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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!

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The Trap That Keeps You from being Financially Free

Freedom Or Security – Which Do You Choose?

(Image in today's post by srbichara)

4 Types of Free Agents

freedomThis is the final installment of our five-part series on freedom. In the first three parts, we discussed the 3 levels of freedom – freedom of, freedom from, and freedom to. Last time we talked about financial freedom.

Now we want to talk about the freedom to spend your time however you want. If you can do that, we think you’re a free agent. We’ll identify four types of free agents today:

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The Aggressive Passive

Aggressive Passives let their money work for them so they don’t have to work. They make enough money from their investments to pay for their desired standard of living. So they are free to spend their time however they want.

The amount of money you need to be an Aggressive Passive is a lot less if you’re perfectly content not living lavishly than if you want to live large. But it’s life on your own terms, go for what you want.

In our last post, we discussed paths to financial freedom. If you want to be an Aggressive Passive – and you want it sooner rather than later – you’re going to focus on the wealth building path. Maximize income, minimize costs and build Assets – most likely your own business or real estate.

The Passion Player

Passion Players love what they do so much that they don’t feel like they’re working. In many cases, their hobby is their craft and their craft is their hobby.

We have a friend who had built up an incredible business and sold it off. Now he’s back in the same type of business only this time he’s doing it with no employees. He chooses his clients very carefully. He takes plenty of time off, yet he’s still doing very well money-wise. He’s thrilled!

You may choose to work inside a corporation and be a Passion Player. Just keep in mind that, in addition to your work, you must love working for and with the people around you. Since you only have one client – your employer – that may be difficult at times.

Inside or outside of a company, your focus as a Passion Player is building up your personal brand. It may make sense to do this while you have the security of a full-time job. But there’s also some real security – as well as freedom – in moving from an employer (which is like having only one client) to multiple clients.

The Automatic Pilot

Automatic Pilots don’t just sell a product or a service. They don’t just create a brand. These free agents build a business.

In that business, they develop systems and controls. The systems insure a consistent standard of the product or service they offer. The controls allow these free agents to step away from their business without fear of it falling apart.

While they develop their systems and controls, they also train a protégé who can run the business in their absence. Once the protégé is fully trained, the entrepreneur is a free agent!

The Synergizer Bunny

These free agents sit at the hub of a network. They tap that network to bring the best people to the table.

Synergizer bunnies don’t just do projects with others. Bigg success comes to them by creating entire businesses through strategic alliances. Everyone involved is well compensated and the customers receive a great value. It’s a win all the way around.

That’s the key to becoming a free agent of any type: Help others find ways to improve their lives and you’ll be a bigg success.

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Thanks so much for checking in on us today. Please join us next time when we’ll discuss one of the best assets to have today. 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/00430-070609.mp3

Related posts

Three Levels of Freedom – Part 1

Three Levels of Freedom – Part 2

Three Levels of Freedom – Part 3

6 Paths to Financial Freedom

(Image in today's post by svilen001)

6 Paths to Financial Freedom

freedomToday is the fourth installment in our freedom series. We’ll focus on financial freedom.

Financial freedom … can you imagine it? To use the lingo from our last couple of posts, it means freedom from money worries or, even better, freedom to choose how we spend and live.

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Read more

Freedom Or Security – Which Do You Choose?

Let’s start with some definitions of what we’re talking about when we say freedom and security.

When we talk about security here, we’re talking about things like your personal financial security or job security. Freedom means financial freedom and career freedom.

Many experts say that it’s a trade-off – you have to choose one or the other. We want to examine that today.

So here are a few questions –
Given the definitions above, when we say “security”, what do you think?
If you’re like most people, you’re probably thinking things like “a regular paycheck”, “an annual salary increase”, and “no fear of losing my job.”

What do you think when we say “freedom?”
You might say “creative control”, “no money worries”, “set my own schedule”, and “be my own boss.”

Which one is more fun to think about?
Freedom, of course! In fact, most people tend to smile when thinking about freedom. Thinking about security doesn’t yield the same emotions.

If that’s the case, why do we spend so much time worrying about security and so little time planning for freedom?
That’s a good question, isn’t it? Of course, you might say it’s because you have bills to pay and a family to take care of.

What if you could have both freedom and security?
Isn’t that ideal? Before we offer some suggestions on how to make that happen, we want you to think about how secure that job truly is.

Think about two scenarios –
Scenario 1: You’re an employee with an employer.
Think of your employer as your customer. Think of the services you provide to your employer as your business. Now, look carefully at that … isn’t that what a job really is?

How many customers do you have?               One.
What happens if you lose that customer?      You lose all your income.
How secure is that?                                            It’s not.

Scenario 2: You’re self-employed.
Now picture yourself in your own business with five customers. To keep it simple, assume that each of these customers gives you exactly the same amount of business.

What happens if you lose one?                        You only lose 20% of your income.

So which one is more secure?

Ah, but you protest – with your job comes unemployment insurance and/or a contract with severance pay!

That’s true. However it doesn’t change how you will feel when you realize that your job is being eliminated or you’re being let go for any number of reasons. Wouldn’t you rather live a life free from that concern? To do that, you need more than one source of income … you need multiple “customers.”

2 ways to get started having both freedom and security:

#1: Start a business part-time.
Your part-time business may be related to what you already do, or it may not. If it’s related, make sure you’re not violating any company policies.

How do you get started in business? Get a customer! Now, you’ve diversified your income. Then get another … now you’re even better off!

Hopefully, the income from your part-time business grows to exceed your full-time salary. Now you’re free and secure!

#2: Invest aggressively.
You don’t have to start your own business to have the freedom we’re talking about. Start setting aside money each month into your “freedom fund.” Invest it wisely and over time, you’ll see your passive income start to grow.

When your passive income equals your salary from your full-time job, you’re free and secure. If this strategy interests you, check out Getting Aggressively Passive.

Considering a career change?
Subscribe to the FREE Bigg Success Weekly newsletter to help you plan it and inspire you to go for it. Sign up now and get the Bigg Goal-Setters Workbook. It’s FREE, too!

Our Bigg Quote today is by Alan Cohen, the great author.

“It takes a lot of courage to release the familiar and seemingly secure, to embrace the new. But there is no real security in what is no longer meaningful. There is more security in the adventurous and exciting, for in movement there is life, and in change there is power.”

Don’t let a false sense of security hold you back. Ultimately, true security comes from the freedom you find when you pursue your dreams with passion.

Next time, we’ll answer a question from one of our listeners. She’s doing most of the work, but getting little of the credit. We’ll discuss how to get the credit you deserve.

Until then, here’s to your bigg success!

Does It Pay To Be Smart?

We ran across an interesting study about what your IQ says about how rich you’ll be. The study was conducted by Jay Zagorsky, an economist at Ohio State University, and published in the journal, Intelligence.

Zagorsky measured the income and wealth of people who were 40 to 47 years old. He sorted the data by IQ level.

Does it pay to be smart? Yes … and no.

Yes, it pays to be smart.
Zagorsky’s study confirmed what previous studies had shown. People with higher IQs tend to have higher incomes. We wonder if it’s a function of IQ or if educational attainment plays in – since it’s also been proven that higher levels of education tend to result in higher incomes.

Regardless, people with above-average IQs tend to earn more.

No, it doesn’t pay to be smart.
Zagorsky found that people with lower IQs are just as wealthy, perhaps even more so, than people with high IQs! Zagorsky defines wealth as assets minus liabilities. How much you own compared to how much you owe.

Few people with below-average IQs had high income. However, a relatively large number of them had a high net worth.

It turns out that people with higher IQs were MORE likely to have trouble paying bills, have maxed out credit cards, and have declared bankruptcy, than people with lower IQs.

Why aren’t smart people rich?
Zagorsky offers several theories for why being smart doesn’t necessarily lead to being rich. It’s possible that smart people are more confident in their ability to earn more money, so they spend more money. Perhaps they feel they can take more risk, because they can make more money if they need it.

We wonder if it’s not because of the age group. People with IQs below the norm probably started working earlier, on average, than people with high IQs, who were earning advanced degrees. So people with lower IQs have had more years in the workforce. Will people with high IQs catch up with them over time?

Smart or not, we’re only human!
What this study really confirms is a timeless principle – the real secret to accumulating more wealth is to spend less than what you make. How profound!

We’re all human – some smarter than others. However, we’re all subject to that human trait that makes us spend as much as we make. Make more … spend more.

Do you remember the secret to begin accumulating wealth, as told in The Richest Man in Babylon?

A part of all you earn should be yours to keep.

If you don’t spend it, you’ll always have it. And more – because your money will make money for you if you invest it right.

For whatever reason, people with below-average IQs seem to do a better job of that than people with above-average IQs. At least according to this study.

What do you think? Why do people with lower IQs have more wealth? What tips do you have for managing money? Let us know.

Our bigg quote today is by Benjamin Franklin.

“A penny saved is a penny earned.”

It’s smart to save money, because being smart with your money is money in the bank.

Next time, we’re going to talk about your own personal SWOT analysis – analyzing strengths, weaknesses, threats, and opportunities. It’s a follow up to Visualize The Life You Want and Live Your Dream Life With Purpose.

If your goal is to save more money, learn how to achieve that goal with our Bigg Goal-Setters Workbook. It’s free when you subscribe to our free weekly newsletter. We bet you’re smart enough to recognize that for the deal it is!

Until next time, here’s to your bigg success!

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