We once heard Donald Trump asked, “What’s the difference between a net worth of $70 million and $700 million?”

He replied, “A bigger boat.”

BIGG success is life on your own terms. If a bigger boat floats your boat, then go for it.

When people sell their boat to buy a bigger boat, it helps our economy. It puts people to work. Companies make more money. Taxes are generated. It’s a win all the way around.

Or is it?

We’re going to share a thought process to determining if a bigger boat (or any other major purchase) is consistent with life on your own terms.

Hear George & Mary-Lynn discuss today’s topic on The BIGG Success show. Click a player to listen.


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We hope to demonstrate the interconnectedness of the five elements with this discussion.

Money

Obviously, it will cost you money to buy a bigger boat. You will get the money by earning more than you spend.

The question is: Is a bigger boat worth the price? To determine that, you need to answer two more questions:

What are the returns?

What is the true cost?

A bigger boat may or may not yield financial returns. We’ll talk about this more when we hit on work.

However, you would expect a bigger boat to give you emotional benefits.

Time

In order to reap those benefits, though, you will have to spend something else – time. Time is part of the cost of a bigger boat.

Will you really have time to enjoy it? Or will you have even less time because you’re working more to pay for it?

Work

Let’s skip growth for now. We’ll come back to it shortly.

Work may pay for your bigger boat. However, if that’s the case, your true cost of the boat is higher. In your quest to live large, you’ll sacrifice living.

You’ll be spending more time at work. Is it worth it?

Of course, a bigger boat may actually help you make more money. You may be able to entertain clients, employees, funders, etc.

A bigger boat may help you build more and better relationships. Or is that just a rationalization? If that’s what it takes, are they the right relationships?

Play

On the other hand, a bigger boat may be the ticket to more free time. You may enjoy being on it so much that you just naturally schedule time away.

Of course, you could do this without a bigger boat. But maybe you know you won’t.

Growth

How does growth come into play? If we use the factor cited by Donald Trump, your net worth must increase 10 times to buy a bigger boat.

So it will take a significant amount of growth to accomplish this. How can you increase your wealth 10 times over?

This is where a bigger boat really comes into play. It makes the intangible tangible.

It’s your reward. You know you will work long, hard, and smart to be able to buy it. You will save and invest your money wisely or you won’t get it.

It represents BIGG success to you. Great!

Then get a brochure. Or find a photo of the bigger boat you want.

Keep these visual representations in front of you. Plaster a BIGG “10x” on top of it.

Put the exact net worth you need to reach on the brochure or photo. Now break this goal up into smaller steps. Devote all your energy to getting to the next one. Then keep going. Keep driving to BIGG success!

For you it may not be a bigger boat. What is it? What drives you to achieve more?

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Status – a high rank or standing within a group of people – is a good thing. It means prestige, importance and respect.

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But status also can work against us. Sometimes in our quest to show off our net worth, we lose our self-worth. We worry about our image instead of our essence.

We give off the illusion of money when often the money isn’t there. It’s the magical money illusion. Even though we make a lot of money, it all goes out the door trying to give off the illusion of wealth.

This is one of the lessons we’ve learned from recent history. Now we’re going back to timeless principles of saving money and using debt sparingly.

For some reason, there seems to be a natural human tendency to compare ourselves to others. We found a great article that describes two experiments that tested people’s desire for relative affluence.

Earn $2,000 more!

The first one was conducted in the early 1990s. Participants were presented with two job opportunities in the same industry.

With the first option, they would earn $35,000 a year while their colleagues earn $38,000. Under their second choice, they would earn $33,000 while colleagues earn $30,000.

Most people chose Option 1. However, here’s where it gets interesting:

Two-thirds said Option 2 would make them happier.

We think more money will make us happier. However, this research shows that, for a lot of people, making more than their peers is what really does the trick.

Half the money is just fine

Let’s look at a second study. Its participants were a very bright group – the faculty, staff and students at Harvard University.

They were also presented with two options. The researchers took special care to make it clear that the prices paid for goods and services would be the same in both cases. In other words, more money would mean more and/or better stuff.

Under Option 1, they were offered $50,000 per year while others were only making $25,000. With Option 2, they would earn $100,000 a year while everyone else earns $200,000.

56% of the participants chose Option 1! They gave up $50,000 in income in order to make more than their peers.

It’s the Jones Effect. They’re happier making more comparatively but less absolutely.

Isn’t it amazing that really bright people making choices that seem illogical?

How do you move past this natural inclination to compare yourself to others? How do you do what’s really best for you?

Change the focus of your comparison.

Instead of focusing on what you make or what you have compared to others, concentrate on what you need to live the life you desire.

When you live your life on your own terms, you’re liberated from all of that. You focus on what you make relative to you what you need to make. Others disappear from the calculation.

You focus on what you want relative to what you have. Who cares what anyone else has.

You focus on what you know, not on what other people think. You create the life you want and you make sure it’s sustainable. That’s financial freedom. That’s peace of mind. That’s bigg success!

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Thank you so much for checking in with us today. Please join us next time when we talk about horse jockeys and personal productivity. Until then, here’s to your bigg success!

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We’re going to take a little different tack today than we have with the last two shows. We’re going to talk about two specific things we need to know when it comes to arithmetic.

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These two things both involve our personal finances. That’s why they’re so important.

The power of compounding money

The first one is compounding. This can be a little complex so we’ll offer an example that’s so simple we won’t even need a calculator!

2 + 2 + 2 = 6. 2 x 2 x 2 = 8.

If we add two together three times, we get six. If we multiply two by itself three times, we get eight.

That’s the power of multiplication. And money multiplies if you manage it properly.

Stuffing it in your mattress

That’s just numbers. Let’s apply it to money to make it more tangible.

Let’s say you have $2. You stuff it in your mattress. Next year, you get another $2 and put it in the same mattress. The year after that, you do the same. Now you have $6 in your mattress.

But you haven’t earned any money on your money.

Investing it

Let’s assume that you could double your money every year. Now understand that we’re just doing this for the purpose of illustration.

We don’t know of anything you can invest in and double your money every year. If there was such an investment, it would likely involve taking a whole lot of risk.

So you start with the same $2 that you did before. Only now you invest it and earn 100% on your money each year. Instead of $6, you would end up with $8.

And you only invested $2 one time!

If you invested all $6 at the times suggested above, you would have $14 at the end of the period.

That’s the power of compounding interest. It’s how interest works for you.

But it’s a two-edged sword. It can also work against you. We’ll talk about that more in just a minute.

Building Net Worth

The second thing to understand about arithmetic is the basic accounting equation:

Assets – Liabilities = Net Worth.

Of course, our goal is to increase our Net Worth. If we understand this basic equation, we can quickly see there are only two ways to do that.

We increase Assets faster than Liabilities

We decrease Liabilities faster than our Assets are decreasing

Let’s look at the extremes to keep it simple:

• If we increase our Assets without increasing our Liabilities, our Net Worth increases.

• If we decrease our Liabilities without decreasing our Assets, our Net Worth increases.

A painful vacation

Let’s get away from words and look at something tangible. Let’s say you borrow money to go on a vacation.

You don’t increase Assets at all but your Liabilities increase. So your Net Worth goes down. You lose financially. You may reap psychic returns but that’s a different post!

It’s the pain we talked about earlier. You have to pay for the vacation over time. You also have to pay interest on the money you borrowed. This is a situation where compounding works against you.

So what’s the key?

Find ways to increase Assets without taking on more Liabilities or invest in Assets that earn a return higher than the cost of your debt.

Money multiplies if you manage it right. That’s a path to bigg success!

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Thank you so much for checking in with us today.

We’ve talked about the 3 R’s we learned in school. Please join us next time when we begin talking about the 3 R’s of bigg success. Until then, here’s to your bigg success!

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You need a net worth of over $8 million to make the top 1%, $2 million gets you in the top 5% and it takes about $900,000 to place yourself in the top 10%.

So those are your targets if life on your own terms means being in the top 10% or above.

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Making more doesn’t mean having more

This report also looked at share of total wealth. As it turns out, the richest of the rich – the top 1% – didn’t get richer. They still held approximately one-third of the country’s total wealth in 2007, the same as 1995.

However, their share of income was up significantly – from 17% in 1997 to 22% in 2007.

The wealthiest people in our country saw a bigg increase in share of income, but their share of net worth didn’t go up. Does that mean rich people got caught up in the “spend, spend, spend” economy? Possibly.

We often think, “If I could just make a little more money.” This study offers further proof that making more doesn’t necessarily translate into having more – even for the richest among us!

Make do, then make more

The crucial thing – the starting point – is to figure out how to make do with what we already have. Then when we make more, we’ll have more because we manage it all better.

We can enjoy some of it now and invest the rest for our future – for the life we dream of living.

How the rich make money

As might be expected, the average person gets most of their income from salaries and wages. As we move to the top 5%, we see that a larger share of income comes from business ownership and investment real estate.

It really kicks in for the top 1%. Plus they have built up enough assets to get a significant boost from selling those assets for a profit. It’s Economics 101 – buy low and sell high.

But it’s no panacea

We’ve recently seen people losing money in business and real estate. Like most things, it’s no panacea. It’s risky. But if you aren’t trying to get rich quick, you can greatly improve your odds.

The best advice

We also found it revealing that this study showed that the bottom 50% lost money holding assets and from the ownership of businesses and real estate.

The rich made a lot. The bottom half lost money. What do the rich know?

Before you jump into investing in a business or real estate, educate yourself. Get advice from someone who’s actually succeeded at it. If they’ll mentor you, that’s great. If they charge you for it, it will be worth every penny.

You’ll get where you want to be faster by learning from people who have done it rather than trying to learn it on your own.

So if life on your own terms means building wealth, get started creating multiple streams of income today – even if it’s just part-time!

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Please join us next time when we ask, “Are you talking to the right person?”

Thanks for reading our post today. Until next time, here’s to your bigg success!

Subscribe to The Bigg Success Show in iTunes. 

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Direct link to The Bigg Success Show audio file:
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