We all love looking at our accounts and watching them go up. In a market like this though, I’ve got some specific advice for what you should be doing as an investor right now. I shared that advice on The Willis Report yesterday. Watch the video here.
Ric Edelman and I were just on The Willis Report with Gerri Willis. Tune in here to find out why now is the time to rebalance your portfolio.
I recently caught up with David Bach, who has written multiple New York Times bestselling books such as The Automatic Millionaire and Start Late Finish Rich. His latest book is called Debt Free for Life: The Finish Rich Plan for Financial Freedom. In total, he has more than seven million books in print, translated in over 19 languages. Bach has appeared several times on The Oprah Winfrey Show and is a reoccurring guest on The Today Show. He is the founder of FinishRich.com, a website dedicated to revolutionizing the way people learn about money. In this interview, he talks about how your career can impact your financial life, offers some career tips for succeeding in business, and more.
Does your career choice impact your long-term potential of becoming wealthy? Why or why not?
The obvious answer to this is “yes”, the real world answer however, is “no”. I will give you an example. When I was a financial advisor and a Senior Vice President of Morgan Stanley I had a realization that I loved to teach people about money as much as I enjoyed managing people’s money. The challenge was, “teachers” don’t make a lot of money historically. My friends thought I was crazy to go spend time writing a book and teaching when I could simply manage money and make so much more. Today however, I teach millions to be smarter with their money, and I have earned millions as a result.
I took my passion and purpose of teaching people to take action financially and turned it into a multi-millionaire dollar business. In ten years, FinishRich Media, LLC has produced 9 consecutive New York Times bestsellers with over seven million copies in print and taught and trained millions of people our principles around the world. My work has been translated into 19 languages and can be found in over 50 countries. We have had some of the largest companies in the world partner with us to license our financial education content. All of this started from me teaching an adult education class at a local high school for free.
Is it wise to choose a career based on earning potential or is it better to do something you love regardless of your paycheck? Why?
I think personally, it’s important (actually critical) to find something to do that you deeply love. You have to be able to jump out of bed and be excited every morning when you start a business or a job, if you are going to be successful. The truth about business is that it’s normally very tough. It’s very rare that you will start something and succeed right away and if you do succeed, you might not make a lot of money.
Most businesses take at least two to three years to show profits. The other thing is that most huge success stories that we read about and see have been ten years in the making. I’m a true example of a “ten year overnight success story”. In 2004, my fifth book The Automatic Millionaire was the #1 book that year. It spent 31 weeks on the New York Times bestseller list and reached #1 on the New York Times, Wall Street Journal, USA Today and Business Week bestseller lists. Most people thought that was my FIRST book when in reality, it was my fifth.
The beauty of truly loving what you do is you can get through the tough times, because you feel in your soul it’s your mission and purpose in life. And people can also tell when you truly love what you do versus doing something for the money. I believe this is what has truly worked for me.
With this all being said, there is a second route to go—and I have seen it work very effectively. I have friends that have started businesses purely because they have a specific mission and purpose to make a certain amount of money. I have a friend that built a business, in a space he didn’t care deeply about but he knew if he built the business he could sell it for a seven to ten times multiple of EBITA. He even had a great idea of who would buy it. He built the business over a seven year period and reached his goal (which was to sell the company for over $20 million dollars). My friend today is now focused on his real passion which is a charity built around helping moms and children that are victims of domestic violence. His business goals lead him to now have the time and resources to fulfill his true passion and purpose.
What three career tips can you offer based on your experience?
…Head over to Forbes to read the full interview.
Watch the nine minute interview I just did after the PA Conference for Women with Arthur Kade. You can also check out the video on his website here: http://bit.ly/TBzzzm
My grandmother used to say that you should never put all your eggs in one basket. She was right. As I see it there are three baskets into which you should put your eggs. I call them the security basket, the retirement basket, and the dream basket. The security basket protects you and your family against the unexpected (such as a medical emergency, the death of a loved one, or the loss of a job), the retirement basket safeguards your future, and the dream basket enables you to fulfill those deeply held desires that make life worthwhile.
This three-basket approach may sound simple, but don’t let that fool you. If you fill the baskets properly, you can create for yourself a financial life filled with abundance and, most important, security. In today’s blog post I’m going to give you a breakdown of the 3 baskets- how much you should be putting aside, where the money should be going and how to make it automatic!
The goal with your security basket here is to put away “rainy-day money” to cover expenses in case you lose your income. Exactly how much money you need to put away depends on what you spend each month. I generally recommend to my students and clients that they put away somewhere between 3 and 24 months’ worth of expense money.
Now this 3- to 24-month range covers a lot of ground. What’s right for you depends in large part on your particular emotional makeup. Some of my students simply do not feel safe if they have anything less than two years’ worth of cash sitting in a money-market account. I happen to think that’s a bit excessive, but if that’s what it takes to make you feel comfortable, then by all means make it your goal.
Whatever amount you decide it’s important to put this money an FDIC-insured bank account (not your regular checking account but a separate one set up specially for this purpose). Until this emergency account is fully funded, you should have at least 5% of your paycheck directly deposited into it. If your employer doesn’t offer payroll deduction, arrange to have your bank automatically transfer the money from your checking account the day after your paycheck clears. To learn more check out my appearance on NBC’s Today show where I share my 6 tips for setting up an emergency account.
What’s a dream account? This is where you save the money that is going to pay for your home, car, wedding, trip to Hawaii, new boat, guitar, ski lessons, cooking school—whatever your dream happens to be. Most dreams require CASH, and because most people don’t have the cash, they either borrow to pay for their dream (whether by putting it on their credit cards or taking out an actual loan), or they never make the dream a reality. In some ways, your dream account is the most important account you will have because living your dreams is where the excitement of life really is. The best way to start filling this basket is to decide upon a fixed percentage of your income that you will automatically contribute every month. I usually recommend people start by investing 3%-5% of their after-tax income. As with your emergency fund, use either payroll deduction or your bank’s online bill-pay service to have a percentage of your paycheck automatically transferred into an FDIC-insured account set up just for this purpose. If your dream is at least three years away from fulfillment, start investing the money more aggressively once your dream savings total $10,000.
In my earlier blog post I explained the critical importance of paying yourself first—having at least 10% of what you earn deducted from your paycheck and deposited directly into a 401k, IRA, or similar qualified retirement account before the government takes its bite of withholding tax. Ideally, this deduction should total 12.5% of your income (the equivalent of one hour’s worth of work each day). But whatever you can manage, you must make the process automatic. The good news is that payroll deduction is a standard feature of most 401k plans, so as long as you’re signed up, your contributions will be automatically deducted from your paycheck.
If you’re not eligible for a 401k or similar plan and as a result use an IRA for your retirement saving, you’ll have to create your own automatic “pay yourself first” program. Tell the bank or brokerage where you have your IRA that you want to set up a systematic investment plan. This is a plan under which money is automatically transferred on a regular basis into your IRA from some other source (such as a payroll deduction). Most banks and brokerage firms will handle all the arrangements for you, contacting your employer’s payroll department on your behalf and dealing with all the paperwork. (If your employer doesn’t offer payroll deduction, you can have your retirement-plan contribution automatically moved from your checking account to your IRA—ideally, the day after your paycheck clears. Most banks have free online bill-paying services that allow you to schedule regular automatic payments of specified amounts to anyone you want).
I hope this blog post helped you gain a better understanding of the 3 basket approach to financial security and has motivated you to start funding all 3 – AUTOMATICALLY! Please leave a comment below or on my facebook page. I love hearing from all of you!
Hey everyone. Happy September!
I just did an amazing interview with remarkable man and entrepreneur named Brandon Steiner.
Brandon, has a new book coming out called You Gotta Have Balls: How a Kid from Brooklyn Started From Scratch, Bought Yankee Stadium, and Created a Sports Empire
The book is fantastic. I read it cover to cover in about three hours and loved it. While the title sounds funny, it’s not what you may be thinking. It’s actually about how to pursue your dreams, recover from adversity—and raise children with strong values that will benefit them for life! It really moved me as a parent.
Brandon, owns a company called Steiner Sports Marketing & Memorabilia, Inc., one of the largest sports memorabilia companies in the world.
Last year, he made my dream come true—when he took my son Jack on a tour of Yankee Stadium, and had “second base” hand delivered to his seat at the seventh inning of the game! This was Jack’s first time at Yankee Stadium, needless to say—not your normal first experience at a baseball game. He’s one lucky kid, and I am one lucky daddy!
This interview is one of the best I think I have done in a year—and it’s my gift to you for being a member of the FinishRich Community! Enjoy and please share your comments on how you liked it.
Oh…and if you haven’t “liked” me yet on Facebook—come join me (we just went over 25,000 “likes”—would love to see you there)!
In my earlier post, The Foundation To Building Wealth, I explained how the kind of wealth you build is determined by the way cash flows through your life. With that in mind, I suggested that you set a goal of Paying Yourself First at least 10%-12.5% (or 1 hour a day) of your pretax income. I received tons of great comments and some awesome questions, one of which I would like to highlight and answer in today’s blog post….
“Should I still open a retirement account and save money if I have credit card debt?”
This is a question I get all the time and my answer is:
Yes, you should absolutely open a retirement account and start saving even if you are in debt!
After more than two decades of experience teaching people about money, I have come to believe with all my heart that it’s a big mistake to put off saving money until you are debt free. If you do, you may never get started saving. And you’ll miss out on the matching contribution many employers offer on 401(k) plans.
But if you’re in credit card debt, you need a different plan. Here it is: whatever amount you decide to Pay Yourself First, split it in half. Put 50% in your retirement account and use 50% to pay off your debt. Once the debt is paid, you can revert to Paying Yourself First with the full 100%.
If you make $50,000 a year, Paying Yourself First 10% would mean setting aside $5,000 a year or $416 a month. But if you have credit card debt you’d split that in half, putting aside $208 a month and using the other $208 to pay off credit cards. This system allows lets you feel like you’re working for the future while erasing the mistakes of the past.
This is bound to motivate you and get you excited about the future. In my experience, money is as much an emotional issue as a numerical one. This approach helps you handle both at once.
I call this my “Bury the Past, Jump to the Future” system. Try it. It really works.
Exercise: The Pay Yourself First 50% Debt Paydown
How to Use It: Print out this blog post and fill in the blanks below to figure out how much money every month you can put toward your debt while still Paying Yourself First. (you can also just write this on a piece of paper if you don’t have access to a printer).
Why to Use It: It’s a fast, easy way to know exactly how much you’ll have every month to pay off your credit cards.
The Bottom Line: Dividing your money this way makes sense, because it lets you keep building for a bright future while steadily getting rid of that killer consumer debt.
When You’ve Finished the Exercise: Now start making those payments and watching your balances fall! If you have more than one card and you’re not sure which to pay first, then CLICK HERE for my easy and effective system to prioritizing your debt.
If this post helped you, please leave a comment below!