting the cart before the horse. You end up going nowhere, perhaps even backwards.

The process to manage your personal wealth is simple. Open up 7 savings accounts at your bank (yes, you are allowed to have more than one savings account. Don’t worry, they’ll all be on the same screen if you do your banking online). Each account will serve a different purpose. Modern online banking even lets you give these accounts a nickname. Your source of income may only be “active income” from a job at first, but will eventually be income from your investments, by taking the monthly profits from your managed accounts. Here is the Personal Money Management System:

1)  Investment Capital (INV)= Start by always putting 10% of your after-tax income in this account, earmarked exclusively for building PASSIVE income. You might even put your daily pocket change in a bowl and deposit it into this account at the end of each week. This is the fuel for your wealth creation machine. Use this money to pay for the corporate credit building process and to get the unsecured lines of business credit that will fund your managed accounts which will generate MASSIVE PASSIVE INCOME. This category gets a check mark when you re-invest a percentage of your profits so that you enjoy the magic of compounding interest. Eventually, you may end up putting up to 50% of your after-tax income into this account, but you have to start somewhere.

2) Give Account (GIVE) = You may only be able to allocate 10% of your after-tax income to this at first, but eventually this account may grow to 40% of your after-tax income. This is a worthy goal, for this is the money you use for charitable and philanthropic purposes, both local and foreign. Use this money to feed the hungry, clothe the naked, liberate the captive, and administer relief to the sick and afflicted. Relieve the suffering of other people who are less fortunate than you. There are many underfunded soup-kitchens who have increasingly long lines due to widespread economic hardship. Who knows, maybe one of your donations ends up funding the research that cures cancer or finds a cure for malaria.

3) Living Expenses (EXP) = Depending on your present situation, this account may require up to 70% of your after-tax income. Under no circumstances should you spend more than 70% of your income on living expenses. If you find this impossible, then reduce your living expenses accordingly (Cable, cell phone, air conditioning, etc) The money in this account is what you use to pay for food, clothing, housing, etc. As you income grows, your living expenses may eventually require only 10% of your after-tax income, or less. This is a worthy goal.

4) Contingency Account (CONT) = This is for irregular expenses that do not come up but once every several months, or very irregularly, such as a down payment on a home or car, or purchasing furniture, or semi-annual insurance payments. You may choose to allocate from 5% to 10% of your after-tax income to this account. Not only should you be earmarking these dollars toward future planned expenditures, but you should try to maintain 3 to 6 months of income in this account as a contingency so that you’re prepared for the unexpected.

5) Personal Development Account (DEV) = Do you spend more on coffee than you do on your personal development? Use this account to pay for your Financial Education and your Personal Development… books, CDs, seminars. You should be engaged in lifelong learning, daily reading of personal development or biographical books. Please see our suggested reading list for some of our favorites. Allocate 2.5% to 10% of your after-tax income toward this.

6) Play Account (PLAY) = For some this is easy, for others this may be hard, but you must allocate a certain percentage of your income to be spent on yourself every month or at most every two months. If you do not, your child-within will start rejecting the wealth creation process, because of personal neglect. Reward yourself every month with something extravagant: a limo ride, a massage, a triple scoop of double chocolate fudge ice-cream, fancy shoes, a Rolex, a ski trip, an Alaskan fishing trip, a safari, trekking the Himalayas, a trip to the Grand Canyon, Patagonia or Antarctica… it is up to you, but make sure it is something you really really enjoy! At first, you may only be able to allocate 2.5% of your after-tax income to this account, but eventually you may allocate up to 10%, if you enjoy the luxurious lifestyle.

7)Tax (TAX) = As you wean yourself from W-2 income (active income) and increasingly move towards living off of your investment income (passive income), you will not have an employer withholding your taxes for you. Therefore, it will be necessary to set aside about 20% of your income. Keep it in a business checking account, which will help you in the credit building process.

Synopsis

To synthesize all the Wealth Creation concepts at play here, the key to financial freedom is:

1. Minimize Expenses (the 7 accounts help you plan and track that)

1. Maximize Income (both earned income and passive income)

1. Use your excess income and/or use other people’s money to buy assets that produce passive income.

1. Once your assets produce more passive income than your expenses, you are officially FINANCIALLY FREE!

1. The slow, traditional route is to only use your own money (OPM) and to only acquire assets with single digit and low double digit returns.

1. The accelerated, alternative route is to use other people’s money and to find assets with high double-digit and with triple-digit returns.

1. The two key drivers are the rate of return and the effect of compounding interest.

1. The key to massive wealth is to get a critical mass of investment capital to start with, either your own money or other people’s money (OPM).

1. The highest returns we have identified, with the least head ache and best managed risks, can be found by using world class professional traders to create the returns for you in your own managed account.

1. After you achieve financial freedom, you enhance your lifestyle and the accompanying expenses only after first creating the additional passive income from your assets. To spend more, first you must earn more, otherwise, you create poverty, not wealth.

*Note: As you build your financial discipline and start to see the fruits, you will want to adjust the percentages according to your needs and desires. However, we invite you to always be extra generous in your allocation to your GIVE account. As the Law of Restitution plays out, you will find that you cannot give it away fast enough, for the abundance that continues to come in. Who knows, you may eventually end up with a 90% allocation to your GIVE account, because your other needs are already satisfied by the massive influx of passive income and stellar investment opportunities that endlessly flow your way. We believe that such behavior can fundamentally transform our society.