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unbudgeting blog post image tag budget

Unbudgeting: Budget Without Budgeting

unbudgeting blog post image tag budget

Unbudgeting is an alternative to traditional, personal budgeting. Think of it as a way to budget for people who hate budgeting.

Do you prepare a budget for your household? If not, you’re in the majority. Nearly 3 out of 5 people don’t, according to a U.S. Bank Possibility Index study.

We must confess: we don’t prepare a traditional budget, although we have in the past. Now, we practice what we call “unbudgeting”.

We discuss this on The BIGG Success Show today. We’ve found it fits us more naturally than traditional budgeting. See if it makes sense to you.

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Money Smart Week Guest on BIGG Success David Bach

David Bach on The Latte Factor

Money Smart Week Guest on BIGG Success David Bach

9-time New York Times best-selling author, David Bach, joins us to share the secrets of financial freedom from his new book, The Latte Factor. This show is made possible by FinancialFreedomTool.com.

Today’s show is part of our special podcast series for Money Smart Week – coordinated by the Federal Reserve Bank of Chicago to help individuals and families better manage their personal finances. Learn more at MoneySmartWeek.org.

Today, on The BIGG Success Show, we’re thrilled to talk with David Bach, one of the most trusted authors of our time. He’s written nine consecutive New York Times bestsellers, including two that hit #1.

David joins us today to share the secrets to financial freedom from his new book, The Latte Factor: Why You Don’t Have to Be Rich to Live Rich*. Here’s a summary of our discussion…

Why did you write this book as a parable?

David says he’s wanted to write this parable since 2004. He was on Oprah, talking about The Automatic Millionaire*, his most popular book at that time. It’s about an ordinary couple who achieve total financial freedom at the age of 52, having never earned over $52,000 a year.

It shows, he explains, that you don’t have to be rich to invest. You don’t have to make a lot of money to retire early.

As the book became more and more popular, David realized that one of the best ways to reach people is by telling stories. His favorite books – The Alchemist* by Paulo Coelho and Who Moved My Cheese* by Spencer Johnson – were stories.

He adds: The truth is 98% of the people are never going to buy a financial book. But they’ll buy a story book. So I thought I could reach more people by putting this into a parable. But the story didn’t end there…

David is a BIGG fan of Paulo Coelho, author of The Alchemist. He spent a delightful evening with him back in 2012. As the time to retire neared, Paulo turned to David and said, “What is the book that your soul desires to write, that you have not yet written?”

David replied, “I want to write this book called The Latte Factor, that could inspire tens of millions of young people all over the world to realize that their dreams are closer than they think, that small amounts of money could change everything in their life. I have a son. He’s a teenager. I can’t get them to read my books yet.”

Paulo put his hand on David’s arm and said, “Then David, you must write that book.”

So David wrote The Latte Factor. And his son read it…and immediately acted upon it.

Want to know what George said to give David chills? Then listen to the show. Simply click the PLAY button above.

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Money Questions You Need to Ask

Money Questions You Need to Ask

Money Questions You Need to Ask

Asking better money questions is one of the keys to getting the future you want, says Veronica Karas, author of the new book, Money Matters: Everything You Should Have Learned in School but Didn’t.

On The BIGG Success Show today, we talk with Veronica Karas, CFP, about her new book, Money Matters: Everything You Should Have Learned in School, but Didn’t*. Here’s a summary of that discussion…

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How to Lose Money Without Really Trying

losing money | BIGG SuccessDo 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.

Image in this post from stock.xchng

Step 2-Find Abundance in a World of Scarcity

abundanceWe’re doing a series on abundance. Last time, we took the first step – create a fortune by feeling fortunate.

No matter what life may throw our way, we are so lucky to live freely. We may not have everything we want, but we’re so fortunate to have so much.

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Now we’re ready for the second step of finding abundance:

Build in Reserve Capacity

Many people today are trying to sprint through the entire marathon. To run that pace for a short time may be fine. But to run the whole course at that speed only leads to wearing out long before the finish line.

In your schedule
Finish strong by building reserve capacity in your schedule. Here are some suggestions:

  • You start to do this by setting your direction. What does bigg success mean to you? Bigg success is life on your own terms. What does that look like? Get a clear picture of it in your mind.
  • With that vision, focus every day on the things that are the most important to getting there. If it doesn’t move you toward it, stop doing it!
  • Then honestly assess how much you, as a human being, can accomplish in a day. Live as a human, not a superman or superwoman. Live like a human, not a machine or a robot. Leave yourself some breathing room when you plan your day.
  • Also plan for the unplanned. Things will happen that will need your attention. Projects will take longer than expected. Opportunities will present themselves along the way.

    If your schedule is jam packed, you won’t be able to take advantage of them. Or your bigg opportunity may pass right before your eyes and you’ll be so busy you won’t even notice it.

In your budget
Once again, it comes back to what life on your own terms means to you. When you look at what you’re spending money on, are all expenditures moving you closer to that dream life?

You know where you want to go. You know how fast you want to get there. Sometimes that means creating abundance for the future by creating a reserve today.

When you have money in the bank or money in your investment account, you feel a sense of abundance, don’t you? It’s only human. So let’s do it:

  • Eliminate every cost that doesn't move you closer to where you want to be. Take the money you save and stash it away.
  • Another great financial reserve is reserve borrowing capacity. It’s not an asset in the strictest sense of the word, but it sure is an asset when your bigg opportunity presents itself. So build reserves to live in abundance. That’s bigg success!

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Would you like more tips and tools to live your life on your own terms?
Subscribe to the Bigg Success Weekly – it’s FREE!

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Thanks so much for reading our post today. Please join us next time as we discuss the third step to living in abundance. Until then, here’s to your bigg success!

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Direct link to The Bigg Success Show audio file:
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Step 1-Find Abundance in a World of Scarcity