Part one of what will probably be a multi-part series on The Ultimate Money Maker. This is probably a mythical concept for the average person if they are looking for someone else’s ideas. The Ultimate Money Maker is about 3 megabytes.
What do you believe about this topic?
If you have ever managed people then the manager-tools.com podcast series is for you. Why does this relate to money management? Because if you’re looking to get ahead to increase your income then you will need to be a better communicator and more than likely a manager of people as well as finances. The advice on that site is free (with for-money advice also available), the advice is practical, and it is sure to at least begin to prepare you for life in the wide-weird-world of management.
If you’re currently just an employee then you’ll want to listen to this stuff simply to learn how your manager may be trying to communicate to you. Sometimes managers don’t know that they’re doing a bad job of communicating and you may learn from these audio lessons how to help your manager manage better - heck, you may even want to pass them along to your manager.
If you’re a parent these are valuable because they even apply some things to rearing a child. And let me tell you: rears of children should always be managed. If you’re a manager you should listen to these because odds are you’ve never been trained to be a manager, you’ve just been thrown into it. I have recently been chucked in front of the wheels of an oncoming management train myself and this sort of thing is going to be handy.
I would recommend starting at the bottom of the page and working your way up so that you can get a feel for their methodology. Its not difficult to listen to and you’ll want to keep a pencil & paper or a word processor open to take notes. I have a page of notes from one podcast already and am just starting my second. This stuff is dynamite strapped to the body of a dead manager - go ahead and light the fuse… its attached to you.
I have not done the best job of being a financial manager throughout my adult life. If you’re like me you probably have plenty of excuses, some legit, some are just an attempt to cover character flaws, and others are things you were simply ignorant about. In the end I’ve been thinking about the idea of most important things. Here’s a list that I cam up with, what would you add or change?
Self discipline is like the super drug of the bunch. There’s really nothing you can do if you’re lacking self discipline. Some suggest things like the automatic millionaire’s principle of automated systems, but the truth of the matter is that those can still be foiled if you don’t have discipline. I lack this sometimes. When my stomach gets in the way, when my greed kicks it up a notch. I really struggle with this at times. Sure, there are other times when I’m dogmatic about things, but not enough to be 100% consistant. 
Lewis & Clark set across the United States with very little information and had to create a map. They had to plan with what little they knew and make up the rest. Good financial management is going to require a little bit of this mindset as well. You have to plan for what you do know, but be prepared to shift courses as needed (more on that later). Planning is like a giant black hole for some. They never feel like they have enough information or their tolerance for risk is so low that they can’t plan anything grandiose because they’re certain that they will fail. So they go back to the drawing board. And again come back looking for more data and then go back to the drawing board. Rinse. Repeat.I tend to take the mindset that I will plan for what I hope tomorrow has, plan for next year, plan for five years and get my focus set in just such a way so that I can adapt as new things arrive on the horizon or show up on the radar - seconds before impact. If you don’t make a plan with what you know you’re not going to get anywhere because you’re lacking the goals you need to succeed. 
Opportunity knocks just about a hundred times - you need to recognize a good opportunity verses a bad one. I have had opportunities that I have taken and they’ve gone horribly wrong because I didn’t have the instinct to guess right or the discipline to carefully evaluate them. Taking on every opportunity is foolish, ignoring them all is just as dumb. Right now the housing market could be a bad choice, so what else is out there? What investment areas are just unexploited and need your money to grow and leave you living high on the hog? 
If you’re married then you best be united and not untied. I have mentioned on multiple occasions that my wife really keeps her 100% of the finances on track as much as possible. We make unified decisions. In the Millionaire Mindset it is recorded that wealthy families are not tied to just one of the people in the relationship, its usually both working as a team. For an example of humor and failure read this funny article about a woman who brings only looks into a relationship. 
Patience, with determination, will often bring long term rewards. If your plan is to be a millionaire by some date you need to be focused on success but patient for the fulfillment at a potentially later date. I personally don’t know how I’ve endured some of the things I’ve endured, but money comes and money goes and so I am patient. Had I planned better I’d have probably had a lot less go, but patience is waiting for a good opportunity, waiting for the market to turn around, or waiting to not say anything when someone else is not as well off as you are. Patience is a virtue - do you have patience? 
Reading with the purpose of education is invaluable. Be ready to read. Right now I have a book on programming, some theology books, and two books on finances going in my rotation. I make time for each. I also read many blogs faithfully every day so that I can manage everything and continue to feed the most valuable asset I have: my mind. Many of the things I’ve mentioned before are growing and fed by my constant attitude of learning. This blog is designed to help me share what I’m learning and I’m hoping it keeps growing because I keep learning. 
Not relying on others for value or esteem will help you endure the times when you go without. I don’t have a large screen TV. I don’t have a Nintendo Wii. We’re not buying those or an iMac (which would be nice for the family over our older HP desktop machine with CRT monitor). Our value is not in our stuff and our stuff doesn’t prove wealth anyway! Self confidence is what lets us live in a neighborhood that isn’t at the high end of the spectrum, but instead in an older, but established neighborhood. We’ve done lots of thinking, but it hasn’t been about what others think of us. 
A mind that understands the long term reasons to not spend money now so you can spend money later [see: a ton of bricks]. A marathon runner knows that starting off with a sprint will more than likely mean failure, cramps, or injury later on. Instead the marathon runner paces himself or herself so that they can reach their goal and achieve the mile marker achievements. Debt repayment may be one, but you have to endure and be patient and paced. Your first $20,000.00 may be another. As you see the mile markers pass you start to realize you’re closer to the finish line than you are to the starting line (unless you’re running a circuit). 
Odds are that you are not keeping all of your money in your home and in a secret hole in your back yard. In that case you need to have great, clear communication with your financial companies, as well as with anyone else you’re doing business. Make sure that you make communication a priority. Today I called one of my credit card companies and discussed my interest rate with them. I wanted to make sure I knew what I was getting and what they were charging me. When you trade mutual funds you need to be aware of what the funds are doing and where your fund is heading. Your broker will be able to get that info to you online, or you may need to call certain people to keep up to date on things.
You need to be able to unwind at times in life and its handy if there is a hobby that can let you do so without breaking the bank. My wife can scrapbook with the best of them but much of what she’s got was in gifts. She can spend some money now and it allows her to be creative, relax, enjoy memories and spend relatively little now that she’s got so many tools to use. I have musical instruments, many of which are older or used, but they let me play and have fun. Some people enjoy walking. Some people enjoy window shopping (without cash to blow), and some people enjoy fishing. Whatever your hobby, consider the long term costs and make sure that you give yourself some time to relax because it will help keep your life balanced. So those are some areas that I think you and I as money managers need to be honed in on. What am I missing? Do you agree with me? I’d like to invite your comments or blog post responses. I’ve got to work on several of these areas, but I think they’re key to my financial success.
All pictures are creative commons and you can click on them to see them on Flickr.com.
One of my favorite lyrics from a band called “Model Engine” are from a song called “Scarred but Smarter”
If its all true
the only time you fail is the last time you try
if I concede defeat will I
be complete in this failure
am I incomplete and a complete failure
As the of the song indicates the ‘failure’ was a lesson learned. As the title of this post indicates we didn’t quite get our envelope system off the ground. The failure to complete the process fell completely on my shoulders. I simply didn’t push through my busy schedule and get things set up like they should have been. This post contains some lessons learned from my failure so that I don’t do it again and so that you don’t have to go what I went through should you choose to adopt the envelope system for your own household.
Banks Limit ATM Withdrawals - Part of why I didn’t complete my envelope system was the realization that I couldn’t withdraw as much from the ATM as I had planned and therefore my scheduled envelope stuffing wasn’t going to work, but I didn’t take time out from being busy to step into a branch and withdraw the amount we needed to fulfill this role. There is very little work that can be done from the envelopes if the envelopes are empty.
Almost isn’t good if you’re on the receiving end of a handgrenade or a horseshoe - Almost going to the bank and almost withdrawing the cash almost worked. If you’re on the receiving end of failure then being so close to safety (the envelope system) isn’t going to help you. You want to have completed the system setup rather than have bombed out of the system by blowing it.
Debit Cards can at least Track Spending, sort of - The upside of this is that we still came really close with groceries and we can track things using our debit card. It didn’t work like the envelope system but it did at least show us where we blew it. I could have started in after the beginning of the month and used the recorded expenditures to help me pick up from the post-first starting point.
I’m a Lazy Bum - I am not lazy in some areas, but for some reason this simple task of going to the bank and into the bank and getting the money out put my brain into a delayed shift where I could come up with any number of things to do before getting the money out. I could have gone to the bank on the way to another errand. I could have withdrawn money several days in a row after my banks regular hours to achieve the same amount withdrawn. Other options existed by I was simply lazy.
So, now November will be the first envelope system and we’ll get it done because I’m determined to not let this be the last time I try.  Failure is not an option.
In our house we have a few things that we’re trying to do to help manage Christmas’ big expenses and turn them into moderate and or tiny expenses. As the title implies you’ll want to plan ahead for Christmas expenses, holiday travel expenses and of course stay away from credit cards where the bills come later after the kids have played with the empty boxes and wrapping paper and left the toys for the dog to chew up.
We try to not let gifts be the part of Christmas that we look forward to and instead think of the gift of Christ and the time that we have together as the important part. Oh, and most items my sister makes for food - we definitely look forward to those things.
Only a tiny, tiny percentage of young baseball players make it into professional baseball. Our local home team is the Colorado Rockies, they’ve just now, moments ago, made their way into the playoffs vying for the position of representing their league in the World Series. What continues to amaze me in all of this is the salaries of the players. The players are signing multi-million, multi-year contracts that should allow them to retire at whatever age they choose and take up coaching, broadcasting or sitting on their backsides. I was just looking on the CBS sports site at the Rockie’s Roster and salaries for their players.
For example if Matt Holliday had no endorsements, no external cash flow from bonuses resulting from post-season playoff action, he would make $4,400.000.00 this year. With a salary that big you know he has to be paying a lot in taxes (though maybe a smaller percentage than we would think) , but after taxes he’s got money that he can put into investments that should help him clear a good chunk of interest every year until his grand-kids inherit a piece of the action. Assuming a 10% investment of that money ($440,000.00) at 12% interest for the year that would earn Matt$52,800.00 in interest. Ten years, without adding any more money to the investment (at 12%) would give Matt a compounded value of 1,366,573.21. Now, lets assume that he adds $100,000.00 to that every year between now and his retirement in ten years (which may or may not be reasonable… but we’re just playing with numbers) that would have him earning a grand total of $3,332,031.54 in his investment account. The good thing is that the number is going to continue to grow. Assuming that he makes 12% from that point forward from interest for do years, but lives off of 4% of that interest (effectively only earning 8% in compound interest) he’d end up with $15,530,456.21 at the end of 30 more years. Living off of the four percent interest the first year he’d get $133,281.26 to spend on whatever he wanted. Assuming he’s already got a paid for home and set of vehicles that’s a lot of money to do whatever you want with - and its also assuming he’s not working for a salary as a coach or as some sort of public personality.
Sports is amazing world to look into, a tiny percentage of the players make it big, a smaller percent can demand such huge salaries, but if you look at players like Alex Rodriguez who got paid $22,708,525.00 for this last season (again, just for the regular season and without any endorsements or other bonuses) it jumps to even more astronomical numbers. Ten percent of that salary is $2,270,852.50. That is to say that one tenth of A-Rod’s salary covers more than 50% of Matt Holliday’s salary. In essence the same assumptions made earlier about Holliday’s income and investment potential can be multiplied five times to represent A-Rod.
To set it all into a greater contrast evaluate this: The best paid team in the Major Leagues is the New York Yankees. They get paid a collective $189,639,045.00 a year to play professional baseball. The lowest paid team in the league is the Tampa Bay Devil Rays who get paid $24,123,500.00 collectively. One player on the Yankees gets paid almost as much as the entire team of the lowest paid players. The three best paid Yankees make a collective $67.7 million. The Devil Rays paid their top three paid players a collective 8 million dollars for the season.
All of that is to say: don’t sweat your income in contrast to others: even in the big leagues there’s a disparity. Get your job done right, get your job done well and look for opportunity. You never know when someone may be looking for a professional in your arena to pay a quarter of a billion dollars for the next ten years 
At church on Sunday I began talking with a friend who asked, “Do you know who Dave Ramsey is?” And thus the conversation developed as we both shared brief stories of how being financially focused for the last (insert time period here) we had both discovered that we could have financial peace, and then that we could also have financial goals that were sound and methodically possible.  The conversation was good because it allowed us to bond at yet another location in our lives. We didn’t have to discuss numbers, but instead a lifestyle of financial responsibility.
The good thing about having financially focused friends is that they’re going to understand when you don’t go out to eat. They’re going to understand when you don’t drop ten grand on a Disney cruise vacation and instead they embrace a frugal lifestyle and understand your long term goals to become independently wealthy independent of the lottery. They’re also great friends to get together with because as both of you discover areas to be frugal you’re more than likely going to be sharing those ideas to help each other achieve your goals faster or more efficiently! You can’t beat that opportunity.
The other area that folks need to consider is that when you have friends that are like minded it may help you to relax in other areas and grow a deeper friendship. A deeper friendship that will stand the test of time, finances and the sucking sound of instant gratification, pop culture and gadgetitis.
My five year old told me that she was richer than her friend. Rich. I asked her why she thought she was rich and she told me that she had lots and lots of money. Of course her valuation of the various coins she has is probably not right. Each coin counts as one coin - and so if she has four hundred coins then she has four hundred. Not dollars, not cents, just four hundred. I then proceeded to explain to her that wealth is evaluated differently based upon different assets. I have a relative that some would describe as ‘land wealthy’ because the estimated value of his land might be a high dollar amount. I have a friend who has lots of possessions that are worth a lot of money all together.
My daughter’s estimation of being rich and my desire to some day have accumulated some wealth are very, very different scales but the discussion reminds me of the need to teach her about money and personal finance. If she can start out her life with a better sense of financial stability and a plan for her future financial goals she’ll be rich. Not as much, or maybe more, than her friends but hopefully she’ll be able to teach them a thing or two and they can teach her a thing or two as well. Educating my daughters about faith, finances and most importantly my love for them are things I strive every day to do.
Next month we’re going to switch over to the envelope system to help us keep our spending under tight wraps. There’s no reason for us to accidentally splurge with a few excess expenditures so we’re switching over to make sure we’re on top of things in our budget. We’re also going to keep our focus on the short term, medium and long term goals not losing sight of where we want to be in each of these stages. I’ve started work on the online price book but my wife has also begun a paper based price book for the short term so that we can maximize our groceries. The two major grocery chains near our house are King Sooper (AKA Kroger) and Safeway (AKA Tom Thumb). So far she says that Safeway has slightly lower prices on many of the staple items and that the twenty cents savings per gallon of milk will not make up for hauling our two girls in and out of the car, through the store, and then back to the car again. I concur.
What are your plans to make October a great month for your finances?
This evening at a company event for a client we played Laser Tag. There’s nothing like laser tag to get your heart pounding, sweat going, and lungs aching for air without fake smoke. It was fun but I’m glad that after two games we’re not playing a third. I’m apparently in need of more exercise of a cardiovascular sort. Time to kick my elliptical machine avoidance habit. Here are some things I am reminded of in finances that were true in laser tag.
Everyone has the appearance of having the same equipment
Each person was given the same vest and the same gun was attached to the vests. Jobs pay, but not all jobs are the same. You’re going to need to figure out how your vest sensors work and how your gun operates quickly or else you may be hosed. There’s no recovering from a bad first half of the game unless you work really, really hard. The managing director that works over myself and other contractors and employees got a broken weapon and we ate him alive. Watch out for the predators that are the creditors in the financial worlds - they’ll get you when you’re weak.
There is no ‘i’ in team except for at Apple. We didn’t have a real team mentality in the first game and we lost bad due to our lack of team work. My wife and I have to cooperate as a team to make our finances work and be successful. Don’t get spanked at laser tag or finances - work as a team.
If your team is going to run out in chaos you will more than likely get wiped out by a team with a plan when it comes to scoring. If you get lucky you could be the tiny percent of people who win the lottery - but in reality the team with a plan is going to route the other team in wealth building if they start from the beginning with a plan and continue strong, adapting if needed, but maintaining an offensive plane with a legitimate defensive strategy as well. We’ll assume that’s an emergency fund, which is good to have anyway.
And with those key parallels I’m going to bed - I’m tired!
