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The One Thing You Need to Know to Retire Early

people walking on the beach as the blog post image for: The One Thing You Need to Know to Retire Early

Retire early. Most people like the idea, but how can you do it? Start by knowing this one thing.

We discuss retiring early on The BIGG Success Show today. Here’s a summary of that discussion.

How do you win with money? How to win the game of life?

Don’t just think about today. Think about today AND tomorrow AND through your retirement.

Which brings us to a very important question to ask yourself, the one thing you need to know to retire early:

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The Only Two Sources of Money

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

When you look at the essence of money, you realize that it comes from only two sources.

Money for time

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

This is the first source of money. For millions upon millions of people, it is the only source of money.

For the most part, these people will never get ahead. In fact, they will probably end up worse off than they are now.

Once they are unable to trade time for a paycheck, they will be destined to scrape by for the rest of their lives.

Money from money

Your money will work for you if you let it. When you save and invest, you make money on your money.

This is the second source of money. It’s how most wealthy people got rich.

Every human being has the same 24 hours a day. So the only way to get ahead is to get your money working for you.

The starting point of riches

How do you get money to go to work for you?

You must understand this concept:

What you make matters much less than what you keep.

You can’t always control your earnings. However, you are in full control of your spending.

The key to getting started on the road to riches is saving money, month after month. It leads to BIGG success!

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Entrepreneuring Your Personal Finances

personal_financeBigg success is life on your own terms. You are the entrepreneur of your life. Entrepreneurs look at the world through a different lens than do large company CEOs.

For example, large companies and small companies use different financial models. Large companies generally have the ability to raise large amounts of money when they need it.

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For small companies, it’s much more difficult. So it’s more critical for small business owners to watch their cash flow. For us as individuals, our financial model is much closer to the entrepreneur’s.

The two decisions

There are two types of decisions which we must think about: investing decisions and financing decisions.

For large companies, these two types of decisions are independent. They decide what they will invest in. They determine how they will finance their firm.

In an entrepreneurial firm and for us as individuals, these decisions are interdependent. We invest in the things we can finance. It could be a new business or a piece of real estate. But it could also include a new car or a new house.
 
If we have an idea for a project, we first must either have the needed financial resources already available or we have to sell someone on funding it.

If neither of those is true – if we don’t have the money or we can’t sell someone on funding it, we can’t do the project.

Now let’s look at four ways to think entrepreneurially about your personal finances:

Bootstrap
Entrepreneurs understand that they have limited resources. They recognize it, but still make the most of what they already have. You can carry that same attitude into your personal finances.

Retain earnings
This is what we call it when a business saves money. Pre-fund your projects when possible. If you know that you need financing to make an investment, why not finance it yourself? That’s financial freedom.

If cash is king, reserve borrowing capability is queen.
Protect and preserve both your credit rating and your credit capacity. Then you’ll have the ability to fund your bigg opportunity when you see it.

Create value with your projects
Simply stated, Value = Cash Flow ÷ Cost of Capital.
Entrepreneurs must understand that capital comes with a cost. It may mean giving up a stake in the company. It may mean sharing the money with partners or bankers. In all cases, it requires a reasonable return on the money invested.

As an individual, your capital comes with a cost as well. You have to share some of the money you will make in the future with your funders. So just like an entrepreneur, you need to understand if the benefit you will receive from the project makes it worth the money you’re investing.

To determine this, look at the incremental cash flow from any project you consider. If the return on your investment exceeds the cost of the capital needed to fund it, you should do the project and vice versa.

Let’s say you have an old car that’s requiring a lot of repairs. You see that you can save money if you buy a newer car and pay interest. That’s a project that’s worth doing.

Smart entrepreneurs and wealthy people look at every cash outlay as an investment. They want to make sure they’re getting enough value out of the investment to make it worthwhile.

Now that value may be somewhat fuzzy – like it makes you happier or adds to your sense of well-being. In any case, thinking entrepreneurially about your money leads to bigg success.

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Thank you so much for reading our post today. Please join us next time when we’ll talk about the long and winding road to bigg success. Until then, 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:
http://media.libsyn.com/media/biggsuccess/00486-092209.mp3

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(Image in today's post by srbichara)

Money Tips if You Do Not Have a Steady Income

life on your own termsBigg success is life on your own terms. We talked all about that last week in a series of five posts where we painted the bigg picture.

Now we want to get into the nitty-gritty. What keeps us from living our lives on our own terms?

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The challenge of irregular inflows

One of those things is not having enough money – one of the five elements of bigg success – when we need it. It’s one thing if you have a regular salary. However, a lot of people don’t have a steady income. It fluctuates from month-to-month.

What if you’re a salesperson working on straight commission?

What if you own your own business and don’t draw a regular paycheck? You may be a freelancer or a solo entrepreneur. You may be in business and have employees. You not only feel responsible for putting food on your table, you also have a group of people to whom you feel responsible.

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georgeI certainly can relate to this subject, having been a business owner for pretty much all of my adult life. Come to think of it, before I went into business for myself, I worked on commission as a sales person so I’ve seen both sides of it.

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marylynn
Of course, with George, I now am a business owner too.

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george
Welcome to the club, Mary-Lynn!

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marylynnWe have a couple of businesses in their early stages. I left a job in the corporate world with a regular paycheck, but I sure understand now what it’s like not to have that. I know I’m not alone. A number of people in our community have mentioned this as a major challenge to living their lives on their own terms.

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So what can you do if your income fluctuates from month-to-month?

Understand your cycles

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georgeOne thing that I found is that I had to understand my cycles. I’ve struggled with this one. When I wasn’t busy, I’d spend time and money promoting and prospecting. Then I would get too busy – I don’t have time to promote and prospect. So I stopped doing it. The thing I knew, I wasn’t busy again and the cycle would start over!

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If you can be consistent with your most important activities – those things that generate the most income for you – you may be able to smooth out your inflows.

You might even find that you can hire an assistant to perform some of these activities for you. You spend a little money now to save you time and make you money a little later.

What if you can’t afford to hire someone to help you? Then you’ll have to invest the time yourself. When you find yourself in your next “up” cycle – you’re too busy to spend time on crucial prospecting and promotional activities – take a look at it again to see if it makes sense.

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marylynnAnother thing I’ve found is that I can be more consistent if I carve up my activities into smaller chunks. For example, I may send out five e-mails every day of the week instead of thinking that I need to send out 25 e-mails. If you don’t have the time to do that, start with three e-mails a day.

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Stabilize your outflows

Risk is often measured by volatility. So by definition, if we have irregular inflows, we are taking more risk. Because of that, we should strive for less risk in our outflows.

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marylynnWe do this by keeping our standard of living relatively low. Our businesses are in their early stages. So we watch what we spend and live very frugally. For example, we watch how much we shop and go out to eat less than we did when our incomes were more regular.

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One of our newsletter subscribers, Randy, says “rowing his own boat” by working for himself are his terms for his life. He’s been on his own for about 25 years now. He’s put his two sons through college while remaining debt free. He says he did it by having a plan when his boys were just babies. That plan paid off. He just turned 50 and plans on living the way he wants from here on out.

Congratulations Randy and thanks for sharing your story with us!

Randy’s story also helps us understand a second part of stabilizing our inflows:

Be very, very careful with debt.

We have to resist the urge to pile onto our outflows by adding principal and interest payments. It puts even more pressure on our inflows and more stress on us because we have to earn even more.

What do you suggest?

Share that with us by leaving a comment below, calling us at 888.455.BIGG or sending us an e-mail at bigginfo@biggsuccess.com.

Thanks so much for checking in on us today.

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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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One of our listeners just accepted a new management job. Join us next time when we help him with bigg challenge.

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/00361-033009.mp3

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(Image in today's post by kikasha)

Savers Spenders and Investors

investments When personal finances are discussed, the experts usually divide people into savers and spenders. We ran across a press release from Fidelity, the mutual fund giant, about a survey of workers in the non-profit world. They asked the participants if they were a saver, a spender or an investor.

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We thought it was very astute to add that third category. Which one do you fit in?

The workers in the study split themselves about evenly between saving and spending. 46 percent claimed to be savers while 45 percent admitted to being spenders. So that leaves only 9 percent who classified themselves as investors.

Merging the two categories

We suspect that fewer people today would classify themselves as spenders than say a year ago. A lot of us are getting on the savings bandwagon. That’s definitely a step in the right direction, but saving it isn’t good enough.

This data suggests a bigg idea. We shouldn’t think of ourselves as either savers or spenders. We should always think like an investor. We should merge the two categories – spender and saver – into the third category – investor.

We must know how to invest it or we won’t end up with the resources we need to live the life we want.

From spender to investor

Here’s some good news for spenders: thinking like an investor doesn’t necessarily imply that you don’t spend. It means that you spend differently.

You look at every single dollar you spend as an investment. Is it going to bring you enough return to make it worth giving it up? And that “return” may not come in dollars earned on dollars invested.

It may mean that it adds enough to your level of “happiness” to make spending the money worth doing. If it passes that test, then spend, spend, spend! If not, hold onto it.

For example, you may see a real deal on some non-perishable consumer good. Buy it. Stock up. Say an item is on sale for half off. Let’s pretend that you know that it only goes on sale once a year. If you buy a year’s supply, you’re making 100% on your money. That’s hard to beat!

So get to know the promotional cycle of the brands you use regularly and time your investment appropriately. Know when various businesses need the money more. For example, from car dealers to contractors, there are seasons when people are buying a lot and times when people aren’t. Time your purchase for their slow periods and reap the benefits.

From saver to investor

Now let’s think about savers. It’s great to save, but if you’re only earning two percent on your money, where’s that getting you?

We know … we know … you’d rather earn 2% than lose 40%! We completely understand that thought process.

However, investors don’t operate out of fear. They operate rationally. And we have to resist the temptation to go with the masses because they’re usually wrong in the long run.

Just like with consumer goods, there are some real deals out there on assets right now if you can afford to hold them long-term.

The best time to get out of a particular market is often when everyone else is getting in. And the best time to get in is usually when everyone else is getting out.

Years ago, we were told by a very successful real estate investor that when you see the no-money down real estate infomercials proliferating, it’s time to get out of real estate. How many of those do we see now compared to three years ago? 

Now think about stocks. Many of the same people who are touting doom and gloom now were spouting off about the end of the business cycle and the ever-upward spiral of stocks just a couple of years ago.

So to think like an investor, think for yourself. 

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Get the tips and tools you need to be a BIGG success.
Subscribe to the Bigg Success Weekly – it’s FREE!

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Thanks so much for spending some time with us today. Join us next time when we ask, “Does haste still make waste?” 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/00336-022309.mp3

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(Image in today's post by woodsy)