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Cliff Botchway & Michael H
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I recall listening to an interview and on this interview there was an able bodied young lady who was receiving government assistance. This young lady mentioned she doesn’t contribute to society, and then asked the question why should she? Her argument was that she would get a check in the mail every month on time, she would get gifts delivered for her kids, and she gets subsidized housing, so why should she work. I have to admit; just listening to her argument without giving it much thought, would cause me to ask the question why should she too. Now there is nothing wrong with getting assistance when you need it, but pillaging the system when you are able to contribute can be a huge disservice to yourself and your fellow man. So why should someone contribute to society when they have an assistance check coming in every month like clockwork.
There is no Welfare Fairy or Government Assistance Leprechaun
This word “free” can get a lot of us in trouble. When it comes to the government there is nothing “free” someone has to pay for it. There are so many who has this idea that resources just come out of thin air or resources will always be there with no work on their part. This goes back to what we talked about in The Super Hero Complex episode.
Your fellow man will get tired and have enough
Having just a little respect for our fellow man would cause us to adopt the mindset to contribute. But when we don’t show respect to our fellow man and our fellow man’s back is against the wall, he will then show himself respect and say enough is enough. What happens when more people try to live on assistance? Will that check that come in every month be the same size? Who will be putting money into the pool? What will happen when the assistance stops and you have to go hunting? Will you be in hunting condition?
Limits your opportunities to be great
The last question I asked in the above section was “Will you be in hunting condition?” This question is important for this point. Because when we sit around and wait for handouts especially when we are capable of contributing, we eventually lose the skills required to hunt and provide for ourselves. Much like the duck analogy Cliff uses in this episode, we have to be able to fly when winter comes. If the checks and assistance stop coming in, will you be able to provide for yourself?
We set the generation after us up for failure
This may be one of the most important points. The younger generation is watching us, if you have kids, there is a good chance they will live the way you do at some point in their adult life. Going back to that interview I was listening to, that young lady on assistance was asked if her parents were on assistance. Guess what her answer was, yep it was YES! This is a good example of how we set the generation after us up for failure through our behavior and habits.
Let’s not allow any type of assistance stop us from contributing, growing, and providing value to this world. We should be careful not to enable others to lose their ability to hunt because we are consistently giving them handouts. We may think we are helping but we may actually be hindering them. To conclude I want to refer back to that interview I was listening to. The young lady was asked “if your check was cut off would you go to work?” she replied “if my check was cut off I would have to go to work.”
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For the fortunate few that have been accustomed to just going to work every day in the US, and receiving a paycheck. This sure thing is slowly going away, per the technological advances that have been made that give all industries a new model of doing business. Long gone of the days when offshore positions only affected the “blue collar” worker, and thus the “so called” highly trained professional was safe. Companies these days can manage a resource from across the world, and measure their production output with extreme accuracy. Now the highly trained professional with many years of experience has to compete with a resource that can do the job for more than 20% of their cost. It’s debatable if the overseas resource can do the job at the same level, but it doesn’t matter. It’s up to the employer or owners of the company to make that determination. Since the owner created the job it’s their prerogative and right to give that job to whomever they feel is going to give them the most value.
Since most of us don’t have a “big picture” outlook, and just think about our situation. We don’t really see the forces that are working against us in the company we are employed by. These forces include inflation, competition, and taxes just to name a few. Believe you me the company will not just sit back, and lose their current market share. They will implement strategies to ensure that they remain profitable, and all options are on the table. So, if the company is willing to be flexible and do what it takes to survive. So what is your next course of action? Are you just going to complain and cry it’s unfair because the hand is feeding you no more? That wouldn’t’ be a good way to deal with a possible reality of when that hand isn’t feeding you. The best course of action is to do the same as the company and be very flexible in adapting new strategies to remain profitable. Now going back to school and relearning new job skills is 1 option. But it puts us back in the same position of getting replaced by the less expensive resource. The better choice would be to create or invest in an asset that doesn’t depend on any hands to feed you. Ideally, we want to do this while we are still earning a paycheck, so we can learn what it takes to be an asset creator/manager. As time goes on with sheer determination, and discipline we will get to the point to where those assets provide our sustenance. As we stated in this podcast it’s better to hone our hunting skills while still receiving a paycheck. So, as we get more comfortable with our hunting skills that produce positive results we focus less on the hand, and more on hunting for ourselves.
To give you a reference in regards to hunting let’s look at the lion, which is generally known as King of the Jungle. I’m a national geographic fanatic, so I know off hand that the lion’s success rate is 25-30% when hunting for prey. Now, this is a highly skilled lion’s rate of success. If you reference the lion’s teenage children the success rate at first is less than 3%. But after continued practice, they improve their odds with the experience of constant failure. But since they are teenagers they are still getting fed by their parents, so the pressure isn’t there yet to feed themselves. But as they progress to their parent’s success rate it’s expected for them to leave the territory, and make a life for themselves. This wild life example illustrates that there will be a hand to feed you, but that has an expiration, but there is never an expiration date on when you know how to feed yourself.
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For the most part many of us have been face with this dilemma, specifically for most men. How much should I spend when I take a female out on a 1st date? Maybe it’s a person that we really want to impress, so we go all out, and utilize all of the resources available to make a great 1st impression regarding the total experience that you’re willing to pay for. As we stated in the podcast “Budgeting Nothing Natural to It”, we must consult our current budget, and financial status on what we can afford to pay for the date. Maybe we have a high score on the Initial Financial Health Meter that is available at our website http://www.themikeandcliffshow.com/ifhc, and we have multiple streams of income that provide an enormous surplus of cash flow after paying for our expenses. From that standpoint all options are on the table, and we can go all out. But if we need to resort to paying for this date with our credit cards it will be like that hip hop song made by Main Source called “Faking the Funk”. Don’t fake the funk and make a false impression with your date, keep it real from the beginning. Maybe days prior to your 1st date you have conversations discussing finances with your potential date, and fit into one of those conversations that your current financial situation determines the date may not involve the best restaurant in the city. Depending on the response whether good or negative that may provide a good indication of the person’s mindset regarding finances. If the response is negative, maybe going out on a date may not be a good ideal, since she or he would be expecting the world. Now, if the response is positive the experience has a high probability of being pleasant. Get Your Financial Health Checkup http://www.themikeandcliffshow.com/ifhc Do you have questions? Email us at questions@themikeandcliffshow.com The post Dating Around Your Budget appeared first on The Mike and Cliff Show.
We live in a time when very few want to truly be held accountable. The reason being is because very few are responsible or even want to be responsible. Responsibility is having certain task and duties that requires you to act. Accountability is honoring the outcome of what you are responsible for. It’s funny how with our finances we want to have control and only our names on the accounts, but we sometimes but our financial responsibilities on others. I am going to be candid, it’s not your employer’s responsibility to make sure you and your family eats. It’s not your neighbor’s responsibility to budget your money; so that you can pay your rent. It’s not a presidential candidate’s responsibility to make sure your finances are in order. If you are thinking did he really say that, yes I did. Sure our employer, neighbor, and president all have a certain level of responsibility as it pertains to their employees, neighbors, and country. However, make no mistake; it’s not all about you. The president has a whole country and even a whole world to consider. Knowing this we have to understand that they are not the answer to solving our problems, or even a group of individual’s problems. Let me ask a question, do you have a plan for your financial future? Did you have a plan for your finances before the presidential election? If not, I urge you to develop a plan for your financial future. Take responsibility; take control of the financial futures of you and your family. Don’t waste your time, energy, and resources on task that will not provide you the best results for your future. Understand men are imperfect, corrupt, and fallible. We have to take responsibility for our lives and not just put it all in the hands of a man. If you have any questions or comments please send them to questions@themikeandcliffshow.com Reference: The Super Hero Complex – www.themikeandcliffshow.com/mcs009 The post Your Responsibility Not Theirs appeared first on The Mike and Cliff Show.
The cost of trying to appear cool Many of us feel our appearance is a right, it’s a freedom; we have to look any way we want. This may be true; however, since our appearance is a reflection of us, it comes at a cost. There are many who wear what they see the celebrities wear, or wear clothing in such a way, they feel will look cool to those around them. It’s pretty clear that the way we dress is for the most part extrinsically influenced. It’s understandable that companies and schools have dress codes for us to follow. In some situations, we may even have to wear uniforms. There is usually not an issue with the clothes or the uniforms we wear; a lot of the time, the issue is in how we wear the clothes or the size of the clothes. Just look around; there are many grown males, young and old, who have seemed to have forgotten the basic function of a belt. These males wear pants that appear to have fifty-pound weights in the pockets, which cause their pants to fall below their waist, exposing the whole full crack of their behind. We can also see grown females, both young and old, wearing clothes that appear to have come from the little girls section of the store. The problem is this cost us when we are interviewing for jobs, working on jobs, looking for potential business partners, or looking for potential clients. Companies worth working for, business partners worth having, and clients worth having, will carry and present themselves in a professional, confident, authentic manner. When we are not carrying ourselves in such a manner, it will be nearly impossible to get quality jobs, business partners, or clients. The bottom line is our appearance impacts our bottom line. The cost of trying to appear rich Like with dressing to appear cool, dressing to appear rich is also largely extrinsically influenced. We often try to mimic what we see the rich and famous do. We see our family, friends, and neighbors with “stuff” that they probably can’t even afford, and we want what they have. These extrinsic influences seem to bring out the inner child in us. We go out and purchase clothes, vehicles, expensive meals, and even houses, all for the sake of looking good. The fact of the matter is; we can look as good as we want on the outside, but if we have poor financial health (financial health series MCS006 – MCS008), it will eventually surface. Going into debt to purchase things we can’t afford for the sake of looking good, is a sign of immaturity on all fronts. We have to exercise emotional intelligence, financial maturity, and a little bit of common sense. Most of the people we see, probably can’t truly afford what you see them with (the only way you would truly know is if you look at their financials), and they probably don’t really care about what you have. So who are we trying to look good for, and at what cost? Being true to our appearance Okay, no one want’s to walk around looking like a bum. No one wants to drive around in a death trap waiting to happen. The point we want to make is; just be honest with where you stand financially, and from there you can make the best fiscally responsible choices, as it relates to your appearance. There are many alternatives out there for individuals on a tight budget. We can look decent, drive decent, and live decent without committing financial suicide. We don’t have to eat roman noodles every night or live like Oscar on Sesame Street, just because we are on a budget. The take away is we have to remain financially healthy; we don’t go outside and dance in the rain when we have the flu. However, many are pulling their own plug, while on financial life support just to look cool or rich. This is financial suicide. Know where you stand financially, and make every effort to operate within your financial capability. The Financial Health Series: www.themikeandcliffshow.com/mcs006 Budgeting Nothing Natural To It
www.themikeandcliffshow.com/mcs007 What Is Your Number? (Creating and Executing a Budget)
www.themikeandcliffshow.com/mcs008 What is it really worth? (Creating a Financial Balance Sheet)
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The Student Loan Crisis 25, 50, 75, and 100 thousand dollars of student loan debt and beyond; how did we get to a place where taking out so much debt is an accepted norm? Many students come out of school with mortgage level debts and unrealistic expectations finding it difficult to land a job that pays $10 an hour. How is it possible and how does it make sense to give loans to kids who are not able to pay them back. Some student loan borrowers are not able to pay the monthly amount required to cover the interest owed on the loan, and some who are not able to pay at all. When payments are not made on the loan, interest and fees rack up increasing the loan amount. Interestingly enough, when many of the borrowers are not able to pay back the loan, guess what their solution is; yep, to borrow more money to go back to school. This student loan system when not properly used (like it is so often by many), can be a downright terrible solution for funding education; instead of producing lifelong productive, educated individuals, it mainly produces lifelong enslaved desperate borrowers. The Education Crisis While going through grade school, we often hear about college. College is spoken about so much in the schools that it has become the accepted path of natural progression. I mean, not even going into the military is as so strongly promoted as going to college after high school. Kids are being taught continuously that college is pretty much the only way to succeed in this world, and for most to go to college, they will have to borrow especially if their parents had to borrow. It’s been a while since I attended grade school, but I believe that there is now a push for financial education and entrepreneurship in the schools. However, I don’t think it is enough to offset the student’s mindsets. The Parenting Crisis We live in a society where we practically have kids raising kids. We see it so often that it has become the norm. Our society has individuals who have low levels of academic, emotional, and financial education. These individuals raise kids, and their kids raise kids, and the cycle continues from generation to generation; also what’s learned in the home continues as well. If we come from a home where there was little or no financial education and the family had low emotional intelligence, we may be the type of individual who just make financial decisions based on our emotions. This cycle has to stop; we have to educate ourselves and our children even in their adult years. As parents, we have signed up for a lifelong job of educating our kids; we should not leave this up to a school/college, and we definitely should not allow Professor Bad Debt to teach our children. The post Student Loans The Crises Behind The Crisis appeared first on The Mike and Cliff Show.
Is this the only way to pay for a car? If we are watching TV, it doesn’t take long for us to view car dealers advertising their financial terms to purchase the latest and greatest cars they have available for sale. If we think about it, most of these cars average $20K, and most of us don’t have that sitting around just to get us from point A to B. The constant bombardment of these car dealer commercials I believe steer us to only think of purchasing cars via long-term monthly loans, and only acquiring the newest model. Now common sense would say the only other option is to save up, and purchase our car. But unfortunately, most of us live paycheck to paycheck, and having $20K lying around isn’t a reality for us. My opinion there is a happy medium for this problem. We can still utilize financing, but only after knowing our expense number to dictate what we can afford. I can afford it; my car payment isn’t that much The first thing that comes to our minds with financing cars is the monthly car payment. Car loans are categorized as being amortized. Essentially, interest and principal are combined, which equates to the monthly payment. Now before signing our name on that dotted line to finance that new car with the plastic wrap still on the car seats, let’s review our financial health to determine how much can we really afford. Since we did our budget in podcast MCS007 (What is your number?), we can clearly verify if we can or can’t afford the potential car payment. Now do we give into our emotions to purchase that shiny new car to impress our family and friends, or do we allow our financial health to dictate our decision to guide us to a solution? When our budget and financing a car work in perfect harmony To determine how much we should spend, in financing a car via an auto loan, “The Mike and Cliff Show” suggest the following as a guide as it relates to your budget and income before acquiring the auto loan. Our first suggestion is the initial car balance should be no more than 25% of our gross salary. Our second suggestion is the monthly payment shouldn’t be any more than 7.5% of our monthly net income. Lastly, the length of the auto loan should be no more than 48 months. The idea behind these suggestions is to resolve our transportation requirement with a reliable and nice car, and not to commit unnecessary income to what amounts to be a depreciating asset, especially; when purchased new. The more time and resources we dedicate to “stuff”, the more we delay our time to destination Financial Freedom. Below is an example detailing the differences between purchasing a used and new car against our suggestions.
References MCS007 What Is Your Number? (Creating and Executing a Budget) The post How Much Do We Have To Pay To Ride Nice? appeared first on The Mike and Cliff Show.
Making them rich by our poor financial habits Let’s begin by examining the final part of the payday loan transaction whether it’s completed electronically or by walk in. The receiver feels like they have been saved, and they can pay their electricity bill before it goes dark at their home. Now let us go to the beginning before we go and happily sign the contract of this loan. It is vital that we analyze the root cause of why we are signing this contract in the first place. In our podcast, “What is your number MCS007” we created a budget to determine our monthly expenses minus our net monthly income. Successfully executing this activity on a consistent basis will keep us out of these types of toxic places of business. By simply not executing our budget, the owners of these types of businesses are getting rich. We are going to breakdown the structure of a payday loan, and we will understand how and why these business owners are getting rich by our poor financial habits. Breaking down the structure of the payday loan The majority of payday loans can basically come in 2 forms. A car that is free and clear in your name can secure loans. The other form is completed by unsecured means; essentially, just by signing the contract you receive the funds without providing any collateral. Both types of these payday loans have the same basic structure, but the essential part to pay attention to is the annual interest rate. An average payday loan annual interest rate can range from 300% to 700%. But let’s create a real world example to get a clear picture of what is occurring on a daily basis. Assuming we borrowed $500.00 and use 300% as the annual interest rate and we intend to pay back this payday loan in 30 days. The interest (profit) that this loan produces for the business is an amazing $125.00. So every day this loan is costing us $4.16. To pay off the loan on day 30, it will cost $625.00, plus processing fees, which varies. Now these organizations will tell the public that these loans are short term, and designed to be paid back in 2 weeks; hence it’s called a payday loan. However, they are well aware that these consumer’s poor habits will make them repeat clients, and essentially get caught up in a vicious cycle of constantly taking out these loans. Now there is a reason that 12 states have completely banned these businesses from operating in their jurisdictions. Even these businesses that exclusively operate online aren’t allowed to extend payday loans to the residents of these states; this should tell you that something isn’t right!
Getting out of the cycle for good! The first step in analyzing any habit is to identify the triggers that produce the action. For example, when I smell St Louis style grilled ribs that trigger me to eat a slab of them at once, which is the next action! By not having a budget and not knowing our monthly expense number triggers a bad habit to scramble and seek out this toxic financial action to pay for our living expenses. The Paycheck Punisher (Payday Loan) is an enemy of financial freedom that can’t co-exist under any circumstances. So let us change our bad habit into a good habit by simply creating a budget, and allowing that to guide our spending. Finally, we can eliminate the Paycheck Punisher from our lives for good! The post Payday Loans (AKA Paycheck Punisher!) appeared first on The Mike and Cliff Show.
Hey it’s a bird, no it’s a plane, oh wait it’s no one. Many of us go through life drifting from day to day, not really giving much thought to our financial health. Many say “I only have to be on this job for 30 more years before I retire; however, when asked how much they have saved or how they plan to fund their retirement, they give the classic “I don’t know” answer. It’s incredibly hard to expect something when there is no plan or work to support our expectation. Most of us have the super hero complex, we believe someone will, and should save us, from the financial mess that we have created ourselves. The belief is that someone will come to our rescue. This type of thinking is toxic and it hinders us from taking responsibility for our own financial futures. The Ugly truth The truth is that no one will care about our financial future, and our financial health, as much as we do. That’s right; not our employer, not our mom, not our dad, and definitely not our Uncle Sam. This is why we see individuals in their 60s and 70s with debt, and also working beyond the age of 70. Do we want to be working at the age of 70 for basic necessities? The answer is a resounding no, so we have to take responsibility, and act now, before reaching that point. The super hero complex suggests that a 401K and social security will save us, when we reach the “so called” retirement age. Although these options provide us with a level of income, they are not a complete solution for our future retirement. The truth is these promoted plans alone; do not provide the financial security as advertised. In addition to these promoted plans; as discussed in episode MC005 (What is an Asset and Why Do I Need Them) we have to create assets that we control, to assure financial security in our late stages of life. Have a plan When we learn to take responsibility for our own future, then we can start to develop a plan. We should start with a financial health checkup (check out episodes MCS006 – MCS008); this is where we take a look at our finances to see where we stand financially. We then need to develop a plan, it’s important to note that we all are unique and have different circumstances, skills, and talents so no two people’s plan will look exactly the same. The point here is to have the mindset to take responsibility, assess where we stand financially, develop a plan for our financial future, and then work the plan. Reference: MCS005 – What is an Asset and Why Do I Need Them MCS006 – Budgeting Nothing Natural To It MCS007 – What Is Your Number? (Creating and Executing a Budget) MCS008 – What is it really worth? (Creating a Financial Balance Sheet) The post The Super Hero Complex appeared first on The Mike and Cliff Show.
Having a bunch of stuff If we created a list of items that we own free and clear. That list would probably be a short list for the most of us. Items such as our TV’s, cars, jewelry, shoes, clothes, and other items similar to these to support our standard of life, suggests we can easily say we have a lot of stuff of value. But the “stuff”, if required to sell, would be more than likely sold for far less than the purchase price. Having to do this exercise of selling our “stuff”, should make us realize, that our “stuff” isn’t worth much. Now there is a fine and distinct line of purchasing “stuff” to support our lifestyle, and having too much “stuff” that we don’t need. Once we get to the point that we have enough stuff to support our lifestyle, the next step is to create “assets” that can generate income, and also rise in value while we own them. But before that let’s delve into defining and creating a personal financial balance sheet, to assess how much “stuff” we really own and assets we want to have. Defining and Creating a Personal Financial Balance Sheet Essentially a financial balance sheet is broken down into 3 parts assets, liabilities, and net worth. Assets can be categorized as bank accounts, personal possessions, personal residences, retirement plans, and ownership of businesses, common stocks, mutual funds and income producing investment property. What is important with assets is determining the actual current value for each item. For example, if we analyze a personal possession, which could be our cars. We can go to a free online appraisal website, and input the current characteristics of the car, and that will produce a good estimate of what we can sell the car for. Appraisal for each listed asset will vary in determining the value. The result of the appraisal should provide a good ideal of how much we can sell the asset for. The next part is identifying liabilities, which is practically the debt we owe now and in the future. Let’s utilize the car as a reference to illustrate an example of a liability. Let’s say we decided to purchase a new car via car loan, and we drive off the lot feeling great. After 6 months you decide that the car isn’t what is cracked up to be, and you want to sell it. You review the loan balance to be $35,000. After that you visit a car appraisal web-site, and you can’t believe it. The car is now worth $32,000, and you say yourself how could this be. You don’t believe it, and you attempt to take it back to the dealer. The dealer does their appraisal, and they come back offering even less. So that leads us to the last part of the balance sheet called net worth. By reviewing the debt we owe on the car of $35,000, and the current value of $32,000. That gives us our net worth for this particular asset. In this case it’s a negative net worth of $3,000. Although this is just one asset/liability we have utilized as an example. I’d venture to say that most Americans have similar situations regarding the final net worth number when listing all assets and liabilities. The Personal Balance Sheet of Financial Freedom If after completing the personal balance sheet, it can be discouraging if the results provide a negative net worth. But understand this is the first step in accessing our financial health. By completing this exercise we become honest with ourselves, with analyzing our “stuff”, which really doesn’t have a lot of value. The balance sheet of the financially free have “stuff”, but since they are free it’s purchased for by having well managed assets. The first balance sheet example below illustrates what most of us probably would list, and the end result of having a net worth that is negative or just above it. The second balance sheet conveys assets that have value, but most importantly producing income that is stated in our budget. The Average Person’s Personal Balance Sheet
The Financially Free Personal Balance Sheet
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Account for Everything I can’t say for sure but I’ll be willing to bet that most people really don’t know how much they really spend on a monthly basis. So that is why budgeting is one of the financial foundation pieces that set us up for Financial Freedom. Essentially at its core, it’s a simple subject. We add up all of our monthly expenses and subtract them from our monthly net income. Hopefully, the result is a positive number to which can be used for savings and investing. True self-analysis of your spending is vital in determining your average expense number. This step may take a few days or weeks to know what exactly you spend your money on. Our living expenses such as house, grocery, car, insurance, utility, transportation, credit card payments should be easy to determine. But the other expenses such as entertainment, shopping for clothes, vacations, hair care, car maintenance, and other miscellaneous expenses are usually not accounted for. What we stressed is to account for these expenses, and budget for them accordingly. Once we have a true and accurate monthly expense number from there we look in terms of percentages when comparing to our net income. The 50% Expense to Income Ratio Goal The target ratio of 50% monthly net income to expenses is aggressive, but the goal is to get as close to it as possible. If we are close to 100% (meaning 100% of our income is going to expenses) then we are setting ourselves up for imminent financial disaster. An example of financial disaster is a car break-down, and we need $1,000 to fix it. If we are closer to the 100% end of the ratio then our options to resolve the problem usually leads to high interest credit cards/predatory lending; which will be discussed in another Podcast. But by operating at this 50% ratio we can quickly build up an emergency fund, and build up capital to invest. That is why it’s vital to analyze our spending with pin-point accuracy. This will enable us to quickly determine where unnecessary spending is occurring, and make adjustments accordingly to fix it. Tools That Can Be Utilized For Budgeting The most basic tool to analyze your income/outcome cash flows is simply grabbing a pencil and a piece of paper and writing each item down. Personally I use a spreadsheet, but there are various budgeting tools out there on the Internet that can assist in creating a budget. We may want to go the personal financial manager route to assist with this task. But whatever preference we may have; the bottom line is having disposable income available for getting educated on investing, and eventually investing on the potential cash producing asset. Below is an example of a monthly budget that provides us a high level view. This will assist with easily verifying what specific types of income and expenses that gives us our number, and income to expense ratio percentage. Example of a Budget
Tools To Create a Budget/Income Statement -Online budgeting applications (Perform a search via a search engine to find a good fit for your needs) -Personal Finance Manager/Bookkeeper Assistance
The post What Is Your Number? (Creating and Executing a Budget) appeared first on The Mike and Cliff Show.
Where Did My Money Go? Where did my money go? That is a question I believe that most of us ask ourselves when we can’t withdrawal not even 20 dollars from our bank accounts several days before our next paycheck. From that point before receiving our next paycheck the few remaining funds that are available is budgeted with extreme caution and calculation. Unfortunately, this is a cycle that most of us repeat with the mindset that this is normal. This type of behavior shows that we only budget when we are under extreme financial stress, because we don’t have the funds to spend as we did when we initially received our paycheck. Common sense would suggest that budgeting is a skill set, if applied properly would resolve this problem. Take the Emotion Out of Budgeting Emotion is probably the most important factor in being a successful budgeter. As discussed in the entitlement podcast, if you don’t have a plan for your money there are external forces that have a plan for it, and also the value received is far less than you paid for. The act of budgeting requires logic. The left side of our brain which provides the logic is turned up, and our right side of the brain which provides our creativity has to be turned down. Why should I want to be a great budgeter? The principal objective of being a great budgeter is managing our expenses to where it doesn’t consume 50% of our income. Although an aggressive objective this is the target to aim for in efforts to have as much disposable income available to accumulate income producing assets. This objective of 50% expense to income ratio will be discussed in detail in our podcast “What is your number”? In summary budgeting is an exercise that should be completely left without emotion. The post Budgeting Nothing Natural To It appeared first on The Mike and Cliff Show.
Definition of an Asset The word asset can be applied in many different ways. For example we might have heard of the term that we are an asset for the company we are employed by. What this means is we provide great value that affects the financial bottom line in a very positive manner. In the context of financial independence assets are companies, properties, stock holdings that we own or control. Simply stated the primary goal of assets is to provide income to pay for our living expenses now. We might ask ourselves we want our assets to grow in value while receiving income. Yes that is the goal, but if we are receiving steady income from these assets over consistent period of time. More than likely the asset will grow in value because of the fact that it’s generating income. Types of Assets Most of us have a bank account, cars, and our primary homes that we live in. Even our clothes, jewelry, electronics are considered assets in the general sense of the word. But as stated we don’t count those as being assets. Outside of a primary house the rest of these “so called” assets are guaranteed to lose their entire original value over a short period of time. Do you think acquiring these “so called” assets will provide financial security? Real assets as stated before provide income based on the quality and value for the person that buys them from us. For example when we go to the movies and pay those high ticket prices. We don’t mind; if the movie theater has a great and comfortable environment to watch our favorite actors perform. I can easily name potential cash producing assets like owning a beauty salon, renting real estate, stock options trading. But the key is to understand in our asset creation process we are entering a market, and for success it’s vital to understand what we can uniquely offer within the asset’s market place. We have to trust and love the process of asset creation, and not to focus on the end result. Why we should focus on creating and acquiring assets Our financial management principles of time, income, and debt build up to get us to the point to creating or acquiring assets. Imagine ourselves in a position to where we are going to our jobs on a daily basis, and all of sudden our services are longer required at no fault of our own. The sense of panic sets in and we have to quickly figure out how we are going to pay our bills. Ideally before that to occur we are in a position that we have been utilizing our financial principles, and we are producing income from various assets. There are no worries of maintaining our lifestyle. We have essentially utilized our jobs as a fund raiser because the profits from the assets can be re-invested without the dependence of living off them. That unfortunate day of being laid off isn’t met with panic, but with the peace of mind knowing that we have assets providing income to maintain our standard of living. The post What is an Asset and Why Do I Need Them appeared first on The Mike and Cliff Show.
Where does our time go? There are twenty-four hours in a day, and seven days in the week. The average person works an eight hour shift for five days out of the seven day week. Let’s take a closer look at this; work is eight hours plus the one hour lunch break that makes nine hours. We also have to account for the time to prepare for work, eat, and travel to and from the job; we will say this takes two hours, so practically half the day is gone to work. Now let’s say we are getting the average eight hours of sleep that will leave us with five hours; a very crucial five hours I might add. Now everyone’s situation is unique some have kids, some take time to cook dinner, some have extracurricular actives but let’s say the average amount of extra time we have is three hours a work day. Again everyone’s situation is different so let’s just focus on the five work days; due to our unique circumstances the weekend can be very dynamic; however, this principle applies to the weekend as well. The point here is we have to really examine how we use these extra hours throughout the week and on the weekend if we want to reach financial freedom. Have a plan for your time We can see a lot from breaking down the average person’s workday. One thing that should really capture our attention is that the average work day takes up half our day. See when we look at the average “eight hour” work day we see that it is actually like eleven or twelve. This should answer some questions as to why we feel tired or feel like there is not enough time in the day. Knowing this we should be able to conclude that it does not make any sense to give more time to the job; it’s taking enough of our time. Another attention grabber is that on average we have three extra hours to ourselves. So throughout the week that’s three hours on the average work day for our spiritual, personal, and educational growth; and for family, loved ones, and running errands. We have to understand that like our income we have to plan and budget our time. The question we should ask ourselves is what are we doing with those extra hours throughout the week and on the weekend? Time = Money in a sense, So just like if we do not have a plan for our money someone else does; if we don’t have a plan for our time someone else does. We should value our time so much to the point that if we are asked if we have a minute to spare, we take a couple seconds to actually think if we have a minute before responding. Diligence in utilizing our extra time is the key Just like with our extra income; being diligent in managing our extra time is important for reaching financial freedom. We may look at the extra three hours and say that is not enough to start my own business, purchase real estate, or to buy and sell stocks. Well if we were to ask the average person if they could run twenty miles the quick response may be no! But if we were to ask can you run one mile the answer would be much more likely to be yes. So if you can run one mile five days a week and four weeks a month you can run twenty miles; just not all at once. This same principle applies with starting a business, purchasing real estate, and with buying and selling stocks. A point to mention here is this can work against us as well if we are not careful. For example eating one piece of cake is not that harmful; however, if I ate one piece of cake five days a week four weeks out of the month I will feel and see it if you know what I mean. The point here is we have to be diligently using the extra time we have to work on those things that will lead us to financial freedom. The post Time To Break Down Our Day: Time flies when we don’t value it! appeared first on The Mike and Cliff Show.
How we commonly view the entitlement attitude When we think of the entitlement attitude we often picture someone demanding something they did not work for or someone expecting the government to give them a handout. Now these can be considered entitlement attitudes especially if the individual is able to work for what they want but they choose not to. However the entitlement attitude is also commonly seen in those who have went to school and work hard every day. Going to school and working forty hours a week does not entitle us to everything we want. Everyone’s situation is different we have to take inventory of our life and our finances to determine if we can truly afford what it is we desire. Have a plan When we sit down to count the cost and come up with a plan; what we are doing is displaying the proper attitude to reach financial freedom. Before we take out a loan for school, before we swipe our credit cards, before we buy a brand new car; we should take a look at our current financial situation and where we would like to be financially. Then we should consider how the present choice will impact our future financial situation and will it lead us to where we want to be financially. What we feel we are entitled to should be backed by a plan that has been executed successfully and has produced the results we planned for. The beauty of when we have truly planned and know where we are heading financially we know what we are entitled to and what we deserve. When we are in this position we can go get what we planned and worked hard for and no one can tell us any different; because it’s backed by a well thought out plan. If we don’t have a plan for our money believe me someone else does. Beliefs and Emotions We don’t really think of our beliefs or emotions as having any significant impact to what we spend our money on or what we feel entitled to however they both do. For instance if we are constantly being fed that those with great material possessions have a happy and abundant life; we will begin to believe that and set out to acquire those things without a plan. Another example is if we are told going to school for a certain degree will guarantee a six figure salary, once we receive that degree we will be expecting that salary. The truth is we believe things that have been told to us that are unrealistic and not the truth. We may be able to make a six figure salary after we have ten years of experience under our belts, but in the mean time we will have to work on paying back those student loans. And those who have material possession may live a happy and abundant life, but sometimes we never really take the time to think why that is so. We often think they have a happy and abundant life because of their possessions, instead of thinking they have their possessions because they have a happy and abundant life. We have to check our beliefs and emotions when it comes to money and the things it buys. Things are not always what they appear to be and people don’t always have what they appear to have. We have to remember to be true to ourselves, our situations, and our plan. The post I’m Entitled To Get What I Want Even If Using Debt appeared first on The Mike and Cliff Show.
Common Way of Thinking for Income Generation Most of us growing up saw our parents get up early in the morning to prepare themselves to go work. As we progressed to teenagers we replicated our parents by having part-time jobs after school. I’d venture to say in most of our households that they were never any discussions about starting a business or investing in real estate. In our minds, there was only 1 tangible method to generate income. As we progressed to adults we prepared ourselves via going to college or trade school to hopefully put ourselves in a position to attract a high paying job to support ourselves. Once achieved there is a reassuring feeling that we made it, and especially if we have a better job than our parents. Maybe after a few years of generating income in this fashion; you might say this is OK, but I just have enough money to support my lifestyle. If you ever heard of the phase have our money work for you instead of we working for our money. The phrase makes a lot of sense, but how do we put ourselves in that position to live that phrase. This leads me to discuss the awareness of the other types of income that can be generated to reach financial freedom. Types of Income As stated earlier working a job is the standard way of generating income and this is universally labeled as employment income. If we are renting an apartment the owners of the unit are receiving passive income. Receiving income from operating as an owner of a food truck, will classify as active income. The last type of income is from investments from stocks, which is classified as portfolio income. So altogether there are 4 types of income employment, active, passive, and portfolio. Let us delve into each type of income category in the next section, and see how each fits into our goal of Financial Freedom. Multiple Streams of Income Break The Chains of Financial Bondage Let me stress that immediately quitting your job isn’t a viable solution to achieve financial freedom. Instead of thinking of our jobs as a hindrance to achieve Financial Freedom, think of it as fund-raising to utilize the excess funds from our paychecks to assist us in generating income from the other income types. True Financial Freedom can only be attained by generating income outside of employment income. References Passive Income: Income received on a regular basis requiring little to no effort to generate. That is the standard definition, but don’t believe it. You will need to apply effort to successfully generate income on a regular basis. Active Income (Our Version): Income generated from a business that you own and or control. Employment Income: Is generally classified also as active income, but the key difference is that we have no ownership or control. Portfolio Income: Income primarily from stocks, bonds, mutual funds, and annuities. Cash Flow: Income minus Expenses should equal a positive number. This is applicable to our house budget, businesses, and real estate rental property. The post Different Income Types: Generating Income More Effectively From Other Sources appeared first on The Mike and Cliff Show.
TIME MANAGEMENT Time is the foundation of the management principles. Time when managed properly will allow us to reach financial freedom, accomplish our dreams, and serve others in a positive manner. How we manage our time on a consistent basis can make the difference between us barely surviving, or living a life of abundance to where we have so much we are able to share it. Have you ever stop to think how much time you dedicate to certain activities like working, watching TV, cell phone usage? How are the results of these activities done consistently over the years going to put you in a position to reach Financial Freedom? Our focus with this management principle is to make you aware that the sum of your activities done daily consistently and correctly will result in Financial Freedom. As the saying goes TIME WAITS FOR NO ONE! INCOME MANAGEMENT For most people earning a paycheck and paying bills on time is the most responsible way of managing income. Maybe indulging yourself to a nice dinner or family vacation is the gift to yourself for managing your income this way. Having just enough income for your bills has become an accepted way of income management in our society. Our goal for this management principle is to help you realize that there are more efficient ways to generate INCOME from other types of sources. When we have the knowledge to effectively utilize our INCOME; our path to Financial Freedom changes from a dream to reality. DEBT MANAGEMENT Credit cards, house, and car payments is how most of us manage debt. Interest rates and monthly payments are buzz words that are comfortable for most of us. There is more than what meets the eyes regarding this management principle. The way we manage debt can either accelerate or impede us in our journey to Financial Freedom. Our focus with this management principle is to learn how we can manage debt properly and effectively to reach Financial Freedom. ASSET MANAGEMENT What is an ASSET? My definition of an ASSET is an entity that I own/control that provides me with a consistent stream of revenue. Sounds pretty simple right? Examples of ASSETS are rental real estate, home based business, writing a book, inventing a new product to sell. The major concept of ASSET management is that you are active in growing and maintaining the asset while having control or some type of ownership of it. Think about it can we change policies and rules at our place of employment to benefit us at our discretion? The answer is a resounding NO! Not even our manager has that power they have somebody to answer to. The owners ultimately decide the fate of the company based on their financial goals. So without us even knowing it we are working on somebody’s ASSET, and the time we invested is essentially providing financial freedom for the owners of that ASSET. If we are willing to invest our time in somebody’s asset, why not start to create and develop ASSETS of our own? What we want to focus on with this management principle is how creating and managing ASSETS play a pivotal role in attaining Financial Freedom. The post Financial Management Principles: 4 Principles That Gives Us Our Financial Independence appeared first on The Mike and Cliff Show.