Have you ever thought about the values of money?

If you read that question quickly, you may have missed a subtle yet incredibly important distinction:

The “s” in Values.

BIGG success is life on your own terms. You get there by taking control, as the entrepreneur of your life.

As an entrepreneur, you know you add value in the lives of others to create value for yourself. Value is a synonym for wealth or money.

But wealth comes in many forms. Some of the greatest riches you may experience have nothing to do with money. Are you rich?

Research shows that, at the lowest levels of the economic rung, money matters. A little additional money makes a huge difference in happiness.

But once basic needs are met, more money matters little. And the little bit it does matter doesn’t last long.

Every time you spend money, you reflect your priorities. That’s why it’s incredibly important to know what’s most important to you. So your values and your money are in sync.

Quite some time ago, we did a series of two shows on living your dream with purpose (Part 1, Part 2). In Part 2, we provide a worksheet that helps you identify what you value the most [pdf] and discuss how to use it.

After you’ve gone through the list, think about how you spend your money and your time, your other resource.

Is it reflective of your values?

If so, congratulate yourself.

If not, what one change could you make today to move the two closer together?

Aligning your values and your resources brings BIGG success.

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BIGG success is life on your own terms. Money is one of the five elements of BIGG success.

We gladly display our relationship status on Facebook. What if Money reported its relationship with you in the same way?

Listen to this post, click a player to hear George & Mary-Lynn on The BIGG Success Show Podcast! (Runtime 4:20)


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But it doesn’t feel any sense of commitment. You play around, but Money soon departs to meet up with someone else.

So Money comes and Money goes.

Eventually, you meet up with Money that seems like it wants to hang out with you. This Money reports that you are In a Relationship.

It’s still new…you’re still getting used to having Money around. You’re still getting to know each other.

But at least this Money doesn’t run off with another person every chance it gets.

At some point, you and Money get Engaged. You make an initial commitment to each other.

You begin making preparations to make it all legal. You start to trust Money.

But then, Money calls it all off.

That’s when It’s Complicated. You’re not sure what happened.

Money seemed devoted to you and your future. But it got cold feet and ran off.

You know it’s not you; it’s Money. But you still wonder…what did you do wrong? If you examine the situation, you’ll realize that Money wasn’t giving you what you really needed.

Sure it was fun. You would go out. You would have a great time. But you weren’t building the foundation for a lasting relationship.

So you learn more about relationships with Money. As you discover how to maintain a healthy relationship, you and Money decide to get Married.

The wedding is an informal ceremony. Few people attended. Of course, there was a loved one or two. No minister was necessary.

Just your professional advisors. They were there to help you get what you want out of your relationship with Money.

You’ll want to check in with them from time to time, just to make sure you and your Money are fulfilling all your desires.

Everything is wonderful. You love Money. So much so, that you get possessive.

You don’t let Money out of the house. You try to save Money just for yourself.

But you feel empty. And Money isn’t at its best either. Money doesn’t do well holed up at home.

So you and Money come to an agreement. You will be In an Open Relationship.

You’re still committed to each other. Money wants to help you fulfill your heart’s desire. It likes to get out with you and explore the world.

But it also wants you to willingly share it with other people.

Money is a tool. And not the bad kind unless you turn it into that. Money can be a force for good. But it needs your help.

Money follows your lead. And a healthy relationship with it leads to BIGG success!

What is your relationship status with money?

Direct link to The Bigg Success Show audio file | podcast:
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Do you feel poorer? You may be.

PNC recently published their 2011 True Cost of Christmas Index [pdf]. The cost of the 12 days of Christmas is up 4.4% this year.

So true love is more expensive.

This is a fun way of highlighting an important principle of personal finance – you can lose money without really trying.

In fact, you don’t have to actually lose money to lose money!

The hidden tax

Money itself is essentially useless. It’s just a tool, a means of exchange for goods and services.

Your purchasing power is what matters. And if you stuffed all your money in your mattress in 2011, you would need to cut back just to break even.

You will still spend $25. But it will only buy you $24 of the same goods and services you’ve been used to purchasing.

Now, on the surface, that doesn’t look so bad. But take a family with a household budget of $50,000 a year.

They will have to cut $2,000 from their budget just to maintain the same standard of living!

In other words, inflation is a hidden tax. You don’t see it, but you sure do feel it.

Little by little, it eats away at your ability to buy the things you want and need. You feel poorer because you are.

So what can you do about it?

Cash is the best asset to have, but the worst asset to hold.

You need cash to survive. We all pay bills with cash – mostly in electronic form these days, but cash nonetheless.

However, cash loses its value day by day in an inflationary environment. So holding cash is the worst thing you can do.

It’s a delicate balance, but one that must be found to get the most you’re your money.

The difference between nominal and real returns

If inflation spikes up, interest rates will follow eventually. Here’s where a lot of people fall into a trap.

It may be especially tempting as an encore to the low current interest rates. What if CD rates jumped from 1% to 5%? Sounds great, right?

But it’s a losing proposition. Here’s why:

Let’s say you were able to find a one-year CD that pays 5%. You invest $10,000 so you’ll earn $500 ($10,000 x 5%) over the course of the year.

But you still need to pay taxes on this money. Assume your marginal tax rate is 25%. After taxes, you’ll only earn $375 ($500 income x 25% tax rate = $125, $500 income – $125 taxes = $375).

In other words, your nominal return is 3.75% ($375 ¸ $10,000).

If inflation is 4%, your real return is -0.25%. (3.75% – 4.00%). So you’re losing purchasing power even though your return seems high by today’s standards.

Granted, it’s better than stuffing it in your mattress. But you’re still losing money even though you’re trying not to.

Buy now, use later

One safe thing you can do to preserve your purchasing power is to buy ahead. Note that we said buy ahead, not just buy.

Buy things now that you would normally buy later. More specifically, when you see a great deal on an item you use regularly, stock up.

Hard assets generally trump financial assets

Financial assets often struggle in an inflationary environment. For example, traditional bonds tend to get destroyed because interest rates are rising, making the bonds less valuable.

Of course, now you can get Treasury Inflation Protected Securities (TIPS) which helps protect you.

Stocks may do alright if the company is able to pass along price increases to its customers.

Hard assets (e.g. real estate, commodities) have tended to perform well in inflationary times in the past. Of course, the past is no predictor of the future, as we always hear.

In addition, how long will it be before real estate market really starts to recover? Can gold, silver, and other commodities continue their meteoric rise?

You have to decide for yourself. Or get help.

We highly recommend working with a financial planner. More specifically – work with a professional who gets paid to advise you, not sell you investment products.

They’ll earn every penny you pay them!

The quest for more income

BIGG success is life on your own terms. It’s about taking control to design and build the life of your dreams – no matter what the economy is doing.

One way to do that is to start your own business. You can do it part-time.

The extra money you make will help you preserve your purchasing power. And if done right, it could be your first step to financial freedom. That’s BIGG success.

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Money is one of the five elements of BIGG success. When you really think about it, there are only two core paradigms when it comes to personal finance:

The more money you have, the more you can do.
The less money you need, the sooner you can do it.

The more money you have, the more you can do.

Money means options, options to do what you want.

To buy what you want. To spend your time how you want.

Time is another one of the five elements of BIGG success. You can exchange money for time.

You can pay people to do chores for you. You can pay people for tasks outside your strength.

Money can buy time. Money can buy things.

Money means freedom, at least to some extent. So focus on accumulating more money.

An attitude of “more” propels you forward. The desire for “more” makes us grow. For us humans, growth is where we find meaning. Be happy, not content.

The less money you need, the sooner you can do it.

But there’s another side to personal money management. It’s the second mindset of personal finance.

This is the one people often don’t think about. Or talk about.

But BIGG success is life on your own terms. If your definition of BIGG success requires less money, you will likely reach your destination sooner than someone who requires more.

In other words – if you can be happy with less, you can enjoy it longer!

An attitude of “less” also has other benefits. “Less” may very well mean less stress. Because you need to protect your nest egg once you accumulate it. So more money often means more worries.

Another benefit of “less” is perhaps the most important one of all. “Less” helps you stay within your boundaries. It stops you from crossing the line. “Less” helps you get to your vision of BIGG success with your values intact.

That’s it. The essence of personal finance in two sentences.

How much is enough for you?

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Uncertainty. It’s a word you hear a lot these days.

How do you live with uncertainty? How do you face the great unknown?

Think like an entrepreneur!

BIGG success is life on your own terms. You’re the person in charge of your life.

Entrepreneurs know that you can’t predict the future.

So don’t try. Instead, do what they do – create your future.

But not just any future. The future you want.

Build your own personal economy day by day, moment by moment.

Watch the inflows and outflows in your economy. Build a baseline for future flows of money.

Inflows

How much do you plan to increase your income next year? The year after?

Build a plan for three to five years. Then ask a very important question:

How will you get from where you are to where you want to be?

Be on the lookout for opportunities that match well with your passions and proficiencies. Then go for the ones that you think are the most profitable.

It’s a powerful combination when your passions and proficiencies meet profits.

Outflows

Many people never stop to think about this basic reality:

It’s easier to control your outflows than your inflows.

So while you project your income to grow, be careful about future increases in expenditures.

Sure, some will go up. Inflation will play in. And you probably want to enjoy some of the fruits of your labor now.

But controlling your outflows will give you more options and create a more sustainable personal economy.

Surplus

You do plan on a surplus, right? No deficit spending here!

With the surplus you generate, you can invest. Your money starts working for you. It’s a powerful thing.

Because, eventually, your Department of the Treasury will dwarf your Department of Labor.

It’s what you want – the freedom to work when you want, where you want, with who you want. That’s BIGG success!

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