___

___

When it comes to money, the author says that a gentleman would never:

• Borrow from a lady

• Borrow from a man without collateral and a plan to pay it back quickly

• Discuss money

• Discuss his possessions or their cost

• Name drop about his rich friends

___

I think the idea that a gentleman never borrowed money from a lady shows that we are living in different times. Many women are financially independent today and willing to be angel investors. It’s when you don’t pay someone back, male or female, that it becomes rude.

___

Money talks. Should you listen?

Why do we feel the need to talk about, or show off, what we have? We all know people – be it co-workers, family members or friends – who like to talk about how much they make or how much something cost. We really liked the author’s final quote: “There was once a day that we did not try to keep up with the Joneses – because we didn’t know what the Joneses had and no one knew what we had.”

Materially possessed

___

I recently saw a picture of people standing line. It made me think of the pictures we saw from the Great Depression. Back then, people stood in line to get a little soup or bread. The picture I saw recently showed people waiting in line to buy a Blackberry Storm!

___

Why is it so important to have the newest phone? Because we get our identity from our possessions.

We’re not saying that it’s bad to be an early adopter; we need them. The question is, and only you can answer it, “Is it best for you to be an early adopter?”

It may be. Your career may require you to have the newest phone. That’s a good reason. However, buying one just to be able to show it off to our friends … not such a good reason.

Just say “No”

It’s not a good reason because it leads to an ongoing problem. If that’s really the reason we’re doing it, we’re going to have to keep buying over and over again.

It becomes like a drug and we need our fix.

“I want it. I want it now. I want people to know I have it.”

A void check

After we admit that we’re doing this, we have to ask ourselves why – what’s the underlying reason? You see, we buy because of how we feel about ourselves.

We’re spending money to fill an emotional void.

We’re showing off our latest acquisition to cover up our real feelings. When we do this, we just create a bigger problem.

Getting it in balance

That problem is – we end up with a weak balance sheet. We want a lot of assets and few liabilities. The result of our spending is few real assets and a lot of liabilities.

Millionaires do the opposite. They focus on building up their balance sheets by buying assets with real value and keeping their debt relatively low. That’s not determined by how much we make or what we buy. It’s based on how much we save and invest intentionally.

Shhh … be very, very quiet!

We do that quietly. Perhaps nobody knows but us! But that’s the beautiful thing about it – we know!

In the last few months, we’ve relearned how incredibly important it is to have a financial safety net. We have to build up an emergency reserve. It’s not a sexy thing like a Blackberry Storm or a new car. It won’t get your friends excited. In fact, you probably won’t even talk about it because it’s so boring. But it sure will come in handy in the future.

You can also quietly get out of debt. We like to show off what we just bought, but we don’t talk about how we maxed out our credit card to buy it. So we put out a false identity, which doesn’t help us feel better about ourselves, because down deep we know the truth. And that truth does not set us free!

Don’t worry about what your friends and neighbors think you have. Take solace by knowing what you’re doing to have all you need and then some!

___

___

We’re grateful that you read our post today. Please check in tomorrow when we’ll talk about night moves. Until then, here’s to your bigg success!

Subscribe to The Bigg Success Show in iTunes. 

Subscribe to the Bigg Success feed.

Direct link to The Bigg Success Show audio file:
http://media.libsyn.com/media/biggsuccess/00281-120808.mp3

Related posts

Your Emotions and Your Money

Squirrels, Nuts and Business Cycles

6 Easy Steps To Financial Freedom

Getting Aggressively Passive: Creating A Passive Income That Sets You Free

(Image by isouthpawi)

___

___

When it comes to money, the author says that a gentleman would never:

• Borrow from a lady

• Borrow from a man without collateral and a plan to pay it back quickly

• Discuss money

• Discuss his possessions or their cost

• Name drop about his rich friends

___

I think the idea that a gentleman never borrowed money from a lady shows that we are living in different times. Many women are financially independent today and willing to be angel investors. It’s when you don’t pay someone back, male or female, that it becomes rude.

___

Money talks. Should you listen?

Why do we feel the need to talk about, or show off, what we have? We all know people – be it co-workers, family members or friends – who like to talk about how much they make or how much something cost. We really liked the author’s final quote: “There was once a day that we did not try to keep up with the Joneses – because we didn’t know what the Joneses had and no one knew what we had.”

Materially possessed

___

I recently saw a picture of people standing line. It made me think of the pictures we saw from the Great Depression. Back then, people stood in line to get a little soup or bread. The picture I saw recently showed people waiting in line to buy a Blackberry Storm!

___

Why is it so important to have the newest phone? Because we get our identity from our possessions.

We’re not saying that it’s bad to be an early adopter; we need them. The question is, and only you can answer it, “Is it best for you to be an early adopter?”

It may be. Your career may require you to have the newest phone. That’s a good reason. However, buying one just to be able to show it off to our friends … not such a good reason.

Just say “No”

It’s not a good reason because it leads to an ongoing problem. If that’s really the reason we’re doing it, we’re going to have to keep buying over and over again.

It becomes like a drug and we need our fix.

“I want it. I want it now. I want people to know I have it.”

A void check

After we admit that we’re doing this, we have to ask ourselves why – what’s the underlying reason? You see, we buy because of how we feel about ourselves.

We’re spending money to fill an emotional void.

We’re showing off our latest acquisition to cover up our real feelings. When we do this, we just create a bigger problem.

Getting it in balance

That problem is – we end up with a weak balance sheet. We want a lot of assets and few liabilities. The result of our spending is few real assets and a lot of liabilities.

Millionaires do the opposite. They focus on building up their balance sheets by buying assets with real value and keeping their debt relatively low. That’s not determined by how much we make or what we buy. It’s based on how much we save and invest intentionally.

Shhh … be very, very quiet!

We do that quietly. Perhaps nobody knows but us! But that’s the beautiful thing about it – we know!

In the last few months, we’ve relearned how incredibly important it is to have a financial safety net. We have to build up an emergency reserve. It’s not a sexy thing like a Blackberry Storm or a new car. It won’t get your friends excited. In fact, you probably won’t even talk about it because it’s so boring. But it sure will come in handy in the future.

You can also quietly get out of debt. We like to show off what we just bought, but we don’t talk about how we maxed out our credit card to buy it. So we put out a false identity, which doesn’t help us feel better about ourselves, because down deep we know the truth. And that truth does not set us free!

Don’t worry about what your friends and neighbors think you have. Take solace by knowing what you’re doing to have all you need and then some!

___

___

We’re grateful that you read our post today. Please check in tomorrow when we’ll talk about night moves. Until then, here’s to your bigg success!

Subscribe to The Bigg Success Show in iTunes. 

Subscribe to the Bigg Success feed.

Direct link to The Bigg Success Show audio file:
http://media.libsyn.com/media/biggsuccess/00281-120808.mp3

Related posts

Your Emotions and Your Money

Squirrels, Nuts and Business Cycles

6 Easy Steps To Financial Freedom

Getting Aggressively Passive: Creating A Passive Income That Sets You Free

(Image by isouthpawi)

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He’s not just talking about money, but it reminded me of one of the guest speakers for my class. He said that his goal is to give away a million dollars in his lifetime. One of my students asked him why he set a goal for giving instead of a goal for how much he would keep. He said that he felt that, if he could afford to give away a million dollars, he knew he would be doing just fine!

.

Fred also said that a lot of people think you have to work hard to be a success. He disagrees. In fact, he thinks you have to avoid work to be successful.

The definition of work

This is what we found most interesting – how he defines “work”. He says you are working “if you’d rather be doing something else.”

So if you love what you do, it’s not work! You can spend countless hours at it, because you find joy in it.

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We love what we do here at Bigg Success. Sure, we work hard by most people’s standards … it’s definitely not 9 to 5. But we found a way to work together doing what we love for a fantastic community of people. It’s not always easy, but it is fun … it doesn’t feel like work, at least not most of the time!

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Blaze your own trail

A great example of this is a young man we talked with recently – Sean Aiken. His last year of college, Sean’s dad told him to find a career that he was passionate about. Like a lot of young people, Sean didn’t know what that was. So he decided to find out by working 52 jobs in 52 weeks!

Now he’s working on a documentary about the project and he’s writing a book. He found his passion by blazing a new trail.

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My students are usually a pretty money-motivated group. They often go for the jobs that pay the most. The problem is it’s cyclical – the highest paying job now may not be the highest paying job in five years. So I encourage them to think about what they really enjoy doing and find a way to make a career of it. Now they’re set to rise to the top of their profession because it won’t feel like work.

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Don’t accept the terms that the world sets for you. Don’t define yourself by other people’s terms. Use your imagination to create your own world.

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As Ralph Waldo Emerson said, “When you make a decision, the universe conspires to make it happen.” So make a decision to do what you love! 

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Your Potential Power 

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Next, we looked at cutting back on 401(k) contributions. This is a much better option than cashing out, but you should try to contribute up to the limit of your employer’s matching contribution. That’s found money so you’ll be thankful you did.

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Now, we want to look at borrowing from your 401(k). The best advice we can give you on this is … don’t listen to us! Seriously, we can only talk about this in a general sense. So before you make a decision, talk with your professional financial advisor about the specifics of your situation. Then you can do what’s best for you with confidence.

There may be a better solution

Before you borrow from your 401(k), consider whether a home equity line-of-credit might be a better solution. You may already have one you can tap into. If not, consider applying for this type of loan instead of borrowing from your 401(k).

These loans are not as easy to get as they were a couple of years ago. You also won’t get as much of a line as you might have then because house values in many areas.

How much can you borrow?

If you decide a home equity line-of-credit isn’t your best bet, you can tap your 401(k) up to two times each year for money. It’s your money, so there’s you don’t need to be approved for the loan. You can borrow up to half of the vested portion of your portfolio, with a $50,000 limit.

Pay back is purgatory!

A loan from your 401(k) is a relatively inexpensive source of money. However, you’ll be paying the loan back with after-tax dollars (i.e the interest isn’t deductible). Compare that to a home equity line-of-credit, which is deductible in most cases.

In the eyes of the government, you and your 401(k) are two separate “entities”. So even though you think you’re borrowing from yourself, you’re not – you’re borrowing from your 401(k) so you have to pay it back within five years with an exception for first time homeowners who may have a longer payback term.

You can do that with each paycheck or you can do it in installments. You have to make a payment at least once every quarter. For example, if you borrowed $10,000, you would have 20 quarters to pay back the loan so you would have to pay $500 every quarter plus interest.

Of course, while you’re paying back the loan, you’ll have less money to spend every paycheck or every quarter, depending on which way you choose to pay back the loan. If things are tight now, what will they be like with even less free cash flow?

The other thing to consider about paying back your loan is that the dollars that were taken out of your portfolio are only earning whatever interest rate you’re paying. If that rate is less than what you could have earned if you kept it invested in your portfolio, you’re losing money you would have had at retirement.

No pay back is hell!

So it may be tempting to “borrow” the money and then not pay it back. In the government’s eyes, that’s the same as cashing out. So you’ll have to pay income taxes and, if you’re under 59½, you’ll also pay a 10 percent penalty. 

Analyzing the scenarios

The Center for American Progress Action Fund recently analyzed a number of scenarios [pdf]. Let’s look at the two extremes:

IF you take out a loan, pay it back with interest, and continue making your regular contributions, THEN there is almost no effect on your expected portfolio at retirement. In fact, in all the scenarios they considered under these conditions, there is less than a one percent difference in the end portfolio. Not so bad, huh?

But that ignores the fact that we’re borrowing money because we need it now. So we’re likely to cut back on our 401(k), if not stop making contributions altogether. That’s the double whammy.

IF you do that (i.e. the double whammy), THEN you can expect your savings at retirement to be as much as 22 percent less. 

What if …

Before you borrow, ask yourself some questions. For example, what if your company cuts back and you lose your job? Let’s spin it in a positive direction, what if you get a great job offer? You want to consider these scenarios as well before deciding if you want to borrow now.

Bottom line

Look for other ways to cut back on your spending. Even a little bit here and there can make a bigg difference. Consider temporarily cutting back on your contributions, but don’t dip below your employer’s match if you can possibly avoid it. Borrow if you must, but don’t cash out unless there is just no other alternative.

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The loan process seems somewhat mysterious. Wouldn’t it by nice to know where bankers are coming from? Then you would be better positioned to get the money you need.

3 things to understand about your banker

#1 – Banks can’t afford to lose money.
A lot of people don’t realize that banks operate on relatively thin profit margins. So, contrary to popular belief, they don’t make that much money on every loan.

The biggest question every banker has when looking at every loan proposal is …

Will we get paid back?

They’re more concerned about the return OF their investment than the return ON their investment. That comes later.

#2 – Banks don’t fund start-ups.
This is perhaps one of the biggest misperceptions in the business world. People think the bank is the best place to go for money they need to start a business.

To which we say, reread our first point! Bankers are relatively risk averse for the reasons stated above and more. So banks don’t tend to lend money to new, unproven firms.

You might be saying, “But I know people who got money to start their business from a bank.” Here’s the distinction – the bank wasn’t loaning money to their BUSINESS; they loaned them money as individuals FOR their business. If you look deeper, you’ll find that, in almost every case, they secured the loan with equity in their house or some other asset.

#3 – Banks need to lend money.
That’s their business. So if you need money, and you can prove that you can pay it back, and you have some assets to secure the loan, go to the bank with confidence!

Your bank is just like your favorite video store.
Video stores rent DVDs for a fee. Banks rent money for a fee. So going to the bank is just like renting a movie. You have to return the movie and pay a fee. And hey, unlike video stores, bankers don’t charge their fees upfront!

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Our bigg quote today is by the great Stephen Covey:

Understand your banker’s needs so you stand to get your money needs. 

Next time, we’ll discuss how to offer criticism without being critical. Until then, here’s to your bigg success!

Subscribe to The Bigg Success Show in iTunes. 

Subscribe to the Bigg Success feed.

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