Handing You The Keys
To Your Financial Future
THE SECRET TO ATTAINING WEALTH
Published by: Myles A. Bush, Jr. at Smashwords
Hard Copy available 3-16-12
Copyright 2012 Myles A. Bush, Jr.
http://www.financialsenseseries.com
All rights reserved. No part of this book may be reproduced by any means, nor transmitted, nor translated into a machine language without the express written permission of the Publisher or Author. This copy of the eBook is for promotional purposes only! It should not be sold, redistributed, loaned, given away, or reproduced in any way, form, or fashion.
Dedication
This book is dedicated to
Adiner Edmond, Myles J. Bush, Eddie McGee,
Thelma Jones and
Barbara N. Dorsey-Randall.
ACKNOWLEDGEMENTS
First I want to thank God for giving me the insight, the courage, and confidence to take on this project. I want to thank my wife Erica, my kids, Myles and Brandon, and my family for their hard work, dedication, and support while I worked on this project. Erica, I love you and you inspire me. I did this project for you. When I lost my job you were there for me every step of the way. Thank you so much.
I dedicate this book to all my math, business, and accounting teachers and professors from elementary school through college. I dedicate this book to all teachers and professors who enrich people's lives through teaching these subjects. My hope and my prayer is that this book helps you and your students in the classroom. Keep up the good work.
Finally, I thank you for buying this book. Thanks for trusting me with your financial education. This book is a lot less costly than college tuition so you'll definitely get your monies worth. My only requirement is that you share what you've learned. Help someone else accomplish their financial goals by purchasing this book for them. Be ready for the transformation that will come as a result of you studying this book and applying the principles. Thanks again.
Introduction
Chapter 1…Welcome to Class
Chapter 2…Choose Your Classmates
Chapter 3…Let's Talk Money
Chapter 4…The Road to Success
Chapter 5…Assets vs. Liabilities
Chapter 6…Get Out of Debt
Chapter 7…Spend Your Way to Wealth
Chapter 8…Investment Workshop
Chapter 9…Develop Business Relationships
Chapter 10…Create Retirement Options
Chapter 11…Pass It On (Generational Wealth)
Chapter 12…Put It All Together
Thank you for the privilege of introducing you to The Financial Sense Series. This life changing series is designed to teach every American the principles of money. This book, "The Secret to Attaining Wealth" is the introductory course and will serve as the foundation to the entire Financial Sense Series. I'd appreciate you reading this book in its entirety before reading any other work, even if you're well versed in the area of finance. I personally consider myself seasoned but I can appreciate refresher courses, reminders and workshops geared towards re-focusing, rebuilding, and/or re-establishing my foundation. The Financial Sense Series is designed to do just that. I'm not interested in teaching you the basics. As my student I want you to Master the Basics. In order to get the most from this book and the entire series you have to be refreshed on how to handle money. There is a distinctive difference between knowing and mastering. This book, along with the Financial Sense Series will make you an expert, help you get out of debt, and pave the way for the future.
Introduction to
"The Secret to Attaining Wealth"
If you're like I was, you're living paycheck to paycheck, you don't like your job, and you're wondering how to get ahead financially. You don't have the level of education you need to start a business, invest in the market, or buy real estate, for that matter. You're afraid to leave your job, you have little to no savings or retirement, and you don't know what it's like to have true wealth. You're embedded in debt. Credit cards, student loans, a mortgage, and car payments control your life. I can imagine you asking yourself, how do I get off this treadmill? Surprisingly, you already know the answer to this question. As a matter of fact, you've always known the answer to the question. Neither the problem nor the solutions have changed. Most Americans have dug themselves into a deep hole called DEBT. The sad reality is, once we're in the hole we don't try to dig ourselves out, rather, we dig ourselves deeper and deeper into the hole. Some of us dig ourselves so deep we reach the point of no return—literally. This is a place where you cannot recover. Now I know what you're saying. There is always hope. My friend, optimism is good but it has to be rooted in reality. And if you don't know the basics principles of money, like it or not the hole is your reality.
Most of us would like to be wealthy but we don't know what true wealth is. People measure wealth in dollars and cents, and rightfully so. But, money is only part of the wealth equation. Wealth is a way of life. It's a journey, a lifestyle. Wealth is having knowledge and wisdom. There's one thing surely true about generating wealth. ANYONE, yes ANYONE, can be wealthy. As you continue reading I'll teach you how to build wealth by modifying your behavior through the application of a few key principles. This behavioral shift has put me on a sure path to generating wealth. I can't say I've reached my destination, but I can say I'm pre-destined and on my way to doing it. Generating wealth is a process. Being wealthy is the end result of going through the process. In order to get the end result you have to Master the process.
The first step is educating yourself. Most of us don't take Money 101 at any point in life so the Financial Sense Series is designed to teach it to you. "The Secret to Attaining Wealth" is probably the most important book in the series. This book will not teach you how to be the next Warren Buffet, or Donald Trump. This book will ONLY teach you to Master the Basics. The basics are the key. I want you to clear your mind and journey with me as we travel, teach, and learn together. If you want to start generating wealth and eventually become wealthy, the basics will get you there. The basics keep you rooted. The basics will lead, guide, and protect you. The basics are so important that you will NEVER generate wealth or become wealthy without them. I guarantee if you learn, follow, apply, and SHARE the basics, you'll start to generate wealth and eventually become wealthy. You'll decrease your debt, earn and save more, and you'll invest in your family's future.
Mastering Tip
Understand, the hole and the point of no return do exist.
The severity of both is relative to the situation.
The Purpose of this Book and Financial Sense Series
You've probably read a financial book or two in your days. So, if I were you I'd be asking myself, "What's this book going to do for me that all the others haven't?" "How can this author help me?" "Why isn't Myles mentioned with the Suze Ormans, and Dave Ramseys of the world?" These are all good questions that I'll answer in the "about the Author" section of the introduction. But let me give you a birds-eye view of why this book, along with the Financial Sense Series, will help you like no other book.
First, I can relate—not to say others can't, but I was literally living paycheck to paycheck, and I didn't like my jobs over the last 10 years like a lot of you. I'm not suggesting you quit your job, rather give yourself the options you deserve. Additionally, when I started writing this book in Oct 2010 I was unemployed, $225K in debt and I had little to no savings. I was in a state of disarray. I was living off my credit cards. Now, I'm generating wealth and on my way to becoming wealthy. I'm working towards being debt free and I have a year's worth of income saved. Want to know how? Read this book and the entire series to find out. I'll give you a clue. Master the Basics. If you don't get anything out of this book, I hope you understand how important the Basics are.
The second reason you should read this book instead of or in addition to any financial literature is because of the fact that I've done my home-work. I consider myself a student of finance. In writing this book over the last seven to nine months I've read all the best selling financial books. Books on retirement, cash flow, budgeting, real estate, investing, financial advising, securities, and much more. I've taken all the classes and attended all the seminars so you wouldn't have to. Please understand, I've been a student of finance from elementary school through college. I've always excelled in math, accounting, business, and finance. I'll go into my educational background later but you can be confident that I'm well versed in the area of finance, and I know the basic principles of money and how to teach them to you. We all know there's no better teacher than experience. I've made numerous journeys down the financial roads, getting my share of bumps and bruises along the way. Think of this book and the series as a one-stop shop to learn about money and finances.
Need another reason to read the book? This book EMPHASIZES small group study, entrepreneurship, thinking outside the box, and focuses on how to generate wealth through your untapped potential. It will teach you how to Master the Basics. It will teach you how to become an investor, teaching yourself how to do it in the process. These are all important to generating wealth but this book will focus on doing it together in small groups. Small groups are essential to your ability to Master the Basics. I'll go further into it as we get into chapter discussions but surrounding yourself with the right people is one sure way to generating wealth. Your group members will serve as your instructor(s) and you as theirs. There are not too many, if any, financial books that teach this concept. Within the classroom environment you'll get to ask questions, research answers together, and become financial mentors to each other. Best of all, everyone will generate wealth. And with the consistent applications of what you learn you should be able to build, share, and maintain wealth. I say to you...welcome to class.
About the Author
By now you probably know my name is Myles A. Bush, Jr. (front cover). You can call me Myles. I want to welcome you to my class. Thank you for giving me the opportunity to tell you a bit about myself. I'm in my mid-30s (feeling every bit of 20), I've been married for 11 years and I have two sons. When choosing, reading, and studying a financial work I'll be the first one to tell you to research the Author. This is my first book. But I'm sure you've read other financial works. Your second step is to compare my work to the Experts (or so called Experts) of your choice. You'll find most of what I say is in line with what they say. Financial principles are the same no matter who you get them from. It is true, however, that different people have different methods of applying such principles. One reason I decided to write this book is I know the principles and I know how to apply them. Example: I'm an investor. Warren Buffet is an investor. I use some if not all of the same principles Warren Buffet uses when he invests. The difference between the two of us is Warren Buffet has become a master mind at applying these principles (or mastering the basics), and he has a little more money. My point is you may know some of, if not all of the same principles Warren Buffet knows. Go back to the statement I made about already knowing the problem and having the solutions. The question is, are you applying what you know? I hope reading this book will encourage you to put emphasis on your need to take corrective action. You may not see or understand it now but you will. And just in case you don't know, "The Secret to Attaining Wealth" will teach you.
I have a passion for teaching people how to manage money. I pride myself in the education I received and the educational process I put myself through. I have a Bachelor's degree in Business Administration. I am contemplating pursuing my MBA. I have literally taken hundreds of classes, attended many seminars, and I have read a lot of books. I've also got experience on my side. What makes me an expert (or sort of an expert) are not the years of experience but my focus on continuing to educate myself in the process, which has paid huge dividends. I think being able to relate to me and my situation will help us to connect better. The most important thing you need to know about me is I'm a realist, so I pride myself in being honest. As I've stated over and over again, this book will only teach you the basics. But that is exactly what it is designed to do. You'll learn more about me throughout the book. I look forward to instructing you further as you journey through the Financial Sense Series. Thank you for investing in your future.
Chapter 1
Welcome to Class
Students welcome to class. You can expect a creative yet challenging learning environment. "The Secret To Attaining Wealth" is designed to equip you. It will provide you with the tools needed to become an expert. Here's what you'll need for class: this book, a few basic supplies and, more importantly, an open mind. You'll need to be willing to learn, be committed to your success and the success of others, become a student and a teacher, you'll need to develop good study habits, and you'll need classmates! I'll show you how to choose them in a minute. This chapter will focus on introducing you to the class, the topics we'll cover throughout the book, and how to choose the right classmates. There is an exact science to putting your small group together. It is very important you follow my instructions carefully in the next few chapters. Remember the basics—and how important they are to your future success.
I know some of you haven't done coursework in many years. Though the process is complex, it's easy. In choosing your classmates, you have the opportunity to surround yourself with people that will challenge you, push you, and make you better. This process will build your knowledge, your character, and establish your foundation. One thing most financial books don't promote is the fact we can teach each other through small groups. I'll step out on a limb and say this is the perfect atmosphere to learn about money. In most cases you and your classmates may not understand the basic principles of money. Through your study you'll learn and apply them together. You'll share this whole experience and grow together. You'll follow up with each other and hold each other accountable. You'll also take the next step together, so choose your classmates wisely!
Small Groups
I can't overstate the importance of forming small groups. Most people know and understand the small group concept. Whether you worked in small groups during math or science class, in college, on the job (focus groups), or had small group Bible study, the purpose was the same. Small groups are designed to do a number of things. They provide an atmosphere to develop and share ideas, build character, and they empower members. They create the perfect learning environment, give one-on-one attention to group member concerns, develop social skills, they equip, and build morale. This chapter will focus on how small groups create the perfect learning environment by equipping and empowering members and building social skills. We'll discuss other benefits and characteristics of small groups throughout this book, including how small groups lead to generating wealth. Remember my friends, I consider what we're discussing the basics, and we know Mastering the Basics is what leads to real wealth. So grab your highlighter and start taking notes. As you continue to read, please begin to develop a study habit. This is a very important chapter. I'll tell you how to choose your classmates in the next chapter. And although forming a small group is not a requirement, I highly recommend it. You can study on your own but my writings will be geared mainly towards group study. It's a fine line trying to balance talking to individuals directly and addressing groups. I'll try my best. Either way, everyone will benefit.
Mastering Tip
"I can't overstate the importance of small groups
and the learning environment they create."
The Small Group Advantage
Okay, I'll cut to the chase. I won't leave you in suspense anymore. I know you're wondering what in the world do small groups have to do with generating wealth. I know you can appreciate what small groups offer, but you want me to get to the chapter where I talk about money. After all, you've never heard of small group discussions when learning about money or generating wealth...interesting. I say again, welcome to class. I'll fast forward to future chapters and futures books in my Financial Sense Series. The advantages I mentioned earlier are the main purposes of small groups, but there is another advantage. Your small group members are potential business partners! Now, there you have it. I hope I have your full undivided attention now! In choosing your classmates you are literally choosing (or interviewing) potential business partners. Starting, owning, and operating a business are all ways to create and maintain wealth. This chapter, the next, and the entire book, for that matter, are very important. I won't go into detail about business partners and starting a business because these subjects are covered in future books. I do want to express the importance of understanding the small group concept, and transitioning this knowledge into developing potential partnerships. Now that I've got that out of the way and I have your attention, I'll proceed. The following are some of the advantages of the small group learning environment.
Advantage: The Perfect Learning Environment
My friends, we all know how important education is. As I reflect on my life and you on yours, I can't remember any courses available on how to generate wealth. My parents did not teach me anything about money either. Sure they told me to save, and to pay bills on time, but I don't consider these gestures an act of teaching. The Bible says, "Train up a child," which means, teach the children and they will not depart from it1. Being a teacher and a student is vitally important to generating wealth. Funny thing is you become teachable in part by teaching. You have to be willing to teach others, especially the next generation. We'll talk about creating wealth that benefits the next generation throughout this book and my entire series. Generational wealth is rarely taught in other financial books. An advantage of being my student is you'll learn a number of these wealth building strategies. You'll do this through the small group environment which allows you to help others along the way. The first basic step in generating wealth is attaining knowledge, wisdom and understanding. There are a number of ways to do this. Small groups are the perfect vehicle to getting information. You'll read financial literature like Business Week and Money Magazine, you'll talk to financial professionals, you'll utilize the internet (which is filled with free information), you'll do research projects and study certain stocks, and you'll put the information you learn from this book to work. Applying what you learn creates experience and leads to wisdom. Sometimes wisdom comes from making mistakes—or, more importantly, avoiding mistakes altogether. One advantage of Small Groups is you get to avoid common mistakes most people make. As you journey together you need to feed off each other's professional experience and levels of education. Folks, knowledge that is applied and shared is power. I did not say knowledge is power. Knowledge has to be applied. It also has to be shared (there's no benefit to keeping information to yourself). Being part of a small group study is a perfect way for you to learn the financial principles to handle and manage money. So, step one of the basics is to gain knowledge, wisdom and understanding.
Small groups are not designed to be lecture style. Small groups are designed to be inclusive, everyone teaches, and everyone learns. I'm not saying no one should facilitate. Rather, everyone should participate. Diversity optimizes the groups' potential, it also maximizes both input and output which is vitally important to the groups' success and everyone's learning opportunity(s). You've probably noticed I've not talked much about money. Be patient and focus on what I said about the importance of mastering the basics. Before you can get in-depth information about money, you have to have a solid foundation so you'll have solid footing. Consider this; Warren Buffet doesn't make investment decisions without factoring in sound investment principles, no matter how big or small the investment. Why is that? Obviously he has the cash to lose (just a little), so he can afford to take the risk. Have you ever read news articles about him making a bad decision? Warren Buffet believes in and understands the basics. I've always read articles about how he was right. He didn't lose his shirt during the dot bomb era like a lot of investors. He did not invest because he remembered the basics. He took a methodical approach to doing research, analyzing the situation, talking to his inner circle (his group) and did not put himself in a position to take unwarranted risk to gain the almighty dollar. Some of the smartest and wealthiest people in the world use small groups (advisors, or partners) to generate wealth. They surround themselves with the right people because two heads are, in many ways, better than one. The more insight you get from group members the more you learn and the less likely you are to make mistakes. Take advantage of networking opportunities that may be presented in your small group.
Be prepared to revisit this section after you read Chapter 2. You'll have group discussion questions. Your group will have focal points or mastering tips throughout each chapter and section. You may have individual (if working alone) or group projects to complete as well. Remember everything leads to understanding the basics. These assignments, questions, and projects are vitally important to your individual success and the success of the group. Be sure to take notes and have a system in place that allows you to retrieve information as you need it. This is also a helpful way to share and compare notes with your group members, especially if they miss a session.
Mastering Tip
"Most Financial Authors teach sound wealth building principles
that, if applied, 'should' create an inheritance for the next generation.
The problem; we tend not to teach them (our children) the basics
before the transfer is made."
Advantage: Equips and Empowers
I don't have to tell you that a good education is one of the best ways to equip and empower individuals. As a matter of fact I would rank education as the best equipping tool out there. Since my small group concept is designed to educate, it will create an environment that nurtures, engages, equips and empowers group members. This leads to an understanding of basic financial concepts and principles. Think about what equipping means. It's the same as using the word prepare, train, educate, discipline, or getting ready. Translation: Small groups equip, train and prepare individuals to handle money, make sound investments, educate themselves, pay off debt, start a business, create generational wealth, and so on. You will be ready to take on the challenges of paying off debt. You'll be disciplined enough to handle large amounts of money and make sound investments. You'll be trained to help others, teach the next generation, and to create multiple streams of income. You'll have the discipline to understand delayed gratification and know the importance of saving for your future.
Equipping includes understanding mentorship, and the power of experience through diversity. Small groups have to be diverse. We'll get into diversity more in "Choosing your Classmates," but most of us understand the power of diversity. With a diverse group you should not have a problem with identifying mentors that have various backgrounds and levels of experience and education. These attributes will come in handy as we journey through this study.
Equipping leads to empowerment. Some would argue that you can be empowered without being equipped or fully equipped. I'm not one to argue against this fact because I think there's some truth to it (though it could be costly and dangerous). What I do know is a more equipped mind leads to a more empowered individual. I'll prove it to you. If we agree that education is the best form of equipping, then it's safe to say most people don't invest in the market because they're not equipped, right? Right. If you ask most people why they don't invest in the market, you typically get one of three answers: I don't want to lose money. I don't know anything about the market. Or, I don't have the money to invest. Obviously, there are more reasons than these that keep people from investing but these probably are the most popular. These answers reflect the vast majority of people that will never generate true wealth. "I don't want to lose money" represents a reflection the person might have that there is only a downside to the market. An equipped person would be empowered to make good sound investments in companies that have a proven track record of performance. This individual would also value long-term investments and a diversified portfolio. An equipped person would have 401k and/or IRA accounts. An equipped person would be empowered to do further research into various financial instruments that create balanced risk in case the market is not doing so well, like we saw in 2007 to 2008. If this is too much information for you too early in the book, don't worry, I won't go to deep. I'll stick to the basics. As for the other two responses, "I don't know about the market" speaks for itself and clearly depicts a response from a person not equipped and therefore not likely to be empowered. "I don't have the money" is a little more difficult because you never know someone's situation, but I'll go out on a limb and say that most people think they don't have the money. Investing in the market doesn't cost much if you start early and use the right financial instruments. You have to be equipped through the education process to have or attain this information and be able to use it to your advantage. The point is an equipped person is typically a more empowered individual.
Equipping and Empowering are equally important. Empowerment typically reflects or leads to an action, a need to act, or a desire to act. It describes the urge, the will, the knowhow, the desire, determination, confidence, and the commitment to act on or use what you've learned. I've just explained: Without the equipping process you typically don't have the urge, the will, or the desire. Empowerment says I have the information (through the equipping/education process). Now I'll use it to benefit myself and others. You feel empowered, or inclined to act on what you know. This is vitally important to your quest to generating wealth and becoming financially free. Good thing the small group environment creates an atmosphere that fosters both processes. Notice how the advantages coincide with one another. Although this information may not be entertaining, it is vitally important to you understanding how to Master the Basics. So hang in there with me. We'll talk money real soon.
Advantage: Build Social Skills
The last advantage of small groups is they help members build social skills. Social skills are very important in the world of finance. They are vital to making and managing money. This book will give you specific projects that help build your social skills. These projects are designed to teach you how to talk to people, how to communicate, how to build relationships, etc. You'll do everything from doing a small presentation to family members, to talking to real estate agents, bankers, and brokers. Most people that have generated wealth had the social skills to help them create, maintain, and add to their wealth. Notice I used the word "had" not "have." The reason being, most wealthy folks hire people to handle social issues. This is a skill you need to get started, and during your journey, but not a skill you'll need to necessarily maintain. For the sake of not boring you, I'll cover more of this in the next chapter but know that social media, the internet, and the global economy are the waves of the future. These platforms can be particularly rewarding if you have the right social skills and mindset to take advantage of them. Surely you remember when social skills were mainly optimized in face-to-face conversations. Well, that's a thing of the past. You still have to have the face-to-face skills, but you also need to be savvy in the social media marketing outlets, and be diverse in communicating with other cultures, including speaking foreign languages.
Good social skills lead to networking opportunities and building good business relationships. These skills help both the equipping and empowering processes. You'll need such skills for the next chapter, "Choosing your Classmates." If you're currently looking for a job, you use social skills during the interview process. If you want to start a business or find business partners, you need good social skills. Want to market yourself or a product, good social skills. Want to find the right financial advisors to help manage your money, again you need good social skills. You'll need to be equipped, empowered, and have good social skills to optimize your wealth generating potential and you'll be groomed for all three within the small group settings and environments.
Review what you've learned
Now that we've covered small groups, let's reflect on the information we've learned. Please feel free to take as much time to answer these questions as you or your group needs. Each group member should answer each question and then you should discuss your answer(s). Each set of questions/projects should be completed immediately after your study. Please, follow the instructions for any questions, talking points, projects, and/or focal points, as all the information is relevant. Ensure every group member answers each question and has a chance to share their thoughts. Don't be afraid to have long discussions; however, you don't want to be stuck on one topic forever.
Discussion Questions
1. What are the advantages of small groups and how can you ensure every group member is actively involved? (Give details.)
2. How do you see yourself and the members of your group benefiting from the small group environment?
Think of ways you and your group members can become business partners.
Project: Review the Mastering Tips you've read so far. Create your own Mastering Tips that you think will benefit your group. Once assembled, then share them with everyone.
Footnotes Chapter 1
Proverbs 22:6, KJV
Chapter 2
Choose Your Classmates
Now that you have a general understanding of the small group concept, I want to talk about choosing the people you want to share your learning experience with. After reading this chapter you should revisit the discussion questions in the previous chapter since you'll have a group assembled. One thing I like about the small group learning environment is you get to choose the people you want in your group and/or what group you want to join. This can be an easy, yet difficult, complicated, or complex process. This chapter is designed to take the guesswork out of forming your group. Choosing your classmates is an extremely important decision and is an essential part of mastering the basics. The people you surround yourself with will help determine how much and how fast you learn. They'll help determine the level of success you'll have and how fast you achieve it. They'll help shape your path and mold your future. You want the right people and the right influence(s) in your group. It's important to remember one of the end goals of your group study is generating wealth, and/or forming a partnership(s), sole proprietorships or business relationships. I say that because I believe sometimes you have to start with the end in mind. You need to define your mission and vision. What is the purpose of this small group and the learning experience? What does participating in the small group accomplish? How do individual group members benefit? And yes, what's in it for me? You do want to start generating wealth, right? Please continue to journey with me as I expand on the small group concept, teach you how to put your group together, and answer these and other relevant questions. Don't forget to circle back to the discussion questions at the end of the previous chapter once you've assembled your group and have completed this chapter. My friends, it's time to choose your classmates—wisely!
Choose your Classmates
The interviewing process is extremely important. Therefore, choosing group members for this class is a formal process. How formal will be determined by you and your classmates. The bottom line is you want group members that complement and challenge you. If you choose your group with the end in mind, your group members will make the perfect business partners. Let me be clear. This book will not go into the details of establishing partnerships. I do however introduce you to the idea. Remember, the "The Secret To Attaining Wealth" is designed to cover the basics. Keep in mind that the basics are the building blocks to advanced strategies. If such is the case, it's safe to say you'll need this information (about establishing partnerships) in the future. That's why I introduce it in this book. I want you to be familiar with the concepts and processes. The goal is to choose classmates you see yourself going into business with. Here's a word of caution: Family members may not be the best people to go into business with, so they may not make good group members. On the contrary, some of the most successful businesses are family owned and operated. It is a fine line that requires caution. No worries, I will guide you through the interview process explaining how you can and should surround yourself with family members.
Interviewing should be conducted in such a way that puts you, the interviewer, in the driver's seat. Of course, you can be the interviewee, but I'll focus on your role as the interviewer first. The first step in the process is determining how many people to interview. In order to make this determination you need to determine the potential size and demographics of your group. Most would agree small groups should be seven to twelve people in size. They should also be diverse. When determining the size of the group, remember the purpose is to have 100 percent participation. The group should be constructed in a way that compels everyone to share and be open. Diversity helps challenge the group and its members. Even though inviting family members to join can diversify your group, family should NEVER make up more than 30 percent of the group. There are exceptions to this rule. For instance; you should count couples as one. I encourage couples to study together regardless of the subject matter. If the group gets too big or has too many family members then you should consider splitting the group up. Remember what I said in the previous paragraph. Some of the best companies are family owned and operated. Ideally, you could have a group of all family members if it works for everyone. My point is you have to be careful. We all know family members are not necessarily the easiest people to work with.
Your success is directly tied to the members you surround yourself with. Once you have family members in place, you have to search for raw talent. In fact, I'd recommend starting with raw talent and give them the opportunity to help you assemble the rest of the group. I know most of us feel more comfortable with family, but if you can start with someone outside of your family you increase your chances of putting a good group together. You know a sharp co-worker, former college classmates, or good friends that would be a perfect fit. Talk to these people. Present them with the opportunity to learn about money and the possibility of starting a business together. Stress the fact that this is a learning opportunity that cost less than $25 (about the price of this book) and two to three hours a month. Look at it as a training exercise that leads to business ownership. Think about it. If you were to start a business with partners, you'd want to find like-minded people that you know have adequate education. Going through this book together and the entire Financial Sense Series WILL prepare you for business ownership. It's not a matter of if…it's a matter of when. You'll be able to manage money, make sound investments, and build infrastructure. The science behind the interviewing process is asking the right people the right questions. Read on.
Focal Point: Think of people you can approach other than family about joining you in your study. Write down their names and think of ways you can approach them.
The Interview Process
The next step in the process is to interview people for your group. Or maybe you like the word "probe." Either way, you want to put the right people together. Go back to the written list you have (from the Focal Point exercise). Review the names and decide if they are approachable and how you would approach them. Ask yourself, would they make good study partners? Would they make good business partners? Are they willing to learn? Do they have goals and dreams? Are they focused? What would they bring to the group? Do they value education? Do they have the ability to lead? Are they teachable? Do they have influence? As you can see these are all yes/no questions with the exception of "what would they bring to the group?" If you can answer yes to at least seven of these questions and they would make substantial contributions to the group, these are the people that should be on the list and these are the people you want to talk to. Revisit your list and make adjustments accordingly. Add family members as you see fit. Additionally, if you can think of any other relevant questions, by all means, ask yourself these questions as well. You may also want to get a couple group members in place and have them make a list of folks they know that would meet the same qualifications. Remember what we said about social skills. If you're going to build wealth, you have to venture outside of your comfort zone and be able to communicate. These questions represent the science of putting a group together. These questions are designed to be internal (ask yourself) but you should also use three to four of them when interviewing potential group members/business partners. Be prepared to use them on the front end (when thinking of potential members to interview) and on the back end during the actual interviews. Please feel free to customize the type of questions you want to ask. Here's a word of caution. When you interview people, limit your probing to three or four questions that someone looking for potential partners would ask. You don't want to scare anyone off by bashing them. If I were looking for members to join my group, the interview would go something like this: "Mr. Doe, I'm looking to form a small group to study finance and potentially start a business. Is this something you'd be interested in?" Once Mr. Doe responds, talk back and forth for one or two minutes.
The next question would be: "If you were to join the group, what do you think you would bring to the table during our study or if we decide to go into business together?" Once Mr. Doe answers, create talking points and discuss for about two minutes.
The last question I'd ask is, "Are you willing to commit to continuous education and developing your leadership skills?" The last question is very important. The point of the small group is to learn and grow together. By asking the last question, you are basically asking, "Are you willing to learn?" and "Are you willing to lead?" Remember to limit the time between each question to two to three minutes. This is not a long drawn out thing. Stress the education part because, to form partnerships, you have to know and understand the basic principles of money. Managing a business's finances will be in many ways similar to managing your own.
If you are approached by someone to join their group, ask these same questions of the person and prospective group members making the offer to have you join. You may have to put your group together over time and may have people join your group as you study. Please take notes so you can fill these folks in about topics covered and make sure they do all the questions, projects, mastering tips, etc. Once your group is assembled, have everyone commit to two to three hours a month of group study. This is extremely important. I'd recommend meeting at least two times per month. That way, if someone has to miss a session there's another session in that same month. I'm not opposed to weekly study if it works for everyone in your group. The more time you can dedicate to learning the basics, the faster you can get to the advanced strategies. I promise you'll need all the information learned in this book to study my next book which I hope to have out by year end 2012. I truly want to spend more time on Chapters 1 and 2 (the boring stuff) as I really believe they are important. But, this is a financial book and I know you're more interested in how you can add to your bottom line. After all, I do want you to read the book and value the information. I'll assume you're convinced from my pitch about small groups, and you'll strive to keep your group together. Take your role seriously and help the members you've assembled. The purpose of the study is to show you how to win and help others in the process. Remember you have to change your behavior to get the results you want.
Keep it in the Group
You'll share a lot of information within your small group through this study. Like any other small group setting, it's important for members to feel like they can share. In order to do so you must keep what's discussed within your group between you and group members. The more you and your group members share with each other, the better opportunity everyone has to learn. Some of the group discussions and projects require the sharing of information, sometimes personal. Please do your part in protecting confidential information. Overall, most do a good job of this which is one reason small groups have become so popular. The main point is keep what's shared in your group between you and the members of your group. Chapter 3 is next. Let's talk money.
Chapter 3
Let's Talk Money
In our quest for financial freedom, we deal with a number of complex issues relating to money. Since we're focused on the basics, I'll keep things simple and in general terms. Subsequent books in the Financial Sense Series will give you an in-depth view of various topics. In this chapter I want to focus on the following topics of study; saving, budgeting, and investments. In the previous chapters we discussed the importance of small groups and surrounding yourself with the right people. This information will be very useful in this section, "Let's Talk Money." Your group will do research and projects that are designed to bring this material to life. You'll create individual budgets, help each other come up with ways and plans to save, and you'll learn to read one of the most important cash-flow statements and analyses, your 401k statement. Folks, the boring stuff is over. The next nine chapters will be hands on!! Please review what we've discussed about the small group learning environment and keep everyone involved. Pay attention to the mastering tips, discussion questions, and projects as they will be more in-depth and designed to give the group more work, more research, and a better learning experience.
Save First
My friends, let me say it loud and clear: YOU HAVE TO SAVE!! It's not an option. You don't have a choice. It's non-negotiable. Granted, I know saving presents a challenge for most people because they don't know how to save or they feel they don't have the means to save. I'll say this—saving goes well beyond putting money in a savings or checking account. Obviously there are a number of ways to save, some of which require you to be creative. So, before you and/or your group members develop the, "I can't save syndrome," you need to educate yourself on how to save. I want you to stop right here! Discuss different ways you and your group members can save or have saved. Write them down. Be ready to share and implement some of the strategies you've discussed. I want you to compare your group's discussion with what I share in the next sections. You'll be surprised at how creative you can be.
Ways to Save
As mentioned, there are a number of ways to save. As a matter of fact the "Ways to Save" subtitle is as ironic as Wells Fargo/Wachovia has an account called a "Way to Save Account1." I'll be willing to bet that most of you did not list this type of account (without reading ahead) as a way to save money. Yet most have heard of this account or at least the concept. Many, many banks have similar products or services including Bank of America and their "Keep the Change Program®. "Most credit card companies, major retailers, and airlines have cash back and membership programs designed to save consumers money. Not all of these programs make sense, and I'm certainly not endorsing any particular program. My point is, we have a very traditional view of savings that is costing us a lot of money. We don't see paying off our mortgage in 15 years instead of 30 as a way to save. In fact, we don't see getting out of debt in general, as a way to save. The reality is you save hundreds if not thousands of dollars in monthly payments and interest by paying off debt. We don't see printing a $10 off coupon from the internet for an oil change as a way to save. We don't see buying necessities in life such as food and clothing at discounted rates as saving. Buying a whole life insurance policy that accrues cash and interest is not a way to save for most people (some financial authors are against this but I'll address this later in the book). Reality check: There are a number of ways to save. Individuals in your group that live paycheck to paycheck can save. As a matter of fact, remember, they HAVE to save! I want you and your group members to revisit our previous exercise and discuss different ways you can save. Talk about the many implementation strategies you can use. Talk about how the concepts and principles mentioned, paying off debt, and saving on everyday items can be a realistic way to build your savings. I want every group member to talk about their most difficult financial times and what they are doing/have done to deal with their situation. This is very important and your group should take as much time as you need. We'll tie this section to the budgeting section, showing you how to account for this money, put it away, and use it to generate wealth.
Traditional way(s) to save
The traditional ways to save are still very relevant. I want to be clear in saying there is nothing wrong with the traditional way of saving. In fact, I encourage using these methods, especially if these methods are working for you and your group members. I am saying, however, your ability to save is far too important for you not to know other methods of saving that can potentially add to your bottom line and make your life easier. I told you I would give you different ways to apply well known and established principles. That being said, I will put a twist on the traditional method of saving. Let's develop a basic definition of what saving is. For the purpose of this book we'll define savings as, "discretionary money accumulated over time that is untouched until a pre-specified targeted date or targeted event." The key here is, "money accumulated over time that is not touched." So, let me be frank with you. If you are saving, that means you're not spending. If you are spending, that means you're not saving. The two represent opposite ends of the spectrum. It's very important to remember this as a rule of thumb. Of course you can spend and save at the same time, but look at it this way. The more you save, the less you spend. The more you spend, the less you save. I'll show you specific methods that help alleviate the need to touch your savings until you reach your goals. The traditional ways to save represents the common sense approaches. Putting money in the bank, buying CD's and bonds. Some people still keep money under their mattresses. These traditional ways to save have value. They offer a more conservative way to save which can be beneficial especially when you get closer to retirement age. These traditional methods can be a great way to balance risk. The problem most Americans face is we are too conservative or we don't save at all. We don't see investing in the market as a way to save and build our retirement. Don't be afraid to take advantage of services your bank offers. You can also manage your investments and savings yourself. A 12% to 15% return is not hard to achieve these days. Research both traditional and non- traditional ways to save and try to take advantage of what both methods have to offer.
Assess your ability to save
Most people have set incomes and set expenses. Therefore, you would think, one should be able to easily assess their ability to save. However, this is rarely the case. Most of us don't have a clue as to how much money we have coming into our accounts, much less, what we have going out. We don't know how to assess our ability to save. This in turn leads us to the conclusion that we can't save or have very little to save, even though we haven't done the math. We'll get to the math in a minute, but the process of assessing your situation is very important. The first step in the assessment process is figuring out what you have coming in. You have to add all of your sources of income. Most of us get income through one source, our employer (that will change through this and other books in my series). Be sure to add your spouse's income as well. You may get interest or dividend income, tax refunds, or proceeds from the sale of personal items. The point is you need to add all income from any source and write that number down. Then, you need to figure out your expenses. Note: Expenses typically represent the largest portion of what you have going out. Take all your debt obligations, bills, and necessities such as food, and gas, add them up and write the number down. Next you're going to add up your discretionary spending. These items might include entertainment, home improvements, or your daughter's dance classes. For the sake of simplicity, these are any items you spend money on that are not a necessity, including giving to charity, buying a drink or paying for a magazine subscription. I need you to write this number down. You'll need these numbers later on as we continue. Some of you may notice I don't include any forms, charts or graphs in my book. That's partly because you won't need them for what we're going to cover. I'll have these illustrations in books throughout the Financial Sense Series as they relate to the subject matter. You can also visit my website referenced in the back of this book to find forms and information that can be helpful in your attempt to save and budget. Most calculations, like the one we'll do here, are pretty straightforward. Let me take the opportunity to walk you through it. It's really simple math. Go back to your income. You should have added all your income, including take-home pay from your job, interest, dividends, and other income items. Let's say you're not married and all your sources of income add up to $2915. Note: All calculations are based on a monthly time frame. You have about $2200 of expenses such as rent, utilities, car insurance, etc. Your discretionary spending adds up to $400. You assess your ability to save by adding your discretionary spending to your expenses. You take the total ($2600 in this case) and subtract it from your total income. The net difference is your ability to save. Your transactions would look similar to the example below:
-
Income:
$2915
Expenses:
$2200
Discretionary Spending:
$400
Ability to Save
$315
It's very important that we recognize the $315 as your potential or ability to save. We also need to recognize this calculation as an assessment. In other words this is a good estimate. The reasoning; you may not take that full $300+ and put it in a savings account. The first thing we have to establish is whether or not you're paying yourself first. If you are paying yourself first, perfect. We'll talk more about paying yourself first in the "Pay-Yourself-First way to save" section, but in short it's saving pre-taxed dollars typically towards your retirement, through various retirement instruments. If you are paying yourself first then most of the $315 will go towards saving. In the traditional method of saving you'd put the full $315 in a checking or saving account (at least most of it). You may also consider other money market instruments, CD's, interest baring accounts, or under your mattress. Yep, under your mattress. Remember we're talking about traditional ways to save here. I didn't say the most popular. Sadly, most of us have limited ourselves to these methods of saving only, or we don't save at all! These methods have their uses. When the economy is bad, you're nearing retirement age or you just want to play it safe. I encourage you to use these methods as a way to balance risk. Others take the traditional path because they're afraid of risk or afraid to venture out. I warn you, the element of fear traps you in a self-imposed prison. Remember, knowledge that is applied is power. In the next section I'll go more into detail about some non-traditional ways to save. That way you'll have reference points to compare. For the sake of simplicity we'll use the same numbers and/or examples for this entire chapter. I will give you different scenarios and modify the numbers a little to make sure we cover multiple scenarios. Please remember, what we're discussing represents the basics and will serve as building blocks to understanding and applying more advanced strategies. In order to start generating wealth you have to Master the Basics!
Mastering Tip
"Major companies track expenses to the penny. Besides government regulation, why do you think these companies track expenses so accurately? What can you learn from their example?
Non-Traditional way(s) to save
I'm looking forward to going through this section. I love challenging conventional wisdom and conventional thinking. However, I will not let my passion get me off track. Though these methods will be a bit more advanced than we discussed in the traditional ways to save section, I will still keep it simple. This section will lead up to the section on Budgeting, and tie into Chapters 5, 6, 7, & 8. Please pay attention, participate in the discussions, and review the Mastering Tips.
Non-traditional ways to save can be complex. Before I get into explaining non-traditional ways to save let's revisit our definition of savings. "Discretionary money accumulated over time that is untouched until a pre-specified targeted date or targeted event." One key to the non-traditional way to save is focusing on "discretionary money." Non- traditional, like its traditional counterpart, also focuses on money being accumulated over time that is not touched. Let's deal with the term "discretionary money. For the purpose of this book the term discretionary money will mean money left over after all expenses and discretionary spending is accounted for, simply said, a money surplus. In our example, it would be the $315. This is our discretionary money (our ability to save). Part of the non-traditional method of saving is geared towards increasing our discretionary money. Not so we can spend more, but to save more. One of the best ways to do this is to increase income, then reduce expenses and spending. If you or someone in your group is living paycheck to paycheck, please pay close attention. Take notes as this may help you get back on track. Reducing expenses sounds like a pretty traditional way to save, and it is. But the way I'll show you how to reduce expenses and find extra money is not traditional. If we were to venture back to the "Ways to Save" section we discussed different methods of saving by expanding our minds. With that same concept, we will reduce the dollar amounts we put towards expenses. In essence, if you save more money, you typically reduce expenses and your discretionary spending. Remember what I said: "If you're saving, you're not spending and if you're spending you're not saving." We'll dig deeper into this in the budgeting section but let's take a look at some non-traditional ways to save.