Is it a Hobby or a Business?
Ray Kroc was addressing an MBA class once. He asked them what business he was in. The class gave many answers: restaurant, hamburger, fast food. Ray said they were all wrong. While McDonalds sold hamburgers as a way to raise money, his business was really real estate. Ray Kroc knew that the product he sold was secondary to the location of the retail outlets. An old adage in commercial real estate is that if you need retail space and can’t afford to pay for the traffic analysis reports and demographic studies, just open as close to a McDonalds as you can. McDonalds never allows a franchisee to open a store in an unprofitable location.
The question then is what business are you in when you start a network marketing home based business? Are you a vitamin distributor, a long distance telephone service provider or even a seller of jewelry or cosmetics? If that is the case then you are either running your business like a hobby or you haven’t figured out what business you are really in yet.
Avon, Mary Kay and Cookie Lee Jewelry are very successful companies. My wife enjoys many of their fine products but most of the distributors in these companies are playing at running a business. In most cases the fine ladies who peddle the jewelry, cosmetics and perfume from these companies are very happy making a few hundred dollars a month. The business is not a livelihood for them. It is more of a social event. They get to visit friends, play dress-up and have fun talking about the toys in the catalogs. This is the definition of a hobby business. If this is what you are looking for, then you need to focus on your product—because a hobbyist plays at making money.
If you are looking to make serious long-term money at network marketing, you must treat it like a real business, not a hobby. While product is important, it is only one of several things you need to consider before investing your time and money.
Let’s go back to McDonalds. Why did Ray Kroc say he was in the real estate business? Does McDonalds make the best hamburger in the world? No. Is their variety of fast foods the largest of any major chain? No. Are they the absolute cheapest or most expensive chain? No. Yet, McDonalds is number one in the world. How does McDonalds sell more hamburgers than anyone else with a mediocre product? It is very simple…location, location, location.
McDonalds’ restaurants are placed in strategic locations. They perform extensive traffic studies to confirm that enough cars drive by. They measure foot traffic on the sidewalk. They make sure that the bright signs and banners are easily visible. They do everything possible to make sure that enough families will go by the restaurant and the restaurant is seen by the kids. Why? Because the kids will pester their parents to go there to buy them a hamburger and a toy! McDonalds is in the real estate business!
Now let’s look at your business. Why did you decide to look at a network marketing opportunity? Was it to sell vitamins, long distance service or jewelry? Probably not. You started looking because you wanted something you don’t have today—financial freedom. You wanted the time to go to the kids soccer games, to travel when you want to, to pay off the home faster. Those are then things you dreamed of, not a specific nutritional product.
Now, the business of network marketing is to build an organization of other business builders. You are paid for the success they achieve. Do you ignore the hobbyist or the retail customer? Of course not. You need them to buy your product or service. But your search will be for the business builders. Remember, you will need to talk to hundreds of people to sign up 75 distributors, of whom only four or five will account for the majority of your profits.
Thus, your search for a home based business must be like McDonalds. You must not think you like a hobbyist and focus on the product. Focus on the business instead. Just like McDonalds, who studies and researches each location before allowing a franchisee to spend hundreds of thousands or even a million dollars for a restaurant, you need to research your business like a business and plan for the long term.
What do you look for? Several key factors:
Product Type – the type of product the business you choose has a tremendous impact on your future ability to generate income month after month.
Company – is the company stable and capable of long term growth or will it die like most network marketing companies after a few years.
Management Team – an often overlooked item in a persons business search, does the team of leaders in the business have the experience to grow the company and what have they done in the past.
Timing – when is the best time to join a company, when it is just starting out, when it starts to grow wildly or after the organization matures? There are risks and rewards to each.
The problem is that most people consider these factors only after they have decided to join a company. Instead of looking at the core elements that will guarantee long term growth and stability, most people focus on the flashy product features. The product is important, but too many companies had what appeared to be a great product and lacked the foundation to support the growth their product produced. The product features to focus on are:
Is it unique?
Is it profitable?
Is it consumable?
Is it exciting or emotional?
Is it flashy or marketed nicely?
The last thing to consider is how you make money or the compensation plan. The reason this is the final consideration is that all viable network marketing companies will use a variation of only a couple different plans. Anyone who touts the pay plan is hiding flaws somewhere else in their company. If the company is stable and is poised for growth. If the product is the best available—the pay plan will make you money. Some pay plans pay better then others in different circumstances. This is not the major factor in choosing a company, but in how you may run your business. Don’t confuse the function with the purpose. The purpose of a pay plan is to pay you for your success, the function is to force you to build your business in a particular way to maximize that payment. You can deal with that as you build.
Friday, February 23, 2007
Why Network Marketing
In Secrets of the Millionaire Mind, T. Harv Eker says:
“Network marketing, for example, is an amazing concept. First, it doesn’t usually require you to put up a lot of up-front capital. Second, once you’ve done the initial work, it allows you to enjoy ongoing residual income (another form of income without working), year after year after year. Try creating that from a regular nine-to-five job! I can’t overemphasize the importance of creating passive income structures. It’s simple. Without passive income you can never be free.”
(Wealth File #15, Page 151)
Network marketing combines aspects of two types of income (discussed earlier). It gives you the ability to build a business income. The difference is that instead of hiring employees, you get other entrepreneurs to join in your distribution network. Not having to hire employees is a crucial aspect of network marketing. Your business growth is based on recruiting other business people. As your business grows your income should increase.
Network marketing also provides passive residual income. Once your distribution network is set-up, it is possible to enjoy a continual stream of checks that come to you even after you stop working in the business. The big difference between network marketing and standard residual income—it is possible for your residual income to grow month after month. Why is this? Because this is also a business and the entrepreneurs who have joined you in your distribution network will still build their businesses. You get the benefits of both business growth and residual income!
There are some problems with network marketing as a business vehicle. The first is that most people do not treat it like a business. The average franchise will cost someone hundreds of thousands of dollars to start and run for the first year. For most of the truly successful franchises you have to commit yourself both financially and physically.
A good friend of mine purchased a franchise from one of the famous national sandwich shops. His complaint was that for the first several years of running his business, he gave up his high-paying, prestigious corporate job to work in a minimum wage position making lunches for other people. It took several years of hard work before he was able to buy another location and then another. Finally he was able to have others run his business for him. At that point he was able to go start another business.
In network marketing, most companies only require a minimal fee to sign-up as a distributor. For most people, there is no commitment to this business. It only cost $25 to $50. They try the business for a few days, or maybe only a few hours. After realizing that this is not a guaranteed lottery ticket—they give up. There was no commitment mentally to this business. If they had to invest their life savings, put up their house and risked everything they had on the success of this operation, very few would quit so easily.
The greatest factor to success in network marketing is to treat it like a business and to work it accordingly. Of course, one of the advantages of this industry is that you do not have to work your business full-time to earn a great income. Many of the most successful distributors enjoy this business because they only have to commit a few hours a day or even a week and to enjoy the equivalent of a full time income.
For someone who is committed to running their network marketing opportunity like a business, the industry provides great advantages. One key advantage is that you can learn all you need to know. Robert Kiyosaki says “At least in the network marketing world they'll train you. It's a whole different way of being taught. In the network marketing world if you're not making it, someone will be there to encourage you. It's a lot more humane way of being taught a vital, vital, vital life skill.”
Why do we provide training to people who need it? Think about the difference between network marketing and the corporate world. In the corporate world you are normally hired to do a job you pretty much know how to do. If not, the company has to spend considerable money training you in a skill that you may take to a competitor after you acquire competency in it. Remember that the business world never pays you what you are worth; they have to pay less to make a profit.
In network marketing you are paid exactly what you are worth. But the difference is that your worth is not based on how well you can sell a product, or how skilled you are as an accountant or lawyer. It is based on your ability to train and motivate others! In network marketing, your residual income is based on the success of the distributors you recruit. The success of the person who recruited you is based on your success. If you do not know how to do something, your sponsor probably does. If they don’t—keep going up the line until you find an answer. Everyone in your distribution chain is dependent in each other to acquire wealth. Network marketing is not an industry for the Lone Ranger type.
In Secrets of the Millionaire Mind, T. Harv Eker says:
“Network marketing, for example, is an amazing concept. First, it doesn’t usually require you to put up a lot of up-front capital. Second, once you’ve done the initial work, it allows you to enjoy ongoing residual income (another form of income without working), year after year after year. Try creating that from a regular nine-to-five job! I can’t overemphasize the importance of creating passive income structures. It’s simple. Without passive income you can never be free.”
(Wealth File #15, Page 151)
Network marketing combines aspects of two types of income (discussed earlier). It gives you the ability to build a business income. The difference is that instead of hiring employees, you get other entrepreneurs to join in your distribution network. Not having to hire employees is a crucial aspect of network marketing. Your business growth is based on recruiting other business people. As your business grows your income should increase.
Network marketing also provides passive residual income. Once your distribution network is set-up, it is possible to enjoy a continual stream of checks that come to you even after you stop working in the business. The big difference between network marketing and standard residual income—it is possible for your residual income to grow month after month. Why is this? Because this is also a business and the entrepreneurs who have joined you in your distribution network will still build their businesses. You get the benefits of both business growth and residual income!
There are some problems with network marketing as a business vehicle. The first is that most people do not treat it like a business. The average franchise will cost someone hundreds of thousands of dollars to start and run for the first year. For most of the truly successful franchises you have to commit yourself both financially and physically.
A good friend of mine purchased a franchise from one of the famous national sandwich shops. His complaint was that for the first several years of running his business, he gave up his high-paying, prestigious corporate job to work in a minimum wage position making lunches for other people. It took several years of hard work before he was able to buy another location and then another. Finally he was able to have others run his business for him. At that point he was able to go start another business.
In network marketing, most companies only require a minimal fee to sign-up as a distributor. For most people, there is no commitment to this business. It only cost $25 to $50. They try the business for a few days, or maybe only a few hours. After realizing that this is not a guaranteed lottery ticket—they give up. There was no commitment mentally to this business. If they had to invest their life savings, put up their house and risked everything they had on the success of this operation, very few would quit so easily.
The greatest factor to success in network marketing is to treat it like a business and to work it accordingly. Of course, one of the advantages of this industry is that you do not have to work your business full-time to earn a great income. Many of the most successful distributors enjoy this business because they only have to commit a few hours a day or even a week and to enjoy the equivalent of a full time income.
For someone who is committed to running their network marketing opportunity like a business, the industry provides great advantages. One key advantage is that you can learn all you need to know. Robert Kiyosaki says “At least in the network marketing world they'll train you. It's a whole different way of being taught. In the network marketing world if you're not making it, someone will be there to encourage you. It's a lot more humane way of being taught a vital, vital, vital life skill.”
Why do we provide training to people who need it? Think about the difference between network marketing and the corporate world. In the corporate world you are normally hired to do a job you pretty much know how to do. If not, the company has to spend considerable money training you in a skill that you may take to a competitor after you acquire competency in it. Remember that the business world never pays you what you are worth; they have to pay less to make a profit.
In network marketing you are paid exactly what you are worth. But the difference is that your worth is not based on how well you can sell a product, or how skilled you are as an accountant or lawyer. It is based on your ability to train and motivate others! In network marketing, your residual income is based on the success of the distributors you recruit. The success of the person who recruited you is based on your success. If you do not know how to do something, your sponsor probably does. If they don’t—keep going up the line until you find an answer. Everyone in your distribution chain is dependent in each other to acquire wealth. Network marketing is not an industry for the Lone Ranger type.
Types of Income
Robert Kiyosaki, the author of the Rich Dad Poor Dad series of books does a great job explaining the different types of income you can earn and why they differ. The concept is not his alone but I think he does the best job teaching the concept. He calls this the income grid and I recommend reading his first book, Rich Dad Poor Dad, to understand this in detail. To summarize several prominent experts in this area:
Employment Income
This is the first type of income we normally earn and it tends to be the easiest form for most of us. We get a job and are paid for time and effort. Most of us have earned most if not all of our present wealth with this form of income.
The good thing about employment income is that it tends to be less risky than the others. It is against the law to give an employee a paycheck that bounces. If you are paid by the hour or get a salary, you can predict your income to a great degree. The problem with employment income is that you will never be paid what you are worth!
Think about it. A business has a goal to earn a profit. If you are paid $10 an hour to perform your job—it has to be worth more than that to the company. Even if you are a highly paid professional, earning hundreds of dollars and hour, your pay has to be less than it is worth for the company to make a profit.
Employment income has the fewest risks and the lowest rewards. It also provides the least freedom. Generally someone else tells you how much you earn, when you work, how much and when you can take vacation. If you are looking for financial freedom, this is the least likely path to it.
Generally employment income does not cost you anything to acquire. For most people though, education is directly tied to income level. An investment in technical training or college normally returns more then you spend on it. A bachelors’ degree can cost $20-30 thousand but returns hundreds of thousands or more over a lifetime. Masters’ and doctorate degrees cost as much and also generally add $8-10 thousand a year to income potential. The great advantage to paying for an education, it is an asset that can never be taken away from you.
Business Income
If you start a small business, you will be paid what you are worth. At the end of the day the amount of profit you generate is a cruel measure of your effectiveness as a business owner. Yes, bad things happen to good people. Things beyond your control will affect your business, but it is your job as an owner to plan for contingencies.
How does business income differ from employment income? The disadvantages may not appear worth the risk. As a small business owner you have all the liabilities, all the bills and every dollar brought in is ultimately your responsibility. The advantage is that if you are worth $60 an hour for what you do, you have the ability to actually earn that much.
For the majority of small business owners, business income only differs slightly from employment income. If you do not work at your business, it does not bring in any revenue. Thus, you are tied to your business directly by your pocketbook. It tells you when you can go on vacation, when you can quit for the day and how much you will make.
The advantage to business income is the ability to multiply your efforts by hiring employees. You bring in people who can perform duties worth more to your business than you pay them and you generate profits. As this grows, your income as the owner is less dependent on your own efforts and more on the efforts of other people. Eventually, if your business thrives, your income is free from your efforts and you have acquired a level of financial freedom.
The factor that stops most people from starting a business is the cost. The average franchise costs over $100 thousand and many cost much more. A good restaurant can easily cost a million dollars to start. For the small business owner, the cost is not just the start-up costs of the business but the costs to run it. Many people fail to realize that they will be running their business, without pay, until it generates a profit. Most small businesses fail because the owners were under capitalized.
Investment Income
Investment income comes in many forms. You can own stocks and bonds, real estate, precious metals, collectables, to name only a few. This type is the second easiest form to develop. You can take almost any amount of money and start putting into a vehicle for growth.
The initial disadvantage of investment income is that the return is tied directly to the risk of the investment. A bank will give you a guaranteed rate of return on a Certificate of Deposit, but that return is only four to five percent a year. Other types of investment will go up or down in value. You get paid for risking your money, the greater your risk of loss--the greater the potential reward.
The main disadvantage to investment income for financial freedom is that your income is directly tied to the amount you have to invest. For example, if you need $50 thousand a year to maintain your lifestyle and you wanted that to come only from investment income, compare the chart to see how much you need at various annual rates of return:
Annual Rate of Return Amount Needed to Invest
5% $ 1,000,000
10% $ 500,000
15% $ 333,333
20% $ 250,000
According to Morningstar, as of 12/31/2006, the average tracked mutual fund had annualized returns of 6.93% and the best fund had returns of 23.59%.
Another great investment vehicle is real estate. The traditional way to make money is to pay a house, rent it and then sell it after a number of years. The goal is to rent the house for enough to pay your costs of holding the property. Your gain comes in when you sell it later as the property appreciates. The second method is to buy a fixer house, rehab it and sell it for a profit.
The problem with real estate is the money required to purchase and hold or to purchase and rehab the properties. There are a number of books and late night TV shows that claim you can buy houses with no money down and make a profit. It is possible, but these strategies are very risky and take time you may not have to properly research and implement.
I currently run my own stock portfolio and can tell you how hard it is to make 20% or better a year in returns on a continual basis. I also run a small real estate investment company. Even with cash in the bank to buy the properties, it is a full time job for a team of people to make money in real estate investing. It is possible for the individual, but the returns are smaller and the risks greater.
For your financial freedom plan, you should consider investments in stocks and real estate. I personally advocate multiple streams of income for everyone. Diversification of your investment portfolio helps you weather dips in the economy or specific sectors. Investment income is a must for financial freedom. It is income that comes to you with a minimal amount of effort on your part. You can delegate most of the effort for a fee, if you to not have the time or expertise, and gain the advantages of income gained without working directly for it.
Residual Income
Residual income is generated without your direct involvement. Most people know of residual income in terms of entertainment. Every time you buy a book, record or see a movie the artists get a small fee. Many entertainers receive residual checks years after they actually made the record or wrote the book. Other types of residual income include royalties paid for an invention, franchise fees and payments for intellectual property.
Residual income is generally considered the best type of income you can get. Your only involvement year after year is to cash the checks! The downside to residual income is that it generally goes down with time. Sales of books and records tend to go down shortly after publication. The other problem is that you have to do something that generates the residual income. Very few of us are performers, authors or inventors. In addition, franchising a business requires building a successful model that others can follow.
Robert Kiyosaki, the author of the Rich Dad Poor Dad series of books does a great job explaining the different types of income you can earn and why they differ. The concept is not his alone but I think he does the best job teaching the concept. He calls this the income grid and I recommend reading his first book, Rich Dad Poor Dad, to understand this in detail. To summarize several prominent experts in this area:
Employment Income
This is the first type of income we normally earn and it tends to be the easiest form for most of us. We get a job and are paid for time and effort. Most of us have earned most if not all of our present wealth with this form of income.
The good thing about employment income is that it tends to be less risky than the others. It is against the law to give an employee a paycheck that bounces. If you are paid by the hour or get a salary, you can predict your income to a great degree. The problem with employment income is that you will never be paid what you are worth!
Think about it. A business has a goal to earn a profit. If you are paid $10 an hour to perform your job—it has to be worth more than that to the company. Even if you are a highly paid professional, earning hundreds of dollars and hour, your pay has to be less than it is worth for the company to make a profit.
Employment income has the fewest risks and the lowest rewards. It also provides the least freedom. Generally someone else tells you how much you earn, when you work, how much and when you can take vacation. If you are looking for financial freedom, this is the least likely path to it.
Generally employment income does not cost you anything to acquire. For most people though, education is directly tied to income level. An investment in technical training or college normally returns more then you spend on it. A bachelors’ degree can cost $20-30 thousand but returns hundreds of thousands or more over a lifetime. Masters’ and doctorate degrees cost as much and also generally add $8-10 thousand a year to income potential. The great advantage to paying for an education, it is an asset that can never be taken away from you.
Business Income
If you start a small business, you will be paid what you are worth. At the end of the day the amount of profit you generate is a cruel measure of your effectiveness as a business owner. Yes, bad things happen to good people. Things beyond your control will affect your business, but it is your job as an owner to plan for contingencies.
How does business income differ from employment income? The disadvantages may not appear worth the risk. As a small business owner you have all the liabilities, all the bills and every dollar brought in is ultimately your responsibility. The advantage is that if you are worth $60 an hour for what you do, you have the ability to actually earn that much.
For the majority of small business owners, business income only differs slightly from employment income. If you do not work at your business, it does not bring in any revenue. Thus, you are tied to your business directly by your pocketbook. It tells you when you can go on vacation, when you can quit for the day and how much you will make.
The advantage to business income is the ability to multiply your efforts by hiring employees. You bring in people who can perform duties worth more to your business than you pay them and you generate profits. As this grows, your income as the owner is less dependent on your own efforts and more on the efforts of other people. Eventually, if your business thrives, your income is free from your efforts and you have acquired a level of financial freedom.
The factor that stops most people from starting a business is the cost. The average franchise costs over $100 thousand and many cost much more. A good restaurant can easily cost a million dollars to start. For the small business owner, the cost is not just the start-up costs of the business but the costs to run it. Many people fail to realize that they will be running their business, without pay, until it generates a profit. Most small businesses fail because the owners were under capitalized.
Investment Income
Investment income comes in many forms. You can own stocks and bonds, real estate, precious metals, collectables, to name only a few. This type is the second easiest form to develop. You can take almost any amount of money and start putting into a vehicle for growth.
The initial disadvantage of investment income is that the return is tied directly to the risk of the investment. A bank will give you a guaranteed rate of return on a Certificate of Deposit, but that return is only four to five percent a year. Other types of investment will go up or down in value. You get paid for risking your money, the greater your risk of loss--the greater the potential reward.
The main disadvantage to investment income for financial freedom is that your income is directly tied to the amount you have to invest. For example, if you need $50 thousand a year to maintain your lifestyle and you wanted that to come only from investment income, compare the chart to see how much you need at various annual rates of return:
Annual Rate of Return Amount Needed to Invest
5% $ 1,000,000
10% $ 500,000
15% $ 333,333
20% $ 250,000
According to Morningstar, as of 12/31/2006, the average tracked mutual fund had annualized returns of 6.93% and the best fund had returns of 23.59%.
Another great investment vehicle is real estate. The traditional way to make money is to pay a house, rent it and then sell it after a number of years. The goal is to rent the house for enough to pay your costs of holding the property. Your gain comes in when you sell it later as the property appreciates. The second method is to buy a fixer house, rehab it and sell it for a profit.
The problem with real estate is the money required to purchase and hold or to purchase and rehab the properties. There are a number of books and late night TV shows that claim you can buy houses with no money down and make a profit. It is possible, but these strategies are very risky and take time you may not have to properly research and implement.
I currently run my own stock portfolio and can tell you how hard it is to make 20% or better a year in returns on a continual basis. I also run a small real estate investment company. Even with cash in the bank to buy the properties, it is a full time job for a team of people to make money in real estate investing. It is possible for the individual, but the returns are smaller and the risks greater.
For your financial freedom plan, you should consider investments in stocks and real estate. I personally advocate multiple streams of income for everyone. Diversification of your investment portfolio helps you weather dips in the economy or specific sectors. Investment income is a must for financial freedom. It is income that comes to you with a minimal amount of effort on your part. You can delegate most of the effort for a fee, if you to not have the time or expertise, and gain the advantages of income gained without working directly for it.
Residual Income
Residual income is generated without your direct involvement. Most people know of residual income in terms of entertainment. Every time you buy a book, record or see a movie the artists get a small fee. Many entertainers receive residual checks years after they actually made the record or wrote the book. Other types of residual income include royalties paid for an invention, franchise fees and payments for intellectual property.
Residual income is generally considered the best type of income you can get. Your only involvement year after year is to cash the checks! The downside to residual income is that it generally goes down with time. Sales of books and records tend to go down shortly after publication. The other problem is that you have to do something that generates the residual income. Very few of us are performers, authors or inventors. In addition, franchising a business requires building a successful model that others can follow.
Financial Freedom
If you read any number of books available today on acquiring riches, you will find one great truth. Wealthy people have a different mindset over poor people.
I call this having a rich or poor mentality. Here are some examples:
Rich people invest in books and education that helps them get richer. Poor people invest in large televisions to be entertained.
Rich people look at the long term picture, like farmers, they know you have to invest or plant seeds, water and tend the investment to get a large reward at the end of the season. Poor people say they can not afford to buy the seed to plant.
Rich people know that sometimes crops fail; the rain fails to come, storms rage, they plan for these problems because they know that if you plant and nurture the right seed at the right time you will harvest a bounty over the long haul. Poor people give up after the first set back and claim that life is not fair.
Rich people invest in things that make greater wealth. Poor people buy depreciating assets that make them feel good today.
Rich people know that wealth is not the number of zeros in your bank account, but the freedom to do what they love without hesitation. Poor people only worry about money and become slaves to it—either chasing it because they think they do not have enough or continuing to pursue it after they have more than they could ever spend.
The reason you are reading this book is to become rich. My definition of rich is to have freedom--the freedom to do what you want, when you want to. To not have to ask for time off of work to watch your daughter’s dance recital or to coach your son’s little league team. Your definition of freedom may differ slightly from mine, but personal freedom is the goal we all strive for. In this world, achieving this freedom takes either immense sacrifice or extraordinary income.
Freedom by sacrifice? Yes, you can achieve freedom by sacrifice. There are people in this world and country that have few responsibilities, come and go as they please and answer to no one. They generally have no possessions, no income and live off of the generosity of others. This lifestyle requires sacrifices: sacrifices of comfort, safety and personal satisfaction. For most of us, this is not a viable choice. There is a less Draconian way to sacrifice to freedom. Never buy anything new if you can avoid it. Pay cash for every purchase you have to make. Scrimp and save every penny.
There are several problems with both of these methods. Most people are not disciplined enough to carry out either for long periods of time. Most of us are not willing to forego many luxuries today for a promise of future wealth. The biggest problem is that there is no guarantee that factors out of your control will not intrude and wipe away the efforts of your thriftiness.
But this is the method we have been taught for the most part. It comes from fables we are read as children like the tortoise and the hare where we are told that a basic parable on patience applies toward our future retirement. We are also told that great minds like Benjamin Franklin advocated this program. A penny saved is a penny earned is one Ben’s most famous quotes. But is this how he acquired his wealth? I do not think so. His wealth came from his many different enterprises. Ben knew the value of investing in money making assets.
So, if you are looking for financial freedom your first call to action is to evaluate what preconceived notions you have regarding money and how to acquire wealth. Take a critical look at each one and determine if that is rich or poor thinking. As you identify poor thought processes, resolve to change them through action.
If you read any number of books available today on acquiring riches, you will find one great truth. Wealthy people have a different mindset over poor people.
I call this having a rich or poor mentality. Here are some examples:
Rich people invest in books and education that helps them get richer. Poor people invest in large televisions to be entertained.
Rich people look at the long term picture, like farmers, they know you have to invest or plant seeds, water and tend the investment to get a large reward at the end of the season. Poor people say they can not afford to buy the seed to plant.
Rich people know that sometimes crops fail; the rain fails to come, storms rage, they plan for these problems because they know that if you plant and nurture the right seed at the right time you will harvest a bounty over the long haul. Poor people give up after the first set back and claim that life is not fair.
Rich people invest in things that make greater wealth. Poor people buy depreciating assets that make them feel good today.
Rich people know that wealth is not the number of zeros in your bank account, but the freedom to do what they love without hesitation. Poor people only worry about money and become slaves to it—either chasing it because they think they do not have enough or continuing to pursue it after they have more than they could ever spend.
The reason you are reading this book is to become rich. My definition of rich is to have freedom--the freedom to do what you want, when you want to. To not have to ask for time off of work to watch your daughter’s dance recital or to coach your son’s little league team. Your definition of freedom may differ slightly from mine, but personal freedom is the goal we all strive for. In this world, achieving this freedom takes either immense sacrifice or extraordinary income.
Freedom by sacrifice? Yes, you can achieve freedom by sacrifice. There are people in this world and country that have few responsibilities, come and go as they please and answer to no one. They generally have no possessions, no income and live off of the generosity of others. This lifestyle requires sacrifices: sacrifices of comfort, safety and personal satisfaction. For most of us, this is not a viable choice. There is a less Draconian way to sacrifice to freedom. Never buy anything new if you can avoid it. Pay cash for every purchase you have to make. Scrimp and save every penny.
There are several problems with both of these methods. Most people are not disciplined enough to carry out either for long periods of time. Most of us are not willing to forego many luxuries today for a promise of future wealth. The biggest problem is that there is no guarantee that factors out of your control will not intrude and wipe away the efforts of your thriftiness.
But this is the method we have been taught for the most part. It comes from fables we are read as children like the tortoise and the hare where we are told that a basic parable on patience applies toward our future retirement. We are also told that great minds like Benjamin Franklin advocated this program. A penny saved is a penny earned is one Ben’s most famous quotes. But is this how he acquired his wealth? I do not think so. His wealth came from his many different enterprises. Ben knew the value of investing in money making assets.
So, if you are looking for financial freedom your first call to action is to evaluate what preconceived notions you have regarding money and how to acquire wealth. Take a critical look at each one and determine if that is rich or poor thinking. As you identify poor thought processes, resolve to change them through action.
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