The Plan for Riches and Wealth
Today I will share with you the plan for riches and wealth. It works for me, and I know it will work for you. It is comprehensive in nature and includes every aspect I know for acquiring and keeping wealth. You will see it, desire it, plan for it, act for it, and ultimately achieve it. It is simple in its approach, difficult in its execution, and long in duration; in fact it will last your life. It will demand your very best of talent, mental capacity and inner drive. It will petition you to learn and master new talents. Some days it will hurt and you will definitely need to make some tough decisions along the way. But let me tell you one thing: You know it will be well worth it!
Before you Run for the Exit
Stay with me here, because you knew this wasn’t going to be some soft easy plan. Deep inside you knew this. You are asking for the plan and method to rise to within the 1% of society. You don’t arrive there just by stepping onto the escalator of ease and pushing the faster button. This plan is hard because it works.
Asset Oriented Mindset
This blog post is the last in a series of six posts geared to outline and illustrate every step and facet of the Asset Oriented Mindset. This is the mindset employed by the wealthy and rich whether they consciously know it or not. I outline where their focus lies, what a good asset allocation strategy looks like for them, and how they pounce on new business opportunities as they present. Visit our AOM landing page to see and read the previous 5 posts. Here, in this last post, we will bring it all together. Buckle up!
The Foundation Block
I’m not very much of a sports fan. I don’t follow Hockey, Basketball, Baseball, Football or MMA fighting. However I have tremendous respect for the athletes. Specifically, I love the story of Michael Jordan and how he could single handedly carry his team to victory. His determination and ferocity to win inspired not only his own teammates, his opponents and fans across the world, but they inspired non-sports fans such as myself!
Not every shot was sunk and not every game was won. He had some terrible days on the court. What did he do when things would go sideways? Refocus and work on his fundamentals. So too must we continually work on and master our financial fundamentals.
Our Four Financial Fundamentals
Income Stream –
There are three types of income streams that we will consider as our monthly inputs.
- Business Assets I own and work for – This income stream is the most desirable. You are in control and rewarded handsomely for your performance; there are no limits. You are in control of the salary or dividends paid from the profits generated. If you build a system of business assets that produce a quality product that the public demands you will do extremely well. This is also the most difficult income stream to build. We want a large portion of our monthly income to come from this source.
- Investments I own – These take the form of interest, rent payments, royalties, dividends, and capital gains. These are extremely effective and passive but require large capital outlays and are subject to market fluctuations. That being said we still want to focus on building these assets up. They are reliable sources of income that can be relied on during retirement.
- Business Assets owned by others, but I work for – these take the form of salary or an hourly wage. We sell our time and energy to another in exchange for money. This is your hourly 9-5 job or profession. In exchange for a set limit on compensation, we receive stability. This can be an excellent source of reliable income if the previous two income streams are insufficient. We will rely on this income stream to cover our bills and financial obligations while we simultaneously pursue investments and business opportunities on our off hours.
Bold Presumption
Could I be so bold as to guess that you are probably working hard in this third income stream? There is no shame in this, most of us do and we find security in the reliable income stream this provides for ourselves and families. You can be very successful and gain substantial wealth by combining the last two income streams together and mastering the rest of the financial fundamentals. However, if you’re in this for the win, we need to build that top income stream by building and owning an asset we work for.
Pay Yourself First –
Of all the financial advice you’ve heard this is probably the most common as pervasive. That’s because it works and has been time tested. We need this dialed in at 10% at the very least. The higher you can get this percentage the faster things will happen. The quicker your passive invest income stream will grow and the quicker your savings nest egg will sky rocket. Some important points to implement:
- Keep the investment strategy simple and efficient – We need it simple so you can focus your time and energy on building a business. Let your investments be truly passive and stop looking at them everyday. Read our Four Pillars for Investing Success to read about our recommended investments and asset allocations.
- Automate as much as possible – Setup preauthorized deposits or contributions that force you to pay yourself first. Automate which investments are bought and rebalanced for you. Low cost robo-advisors such as WealthSimple that can do this for us. Follow that link and you’ll get a signup bonus. (Canadians only)
- Tax Advantages – Take advantage of tax advantages or subsidies that can accelerate these investment programs. You can generate a tax free income stream (TFSA or Roth IRA) or at least defer your taxes until you draw on the income (RRSP, 401k)
Budget & Control Spending –
This is the one we all dislike. Not many people like to sit down and budget out how they will spend their monthly income. It seems restrictive, cold and controlling. We all want the freedom to spend freely how and when we want. This makes budgeting the most important financial fundamental we need to master. We are shooting for the moon here with the plan for riches and wealth and if we cannot manage a budget of a few thousand dollars, how will we manage a budget of multiple tens of thousands, perhaps even $100’s of thousands of dollars. Your budget is core, critical and paramount. You cannot manage that which you do not measure.
My friend over at Rinkydoo Finance has incredible articles on how to execute a budget and how to get control of our bills.
- Budgeting: How to Organize your Finances: 10 Simple Tips
- Managing Bills: How to Catch up on Bills: 11 Life-Changing Tips
Invest your Surplus
Now I know you’re going to groan, but our next fundamental is to grind the budget further and generate a surplus. Even though we carefully planned and we’re executing our budgets, we need to squeeze water from rocks. This is important for the following reasons:
- Improved compliance to the budget – You will generally do better if you focus on trying to get deals and come under budget. Some line items will come in over budget while you will be under on some other line items.
- Learning negotiation skills – This really is the primary driver here behind this principle. You need to learn how to negotiate deals that thereby increase your profits or create budget surpluses. So get used to asking a service provider to sell you the same service for less, while you simultaneously ask your employer for more money. Find ways to get the same good or service for less money; find ways to provide the same service to your employer for more salary. This is a powerful life skill that can create an incredible difference in your life and your financial wellbeing.
When you’re successful and you have money left over you will invest it to generate even more income and grow your assets. Read my article Wealth Habit: Invest the Bargain for more information on this and my real-life example here.
Business at Home
If you’re thinking this doesn’t sound like a household, this sounds like a business, then its working. Because I’m trying to get you to start thinking like a business. A business has revenue coming in, an annual budget with expenditures, and constant negotiation to improve both the top line revenue and bottom line profits. You cannot obtain wealth and maintain wealth without mastering these financial fundamentals.
This Foundation Will Easily Build You A Million Dollar Asset Base
Building on our Foundation
As we execute and master our financial foundation we start to put into our mind the idea of branching out beyond the daily routine of working for someone else’s asset and working for our own assets. This is where the true wealth lies – building and working for your own business that grows exponentially. I think you already knew this or at least thought it to be true. Why is it that the richest people in the world don’t work for someone else? It’s because they own the means of production and the ownership of such production has tremendous value. We need to get into that circle.
Current State Analysis
Sometimes it helps to know where we are today and where we want to go tomorrow. If we do a comparison between the rich and poor, we can identify some traits and characteristics that we should adopt if we are to accelerate off our financial foundation. This article effectively breaks down 10 key differences. Carefully analyze the proportion of wealth and how it is distributed across the different wealth brackets. How much is in business equity? How much is tied up in cars and primary residence?
The Starting Block is Always From the Foundation
We’re going to start with “Side Hustle” and work our way through to Large Business. One builds on the previous and the prior is required learning for the next stage with ever increasing demands and risks. If we stay true to our foundation, we can start building upward progress. When we fail, or encounter a bad turn of events, we always first consider if we need to work on our fundamentals. Dust ourselves off, and get back at it.
The Goal
Remember how we budget each month? How we know our monthly expenses and how much income we need to get by? Recall at the start we tally up how much business income we receive from our own assets and then investment assets? Once these first two income streams eclipse the monthly budget we can unhook from the wages earned by working for someone else and their asset. Then we laser in on scaling up our assets and working for these instead.
Side Hustle –
Side hustle can sometimes have a bad connotation like we’re slinging wares out of the back of a van or truck. What we’re actually trying to do is start a small business that we could run from our home while we still have our day job. This gives us the opportunity to learn business lessons that we couldn’t get from our personal finance foundation. Here are the business principles and lessons we need to learn:
Market Research — What the market demands and is willing to pay for
Sometimes what we think the market demands and is will to pay for is completely different than what we want to sell. This means you need to be flexible, adaptable and provide what is demanded, not what you want to. There are too many examples of failed businesses and enterprises that were convinced the market needed a particular product or service only to find out the market didn’t demand it or was not willing to pay the required price.
Supply Chain — Coordinate with suppliers and negotiate their prices
Remember that negotiation skill from the fundamentals section? We need it here to drive our supplier prices down. What needs to be done to get the best prices possible? These businesses are shrewd and you’re no Wal-Mart. So we need to bring our A-game and get creative.
Promotion and Advertising — Social media skills are now essential
We live in a day and age where everything is online and you must have a social media presence. If you’re not online and have no social media presence your days are numbered until someone with your same idea figures out how to take it online.
Social media is the most powerful tool for advertising and building brand awareness. Print and TV advertising are dead. With the current suite of online tools and media platforms, you can reach your target market with laser precision. However, just like anything, this skill and media talent must be learned and mastered.
Proper marketing allows us to sell adequate volume while simultaneously striving to get the highest price possible while giving good value to our customers.
Accounting — Bookkeeping and finance skills are imperative
Every expenditure, every dollar of income must be recorded, taxes collected where required, and remitted to the correct level of government. Luckily there are tools to assist with this such as Shopify and QuickBooks. The importance here will only accelerate and magnify as you scale your business up. I spend 5 minutes every morning recording and classifying the transactions from the previous day. This helps keep things on track and when I pay my taxes I know exactly how much to remit. My accountant helps here too and always has great suggestions on methods and tools to minimize the time required and the taxes I have to pay.
Collaboration — Business is a Team Sport
Which brings me to my next principle in business. Business is a team sport. While personal finance is personal and doesn’t extend beyond your family, business by its very nature, requires the collective talents and abilities of more than just yourself. You need to learn how to play the team sport of business; even if its just two or three of you.
The reason a “Side-Hustle” business makes such a great idea is that its the next natural stepping stone after you master your personal and household finances. It is lower risk than going all in and quitting your job. It also provides a great launching pad for you to learn the critical business skills listed above. Next, you can grow and scale your business upwards on an ever expanding set of business knowledge and financial acumen. Lastly, its fun, exciting and puts to use time you would otherwise spend doing other less fruitful activities.
If you’re interested in learning more about starting a side hustle, check out this great article: Finding Your Side Hustle – 5 Things to Consider over at BearMoney.ca. They have some great insights and things we all need to know before we get started.
Getting Started & Finding Your Opportunity
This is the most difficult part for everyone and also the most difficult for me to write about. All I can really do is say this is a very personal endeavor and share what has worked for me and provide encouragement. Everyone is different, and everyone has a unique way in which they can contribute to their community whether online or in person. The ways to sell products and services are varied and vast and what works for one person may not work for another; but rest assured you can find your method.
Conscious Pattern Recognition
You ever notice how a friend or a relative talks to you about a certain topic, buys a certain type of television or vehicle and then you start noticing that TV, vehicle or topic everywhere? It’s not that suddenly everyone started buying those things; its that you started noticing it because your mind was taught a new pattern. It’s been there all along you just haven’t picked up on it because the pattern hasn’t been made aware to your conscious mind. It starts to consciously recognize the pattern everywhere because it has been taught the new pattern. I’m sure you can relate.
My point is money making opportunities are all around us. What we lack is the ability to recognize and act on them. Every opportunity has a pattern or “signature” and some people recognize them more easily and get motivated to act on them. These people get wealthy; these people have wired their brains to see opportunities and will often act on them. They are actively seeking ways to solve problems, serve people, create new methods, innovate new goods and sell them for a price. We need to tune our brains to recognize the opportunity and seize the opportunity. Not every opportunity turns to gold, in fact most reduce to lead very quickly, but soon enough one will launch and take off.
Recommended Books
These three books have made the biggest impact on me personally and have helped me recognize opportunity patterns when I previously would have overlooked them. They are listed in the order I recommend you read them.
The Secret by Rhonda Byrne
This book is transformative in the way it will make you see the world around you. Pay particular attention to the law of attraction because we want to attract wealth, opportunity, and business into our lives. Focus in on the sections that speak to the power of thought, feeling, desire and how these resonate out and attract back to you the very thing you desire, feel and think about. It is general in nature and can help you in all areas of your life.
Think and Grow Rich by Napoleon Hill
This book will be a step up on practicality from the Secret but uses the same fundamentals and principles explored there. It takes the same and focuses it towards wealth and creating a successful business endeavor. Meditate on these principles and let them seek deeply into your mind. The author gives you recommended steps and habits to repeat each day to ensure your success. Goals and deadlines are also discussed to ensure you apply the teachings contained.
Rich Dad Poor Dad by Robert Kiyosaki
Now over twenty years old, this modern day classic is still relevant and will make you see money and finance in a different light. Few, if any finance books, prior this, mentioned passive income as a worthwhile investing focus. Today this term and focus is so pervasive and ubiquitous that it now seems self evident and timeless. Before this book was released in the late 1990’s everyone was focused on internet stocks and making money through capital gains. Some say this book helped inflate the housing bubble that popped in 2008 with investors buying up real estate in hopes of following the teachings of this book. What it will do is help you focus on business ideas and pursuits that generate positive cashflow and multiple income streams for yourself.
Prediction
If your approach these books with an open mind, they will exert a profound impact on you and nothing will be the same. You will find a successful side hustle or small business. I predict this is what will happen: You will begin to incorporate the methods mentioned in these books and begin practicing the principles that resonate with you. Within months, maybe even weeks, someone will present an idea or problem that sparks something inside you. Pursue this opportunity and see if there is anything to it. Collaborate with the person and see if there’s something you two can do together that generates a worthwhile business venture. These can often be started with very little to no capital. Maybe it won’t have legs, but you just recognized your first pattern. Keep at it and soon enough something will land.
Small and Large Businesses
Once your Side Hustle plus your Investment Income surpass your monthly budget amounts, you’re ready to exit the 9-5 grind and focus on scaling your business upwards. Multi-millions will be the yard stick used to measure your wealth and business assets. Scalability is the difference maker here, along with how well you interact with the other people that work for you and manage the assets you own.
If I’m being honest with my readers I’m not at this stage yet. I don’t have a large equity stake in a small to medium business enterprise so I can’t advise on this or share what it is like. I know a few people who have made it and they mention how hard they work, but they also mention how very rewarding it is. They often mention that scalability is important and being able to manage employees can present unique challenges.
Fail Fast, Fail Often, But Never Give Up
In closing a word needs to be mentioned about failure. Few worthwhile endeavors in life will slap you with failure like pursuing a business enterprise will. Despite even your best efforts and sincerest desire to help others and avoid rejection, it will happen time and again. These setbacks are critical lessons to learn and not to be taken personally. These teach you the points you must correct in order to be successful.
I’ll close with this video. It’s about a 15 year old teen who auditioned on Britain’s Got Talent when he was 12 and was told he wasn’t any good. He didn’t let the failure beat him and came back to audition some years later. Watch what it looks like when someone doesn’t give up on his dream.
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2 comments
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Thanks, I appreciate your comment. All the content on this site is original and my own writing.
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