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This Little Piggy Bank

By Bigg Success Staff
02-07-08

Bigg on Money

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Financial planners for years have said that we should set aside ten percent of everything we make.

Richard Jenkins, editor-in-chief of MSN Money and author of A simpler way to save: the 60% solution, has another outstanding idea:

Spend 60% of all you make!

We know what you’re thinking – you just went from getting to spend 90 percent to only getting to spend 60 percent!

But you haven’t heard the rest of the story, as Paul Harvey would say.

Piggy Bank #1 – This little piggy stays home.

This piggy bank gets sixty percent of your GROSS income. You’ll use it to buy the basics – things like food, clothing, household expenses, taxes, insurance, donations, and the like.

Piggy Bank #2 – This little piggy goes to the market.
This piggy bank gets ten percent of your gross income to invest in long-term assets, like the stock market. Most likely, your vehicle will be a tax-advantaged account, like a 401(k) through your employer.

Piggy Bank #3 – This little piggy gets the beef.

Set aside ten percent in this piggy bank to beef up your long-term savings even more. You’ll also invest this in long-term assets, but you’ll want to maintain enough liquidity so the money is available for an extreme emergency.

Piggy Bank #4 – This little piggy gets none.

The ten percent that goes into this account is for irregular expenses. So you won’t get any long-term benefit from this piggy bank. What you will get is the ability to pay for large expenses upfront instead of with a credit card. So from this account, you’ll pay for your vacations, major repairs, replacement of appliances, gifts and the like.

Piggy Bank #5 – This little piggy cries “Wee, wee, wee” all the way home!
This ten percent is your fun money. It’s your reward for setting aside the money in the other piggy banks the way you planned to. Think about it this way –

If you meet your goals, you get to spend an extra ten percent!

Now isn’t that a better way to look at it?

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Recession Progression

Pretend that we could eat as much as you want, of whatever you want, whenever you want, with no consequences. What would a lot of people do?

Probably eat a lot of their favorite foods!

Of course, in the real world, we know that if we do that for any period of time, we’ll have to go on a diet.

That’s what a recession is – the economy going on a diet.

It’s just the business cycle. Things go well. People get over-exuberant. Too much debt. Bad investments. Then a recession gets rid of the excesses. It’s part of the evolutionary process.

So today, we want to discuss how to survive and thrive in a recession.

How to survive a recession

  • Develop a contingency plan.
  • Start by asking yourself, “What if …?”

    What if you get laid off?
    What if you have to work longer hours because other people got laid off?
    What if your time gets cut back?
    What if your benefits get cut?
    What if your business takes a hit?

    You know your situation. Think about the most likely scenarios and develop a plan for them. Then, do what you can now.

    For example, why put off updating your resume until you need it? Do it now! Most people wait until they need it. You’ll be a step ahead.

  • Watch your spending
  • Businesses cut spending to get through a recession. We should take a clue. Try to avoid making long-term commitments. In times of uncertainty, wait until you’re more certain before making major purchases.

  • Don’t panic.
  • Resist the urge to drastically change your retirement plan and other long-term investments. You need to look at the specifics of your situation. However, as a general rule, if you won’t need the money for five or more years, you should probably stay the course. Historically, that’s been the best thing to do.

    If you need the money before that, you may want to deploy another strategy. Check with your financial planner to figure out your best option.

How to thrive in a recession

  • Take advantage of low interest rates.
  • Interest rates tend to go down during a recession. So consider refinancing your mortgage and other debt. Business owners may have prepayment penalties, but it may still make sense. In both cases, you need to analyze your specific situation.

    Let’s assume you refinance. Use what you save each month to 38 build your passive income].

  • Keep investing in yourself
  • Once again, let’s take a clue from businesses. Businesses that thrive, after a recession, are often those that kept on investing, during the recession.

    There are a lot of opportunities once a recession ends. Position yourself to thrive – take a class, attend seminars, and go to conferences. You’ll build skills and make great contacts. One of those contacts may lead to your next bigg opportunity!

  • Look for great deals.
  • Once-in-a-lifetime opportunities may present themselves during a recession. People are often more willing to negotiate. You probably won’t find your great opportunity advertised anywhere.

    So how do you find it? Network, network, network! You’ll most likely be surprised by it, so keep your eyes and ears open. Your accidental discovery will be the result of your active searching!

Our Bigg Quote today is by an unknown author.

“A bend in the road is not the end of the road… unless you fail to make the turn.”

So keep your eyes on the road and your hands on the wheel. Be ready for detours so you don’t have to come to a screeching halt!

Next time, we’ll look at the question, “Does it pay to blame others to cover your backside?”

Until then, here’s to your bigg success!

 

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How To Make $3 Billion A Year

By Bigg Success Staff
01-23-08

Success Story

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Unless you’re the Wall Street-type, you’ve probably never heard of John Paulson. You may be familiar with Henry Paulson, the United States Secretary of the Treasury. Well, they’re not related.

We’ll bet that you are familiar with the subprime mortgage mess. John knows it well. He manages his own hedge fund, which made huge bets in the subprime market last year.

In 2007, he made over $3 billion! Yes, we wrote that right. BILLION!

Gregory Zuckerman wrote an excellent article for The Wall Street Journal Online called Wall Street Trader Paulson Made Billions on Subprime. He does a fantastic job describing the details of how John made his billions. It’s definitely worth the read, particularly if you’re a serious investor.

Going against the grain
John bucked the herd mentality with his subprime bet. Most people in the business were still very upbeat about the market. John believed that he had a lot of upside potential with very little downside risk. It turns out he was right.

The biggest winners are often “contrarians”. But be careful – find ways to minimize your risk without sacrificing your reward too much.

The outsider’s perspective
John wasn’t an expert in the subprime market. They were all still highly optimistic. Because John was an outsider, he was able to see an opportunity that the insiders missed.

Usually it pays to have special insight into your market. However, sometimes 136 insiders know too much]. That’s when outsiders find opportunities because they’re looking at things with a fresh set of eyes.

Pay the price
John worked long and late, pouring over data to confirm his suspicions. He had a hunch – but he didn’t just play it. He continued looking at the evidence.

You have to pay the price if you want to make millions … or billions! Learn about the market. Look for inconsistencies. But then you have to … 

Go!
John had a bigg idea. It turns out that it was a $3 billion idea! But it’s not the idea that made him the money. He had the courage of his convictions. 130 He took action]!

This is one of the hardest parts of success. You have to put yourself out there. You have to take risk. You’ll never get anywhere until you 144 take a step].  

Persist
John placed his bet … and he lost money! His advisors 166 discouraged him from pressing on]. They reminded him that experienced traders were still very enthusiastic about the market. John didn’t listen – he invested more!

You will face obstacles on your path to success, just like John did. If you’re confident in your idea, you have to find a way to push on. It won’t always work out …. but, you never know, you might just make $3 billion!

The rest of the story
At times during this ride, John faced so much stress that he just had to get away from it all. He went on long runs. Find a way to relieve your stress so you can keep going. Get away from it all somehow.

John started his firm with $2 million under management. Now, from his success last year, new money has poured into his firm. He is now managing $28 billion, becoming one of the world’s largest fund firms. Everybody loves a winner!

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6 Easy Steps To Financial Freedom

By Bigg Success Staff
01-17-08

Bigg On Money

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It’s easier than you might think to accumulate a nest egg. However, it’s becomes more difficult every day. That’s because time is on your side, when it comes to money.

Let’s say you want at least $1 million when you retire at 65. We know … you want to retire earlier than that. We’re glad to hear it! But keep reading our example so you understand the point. It’s important!

At 25, all you need to do is invest $10 a day to reach that goal. If you wait ten years to start, you’ll have to set aside $22 a day. So our point is …

Start today!

Here’s how to retire earlier – if you’re 25 and you want to retire at 55, just find $22 a day to invest. But no matter how old you are, get started right away!

In the above example, we assumed you could earn 8 percent on your investments. If you can earn more, you could retire earlier. But be careful – increased returns usually carry higher risks.

Before we get started on the steps, there’s one thing we want to talk about. It’s important that you have a well-defined goal. For example, our goal above was to accumulate $1 million.

Want some help writing a well-defined goal?

Our Bigg Goal-Setters Workbook is your answer!
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At Bigg Success, we think about this way –

Your money makes money so you don’t have to.
Then you’re free to do what you want.

How much will that take for you? That’s your goal! Now, let’s talk about the six steps to get there.

#1 – Automatically pay yourself first.
Many people are confused by this concept. Of course, you pay yourself first, right? After all, your money is yours to do with as you please. However, they miss the point – at the end of the month, they have nothing left! Pay for your future just like you pay for every other bill.

Set up an automatic deduction from your paycheck or your bank account. People report that if they don’t see the money, they don’t miss it! This is the most critical step because it gets everything started. Don’t stop until you reach your goal.

#2 – Purchase with purpose.
We all make many spending choices every day. Do you really need that plasma TV now, or could you wait awhile? If you don’t have the cash, don’t spend it. Also, look at the annual effect of your daily decisions (e.g. coffee or lunch out every day).

Can you find a way to save an extra $10 every day? As we’ve already seen, that can turn into $1 million in 40 years. As you see your accounts grow, you’ll be inspired to keep going.

Keep your financial goals fixed clearly in your mind. 11 Picture yourself free of all financial worries]. That helps you make the best choices today. See our blog on 150] for more tips.

#3 – Own your own home.
We can make a good case for renting. Research shows that you’re better off “renting and investing” than owning your own home. However, most renters never get to the second half of that phrase.

That’s one of the reasons why the net worth of homeowners is so much greater than that of renters. Owning your own home forces you to save money. It’s very much related to the first step.

Don’t be “house-poor” – it’s not that good of an investment! Find a house that meets your needs. You can always trade up when you don’t have to worry about money anymore!

#4 – Pay off debt.
You’ve probably heard people say, “I want to buy a house because renting is just throwing money away.” Why are we so opposed to “throwing money away” to our landlord, but we think nothing of throwing it away to our banker or credit card company?

After all, the interest they charge is a rental fee on the money you’re using. There’s no difference! So pay off your debt so you stop paying interest.

Start with one obligation, like the one with the highest interest rate. Pay it off. Take the payment you’ve been making on that and add it to another one. Pay that one off. Eventually you’re debt-free! Don’t stop! Keep making those payments – to yourself! It will jump start your future! That’s another secret to reaching your goal early!

#5 – Invest wisely.
A lot of people don’t accept enough risk. If you invest too conservatively, it’s hard to reach your goal. There’s a basic financial principle – increased risk deserves increased rewards.

But here’s the secret – time takes away much of the risk. If you’re investing money that you don’t need for five years your risk is generally less than if you need it in one year.

Don’t put all your eggs in one basket. The easiest way to do this is to invest in a no-load mutual fund balanced for people in your age bracket. Don’t touch this money until you’ve reached your goal.

#6 – Prepare for the unexpected.
Here’s what you can expect – you will face some obstacles on the way to your financial freedom. Prepare for them. Make sure you’re insured properly, including disability insurance.

Stash away an emergency cash reserve. Most experts recommend that you have three to six months of living expenses in an account for unexpected events. If you have equity in your own home, you may be able to establish a home equity line-of-credit to cover these emergencies. Then you can invest the money you have kept in reserve.

You won’t get rich quick with these six steps. However, they will put you on the road to financial freedom. Enjoy the trip!

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Should You Count On Your Counter-Offer

Bigg Challenge:  We received an e-mail from Patrick, who was approached about a job. He met with the prospective employer and accepted their offer. Then he got an unsolicited counter offer when he told his current employer that he was resigning. He wants to know if he should accept it.

Bigg Advice: Congratulations, Patrick! Isn’t it nice to be wanted? It sounds wonderful, but the reality is that it can be quite stressful. We feel the need to preface our comments – we can give you general advice, but only you can decide which offer you should accept.

  • Why did you accept the offer from your prospective new employer?
  • It’s unclear from the e-mail why you wanted to leave. There are many possible reasons why you may have been drawn to your prospective employer’s offer. Was it money? Maybe you were unhappy at your current job – you just hadn’t started actively searching yet. Perhaps the new job seemed like a better opportunity. We’ll assume that if was a combination of these factors.

  • Why did your current employer counter?
  • We can think of two possible explanations for your employer’s counter offer. First, they may be buying time. Perhaps they’re not prepared to do a search now. The timing is bad because of current business volume. There could be any number of reasons for them to buy time. Just be aware of this. Second, they may truly value you. They really don’t want you to go. They’ve invested in you – you’re part of their future plans. It’s hard to judge intentions. Assume the best, but keep the worst in the back of your mind.

  • Get it in writing.
  • Negotiate your counter offer as if it was a brand new job. If you’ve been promised more money, it will be easy to judge whether they come through. It’s more difficult with other factors. You may want to travel less. Maybe you want more flexibility. Or you need more time off. Perhaps it’s growth opportunities that you seek. These factors are harder to deliver. So ask your current employer to put their offer in writing. Tell them that you appreciate their counter. You want to fully evaluate it. You prefer to stay with them, but you want to know that you’re making the right decision. Seeing it in writing will help you do that.

  • Maintain your relationships.
  • We don’t believe you should let your prospective employer know about the counter offer. They probably expect that anyway. However, you should make your final decision very quickly. Somebody will have a position to fill. Lingering only makes that a bigger problem. Whatever you decide, don’t burn bridges with the affected party.

Thanks for sharing your bigg challenge with us, Patrick. We hope our bigg advice helps you!

Do you have a bigg challenge? We’d love to help. E-mail it to bigginfo@biggsuccess.com

Our Bigg Quote today is by Karl Albrecht.

“Start out with an ideal and end up with a deal.”

You’ve been dealt a good hand. Play your cards well. Maintain your poker face. Draw from within and then place your bet.

Next time, we ask you, “What’s your pickup line?” We’ll discuss how to grab someone’s attention with a great opening line. Until then, here’s to your bigg success!

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