We're taught a lot of
things from the time we're born until the time we leave the nest. We recite the
primary colors. Anyone I know can rattle off the five main food groups. In
school, we write reports on subjects such as the Great Wall of China and read
good literature like the works of Faulkner. All of these things are well and
good. What we're taught virtually nothing about at home or school is how to
manage our own money. And face it, the financial abundance, or lack thereof,
that we create makes an impact on the quality of life we live.
Sure, maybe in high school
and/or college, you took an economics course or two-micro or macro or both. You
walk away with great, objective, important information on financial issues and
on frequently vague theories that (if you try hard enough) you can apply sort of
tangentially to your own life. Maybe your parents even helped you open your
first checking or savings account while you were still in high school.
Then, as an adult, you and
your budding career set off to ride into the sunset with a knapsack full of
dreams about all the money you'll make.
Before you know it, your
finances are more confusing than you ever imagined. Between credit and consumer
debt, perhaps a few investments, and maybe even multiple incomes, your financial
picture is more like a hologram with lots of moving parts. With a
trial-and-error approach, you try to pin down those tricky, elusive parts but
finally walk away, figuring that as long as you're making the money, everything
else will fall into place. All the while, though, you're looking over your
shoulder.
It's a mistake that most
people make: we assume that when it comes to money, making it is all we need to
address. Let's set the record straight here and now. Making it is only the
beginning.
I'd like to introduce you
to a concept to help simplify your approach to money; it's called "The 3 C's of
Money"
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The 3 C's refer to:
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Notice in the diagram that
none of them is mutually exclusive. Each affects the other, and the Creation and
Management help to grow the Investing, which is the key to building your
financial well being.
Cash Flow Creation
Ask yourself these
questions:
How long can the human body go without food? 3 to 4 weeks.
How long without water? 5-7 days.
How long without Oxygen? 5 minutes and you die.
Oxygen is critical to your body!!! It's a matter of life and death.
So what is "Oxygen" to your
wealth? In other words, what is essential?
The answer is CASH FLOW. Of
course! When the creation of cash flow starts to disappear, we start to have the
same negative responses as we do when oxygen leaves the body; it's game over!!
For most people, income is where it all begins, but not where it ends and there
are two primary types of income to consider:
Active Income refers to
income you make when you are trading your time for your money. Whether you earn
a salary, a fantastic hourly wage, or a project-based income, you are trading
hours for dollars. If you are self-employed or building a business that can't
run without you, you have active income. There's nothing wrong with active
income, except that you are never really free.
If you have active income,
you want to make sure that you are investing in high income producing
activities. If you run a business, focus on doing the 20% that creates 80% of
the rewards: SELLING first to create cash flow, then recruiting the ultimate
team to replace you!
Passive Income refers to
money that is generated without your direct daily efforts and it falls into the
cash flow creation and cash flow investing categories. Royalties, intellectual
property, licensing, business investments, and real estate can all create
passive income. Other forms of investments such as stocks, bonds, commodities
and other investments may generate passive income in a portfolio, as well.
The real outcome is to find
ways to increase your cash flow to the point that your passive income exceeds
your expenses, so you are "out of the rat race". Robert Kiyosaki's board game,
Cashflow 101, is an essential and fun tool to get you thinking outside the box
of earning money this way. Increased cash flow will also mean you have more
assets to manage and invest. A great exercise to expand your thinking of what's
possible is to list 50-100 ways to create cash by means other than what you're
doing right now. The possibilities for creating multiple streams of income are
endless.
Cash Flow Management
Okay, this is where the
going gets tough for some people, and most people hate the idea of looking at
the numbers and paying bills but it doesn't have to be that way. Ironically, the
opposite is true. Not being "accountable" with your money makes things
exponentially more difficult in the long run. Remember, the real long-term, big
picture goal of money management is to move out of the rat race! That grand
exit=Freedom!
The first thing to do is to
identify and address any problems that may be preventing you from efficiently
managing your money. Our coaches look in 3 areas: 1) Skill set: is the client
missing the actual knowledge on how to manage money and read reports? 2)
Mindset: Does the client have limiting beliefs and emotions that have led to
habitual patterns of self-destruction? 3) Environments: Does the client need to
eliminate environments that are draining them and upgrade to new empowering
environments? (I'll discuss what I call The 9 Environments in detail in future
articles). Remember, the problem could be an innocent lack of knowledge; a lack
of a management system, software, etc.; a negative belief system about money or
your own abilities or any combination thereof.
90% of the time, clients
simply need to reallocate their monies and how they are spending them. You'd be
surprised how much cutting back on "little things" will save you. Make coffee at
home and use gourmet creamers instead of plopping down four bucks a pop for
those lattes! And exchange your pricey gym membership for walks and hikes.
Your next step is to decide
how you want your financial life to look. What does financial success look like
and feel like to you. Once you've determined that picture, keep it dynamic and
set up environments of accountability with a monitoring system, a coach, and/or
a Mastermind Group. You can find more information on mastermind groups at
www.JimBunch.com. You'd be surprised at how much sharing your dreams and
burdens lightens the load and crystallizes your vision!
At every step of the way,
keep asking yourself these four key questions:
What are my financial
goals?
What skills do I need to
develop to master the 3 c's?
What mindset do I need to
adopt to create wealth?
What environments do I need
to design to pull me into financial freedom?
Cash Flow Investing
Here's where things get
interesting! This is the point where it all comes together and your money, your
assets, and your abundance start inter-communicating and growing. All of the
time and effort you put into the creation and management of your cash create a
symbiotic relationship in your cash flow investing.
Think of your investing
strategy as the four legs of a strong, sturdy table. In order for the table to
balance properly and be stable, it's a good idea to have 4 sturdy legs.
The Business Leg-This leg
can be made up of one or multiple businesses that produce positive cash flow
each month. There are thousands of types of businesses to own, from
brick-n-mortar to electronic/Internet based and everything in between; the list
is endless. The more automated you make your businesses, the more
bandwidth-literally or figuratively-you will have to create more businesses.
There is no limit to the number of revenue streams each business can have or the
number of businesses you can own if you simplify and streamline along the way.
Real Estate-When you look
at how the wealthy hold their wealth, you'll find that it is often primarily in
real estate. After all, "they don't make any more land," and according to Al
Gore, the land we have is going to be shrinking. One of the great things about
real estate is the leverage you can apply as long as you've taken care of your
credit worthiness.
Stocks- When you invest in
stocks, you are investing in the future of someone else's business. Either learn
thoroughly the businesses you are investing in or collaborate with a
professional who analyzes those businesses and the likelihood that they will
become successful. A trained investor-not word of mouth of advice-is probably
your best bet, but never blindly give your money to someone without doing your
due research.
Commodities, oil, gold,
etc.-These items round out a diverse portfolio. Again, speak with a trained
investor to get the best diversification and the level of risk that meets your
overall goals.
Your Greatest Assets
Your time and your energy
are your most valuable assets and each day, you choose how to invest it, so do
so wisely. It doesn't matter if you are a billionaire, a millionaire or a
pauper, you still have the same amount of time each day; it's what you invest it
in that makes you wealthy or not. When it comes to the 3 C's of your money, be
conscious and flexible about what percentage of your time you invest in
creation, management & investing. As a rule of thumb, devote 80-90% of your time
to creating and investing your money and 10-20% of your time in managing it.
Creating wealth and abundance really comes down to focus, intention…and the joy
with which you pursue it all!
Until we connect again,
Create Your Ultimate Life!!!
About the Author
Jim Bunch, The Ultimate
Life Coach & Entrepreneur
©Copyright 2006
The Ultimate Game of Life
http://www.JimBunch.com
