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The Magical Power of Compounding Your Time

time_watchBIGG success is life on your own terms. There are five elements of BIGG success: money, time, growth, work and play. Money and time are our two resources.

Most people are familiar with the compounding power of money. For example: Assume you invest $100 a month in a plan that allows you to defer the taxes when you’re 35 years old. You plan to retire at 65 (30 years from now). If you earn a 6% return (conservative by historical standards), your retirement portfolio will be almost $102,000. Not bad on a total investment over the years of $36,000.

A small amount of money, invested wisely over time, turns into a BIGG sum.

Time compounds like money

What about time? Does it compound? You may not have money to invest. But everyone has the same amount of time every day. Time is the great equalizer.

Time, our other resource, compounds similarly to money. If you invest time, over time, you can create BIGG success. It may come in the form of money or in some other form (e.g. a better life for you and your family).

Here’s the challenge:
If you invest your money in the wrong thing, you may lose all or part of it. Or you may not earn as much on it as you should.

The exact same principle applies to time. If you invest your time poorly, you won’t reach your full potential. You’ll miss opportunities. You must focus to reach BIGG success!

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Becoming An Entrepreneurial Employee

employeesBigg success is life on your own terms. Work is one of the five elements of bigg success. That’s our focus today.

Just a generation or so ago, entrepreneurs weren’t highly regarded. The thought was that they were people who no one else would hire.

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Now it seems that most people want to be an entrepreneur. People think that climbing the corporate ladder robs you of your individuality. You become a mindless worker bee.

People associate owning your own business with freedom. It can be liberating. Picture your typical day owning your own business …

You’re the last one in every morning. It’s not like anyone’s going to fire you. Of course, you’re the first one out the door at the end of the day. You’re the boss! You take long lunches. Most days, when the weather’s nice, you’re out on the golf course.

If only it were true!

The reality for many entrepreneurs – especially those with an early stage business – is you’re the first to arrive in the morning and the last one out the door at night. If you take lunch at all, you may eat it at your desk while you keep working. You’re not out playing golf most afternoons. In fact, you’re doing well when you can squeeze in a little play time over the weekend.

Do you remember the BTO song, Takin’ Care of Business? They said that self-employed people “work hard at doing nothing all day. Obviously they had never spent time with a start-up entrepreneur!

It can be very stressful, particularly when you take on employees and have to meet payroll. You have fixed costs to cover every month. There are so many hats to wear, so many things to do, so much to keep up on. It’s easy to feel like you’re buried in work.

Not exactly the fairy tale we often think about.

We’re purposefully painting a bleak picture. Owning your own business definitely has its upsides, but it isn’t for everyone. Some people are much happier keeping their day job.

However, we think there are synergies between the two. Here are six tips to become an entrepreneurial employee:

Select the right career

Bigg success is life on your own terms. It starts internally. Think about the three P’s – passions, preferences and proficiencies. We have a great personality test in The Bigg Success Store that will help you with this. It’s free!

Now you’re ready to look outside yourself. Entrepreneurs look at 2 C’s – customers and competitors. As an entrepreneurial employee, your customers are potential employers. Your competition is other people who do what you do. You’re looking for a mismatch – too many employers and too few potential hires.

Add value

Don’t settle for being average and ordinary. Set yourself apart from all the other potential hires by becoming an expert in your chosen field. Consistently deliver superior results and you’ll become invaluable.

Solve problems

Take on projects that no one else wants. Be positive. See solutions where others see only problems. If you solve problems, money will follow.

Work!

Entrepreneurs work long hours, especially in their early days. Entrepreneurial employees do the same. If you can’t work a little longer, work a little harder. Spend less time chatting and more time being productive.

Embrace change

Change creates opportunity. So welcome change. Continually reinvent yourself. Think about yourself at this time last year. If you don’t have any new skills, if you can’t add anything more, if you aren’t producing better results … why should you get paid more?

Retain earnings

Save means safe so save and invest. Entrepreneurs retain earnings to fund growth. You’ll save to give yourself the liberty to get out of a bad situation as a last resort. And to help you survive through the inevitable downturns and associated layoffs.

You can choose to be entrepreneurial in the traditional sense or by going the corporate route. You choose because bigg success is life on your own terms.

Do you think employees can be entrepreneurial?

Let us know by leaving a comment below, calling us at 888.455.BIGG (2444) or e-mailing us at bigginfo@biggsuccess.com.

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Thanks for reading today’s post. Please join us next time when we’ll discuss a new trend that may affect your retirement. Until then, here’s to your bigg success!

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Are You Throwing Money Away by Owning Your Home?

toss_moneyWe all know that the three essentials for living are food, clothing, and shelter. We definitely rent our food. Do we rent or own our clothing? Hmmm.

Part of the American dream is to own your own home. And there are good reasons to do so. For instance, a Federal Reserve study[pdf] shows that the average family that owns a home has a net worth of nearly $625,000 while families who rent have a net worth of just a little over $54,000.

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Homeowners on the move

We’ve seen an interesting statistic bantered about, but we haven’t been able to pin down a reliable source. If this statistic is true, American homeowners move once every five years or so, on average.

So we thought we’d consider what that does to the buy vs. rent equation. We’ll use some averages and national statistics to create an example. However, what really matters is your own situation and your local real estate market. Only you, working with your financial advisors, can determine what’s in your best interest.

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marylynn When I was younger, one of my bosses in radio told me that I was just throwing away money by renting. I remember thinking that it made sense. I’d reached an age where maybe I should consider buying. So I did. As often happens in the radio business, less than a year later, I lost my gig. So I had to sell my house to move to a different market. I lost a lot of money by buying. If only I had had a crystal ball!

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Putting buy vs. rent to the test

We created a fictional purchase to see if we would be better off renting or owning a house for five years. We assumed that:

  • We put 20% down (approximately $63,000).
  • We financed the rest with a 30-year mortgage
  • The interest rate would be 6.50%, slightly above the current rate.
  • Our house would appreciate 4% per year, slightly below the recent average.
  • Property taxes would cost us 1% of the value of the home.
  • Insurance would run 0.50% of the value of the home. (Renters and homeowners have to insure the contents. We have the added burden of insuring the building.)
  • Repairs & maintenance would consume 1.50% of the value of the home.

Over the first five years, 83% of our total mortgage payments would go for interest. In other words, for the most part, we’ve traded renting property for renting money. If the interest rate is higher, the portion that would go to interest would also be higher. Of course, the reverse is also true.

During this period, we would pay $2,171 per month as “rental costs” for our home. We call them rental costs because they have no value once they’re paid. They only allow us to keep owning. So if we could rent a similar property for less than this, we would be better off renting instead of buying.

Of course, if we had made a down payment of less than $63,000, our cost would go up because we would be paying even more interest.

Where’s the break-even?

We also looked at how it would take before we would break-even. After all, it costs money to sell a house. We would have to pay commissions to our realtor, closing costs, and the like. We assumed these costs would total 8% of the selling price.

Given our assumptions, we looked at what would happen if we sold after one year. Our house would now be worth $326,560. From that, we would pay $26,125 in selling costs. After a year, our mortgage balance would be $248,392.

So we would be able to take out $52,043 in cash. But remember, we invested $63,000. So we lose about $11,000 if we sell after one year.

But that’s not the whole story …

We haven’t yet considered the opportunity cost of tying up that $63,000 in a house. Because if we didn’t invest it in this house, we could have invested in something else. We assumed we could have earned 6% by investing in some portfolio of financial assets.

That would have returned nearly $3,800. So by buying this house and selling it in a year, we would put ourselves in the hole nearly $15,000.

Even after 2 years, we’d still be about $3,500 behind, given our assumptions. Of course, one of those assumptions is that real estate prices are rising. It’s almost certain they will in the long run, but will they rise in the next year or two? They may not in some markets.

What’s the bottom-line?

We concluded that if we didn’t plan to own a house for at least two years, we’d rather rent. We also saw that the longer our holding period, the better we would do. For instance, in the last five years of the mortgage, only 15% of the mortgage payment would go to interest. It seems like buy-and-hold is rewarded in real estate investing.

How to get around it …

We have two friends who have been able to get around the short-term ownership problem. One of them is in the military, so he moves frequently. He only buys a house that he knows would make a good rental property. If he gets transferred, he hires a local property manager and rents it out. Until he decides where he wants to retire, he plans to hold a number of his houses.

Another friend doubled-down on this strategy. He moved quite frequently as he climbed the corporate ladder. Not only does he own houses in a number of cities, he bought additional rental properties, so he has a diversified portfolio across a number of cities. Now he’s retired living off the rents!

So you can get around the disadvantages of short-term ownership by having an alternative exit strategy!

Next time, we’ll discuss how a toy that you probably played with as a kid can help you manage your time. Until then, here’s to your bigg success!

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My Rental Property is Costing Me Money. What Should I Do?

Bigg Challenge
Jeff’s job took him several states away from a rental property that he bought about two years ago. He bought the property and fixed it up. Now his tenant is moving out and the place is a mess. So he’s going to have to invest a bunch again. But he feels he has no choice since he has so much in it already. Besides, it’s a bad time to sell real estate. He wants our thoughts on his situation.


Bigg Advice

It’s been said,

“Find a landlord who lives more than twenty minutes from his
rental and you’ll find a landlord who’s probably ready to sell.”

Properties can be managed across cities and states, but for the most part, real estate is a very local business. And, a lot of people don’t understand that you’re in business even if you only have one rental property.

Consult with a good attorney

You’ve treated this like a business, Jeff. You had your tenant sign a lease. But a lot of landlords feel like there’s little recourse if a tenant tears up the place. However, you can take legal measures against a tenant who causes damage beyond normal wear and tear.

So consult with an attorney to explore your options. There’s a good chance your attorney may handle your case on a contingency. Of course, you’ll still have to cover the courts costs.

Sell!

Check with a realtor, and even other property owners, to get an idea of what to expect if you list your property. Of course, you won’t know until you actually put it on the market, but you can probably make a reasonable guess with some more information.

Sure, we hear news reports that the real estate market is down. However, you may find it’s not as bad as you think. And here’s the thing … isn’t it better to fix it up and let it sit empty than to fix it up just to fix it up again if your next tenant does the same thing?

Distance makes the difference
Every landlord risks bad tenants, but since you live so far away, Jeff, it seems like the best move for you. The only other thing you might consider is contracting with an experienced local property manager to handle the leasing and maintenance.

You sunk my battle ship!
Picture a ship that’s sunk. You can invest money to try to make it float again, or you could just leave it on the bottom of the ocean and get a different ship. Hopefully, you quickly see which one of those two is better.

George said that, unfortunately, he’s learned this the hard way. It’s not easy when you’re the one in the middle of the situation. But the money you’ve already invested is a sunk cost, like the sunken ship. Don’t base your decision today on money that’s already been spent. Base it on what kind of return you can get on the money you will invest. If it’s better elsewhere, cut your losses and move on.

We hope this helps you with your bigg decision, Jeff. Thanks for sharing your Bigg Challenge with us!

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The Billionaire and the Batboy: What Warren Buffett Learned from Eddie Bennett

Warren Buffett, the great investor who is the chairman of Berkshire Hathaway and now the richest person in the world according to Forbes, told a story about a batboy in Berkshire Hathaway’s 2002 annual report.

The batboy was Eddie Bennett, who was 19 years old in 1919. He began his career with the Chicago White Sox, who went to the World Series that year.

The next year, Eddie moved to the Brooklyn Dodgers. He had the Midas touch. They also won their league title that year. Two in a row for Eddie.

But once again, Eddie saw a better opportunity. So he joined the Yankees in 1921. They won their first pennant ever. Eddie knew he was in the right place so he stayed put. The Yankees won five American League titles in the next seven seasons. 

What did this mean to Eddie? He made as much during the World Series as he made all year. So by choosing the right team with whom to associate, he doubled his income.

And he became perhaps the best known batboy in baseball history.

5 lessons Eddie Bennett teaches us

#1 – Sometimes it pays to switch teams.
If you’re with a team that doesn’t look like a bigg winner, and you see a better one, then go for it!

#2 – Don’t have a scarcity mentality.

People who think like this can’t work with others because they don’t think there’s enough to share. Eddie shows us that we may actually make more money BY working with others than we could on our own.

#3 – You don’t have to be the star to be a star.

Eddie became famous in his own right. He’s written about just like Babe Ruth and Lou Gehrig. In fact, he’s the first of that great trio that we’ve blogged about!

#4 – Every job is important.

A supporting role is just as important as the starring role. Eddie knew his place and the importance of what he did. He knew that if he did a good job in his role, other people would thrive in theirs. And he would reap the benefits along with them!

#5 – He had a passion for what he did.
The fans knew it and the players knew it. They respected him for the role that he played. It’s reported that Eddie and Babe Ruth became good friends because they were both at the top of their game.

What Warren Buffett learned from Eddie

In the annual report we referenced earlier, Warren Buffett describes himself as the batboy for Berkshire Hathaway. He turns the heavy-hitting over to the leaders of the businesses in which he invests. He plays a supporting role so they can step up to the plate and hit home runs.

It’s a lesson in management and leadership – give your people the tools they need when they need them and watch them succeed bigg!
 

Speaking of giving your people tools, share Bigg Success with them.
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We thought it only fitting for our bigg quote today to come from Warren Buffett.

“To be a winner, work with winners.”

Otherwise, you risk striking out!

Next time, we’ll discuss tips for spotting your bigg opportunity. Until then, here’s to your bigg success!

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Pages

A Short Pencil is Better than a Long Memory

By Bigg Success Staff
05-30-08

Career Builders

notebook 

The ability to absorb and act upon new information often makes the difference between success and bigg success. One of the best ways to do this is to become a prodigious note taker.

There’s an old saying, “A short pencil is better than a long memory!”

When you write it down, you not only have it available as a reference, you also are more likely to remember it in the first place. So you’re able to absorb and act upon the information better than someone who doesn’t take notes.

So when you’re going to meet with someone – in person or on the phone – take notes!

It’s amazing how many people don’t take advantage of this simple technique that makes such a bigg difference!

Set up yourself apart – take notes!

Take notes when you’re meeting with a group. Take notes when you’re meeting with a single person.

Some people don’t think it’s worth the time. They have it backwards.

It’s a waste of time to invest time in a meeting and then forget most of what you’ve learned. So take notes so you remember what you learned and you have a ready reference in case you forget!

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Ask and You Shall Receive

By Bigg Success Staff
05-07-08

Bigg Success With Money

top_negotiator 

There are two pieces to building your nest egg: you need to have money to invest and you have to invest it wisely. In this article, we’ll explore the first one – finding the money to invest.

Other than winning the lottery or inheriting money, there are only two ways to get money to invest: make more or spend less of it. We’ll look at the first one – making more money.

Here’s one of the secrets to making more money … ask for it!

That’s right – negotiate for a better compensation package when you’re offered a job. Ask for a pay raise at your current job. Ask and you shall receive!

Or for certain, we can say that if you don’t ask, you won’t receive.

Women are much less likely than men to negotiate for a better deal. In fact, Linda C. Babcock, a Professor of Economics at Carnegie Mellon University and author of the book, Women Don’t Ask: Negotiation and the Gender Divide.

She found that about half of all men negotiate for higher pay when considering a job offer while only one in eight women do the same!

Now here’s something to consider, especially if your position involves negotiating deals of any kind for your employer. If you won’t ask for a better deal for yourself, how can your employer count on you to negotiate a better deal for the company?

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The Dogs of the Dow

By Bigg Success Staff
04-30-08

Bigg Success with Money

betting 

Contrarian investors go against the grain. They invest in companies that are “out of favor” with other investors. These companies are often characterized by things such as a low price/earnings ratio or a high dividend yield.

Price/earnings ratio (P/E ratio) is the quotient of the stock price divided by the earnings per share. Sometimes referred to as the “earnings multiple”. For example, if a company’s stock is selling for $10, and its earnings are $1 a share, its P/E ratio is 10.

Dividend yield is the quotient of the annual dividend per share divided by the stock price. For example, if a company pays out a dividend of $1 a year, and its stock price is $20, its dividend yield is 5 percent.

If a company has a relatively high P/E ratio, it generally means that investors perceive something better in the future. For example, they may expect a relatively high rate of earnings growth. That’s why these investors are often referred to as “growth investors”.

Contrarians are often called “value investors”. They do the opposite of growth investors. They look for stocks with low P/E ratios. For any number of reasons, investors don’t have high expectations for these companies.

The dogs of the Dow

There are underdogs in every competition. In horse races, they are called “dogs” and people who mainly bet on “dogs” are called “dog players”.

That leads us to one way to make a contrarian play with stocks – the dogs of the Dow strategy. This strategy dates back to at least the early 1970s, but gained popularity in the early 1990s when Michael O’Higgins wrote Beating the Dow.

Dow refers to the 30 stocks that comprise the Dow Jones Industrial Average, the oldest and single most watched stock index in the world. To many people, “the Dow” and “the market” are synonyms.

The idea behind this strategy is to buy Dow stocks with the highest dividend yield. Those are considered the dogs of the Dow.

It’s a relatively easy strategy to implement:

  • Determine how much you want to invest in this strategy.
  • Divide that amount by 10. This will be the amount you invest in each stock.
  • After the final trading day of the year, select the ten Dow stocks with the highest dividend yield.
  • On the first trading day of the year, buy the ten dogs of the Dow stocks.
  • Repeat this process year after year. Something to note, though, is make sure you hold your winners for a year and a day so you can take advantage of the lower capital gains tax rate.

Like any stock market strategy, in some years you’ll win. In others, you will not. For example, this strategy seems to do particularly well when there is a flight to safety. You may find that being a dog player is a valuable part of your larger portfolio.

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Happiness is Freedom to Spend Your Time How You Want

By Bigg Success Staff
03-25-08

Timeless Principles

flowers 

We probably have more today than any generation since the beginning of time. Yet are we happier?

According to news reports, the answer is no. Research seems to support that notion. So why aren’t we happier?

It seems that many people relate happiness to monetary success. As a bigg goal-getter, you may be one of those people. There’s nothing wrong with that, as long as you realize its limitations.

Its limitation is that happiness from monetary success is short-lived. You’re happy when you reach that level. Then you start looking at all the people who are at a yet higher level. All of a sudden, you’re unhappy again.

Define your desired destination
A better approach is to clearly define the lifestyle that will make you happy. How much money will it take to support that lifestyle?

Create a plan to invest your money wisely so your money makes enough to support that desired lifestyle. Now you’re free to spend your time however you choose. Now wouldn’t that make your happy? Happiness is freedom; freedom is happiness.

Then resist the temptations (and there will be many) to want more than that, unless you clearly understand why it will make you happier. And getting to boast about your bigg new you-name-it to your neighbor probably isn’t sufficient!

It’s a very short-term thing. You’re seeking long-term happiness. What makes you happy? Define it. Get it. Enjoy it.

The journey has its rewards
You don’t have to wait to be happy until you reach your final destination. Enjoy the journey as well! You’ve determined what will give you the freedom to spend your time however you want. You’ve mapped out a plan to get there.

Now, celebrate each accomplishment along the way! Stop and smell the roses!

Appreciate how far you’ve come. Be thankful for what you’ve learned. Be grateful for all the people who have helped you get there.

As you develop this attitude of gratitude, you’ll find that you’ll be happier now. You’ll enjoy the journey more because you’re taking time to appreciate what you’re experiencing – both the good and the bad. These experiences are building a better “you”.

If you’re happy and you know it … 

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Are You A Savvy Spender?

By Bigg Success Staff
02-13-08

Test Yourself

question_mark_jpg

There’s a lot to be learned if you want to manage your money effectively. You have to know how to set aside money in the first place and then know where to invest it once you have it.

It all starts with spending. Some people spend too much money, failing to save for unplanned events and important priorities. Others are too miserly – they’re so focused on the future that they don’t enjoy what they have today.

Find out where you stack up!

The good people at MSN have developed the Savvy Spending Quiz to test your money management skills. Just answer the 20 questions – it will take you less than 10 minutes – to know how you stack up!

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Link

moneycentral.msn.com

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