I Am Money's Master by BallardeCommerce

I Am Moneyâ&#x20AC;&#x2122;s Master by Nicholas Ballard

Book 1

Define Happiness, Learn the Ways to Wealth, and Live the Good Life

Nicholas Ballard

Money’s Master What’s Inside... The three pillars of mastering your money are: • • •

Earning (more), Spending (better), and Saving (smarter).

This book is set up in that order because money has to be earned to be had; spent wisely to be kept; and saved strategically to make it work for you. Main sections and the topics they cover are listed here in the Table of Contents for your reference. The book is organized so you can benefit from either reading it cover-to-cover or just skimming through some of its sections. Read all the way through for the greatest understanding of how to control your finances. Use the Table of Contents to find particular points of interest.

Copyright © 2010 (Nicholas Ballard) All Rights Reserved. All materials in this package are protected by United States Copyright law. This material in any form, or parts thereof, may not be published, reproduced, or distributed to third parties and/or used in any manner without the express written permission of Nicholas Ballard. You may not alter or remove any trademark, copyright or other notice from copies of the content. Recipient agrees to respect and protect the confidential information from any unauthorized persons and/or from falling into the hands of the public domain.

I Am Money’s Master 

Table of Contents Introduction I Am Money’s Master Why You Care The “Master” Plan Section One: Earning (more) Chapter One: My Goal-Setting and Accomplishment Recognizing What My Dreams Are My Step-by-Step for Reaching My Dreams Chapter Two: My Productivity “What Gets Measured Gets Managed” Chapter Three: Making Money My Way Entrepreneur vs. Employee: Which Should I Choose to Be? What It Takes to Be an Entrepreneur What Is Actually Needed to Start a Business Start-up Financing Chapter Four: Specializing Chapter Five: Securing My Income Chapter Six: Enjoying What I Do Chapter Seven: Making Myself Indispensable to My Employer Earning  Spending... the Transition Section Two: Spending (less) Chapter Eight: Planning My Spending Automate Simplify Optimize Chapter Nine: My Car No-tricks Negotiation Chapter Ten: My Housing Renting vs. Owning Chapter Eleven: My Utilities Chapter Twelve: Buying My Home

3 3 4 5 7 9 11 12 17 18 21 23 28 29 39 41 47 51 53 58 59 61 62 64 65 67 70 73 73 77 79

 I Am Money’s Master Chapter Thirteen: My Home Chapter Fourteen: Selling My Home Chapter Fifteen: My Debt Debt Snowballing My Way Out of Debt Last Resorts Chapter Sixteen: My Higher Education at a Lower Cost The Kiddies’ College All Student Loans are Not Created Equal Spending  Saving... The Transition Section Three: Saving (smarter) Chapter Seventeen: What Am I Saving For? Chapter Eighteen: My Investing The Art of Investing The Science of Risk Behind Investing The Act of Investing Chapter Nineteen: My Emergency Fund Building My Emergency Fund Chapter Twenty: My Taxes Chapter Twenty-One: My Retirement Restricted Section Chapter Twenty-Two: Saving for My Goals Conclusion Rhyme and Reason Readings & Recommendations Reading Recommendations Service Recommendations Acknowledgements About the Author

87 91 97 97 98 100 103 105 106 108 109 111 113 114 115 118 123 124 127 129 133 135 139 141 145 146 148 152 153

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Introduction   

I Am Money’s Master Advice this book will give you is not earth shattering. The effects from using it in your life most certainly will be. Personal finance is a huge part of every adult’s life that can’t be ignored despite how much we may want to close our eyes, plug our ears, and hum a tune until it goes away. Dealing with the “business-end” of our lives is painful for most because we really don’t understand it. We are students, nurses, contractors, managers, secretaries, teachers! Not personal accountants! Learning finance is arduous, boring, difficult, and its terms are written in a language alien to anyone who doesn’t specialize in it. Yet being proficient at handling the money we work way too hard for is key to making our lives happier, less stressful, and a hell of a lot simpler. Fortunately for you and the rest of the surface-dwelling population, there are people like me—the author of this book—who have spent far too much of their time studying personal finance and now need to share the wealth on how to build wealth. No slick tricks or crazy money-making investment strategies await you inside; only guidance so clear it makes crystals jealous. What this book offers is a bulletproof wealth-creating methodology. Tweak how you handle your money the way this book lays out, and I promise you won’t be able to stop your own march down the Road to Riches!

 I Am Money’s Master The best part about mastering your money is that it’s easier than what you are probably already doing now. This book will show you how to quickly and easily simplify, automate, and optimize the business side of your life so you can spend more time on the living part of it! Use this book as a step-by-step guide to taking control of your finances, and experience the liberating joys of truly being Money’s Master!

Why You Care This guide is not designed to teach you the fundamentals of finance. I Am Money’s Master is about carving out the best situation for yourself in a world where you can’t escape the effects of finance on everyday life. Barnes & Noble would be more than happy to sell you discourses on pricing, discount rates, compounding interest, output optimization, tax shelters, derivatives trading, blah blah blah blah blah.... If it’s esoteric information you seek, you won’t have a problem finding it. But losing the forest for the trees will not help you push toward your goal of getting your big financial picture in order. “Mastering” forex trading or momentum investing will help you get your money in order about as much as practicing archery will increase your chances of winning the Olympic gold in swimming. When you learn to drive, you are shown the ignition, steering wheel, accelerator, brakes, seat belt, et cetera. Turn the wheel, the car moves accordingly. Press on the accelerator, the car speeds up. Wear your seat belt, or the highway patrol could be mopping you off the Interstate. The car gives you the tools to drive effectively, and practice makes you good at it. Nothing complicated about it. Learning that “doing this results in that” is all you need to be as good a driver as you can be. Just follow the recipe. What you weren’t taught was the physics behind driving. Knowing to “wear your seat belt ’cuz Newton’s Third Law bites back” is accurate, but learning m1u1 + m2u2 = (m1 + m2)v is just worthless trivia in our world. How would you apply that specific knowledge? The

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Introduction  underlying principles will always be there; no need to break everything down to its molecular building blocks. What we actually need is valuable insight through others’ experiences to help us craft wise life choices...without reinventing the steering wheel. Such insight is what’s shared in this book. Not just mine, but that of countless friends, family members, professors, and experts whose names conveniently elude me at the moment. Any concept presented in this guide can be researched further on your own; in fact, I encourage this. Just like a recipe, any advice written here can be tweaked and experimented with so that it’s tailored to your personal situation. All that is promised is a valuable scaffold from which you can build your personal wealth. The good news is this guide’s contents are all you need to dig out of whatever money pit you’re in and help you set out on your personal Road to Riches.

The “Master” Plan What This Plan Achieves In short, it teaches you how to become Money’s Master. It offers guidelines for making more money, spending what you have better, and immediately getting on course for saving to build wealth. Financial realities like taxes, liquidity, and debt are neatly painted into the picture to help you overcome (and harness) these hurdles that are impossible to ignore. This guide never glosses over financial realities to make the “Master” plan seem smooth as glass. These bumps in the Road to Riches are actually what this guide is all about. Specific concepts are applied to specific situations affecting your life, from addressing automating savings all the way down to buying a car. You will find that your common sense and this guide nudging you in the right direction are all that’s needed for you to build wealth. It really is not as unattainable as we often make it out to be in our minds. Set aside the idea that “financial freedom and wealth is for other people.” If there is one thing this guide aims to teach you, it’s that being Money’s Master is a choice, not a situation that just happens.

 I Am Money’s Master How Easy It Is Yeah, it’s really easy. There is very little that the guide is having you do different than what you’re probably doing already. It just changes your perspective and guides your planning so that your actions work for, not against, your goals. I Am Money’s Master is even written in first person (from your perspective). So no preachy obnoxious voice saying “YOU need to do this!” and “YOU are doing it all wrong if YOU aren’t doing things my way!” and “Nag nag nag nag nag....”

Setting Goals and Expectations Planning is the cornerstone of setting and achieving goals. Yes, you have to actually get off your butt and do something for anything to happen. But without planning, your actions will at best result in haphazard and unmeasured outcomes. Abe Lincoln’s maxim of “If I had eight hours to chop down a tree, I’d spend six hours sharpening my axe” is an oldie-but-goodie. Keep it in mind as you work your way through life’s money mires. Acting wisely when it comes to finances is always good, but it’s nearly pointless in the big picture if there is no master plan being worked toward. This is where the “Master” plan comes in. Absolutely in no way is this guide going to tell you what your goals should be. That is for you to decide. It doesn’t matter if the dream is affording that 4-wheeler by next summer or having enough money in the bank to live off the interest in retirement. What I Am Money’s Master WILL do is help you figure out for yourself what you want your goals to be. Then it will give direction for achieving them, while soundly handling the different facets of your financial life. What can you expect from yourself? Hopefully the world. What can you expect to get out of this guide? The guidance needed to achieve the world, or whatever your financial goals may be. I Am Money’s Master “Master” plan is really just a platform; a system for you to work through the many financial situations you will face. It makes no difference whether those situations are long-term or short-term, general or specific. Keep reading to find out what you need to promote yourself to Money’s Master. www.iammoneysmaster.com

Section One

Earning (more)

Book 1

Chapter One

My Goal-Setting and Accomplishment   

aving dreams gives me ambition. Having goals gives me purpose.

Philosophers have spent eons pondering “What is the meaning of life?” Why didn’t they save themselves the trouble by reading this book? For here lies the answer:

I define the meaning of my own life. Others’ definitions of how I should, need, and must live my life can find their home in the trash bin. If someone’s unsolicited philosophy on life is so good, I’ll let them set me an example by applying it to their own lives. In the meantime, I will be doing what I personally choose to do with the one life I have to live. Goals are very much the same no matter how they vary in their specifics. To realize a dream worth pursuing, I need to define it as a particular goal and do what’s needed to succeed at that goal. This is the fill-in-the-blank formula that makes what I once imagined as a vapid dream turn into a solid reality. Clearly, goal-setting has a profound impact on my personal finances. Actually, goal-setting is the binding glue giving all the techniques and methods for financial success one coherent, beautiful purpose: to master my money. Without a clearly defined goal or plan to execute, my goal of being Money’s Master will remain just a dream. Seeing what I

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10  I Am Money’s Master want and knowing how to get it makes something as abstract as mastering my personal finances as clear-cut as putting on my socks. It’s all a matter of knowing what needs to be done, knowing how to go about doing it, and seeing it through to the end. The goal of this book is clear: Give the reader the perspective necessary to master money— to become Money’s Master! The book also knows what needs to be done and goes about it in a structured way, seeing it though to the end: Provide good, structured insight, techniques, and advice touching on the various aspects of personal finance, arming the reader with the necessary tools to take control of his or her personal finances. However, the pages of this book need a key element if they are to be in any way relevant: That element is Me; the reader of this book’s desire to master money. This needs to be one of my ambitions. If not, I need not read any further, for this book will equip me for a personal financial success I do not particularly care to have. Nothing in this world is done without there first being a want. Lacking ambition or motivation to accomplish something takes away any chance for achievement. This is so important, it will be reworded again here: I must first truly want something if I am to ever get it. Everyone in the world is—and needs to be—driven by a desire; a want. Recognizing what I want is the first step to making my dreams a reality. Without an acknowledgement of a want burning ardently enough that I care to pursue it, no other steps can be taken. In other words, no forward progression. No control of the turns and changes my life will inevitably make. And my life will make those changes, with or without my consent. Now it’s up to me to exert my influence so those changes are of my doing, and for the better. This chapter and I are very much alike. We both are going to focus on setting goals and accomplishing them. I should think of how it can be applied to changing my particular financial situation for the better. However, I’ll see this make-into-reality method is not restricted to the realm of money. I am encouraged to apply it to every mental concoction I hoped would someday make it into my real life.

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Chapter 1: My Goal-Setting and Accomplishment  11

Recognizing What My Dreams Are Everyone has dreams. Some could spout off what their greatest ambitions are at the drop of a hat. Certain people have never really asked themselves the question “What do I really want from my life?,” while others had dreams until Big, Bad Leroy Life crushed their soul under the heel of his steel-toed boot. Whichever the case may be, I need to place myself among those of the first group, who know exactly what their dreams are and can articulate them at a moment’s notice. Getting to the point of readily knowing what my specific dreams are is the first step to achieving them. If I’m thinking, “Waaah! But they will never happen! They are just dreams; I live in reality! I wouldn’t even know how to go about getting what I want even if I tried!,” then SILENCE!! The way to get what I most desire from life lies but a few paragraphs below. First and foremost, I have to know precisely where I’m aiming if I’m going to shoot a bull’s-eye. Otherwise I’m firing blind. Make no mistake: Most of my being will dig in its heels like a stubborn mule, fighting to stay in my safe but going-nowhere-fast comfort zone. I need to recognize my dreams so that I may use them as a carrot. They will get me off the couch and moving in the right direction. Ah!... Forward progression at its finest! So what are my dreams? They are precisely what was said before: what I really want from my life. A dream is not a means to an end; a dream is the end which I’m going for. So if I think my dream is to “have a million dollars,” is that really my dream? Only if I have a fetish for seven-digit numbers on my bank statement. More likely my dream is one or many of the needs that a million dollars would fulfill. Perhaps status, financial security, or a feeling of self-accomplishment make the list. Actually, I am damn sure they do, and this is why I’m so certain: Dreams seem to boil down to the satisfaction of human needs 99% of the time. Psychologists like Manfred Max-Neff and Abraham Maslow identify what are called “fundamental human needs” that apply to every individual. Food, sleep, breathing, and shelter certainly make the list. Fundamental human needs do not stop with survival requirements, how-

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12  I Am Money’s Master ever. Family, a sense of identity, sex, and a feeling of importance are other human needs. These may seem like icing-on-the-cake niceties but are in fact as necessary as food and sleep. Sure, there is a hierarchy of needs, whereby the need to eat comes before that of feeling important, for instance. Yet the needs at the top of the hierarchy are just as important for my happiness as any of the fundamentals enabling my survival. That status whereby I feel appreciated by others and myself, and therefore also feel important, has strong ties with my financial security. The same goes for everything down to the bare necessities of food, shelter, and the like, and goes all the way to the top of my hierarchy of needs to my “self-actualization.” Self-actualization is the cherry-on-top stratum where all my needs are met, including that lasting feeling of deep life satisfaction. This comes from the attainment of goals crafted out of dreams that are genuinely of my own design. Incidentally, the whole purpose of I Am Money’s Master is to get me to this point. Mastered personal finances are a key instrument in reaching my self-actualization. Learning how to master my money with this guide will get me there. First, however, I have to set goals to work toward if my newfound financial savvy is to have any use. It’s like a loaded cannon. My job is to aim it true so it blasts through any barriers to my success.

My Step-by-Step for Reaching My Dreams 1) Deciding which of my dreams should be made into goals. Sometimes I wish I could fly. Other times I wish I didn’t have to fly coach between New York and Los Angeles for business. The point being: I dream about a lot of things. A lot of them are fantasies; others are things I tell myself I want but in reality would be no better off for having. It’s good to dream, and I should encourage myself to imagine a whole slew of possibilities for my life, whether fiction, fantasy, or fact. But then there are certain aspirations I have. These dreams are not impossible, even though they may seem impossibly hard to make happen. What makes them worth pursing is determined by one factor only: how fulfilled and important achieving those dreams would make me feel. sECTION 1

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Chapter 1: My Goal-Setting and Accomplishment  13 If organizing my closet makes me feel well-accomplished and takes me for a mental ride on Cloud Nine, I should go for it. But if it’s not a life-goal I particularly care to complete or is not something I actually value, then I must turn elsewhere for a dream worthy of me making a reality. Dreams considered worth pursuing vary among individuals, and I need to pay special attention, making sure my dreams are truly my own, and not what others tell me I should find important. The importance of selectively choosing which dreams to make into goals cannot be overestimated! Seeking my personal holy grail until I can drink from the cup can take an enormous amount of my time, resources, and planning effort. Emotional toil is thrown in the pot when goal-setting as well, because my evaluation of self-worth and feelings of accomplishment are on the line. Therefore, I need to soul-search for what will bring major long-term happiness to my life, then set to chase after it. I do not stop at thinking about what dreams to turn into accomplished goals. Memory is fleeting, fallible, and easily altered. I write my dreams down.

2) Setting the goals. Once I decide which dreams I am going to pursue, work begins on crafting them into ironclad goals. The difference between a dream and a goal: A dream is a statement of a want that doesn’t set standards for attainment. On the other hand, a goal is a set of relevant completed actions within a timeline. ACTIONS + TIMELINE = GOAL. The actions make the goal happen, and the timeline has the goal seen through sooner than later, and not put off. For instance, a dream could be, “I want to lose weight.” After figuring on what I specifically want, I set a goal: “I am going to lose twenty pounds in ten weeks.” With just the dream, I have nothing to check myself on. When will I lose the weight? How much will I lose? Will it be enough? The goal answers these questions and in doing so turns the idea into something I can accomplish. Goals simultaneously set up the scary possibility of failure along with the thrilling potentiality of success.

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14  I Am Money’s Master Failure is a punishment while success is a reward. The success is the only thing I need focus on. Rewards are a far better motivator that work toward my feelings of fulfillment and importance. Punishment via failure works in the opposite direction. It dissuades me from trying to pursue my goals. Therefore, I need to never dwell on failure and work to eliminate it. Sooner or later failure WILL happen. I just need to pick myself back up and approach my goals with consistency. To make my goals happen, they need to be given an additional dose of discipline. Keeping my eyes on the prize all the time is near impossible. The prize of accomplishing the goal is long-term, yet I live and act on a short-term basis. Running a marathon is made up of thousands of individual strides. These small, singular steps that get me to the finish line are called discrete actions. Even the most complex of projects can be broken down into incredibly doable steps. Going after a goal without reducing it into easy increments is goal suicide. The goal will otherwise become overwhelming and too big a mountain to climb. So for the example goal of losing weight, the list of discrete actions to be followed (in order) would be: Using free, objective Internet resources, determine the best type of diet and exercise regimen for weight loss. Accomplish in 1 day, May 1, 20XX. Drawing up a personal diet and exercise plan following guidelines from my research. Accomplish in 1 day, May 1, 20XX. Following the diet and exercise regimen. Accomplish over ten weeks, May 2, 20XX to July 11, 20XX.

Each discrete action brings me one step closer to my goal and is accomplished within the reasonable (but strict) timeframe set by my goal of “I am going to lose twenty pounds in ten weeks.” This way, forward progression in ensured. As long as I follow relevant discrete actions toward my goal, reaching my aim is an inevitable.

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Chapter 1: My Goal-Setting and Accomplishment  15 3) Benchmarking so my goals actually happen. Setting the discrete actions right the first time is unlikely but easily fixed. If my tenweek weight-loss plan involves eating a bag of sugar a day because I don’t know any better, shouldn’t I correct that when the scale starts screaming in protest? Going easy on myself for the first nine weeks because I tell my work-phobic self I’m going to lose all twenty pounds the last week is unrealistic. I need to set benchmarks to check and make sure forward progression toward my goal is happening. Benchmarks are incremental, similar to the discrete actions, and ensure my goal will be realized within my timeline. They are my goal’s project manager, making sure the work gets done on time and within budget. The weight-loss goal of “I am going to lose twenty pounds in ten weeks” is benchmarked by making a rate focusing on short timeframes. Here the benchmark would be losing at least two pounds every week (20 pounds in 10 weeks / 10 weeks = 2 pounds a week). Tracking the big picture of losing all the weight is unrealistic. But if I focus on short-term actions (lose two pounds) within short timeframes (one week increments), I am working toward manageable mini-goals, the sum of which is the accomplishment of my true aim. In this case, losing twenty pounds in ten weeks. I can judge how my discrete actions are working toward my goal when I jump on the scale at the end of each week. If I am not losing the weight I want to, I can reevaluate my diet and exercise regimen, as well as the discipline I put into following them, and tweak accordingly. This way my adjustments will set me on the right track for getting what I really want. Also, I learn what works and what doesn’t work in the process.

4) Following through and following up. Performing the discrete action-set and benchmarking to cinch progress should inevitably lead to the accomplishment of my goal. When I get to where I long dreamed of being, I must take one last step by taking a personal survey. Now that I have what I’ve wanted, does it meet my expectations? How satisfying is the accomplishment of my goal? Does it make me appreciate myself more, and realize I’m extraordinarily capable?

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16  I Am Money’s Master Soak in the glory of reaching the goal. Getting the most out of the experience comes from really appreciating the change I effected, and acknowledging how hard it was to get where I finally am. And need I do more for my life-fulfillment and feelings of importance? The answer to this is undeniably “yes,” though this is in no way diminishes the greatness of my impressive achievement.

5) Moving on to the next one. I have only so many years to live. Probably 200, maybe 250, years at most! So I need to keep after goal after goal. The constant disciplined pursuit of my goals wields the dual-purpose of giving me purpose and bringing me closer to self-actualization—that goody good feeling of genuine life-fulfillment and purpose. As a human, my memory dwells on the more recent. Continuous accomplishment of my goals serves as a good reminder of how good life is. There’s more good news when it comes to reaching my goals. Realizing the first in a set of goals is the hardest because I have to trust the end-prize is worth all the hard work. I’m going off faith, as I’ve yet to taste the sweetness of accomplishment. All subsequent goals along the same line will still require an effort of will, but when I ring the bell by setting my goals, I am already drooling for the end-result. The taste of the last victory is still in my mouth. And I want seconds. I define the meaning of my own life. It’s up to me to make it count.

I set goals to live life to the fullest.

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Chapter Two

My Productivity   

he next step in my Learn-to-Earn campaign is figuring out how to be productive in my cash-generating ventures. High productivity means getting as much money as I can for what I put into my job or business. Two main steps for ramping up Productivity are: 1. Maximizing amount of money made (Output) 2. Minimizing the time, effort, and resources put into making that money (Input)

Productivity = Output - Input This means the dollars per hour I make, the amount of work I do in a shift, or the profit I get for a product I push are all indicators of how productive I am. As far as I’m concerned, the only “output” being considered is the money I walk away with from the work I do. Smiling faces, job satisfaction, and doing good for the world may all be legitimate outputs from my line of work, but this section is only concerned with the outputs that line my pockets (money, not lint). Eliminating waste is the secret ingredient to productivity. Cutting the crap out of what I do to make money purifies my inputs so that I focus my time, efforts, and resources on only things that actually work toward making money.

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18  I Am Money’s Master I can’t be productive all the time, and breaks and relaxation can actually help boost my productivity by rejuvenating me for work. But that is not the point. When it comes down to it, I can’t kid myself that I’m being productive when I’m doing work if I’m unfocused, distracted, or putting effort into something that provides little value. So when I’m working, I’m working. And the work I do needs to have a defined productive purpose. My time and efforts are reserved exclusively for processes resulting in high output. This way I can get my desired results in less time.

“What Gets Measured Gets Managed” —Peter Drucker

Here is what I need to know about Peter Drucker: He was a smart guy. Drucker was a management consultant and writer who had some pretty clear ideas. One thing he noted was how the majority of workers and business owners in industrialized societies are “knowledge workers”: people who get paid for doing heavy lifting with their brains, not their muscles. Output and productivity from physical labor is easily measured (“I pounded two tons of salt today!”). Output from knowledge work is not so easily determined. Think about it (do some knowledge work): What do thoughts achieve? The answer is “nothing special,” unless the thoughts are well constructed and acted upon. A business idea is a perfect example. The business plan may be pure genius, yet it is completely worthless lest put into action. Mr. Drucker is known for quipping, “What gets measured gets managed.” How convenient that quote was in the last sentence, because I need to manage my productivity, and as a result, I need to measure it. I can’t say that I’ve accomplished anything without having something to show for my work. Therefore, I need to monitor and study what I put into my work as well as what I get out of it. This way I can see if what I’m doing is bearing fruit or hindering progress in some way. A quick quote of his ideas from Wikipedia expounds upon Drucker’s work, saying:

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Chapter 2: My Productivity  19

“Knowledge work can ultimately be judged on whether three things occur: 1. when something successful that never existed previously, is now up and running; 2. when something successful that existed previously has been improved or expanded, or; 3. when something unsuccessful that existed previously has been stopped.” The takeaway from this is clear: Create, Innovate, and Destroy. Create a business or get a job that is profitable. Innovate the business or job so it is a more productive money machine (making more with less of my time and money). Destroy businesses, jobs and habits that are sinkholes of my time, money, and efforts. Call it creative destruction and get more out of life by cutting out the junk impeding forward progression of my goals and causing me to stagnate. How can I know for sure I’m successfully implementing this trinity of productivity? By measuring, I manage. Everyday, I write down what I do (or my business does, or my employees do...), and quantify how much time and money each process takes. This includes trips to the water cooler, caramel mochas bought, and time doing nothing during designated times of work. Then I effect my “knowledge work” by creating, innovating, and destroying. The effects are recorded and studied to get an accurate before and after picture of my productivity. Am I moving in the right direction? If yes, I need to keep heading that way. Otherwise I must change course and try something else. Of course, I’m always measuring my steps along the way, and whistling my favorite tune in the whole wide world, “What gets measured gets managed.”

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Chapter Three

Making Money My Way   

here are a lot of ways to make money. There are also only two ways to make money. I can make the dough working for someone else or mint the moolah working for myself. Okay, okay, so like most everything else there exists grey area. Some stuff that fits in the Option ‘C’ category are having my own business while being employed by someone else; making supplemental income through stock investments; or renting out a property for some extra cash, among an endless slew of possibilities. But splitting the options into one of two defined categories helps me understand the inherent risks and rewards of being either Entrepreneur or Employee. Entrepreneur: Assumes full risk and reward of the business in which one is engaged. Potentially unlimited upside. Limited downside. Examples: • business owner • self-practicing doctor/lawyer/dentist/CPA/insurance agent • stock owner (even an employee with stock in her company) • landlord renting out property • seller of knitted socks at local annual craft show for a little extra cash • freelance writer • author (especially the self-publishing type)

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22  I Am Money’s Master Employee: Assumes limited risk and reward of the business in which one is engaged. Severely limited upside. Limited downside. Examples: • accountant • nurse • temp worker • government worker • investment banker • CEO of Fortune 500 company Again, there exists a lot of grey area. An author working with a publishing company only assumes the risk of the opportunity cost from time taken to write the book, while the publishing company is stuck holding the bag if the book doesn’t sell after investing a small fortune into editing, printing, inventory, and promotion. Likewise, a CEO of a big corporation runs a giant risk of losing his job if the company performs poorly but also enjoys the very high upside of a job well done in the form of bonuses, stock options, and salary hikes. Also, besides having to report to the Board of Directors, the CEO is pretty much his own boss. Even so, the classifications still stand. The author, like the business owner and the stock owner sharing her classification, stands to reap potentially unlimited gains depending on how well her book sells. She sets her own hours. If she doesn’t get around to writing and publishing her books, there is no one to answer to but herself—but also no one else to help share the burden of failure. And what’s the worst that could happen? She could have empty pockets and no success to her name. And that’s it. And that’s really not that bad! Destitution is a fleeting condition for the driven. What’s the biggest plus of going big and reaching for that unlimited upside and freedom only entrepreneurship offers? It is that I can only fall so far if I fail! Now if that author were hired to be a ghost writer for someone? Assuming she was offered a flat- or per-hour rate for her writing, no matter if the book tanks or gets bestseller rank, she is sure to get paid what she agreed to. If the book doesn’t sell one copy, she still gets her money. She probably won’t be hired again, but still, she got paid for her work. Yet

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Chapter 3: Making Money My Way  23 if the book sells a million copies she still gets the same amount she agreed to and not a penny more. Though she wrote it, she doesn’t own the book and so doesn’t experience the wonders of potentially unlimited upside. The author sold the rights to her work for the right of a secure paycheck (which she only gets if she does the work anyway).

Entrepreneur vs. Employee: Which Should I Choose to Be? This guide is not trying to sell me on a career choice. It is only trying to make me more aware of the multitude of viable income options that exist besides working the 9-to-5 job. Compensation is proportional to the scope and depth of my effect on people’s lives. Reworded, my economic reward for the work I do is related to how much value I bring to people. That’s why a pop singer gets paid more than a band that plays at local bars. The pop singer is not compensated for her skill (though that may be what helped her achieve fame). She is paid based on her productivity. This differs from effort, since it’s assumed both the pop singer and the band perform their music an equal amount. Album sales, radio play, and concerts are all income vehicles for the pop artist, but these should really be viewed as impressions on the people that listen to her songs and no different from the gigs of the local band. So the only difference between the pop singer and the local band is the number of people they make an impression on. The pop singer’s music reaches millions, while the local band’s touches the ears of only a couple hundred people a week. On the other hand, a surgeon can operate on only a couple hundred people a year and get paid way better than the local band, whose music reaches many thousands of people a year! The difference lies in the depth of impression the surgeon makes on each life he touches. Having their health and lives in the surgeon’s hands is a bigger deal to people than listening to the pop singer’s newest CD or going to the bar and to attend the local band’s Saturday Night Jamfest. This is illustrated when someone agrees to pay $40,000 for a knee replacement and only $15 for an album. So the depth of impression for the surgeon’s knee replacement job is worth $40,000, and the pop singer’s depth of impression is worth $15 for her album. This

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24  I Am Money’s Master makes depth of impression synonymous with market price—the amount a person pays for the impression. This said, the amount of compensation we receive from our enterprises is based on a simple equation:

# of impressions made x depth of impression ($) = Compensation ($) Businesses have been using a variation of this simple equation for forever and a day to figure out how much money they should be getting for what they sell (Price [$] x # of Sales = REVENUE). I can use this in real-life terms to see if my job is paying me close to the fair dollar value of my services (the answer is almost always a resounding “NO!”). Or, the super-simple math can be applied to my business or moneymaking idea to see how much it can (or should) pay off. Depth of impression is the market price of my good or service. In other words, what someone would be willing to pay for what I provide them. The number of impressions signifies the number of times in a given period someone pays for my product (whether it’s number of sales a month, number of people daily who walk on the floor I mop, and so on). This principle lies at the very heart of the Entrepreneur vs. Employee argument. Making perceived positive impressions on others’ lives is what makes me money, but these impressions do not come without cost. My time, energy, money, skills, motivation, and opportunity cost go into making these impressions, and all of these things are very finite resources. My years run up, money runs out; interests wane, opportunities change. Getting paid for my time (per hour) or per job relies on my limited personal resources. My time, energy, motivation, and skills are being tapped into. Also, I am giving up the opportunity to do something else in the place of that work, a concept called opportunity cost. Whether that “something” is drooling on a pillow past when I’d otherwise get up for work, or using the time to find the cure for cancer, I am giving up the chance to go about doing other activities by working. “Something” is more oft defined as vacations I can’t take, son’s football games I can’t attend, and retirement I have to put off.

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Chapter 3: Making Money My Way  25 Entrepreneurship offers a way out of the life sink-trap employment mires me in. Working the 9-to-5 entails working 9-to-5. Stop going to work, the paychecks stop coming. Employment is set up where I get paid in exchange for forking over a third of my life away doing the work of some organization. Given the choice, chances are this is not what I’d choose to be doing with eight hours out of my twenty-four-hour day. Escaping this means changing which of my resources is exchanged for money. The key lies in taking ME out of the equation. Making my earnings independent of my time and effort both frees me up to pursue my dream, while unlocking the potential to earn more than I ever could from working for someone else. Relying on my limited personal resources to generate income is a fallacy. Again, these are my time, labor, energy, skill, knowledge, motivation, presence, and whatever else. Finding a source of income independent of these limited personal resources makes it so I am paid for organizing the limited personal resources of others instead of my own. This makes what I do scalable, making it so I can reach and sell to a million people almost as easily as I can to one. My value-adding contribution to society is organizing others’ time, skills, labor, money, resources, and so on to bring a product or service to the market. What truly matters is that my business benefits consumers, leaving perceived positive impressions. This product or service is something I am passionate about. I am already knowledgeable about the industry or am at least eager to become an “expert.” An expert is merely someone who knows more about something than most people (say, 90% of the population), and it takes surprisingly little research to accomplish this. Reading or talking to a couple reputable and comprehensive sources, and being able to reproduce that learned information in my own words, will be enough to put me in the “expert” category. The next step is getting credibility. This is acknowledgement of my expertise by the community at large. When someone looks to me as an expert, and uses me to form their personal opinion or buying decision based on what regarding the topic, then I know I’ve made it as an “expert.” Providing relevant, accurate, and clear information on the topic of my expertise is a best practice for achieving this ever-important recognition as an expert. Building a positive reputation through magazine, blog, or seminar contributions, or es-

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26  I Am Money’s Master tablishing a strong presence in the selling community are all ways of crafting a prominent niche in the community as an expert. If I choose to sell water to people stranded in the desert, I can use the above compensation equation to see how much I could expect to earn, and how much I can expect to profit (Compensation [$] = # impressions made x depth of impression [$]). If my idea is to plop vending machines full of Dasani in the middle of the desert, I’d better make sure it’s a profitable venture first. First I identify the need: water. Then I develop or find a product to meet the need: bottles of Dasani (or a variety of brands, in case my desperately parched and stranded clients are H2O snobs). Next I figure out how to get the product to my client: For this I’ll strategically place solar-powered vending machines on desert camel paths. The product and distribution have costs associated with them, and I figure these to the best of my ability. Somewhat accurate numbers will give me a good estimate of my idea’s profitability. If I buy three vending machines at $2,000 each, spend $4,000 to get them shipped and set up in the desert, and buy 500 bottles at $1 each, I’ll need an initial $10,500 to start my business ([3 x $2,000] + $4,000 + [500 x $1] = $10,500). Last, I set my price and estimate demand: Here is the hardest part. Demand changes with the price. If the price for a sports car is a penny, demand will be almost everyone in the world. If the same sports car is instead priced at a trillion dollars, the demand will be zero (no one can or would pay that much). Finding that sweet spot is very important when considering whether to embark on an enterprise. The price needs to be set above my unit cost, which is all my costs divided by demand (# of impressions). Otherwise, I would be losing money for every product or service I sell, which is the opposite of what I want! So if I sold the water bottles for less than $1, I’d be sure to be in the red (I’m buying them for $1 each). And since my customers are stranded in the middle of the desert with little water, I can charge a lot and get away with it. I’m going to be a bastard and sell the water bottles for $51 a piece. And I figure out through some reliable source that about 100 people a month wander through this stretch of desert and are willing to buy. Now for some easy math:

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Chapter 3: Making Money My Way  27 # of impressions = 100 per month; monthly “demand” or “sales” works too depending on the jargon I feel like using. depth of impression = $51; some people like to call this “sales price” or “market price.” 100 impressions a month x $51 depth of impression per bottle = $5,100 in Revenue a month. My profit is a little different. Profit is the money I walk away with when all’s said and done. So it would make sense that my profit is my Revenue minus the Costs of doing business. Here my profit from operating the business would be:

Revenue ($5,100) - Costs ($1 / bottle x 100 bottles) = $5,100 - $100 = $5,000 in Profit a month. Breaking even is possible when I’m turning a profit. When my level of operating profit is equal to my start-up costs, I break even. Start-up costs are costs, too, and can’t be forgotten just because they are incurred upfront. For my desert vending machine business, my start-up costs total $10,000. (Note: The $500 spent on the initial water bottle inventory is accounted for in the profit calculation as a unit cost.) Calculation:

(3 vending machines x $2,000 each) + ($4,000 for delivery and set-up) = $6,000 + $4,000 = $10,000. So in two months I will break even, having covered the start-up costs of my desert vending machine business ($5,000 in Profit x 2 months = $10,000 Profit = $10,000 start-up costs). Pretty darn good. Now I just need to make sure my test-math is accurate. My chances of success are enhanced by funneling more factual interpretations of revenue and costs into my calculations. Optimism and pessimism are best checked at the door when crunching numbers, since they both end up skewing the results to the point of useless fiction. But what if fewer people start trekking through the desert? What if competitors steal my idea and start selling water in the desert too? Then prices would go down and I would no longer have a monopoly on the desert water vending machine business! Nooooo!

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28  I Am Money’s Master Well, I definitely need to take these scenarios into account, because they certainly pose a risk to the viability of my business idea. But if my idea still seems good (good = profitable) given the probable level of change I can reasonably account for, then I should go for it. Risk lies in everything. If I take the safe road all the time, yes, things will be more sure, safe, and predictable. But I can also be sure that not taking risks guarantees I can never make it big. Albert Einstein said “The definition of insanity is doing the same thing over and over again and expecting different results.” The same goes for what I do to make money: If what I’m doing now is not helping me achieve my goals, then it would be insane to think I can achieve my goals by continuing down the same path.

What It Takes to Be an Entrepreneur Setting out on my own can be a terrifying prospect. There’s all that risk and no direction, and all for the joys of unlimited upside as my own boss! Becoming an entrepreneur is an exhilarating ride, but it’s not meant for everyone. There is a sign at the entrance of the entrepreneurship roller coaster ride. It doesn’t read “You must be this tall to go into business for yourself.” The sign says this instead: “You must not be afraid of being out of your comfort zone at all times.” “You must be willing and able to sustain huge swings in fortune and failure.” “You must be comfortable making decisions and giving orders instead of taking them.” “You must be a planner.” “You must be a doer with the follow-through to see things to the end.” “You must be accompanied by other people at all times.” The first thing I get from this is that this must be the worst amusement park in the world. Second, I glean that starting a business is a huge undertaking, no matter if the enterprise is making a website to sell T-shirts online or starting a future pharmaceutical giant. People of all personality types have the potential to be effective managers of themselves and others. No one management style should be presented as the end-all/cure-all for sECTION 1

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Chapter 3: Making Money My Way  29 starting and growing a business. Different strokes for different folks. Now I just have to figure out for myself what works for me! And since starting a business is such a huge undertaking, I would be foolish to think I can go it alone. Many have heard small business owners say they learn to get good at doing it all: managing, hiring, firing, buying, selling, bookkeeping, cleaning, advertising, and so on. I say that is completely insane. Economist Adam Smith is rolling over in his grave right now, muttering to himself, “That’s why their business is still small.” Not that keeping a business small is a bad thing; that is often an optimal size for achieving a good balance. But I need to find my niche in making and managing the business. Then I farm every other type of work out to other people. A jack-of-all-trades is a master of none. I need to focus on honing one specialized skill, and rely on others for their specialized skills in all the other areas. Specialization and outsourcing are two fundamentally important (and simple) concepts that I have to understand and master by doing. This is a must if I am to be a truly successful business owner. The maximizing power of specialization and automating power of outsourcing are forces that can’t remain unharnessed if I am to turn my business idea into a budding reality. Equally important, they offer me a freedom to experience the other pleasurable facets of life.

What Is Actually Needed to Start a Business ..Not much. A ton of start-up money and endless hours of market research are both unnecessary for starting a business. Unless, of course, I plan on starting something like a nuclear-power or jumbo-jet factory. I must understand that a “business” is not some abstract concept or special entity. A business is nothing more than one or more projects being carried out in order to make money. Nothing more. If I mowed the old lady’s lawn across the street for $10 a pop when I was a kid, I was running a business. Thinking of any company, whether it’s a small pizzeria or General Electric, all of them are nothing more than an agglomeration of projects. The pizzeria’s project is to get pizza to the mouths of local patrons. General Electric is engaged in hundreds of projects at any one time, be they running a power plant, purifying water, Copyright © 2010 (Nicholas Ballard)

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30  I Am Money’s Master or repairing turbine engines. Yet if either business stopped doing their respective projects and didn’t move on to new ones, their business would cease to exist! A highly-profitable business (or project, whatever!) that is fully automated and is scalable to any size can be started for less than a $1,000. Of course, I could spend much more money setting up a business, but there is no real reason to. Start-up money is put up on the front lines of entrepreneurship. It’s a dangerous place. Using a lot of money to start a business puts all those paper presidents at risk. If it’s my money, then I am taking cash out of my hard-earned savings. So if I use a lot of money to start a business, I’m tied at the hip to the business idea and forced to see it through to the end, even if the idea turns out to be a dud. Then I’m screwed if the business doesn’t break even. Getting a bank loan or private equity are other routes to take, but these routes top the Pain in the Neck List. Debt financing (bank loan) comes at the steep cost of interest payments, while equity financing (trading ownership for money) comes at the worst price of all: giving up ownership. Yes, I will still own part of the company, but the business idea and its execution are 100% mine and therefore I should own 100%. So if I get equity money, I am selling a stake in my business when it is at its least valuable (start-up phase). Then I fork over profits and ownership rights for the remainder of the business’ life, even though I’m doing all the work managing it. Remember, everything comes at a price. Some things just aren’t worth the cost. If I do feel financing through debt or equity is my best option, a lot of work must go into securing the funds with no promise of actually getting them. The beginning of the process is outlined in the “Start-up Financing” section below. It’s there if I want an idea of what outside financing entails but is not necessary if I want to go about starting a business in the much easier, quicker, and exponentially less-risky fashion outlined here. What is needed is a planned process to organizing my resources and those of others’ (preferably others’) into a successful and sustainable business. The process should look something like this:

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Chapter 3: Making Money My Way  31 Brainstorm First I need to think of ideas that meet two criteria. For one, an idea has to be about something I care about and have a passion for. I don’t necessarily need to be knowledgeable about the topic, since knowledge and expertise are both surprisingly easy to acquire in short order. Also, the business idea needs to possess a good “value proposition.” In other words, how is the idea worth its salt? What does it achieve, and why is that so valuable? The quality of an idea’s value proposition is measurable by the depth of impression the idea would have on the type of customer I’m targeting, as well as the potential number of impressions the idea could result in, which is how many people would decide to buy my good or service. Rating a business idea on a 1-to-10 scale is a useful exercise. It helps categorize the business idea’s value proposition as Weak, Okay, Good, or Great. Say a “1” is selling ice to Eskimos; “5” could be opening a restaurant in a good location, or selling in-demand handmade crafts online; and “10” is providing a patented, legitimate cure for all types of cancer. Where do my business ideas rate? Does it reach a large target market; is scalable (can sell a million units almost as easily as selling ten units); desirable or would have high demand; has high profit margins; little or no competition; has a clear purpose; low start-up costs; or has a large impact on the customer? The better the idea ranks in these qualifications, the better the idea should rate on the 1to-10 scale. I should only consider the better ideas, preferably “6s” and up. Because if I’m going to put a lot of hard work into making a business idea happen, I want one that won’t be forever limited by being an intrinsically bad idea. Choosing a bad idea and sticking with it results in an uphill battle that often ends in a “Going Out of Business” sign. Once I have an idea (or many) for a business, I need to further examine my idea by seeing if the value proposition is clear. If the meat of the business’ purpose can’t be summed up in a short, easy-to-understand sentence, then perhaps I should keep searching for ideas. Making a business work is hard enough without a foggy vision of what it’s supposed to be doing. This ebook’s value proposition is “Master money.” Simple, concise, specific. Copyright © 2010 (Nicholas Ballard)

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32  I Am Money’s Master When the iPod first came out, its value proposition was “1,000 songs in your pocket.” Pure elegance in simplicity. Now that I have my business idea, I need to create the business model—the profitable setup through which my idea will operate to make money.

Business Model If my business idea is the brain, the business model is the body housing the idea. The business model is a representation of how the actual business will put my idea into action. And like the body, the model takes orders in addition to giving feedback to the business idea/brain. The business model MUST be a profitable version of the idea. Otherwise the model has to be reworked or changed completely in order to be a profitable moneymaker when implementing the planned business idea. In the case where no easily plausible business model can be formulated for the idea, it’s back to Step #1 to brainstorm business ideas. There are a lot of ways an idea can be put into play to become an actual, living/breathing business. However, I need to consider methodologies involving very little start up cash ($1,000 or under is preferable). The start-up price needs to figure in all costs associated with researching and testing the business idea as well as actually starting the business. Typically a business model involving such a low start-up cost means the Internet will be its main medium, but this absolutely does not have to be the case. Information products also fall into the category of low start-up; this can mean a book, instructional video, howto manual, software, consulting services, most any other intellectual service product, or a million other things. And best of all, these types of products typically have the highest profit margins of any industry while also having a much longer profitable lifespan than tangible goods. Even a bricks-and-mortar business can be started for a lot cheaper than the norm. In that regard, here are some guidelines for minimzing fixed costs:

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Chapter 3: Making Money My Way  33 • •

•

by renting space and equipment instead of buying; working out commission or profit-sharing with employees or contracted help instead of fixed wages (this also serves to boost motivation and productive participation); and by eliminating expensive inventory by ordering or making products after customer pays for them (a good practice that ensures customers always pay, doing away with me having to be a bill collector, as well as only assuming the cost of goods already paid for).

Yes, starting a business for a $1,000 or less is very possible. Just because there is an ill-conceived notion floating around that “businesses are always expensive to start up” doesn’t make it true. Putting a lot of money into a venture that is not guaranteed to work is putting the cart before the horse. Keeping the start-up cost low means certain things. The venture is automatically much less risky because not too much money is at stake. Also, a dollar figure of $1,000 or less can be funded from my own coffers, so I don’t have to waste countless amounts of time and energy begging for the money of others. The real icing on the cake is that the business still holds the potential for unlimited upside ($$$), even though I only invested a little bit of money in the first place. Now that makes for “one grand” business!

Research Researching the market means I’m looking for four things: 1. 2. 3. 4.

scoping consumer needs, looking at what is (or is not) already serving customers, figuring out how to price what I will be selling, and confirming costs.

#1. Scoping consumer needs If the idea is the brain and the business model is the body, then demand is most certainly the food. Without demand no business can sustain itself. Concrete numbers from testing demand in the real world are certainly more accurate than the abstract projections of research, yet research is an important acid-test for the business idea and model. If

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34  I Am Money’s Master anything short of a promising outlook for the business is concluded from research, I should reevaluate the business I want to launch. However, this is a pretty improbable scenario if the value proposition from the brainstorm step is good, as There is always a market for a product or service that brings a unique value to others. #2. Looking at what is (or is not) already serving customers Now, if the idea is the brain, the business model is the body, and demand is the food, then competition are the other people fighting with me for the food! There is only so much demand out there, and the competition are the wolves vying for a piece of that oh-so-delicious pie. (And yes, wolves love eating pie.) Those already in the industry I want to enter have a lot to teach me—if only I’m willing to study them and ask them for advice. Seeing what the competition does right and what I would do differently hones my business idea and model for better success in the market. No reinventing the wheel allowed. Studying the competition helps me determine if my value proposition is unique. Having a unique value proposition is key, because it instantly differentiates my business from every other. Differentiation means there is no competitor that does or sells the exact same thing as me. Essentially I have a pie all to myself that I don’t share with the wolves. Researching to see if I have a unique value proposition is important because the differentiation allows me to price my product at a profitable level. #3. Figuring out how to price what I will be selling Determining pricing is the subsequent consideration. What I sell needs to be reasonably priced so enough customers are willing to buy my product, while having a retail price marked up many times (4x or more is good) from the cost to produce the product. There are often more costs associated with selling a product or service than those of the inputs put into producing it. Producing, selling costs, shipping, fulfillment, transaction, returns, customer service, and advertising are just some of the costs that have to be covered by the retail price of the product. And only after all those costs are taken care of do I get to take home the remaining money left over: my profit. I am the last in line to benefit from my business, but also have the most to gain. Owners are also referred to as residual claimants in snooty financial circles. So if all the rev-

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Chapter 3: Making Money My Way  35 enue generated from my business is a pie (“Oh no! Here goes another pie reference...”), and there is a single-file line at the pie kitchen, I am always bringing up the rear at the end of the pie line. The people in front of me make up the team making my business possible: employees, manufacturers, businesses and contractors that rendered me services like shipping, fulfillment, transaction processing, web design, call center, advertising and what-such, rental and monthly service costs, and debtors like banks, credit cards or people like family or friends who leant me money for my business. So after all these people walk away from the kitchen with their predetermined slice of pie—some served honking pieces and others two-dimensional slivers—it comes my pie plate’s turn to get some lovin’. If there is no pie left over, that is my fault. I orchestrated the business, so the design that accounts for demand, picks the team actualizing the business, and determines my product’s pricing needs to have a comfortable built-in profit margin for me to take home. This is why I’m in business in the first place—to make money with something I’m passionate about. #4. Confirming costs What kind of product would people still want even though it’s marked up many times over? Many more than I’d think! Consider an Abercrombie & Fitch T-shirt. The T-shirts sold by this clothing chain typically sell for over $30 a piece, but it’s reasonable to assume they cost less than $2 to make (fabric is cheap and overseas labor is too). That means a $30 T-shirt is marked up 15 times from its $2 manufacturing cost ($30 / $2 = 15). Paying for the T-shirt manufacturing is just one of the company’s costs; distribution centers, renting mall space, paying employees, inventory, and credit card processing are some other costs that $30 has to cover. But they planned for demand, and sell enough T-shirts at a high enough price to take care of all of those costs. When all’s said and done, the company walks away with hefty profits for the owners. Focusing on an information product is recommended, because the costs of making and selling an information product like an instructional DVD (or ebook) are very low, while the product’s information is valuable enough to the consumers to pay many

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36  I Am Money’s Master times over the cost of bringing the good to market. As long as the cash flow generated ($ Revenue = # Sold x $ Price) in a time period can cover the costs of doing business in that same time period, the product will be profitable. High mark-up on my product does not mean I’m taking my customers for a ride! If my business wasn’t making me money, then I’d end my enterprise, leaving customers without the option to buy my product. When I offer a product with a unique value proposition, it’s a win-win for both my customers and myself. I make money with the mark-up, and customers derive a value from the product greater than what they paid. Costs are unavoidable, since everything comes at a price, and nothing can be gained without something being given in return. If my business is a pie, and that pie was being had for lunch, then there is no such thing as a free lunch. There is also no such thing as relenting with that damn pie analogy. My business costs are best kept as variable costs, where I only pay per product sold. Fixed costs, like renting a space or paying a salaried employee, are best avoided because of their risk-hiking properties. Even if I don’t sell a single product, my rent and payroll still comes due. Better to set up a business where my costs are always lower than my revenue and only go up as my revenue goes up (but always lower than revenue). That way more money is always coming in than is going out. Doing this instantly makes going out of business a much smaller likelihood. Businesses only go out unwillingly when they run out of cash to pay their costs, and for no other reason. If the costs are always lower than the money coming in, then going out of business will never be a problem. The model should be planned so breakeven—where revenue coming in equals costs going out—is achieved with a low sales number.

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Chapter 3: Making Money My Way  37 Test Time to test. I’ve already thought of a good business idea, made out of it what I think is a profitable business model, and did research to see what I came up with has a good chance of working. Testing the business means trying it out on a small scale without yet committing much time, money, and other resources to the plan. Given a successful test of the idea’s model in the real world, starting the business is a “go.” A successful test demonstrates there’s a profitable real-world demand for my product at an acceptable price. Here comes the part where I spend a little bit of money to see if my business is worth investing in. I’ll spend a modest and pre-set amount on having a few products made, or performing a few services. Then I will allocate a pre-set amount for advertising the product. Testing is scientific, and scientific means measuring, and measuring means managing. I record the response to my advertising and test product at different profitable prices to study demand. If the demand is best (and enough) at one of the profitable prices I’m testing, then I am ready to actually start the business.

Start Business There isn’t much to starting a business, but there are two thing I need to understand. For one, I don’t need to worry about all the things that overwhelm most people who have thought about starting a business. Applying for an EIN (Employer Identification Number), filing tax forms, buying insurance, yadda yadda yadda, are all things I can do and figure out later. What I need to spend my time on exclusively is getting that well-oiled machine I call my business up and running, and worry about the other stuff in due time. Better yet, since I specialize in managing my business and others, all that stuff will be best done later on when farmed out to people eager to shovel paperwork for me (there really isn’t too much paper to push). No one is coming to get me if I don’t do everything perfect right from the start. To the best of my knowledge, no honest entrepreneur has been dragged off to jail for forgetting to file Form BS-123 the second he opened for business.

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38  I Am Money’s Master Most importantly, I need to grasp the concept of “Build it and they WILL NOT come.” This is a huge mistake too many failed entrepreneurs have made. I will not fall into the same trap. Connecting my business with the people who want to buy my product is the biggest challenge. Even if demand is out there for my product, it does me no good if potential customer aren’t aware of its existence or don’t know how to buy it. The value of what I’m selling means nothing if I fail at getting it into the hands of those in my target market. Create the cure for cancer, tell no one about it, and no one will buy it.

Improve Just as my mind defines my personality and my actions define me, the business idea sets the goals of my operation, while the business operations themselves define how my business is viewed by others. This is true from the very first minutes of start-up to the end of the enterprise’s life. As the commercial climate changes along with customer needs and technology, the business idea continues to serve as a steadying anchor for the business’ form, always defining it and giving the business a specific purpose. Just like my own perceptions change over time, though, the original idea will probably have to be tweaked and take on a somewhat different form than what I envisioned at the very start. Formulating a business idea is like dressing in the morning. When the business actually gets outside and experiences the weather firsthand, it may have to go back to the closet and change outfits to suit the weather. And that’s what should be done. When I’m in business I will know what I’m doing wrong and right by constantly studying my business and by listening to my customers. Making the necessary improvements— adding what’s beneficial and getting rid of what isn’t—will keep my value proposition relevant and my business profitable.

Entrepreneurship offers me freedom in exchange for taking responsibility.

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Chapter 3: Making Money My Way  39

Start-up Financing [Skip this unless interested in learning how to fund my business through debt or equity.] The first thing I have to do to get a business loan or private investment from venture capital firms and angel investors (aka bored rich people) is to write a detailed business plan. A business plan can easily work out to over fifty pages, and must feature: 1. 2. 3. 4. 5. 6. 7. 8.

An executive summary; overview of the industry I plan to enter; analysis of the target market for whom my business plans to serve; analysis of my potential competitors’ competitive advantages, my own competitive advantages, and the barriers to entry; comprehensive marketing plan for my business’ product, including sales, advertising, and pricing strategies for my product; operations management plan; financial analysis; conclusion.

After the business plan is written, I must make my way around to several banks or private investors, groveling for the chance to risk their money and my credit, all in the form of a presentation of my plan. The tighter the credit markets and individual banks’ or investors’ positions, the harder it is to get a loan. So even if they like my plan, if the lender or investor is not in a position to give out a loan or cash (they many times aren’t), then I won’t get the money I seek. The best advice I can take is to first approach the Small Business Association in the U.S., as well as my local Chamber of Commerce.

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Chapter Four

Specializing   

hanging my financial behavior and awareness in order to master money may seem like a daunting task. Surprisingly, it is easier than the alternative of continuing down an undisciplined path. This comes from the overarching concept of simplicity. And when it comes to maximizing benefit from my earning potential, nothing espouses simplicity quite like good ol’ specialization. Specializing means focusing on doing only one or a few things. Applied to my labor, this means I fill one role, concentrating my efforts, my hours, and my passion toward the skillful accomplishment of the specific work I designate as my area of expertise. Skillful is what I will become, too, because experience by doing is the quickest way to becoming an expert. With expertise comes demand for my quality contribution, where in turn I can ask more money for my production. This consequently answers the question “Why should I specialize?”: Being an expert at something makes doing that task the single most beneficial use of my finite time and resources. The importance of specializing in labor is apparent throughout society. It’s why a town has a baker, a policeman, a mayor, a teacher, a shoemaker. It’s why the globalized world has some countries focused on producing and others geared toward consumption. Looking closer, it’s why a factory will focus on making one thing instead of fabricating every type of good; why one person puts on the body of a car, a different worker attaches the wheels, and someone else entirely paints it. Trial and error has demonstrated to society at large that we all benefit by individuals focusing on filling specialized and individualized roles.

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42  I Am Money’s Master Take as an example a pioneer who lives by his lonesome in the woods. He is a jack-of-alltrades by necessity, having to fashion shelter for himself in the form of a log cabin, hunt his own food, sew his own clothes, tend his own hearth, and fill every other role in the pursuit of sustained survival. The pioneer must labor endlessly without a day of rest, for who else will do the work? All the work that needs to get done gets done, but much labor has to go into accomplishing this feat. Also, there is little room for pleasure and attaining anything that doesn’t fulfill the basic necessities. His entertainment for the evening is a corn-husk doll that’s supposed to look like Martha Washington. The log cabin is made, but very rough-hewn. Same with the pioneer’s clothes, and the quality of his food-preparation. No singular task can be labeled as his trade, where he specializes in doing that task—honing it to perfection through repetition and applying the full weight of his mental, physical, and social resources toward mastering the particular craft. Now suppose the pioneer is tired of his shack of a cabin, sick of his shabby clothes, and wonders what something besides wild deer tastes like. He decides to move into the city. There he doesn’t make his own house—builders do that. Nor does he trap his own food— that’s where the grocer comes in. And clothes—well, like magic, they’re already sewn and waiting to be bought at the clothiers! The pioneer can’t fill all of these roles himself and do them at nearly as low a cost, or as high a quality as those who specialize in whichever particular trade. Mr. Pioneer Man is now, in a way, being cajoled by society into picking a specialty for himself. With his newly found trade (he decided on making corn-husk Martha Washington dolls), the ex-pioneer will produce more of a good or service than he could ever use for himself, mastering it by doing it well, and by doing it often. That single trade doesn’t cover all his many needs, but he can sell what he produces and use the proceeds to pay for others’ products. This way all his needs are met. And better yet, the efficiencies coming from focusing his efforts in one area result in lower total economic costs. The former wanderer of the woods becomes more productive in his particular trade, just as I learn to do things better and faster the more I do them. With this he can produce more, sell more, and so have excess money with which to buy for his wants and needs.

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Chapter 4: Specializing  43 Working every day of the week, fourteen hours a day will also become unnecessary. With specialization of labor comes personal economic gain. It may be apparent that specialization is the best road to take. However, it’s an abstract concept easy for me to forget about in a DIY (Do-It-Yourself ) world. If I get little else from reading this book, it would be well worth it if I learn to follow these two steps: STEP #1: Find a valuable (paid) niche to specialize in, then work to be the best at it. STEP #2: Outsource most everything else to people who focus in those specialties. The concept of specialization pops up in my life every single day as the main driver to my rational decision making. To truly appreciate the power of what specialization can do for me, I need to fully grasp this completely true statement: By specializing in ONE economic niche, I can achieve ALL my financial goals. This is so important, it needs to be repeated again and reread until I truly think of its implications.

By specializing in ONE economic niche, I can achieve ALL my financial goals. I can illustrate this by thinking of a rich person. Real or imaginary, it doesn’t matter. Picturing his mansion in my mind, what does it look like? It’s probably a huge chateaulooking house, perhaps with some outbuildings and such. The outside is beautifully landscaped, and the inside also magnificently appointed. The highest quality gourmet food is cooked in the kitchen, everything immaculately maintained and in its place. The owner is not home. Vacationing in some exotic locale, perhaps? Now imagine what some of this wealthy person’s financial goals may be. Let’s say they are to have a comfortable nest egg, a beautiful home, good landscaping, help for maintenance, cooking and cleaning, being able to vacation wherever... the list can go on. Here’s the important part: How has this rich person managed to achieve all these things? The house, landscaping, vacations and the like? It would be absurd to assume this person of luxury living is that way because he himself is a master at gardening, cooking, cleaning,

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44  I Am Money’s Master designing, and building mansions, a guru at booking trips and an ace at monogramming paisley silk robes. Even if he were all of these things, the rich man literally hasn’t the time in his life to accomplish all of these things to the quality and quantity he has now. The good money is bet on him having a specialty—a focus—from which he amasses his fortune. He does something particularly well. In this case, it may be running or setting up successful businesses particularly well. Understanding the fundamentals that explain why specialization is best for earning wealth isn’t necessary. However, awareness of the reasoning lets me check myself, making sure that I’m doing what maximizes my economic benefit. Differently worded, understanding specialization’s mechanisms lets me know if I’m netting the most money for my time and resources. Behind the curtains of specialization is the great puppeteer called opportunity cost. Opportunity cost means, “What could I be doing instead?” Given the limited amount of time and resources I have, many aspects of my life are mutually exclusive. In other words, I have to choose one thing or another but can’t have both. An opportunity cost of reading this chapter is not reading another chapter in this book with that time. Or a different personal finance book. Or Harry Potter. Or be holding a conversation with someone. Or driving to Burger King. Or or or... This isn’t to say that I won’t read the other books and not drive to Burger King at some point, but not with my finite resources of this time and my concentration now. The opportunity cost would be only one of these things (my second choice of what I would be doing), but not all of them. When it comes to making money with my personal resources, it’s important I do what brings me the most benefit for my time. “Benefit” can be defined as the money I make, but also the enjoyment and fulfillment I get from the work I do. There’s an infinite number of money-making ventures I can pursue with my time and resources, but the only one that really counts is that which I derive the most benefit from. Fortunately, it’s easy to know if what I’m doing is the maximally beneficial opportunity. Using my awareness of opportunity cost, I ask myself “Would I rather be doing something else?” If the answer is anything other than “No,” I need to reconsider what I specialize in. Factors I should include in my assessment are earning potential and gratification. For

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Chapter 4: Specializing  45 every single specialization I consider, I re-ask “Would I rather be doing something else?” until I get that satisfying answer of “No. No, I would not.” Finding my maximally beneficial specialty results in the lowest opportunity cost, signifying what I’m losing out on doing wouldn’t be as valuable as what I’m doing in my specialty. Even if a star professional basketball player is the best dishwasher in the world, he shouldn’t stay home to wash dishes instead of playing a basketball game. He’s missing out on making a million bucks by not playing the game but is only missing out on washing the dishes if he decides to hit the court. And as commendable as a clean sink is, it’s not worth a million dollars. The basketball star probably gets much more satisfaction out of playing his sport. Therefore, washing the dishes has the huge opportunity cost of not earning tons of money and feelings of gratification. This subtracts from his potential overall financial and personal well-being while adding to his opportunity cost, and so is best avoided. Instead, the basketball player is rational and does what contributes the most to his success with those couple hours. In this case, that happens to be playing a game of basketball. Then he can hire someone else to wash his dishes using their time and won’t miss the paltry sum he pays to get the job done. Specializing is an obviously beneficial principle in the extreme case of the rich basketball player. Fortunately, opportunity cost applies in every case, to everyone, including me. In a world without opportunity cost where there is infinite time and resources, things would be without value. This would come from no scarcity of resources for taking opportunities, and therefore no cost would be assigned to missing out on them. Having to choose what I do with the fleeting moments of my life gives my decisions weight. Specializing in one thing is done at the exclusion of my other options. Given only one pass at life, I owe it to myself to do what brings on the most value to me.

I specialize in one thing and outsource all else.

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Chapter Five

Securing My Income   

aking money comes with a lot of perks. Not worrying where my next meal will come from is one of them. But what about next week’s lunch? Next month’s? Next year’s? Securing my income to maintain and better the standard of living I’ve worked so hard to achieve tops the Important Scale. It walks hand-in-hand with increasing my earnings. My one and only insurance policy for securing my present and future financial prosperity is ME. Sustaining and diversifying income are the two steps to securing my earnings for a long time to come. Sustainability means prolonging the profitable life-expectancy of my business, job or other moneymaking venture. It insists on moving away from a “flash in the pan” syndrome and into long-term profitability. Diversification means not putting all of my gold-egg-laying geese in one coop. No matter if my income is generated from my job, owning a business, or whatever else, maintenance and growth of that revenue steam is only sustainable as long as there’s still a demand for my production. If a computer programmer works for a tech giant but his job could be done by someone in India for a fifth his pay, then his job isn’t sustainable. However, if he specializes in a field of programming that few others understand, or has responsibilities not easily transferable to others, then he is now indispensable. All the smart bets are on this indispensable programmer having his job for a long time to come. Again with the programmer, if he was in business for himself making software products, achieving sustainable income will only continue as long as there is demand for his pro-

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48  I Am Money’s Master duction. A patented software application he makes that is needed by many companies would provide a profitable money stream he could bank on—both literally and figuratively—for as long as he controlled the intellectual property (holds the patent), and is in demand (companies still need his software). Production of information—whether in my job or business—is recommended for longterm, sustainable earning. Information is harder to duplicate than physical labor and products (I’m more indispensable) and is typically protected under copyright law. A construction worker can be replaced by any willing and able body, but a best-selling author’s intellect can’t be so readily substituted. The beauty of diversification lies in the fact that if one of my income streams dries up, I’m not shaking a change cup on the corner of Main Street and Misery. At one point or another, most things take a dip in the southern direction. When that happens, I can either be left high and dry when my only source of earnings dissipates, or continue blissfully soaking in my other streams of income. This can mean parsing out my money-making ventures across many different industries. For example, I can earn money from being a web developer; bartending on weekends; owning a rental property; owning dividend-paying stock; or from doing some freelancing on the side. If money stops coming in from one of these sources (get fired, no tenants, not getting work), I still have the others to fall back on. Barring a worldwide nuclear fallout, chances are incredibly slim I will lose all my sources of income simultaneously. A landlord can’t rely on renting out one apartment to make a living. Even if it is enough (the apartment is super expensive and the landlord nets $2,000 a month for himself ), the vacancy of that one apartment for even a month could spell ruin for the landlord. Now, if the landlord sold that expensive property and bought five apartments that combined still netted him $2,000 a month, he would be in a better position. He would have five apartments to rent out, and so if one went vacant, the landlord would still be making 80% of his potential income, or $1,600 a month ($2,000 a month potential income x 80% occupancy = $1,600 a month). He would have enough to get by and wouldn’t have to worry about eating that month while advertising for a new tenant. That’s not bad, having one vacancy with five apartments, especially considering a vacancy when the landlord was relying on

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Chapter 5: Securing My Income  49 one expensive apartment amounted to earning $0 ($2,000 a month potential income x 0% occupancy = $0 a month). I put in effort to earn money to afford a certain lifestyle. This lifestyle can end up being no more than a weekstyle or monthstyle if I don’t protect myself by securing my income. Applying the principles of sustainability and diversification will help me achieve this important LIFEstyle goal!

My income sources are safer in number.

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Chapter Six

Enjoying What I Do   

his book is all about the money; my life should not be. The reason for becoming Money’s Master in the first place is so that I control money, not the other way around. Money, especially when it comes to earning it, needs to be a harnessed to help me achieve my dreams. It is not serving its purpose if making and handling money proves to be a source of stress and frustration. My dreams should be life-goals. Earning enough money to live and achieve these dreams needs to be yet another goal in order to make my life-goals plausible to attain. But making a lot of money should never be a dream—or an end—in and of itself! Striving to make more money than is needed to achieve my dreams, and to secure my financial present and future, is a pointless venture. Having more money than I know what to do with can’t be considered a bad thing, however. Rather, my focus needs to be on enjoying what I do to earn money. Making the moneymaking process a joy instead of being a burden is key to my overall happiness. Everything has a price. Gaining something—in this case money and financial freedom— comes at the expense of putting in the time and effort to earn the green. Setting up a successful business is challenging, and so is working a job. Both can consume a significant amount of my life up in the pursuit of profit (a 9-to-5 job is eight hours, or a whole third of my day). If I enjoy what I do to earn, then the costs of time and effort for financial gain are something I will actually look forward to giving up!

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52  I Am Money’s Master Passion is the main ingredient necessary for having my cake and eating it, too. Pursuing interests I’m greatly passionate about eliminates boredom from the moneymaking equation. While not guaranteeing an amusement park ride experience all the time—some monotony and tedium tend to pop in to say “hello” from time to time in any occupation—coupling my passions with my financial ambitions lends itself toward increasing my career gratification. Focusing on “just the money” is a narrow view to be avoided in order to achieve my overall goals of life happiness and satisfaction.

I earn from what I love doing.

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Chapter Seven

Making Myself Indispensable to My Employer   

eing indispensable to others means those people are indispensable to me. For without them, I would not be needed. In this interdependent world, relying on others—be them customers, coworkers, or bosses—is the first step to making them rely on me. No matter what my trade or area of expertise, dealing effectively with people is what makes the difference between being just a cog in the wheel and being a needed, wanted, and integral part of people’s lives and social groups. And it’s others’ recognition of their reliance on me that makes me truly indispensable. Technical expertise in my chosen trade is undoubtedly important. Having the know-how and skills relevant to professionally execute the specific functions of my trade are necessary if I’m to experience the financial benefits of specialization. Nonetheless, my specialized set of trade skills is arguably less important to my career success than possessing strong people skills. How I interact with people is the great corollary to how I am judged by them. Reiterating the concept of other people holding the key to my success, being highly esteemed by those around me in both a professional and personal regard is Priority Numero Uno if I’m going to humor my ambition of experiencing great success. Money’s Master is also a master of people skills. Effective human interaction is simple in theory and difficult in practice. The best practice is much practice of good communication techniques. It’s easy to be impulsive and socially retarded, because thinking only

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54  I Am Money’s Master in terms of what interests me is effortless. Still, the immeasurable value of culturing an adroitness at handling people is so beneficial, starting to think in terms of others is the only logical course. Here are some mindsets that will help me cultivate productive relationships: • Genuinely like people; focus on their positive qualities. • Think in terms of the other person’s interests; see how they fit in with mine. • Make others feel important with my sincere appreciation. • Avoid argument, complaints, and blame; find positive common ground and solutions. • Let body language, tone, and actions follow my words in generating good will. • Stand out from the crowd by listening intently more than I talk. None of these suggestions is going to work 100% of the time. A casino doesn’t win all the time either, but it sets itself up to be the big winner at day’s end. At their very least, these suggestions will help me be a genuinely better—and better-liked—person. Win against a man, and experience a forgettable victory; win a man’s good will, and he’ll pave the path to victory on my account. Businesses exist to maximize the wealth of their owners. So when it comes down to it, my bosses’ job is to make sure I’m greasing the wheels of business the best way possible—the owners’ palms can be loaded with that good greenback grease, too. When money talks, managers listen. If I’m bringing in money or saving it for the company in a big way, I am 90% of the way to bulletproofing my indispensability in the eyes of my employers. Top-line producers are those who generate revenue for a firm by selling or producing the product or service of the business. They make up the backbone of the company by perpetuating the core functions of the company. There is a cost associated with keeping on all employees. These employee expenses take away from the bottom line of a company’s income statement, which is the takeaway profit for the owners. In an attempt to maximize revenue and minimize expenses, firms will try to cut costs by getting rid of top-line producers with lackluster performance, or who cost too much to keep on. This goes double for support staff. Employees like secretaries or IT personnel are needed for a company to function, but the don’t rake in the cash for the company. They are usually first on the chopping block when a business is cutting back on expenses.

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Chapter 7: Making Myself Indispensable to My Employer  55 There is a sure way for a company to not want to lose me, no matter what the circumstances. The not-a-secret is to demonstrate that I consistently bring in a boatload of cash, or save the firm a bundle of money. Showing I make money and save it for the company is even more preferable. Hell, doing these things for a company are grounds for a promotion, or better yet, a big fat raise! Making and saving money for a company creates the perfect symbiosis of aligned interests feeding off each other. The owners’ interests are being met by helping maximize their wealth the best I can, and my back is being scratched by the company in terms of career and financial success. If my accomplishments aren’t being properly recognized by the company in due time, it’s high time I hightail it elsewhere to where I’m appreciated. (Ahem!... Read the “Making Money My Way” section.) Providing ideas for moneymaking and savings are good ways to earn recognition. Even better still is backing up the ideas with actions yielding demonstrable results. With the managers recognizing my positive contribution, not keeping me employed would be highly illogical. Trimming me out of the company would mean cutting into their own pockets. Making sure the higher-ups fully and objectively appreciate my positive contributions to the company will help them realize this. And along those lines, where it would be nice for bosses to appreciate me automatically, I cannot forget how everyone is caught up in their own world, and it is my sole responsibility to make sure those who need to know about my actions on behalf of the company are well aware. Significant earning and saving for a company gives me a palpable bargaining chip with which my indispensability and financial success can be secured. I mustn’t hesitate in earning this chip and cashing it in. Common sense is enough to tell me it pays to be good at what I do. What might not be so apparent is quite how much more it pays to be the best. There is a phenomenon seen in most every specialty called the Superstar Effect. Of all the people filling the niche, there is a wide distribution of aptitude, ranging from the person worst at their trade to the best—the “superstar.” The Superstar Effect notes that the person best at their specialty is not only well rewarded for their talent, but rewarded way disproportionately to their difference in skill when compared with the second-, third- or fourth-best.

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56  I Am Money’s Master Take published authors, for example. Hundreds of thousands of books get published every year. The vast majority of them, however, sell poorly. The “worst” books in terms of performance probably sell close to zero copies. Most of them sell within a certain poorselling range. Then there are the top-tier authors “good” at their craft, at least in terms of whatever it takes to sell a book. Their book sales are more impressive, but again the vast majority of even the top-tier authors in the same category sell at a level nowhere near a megahit classification. These writers won’t be buying their own private islands any time soon. But then there are the bestsellers at the very top of the list. The superstars.... These overachievers are the great minority. They really are their own islands in a sea of middling performers of their craft, selling a number of book copies that leaves all other authors choking on their dust. The number of megahit authors at any given time can usually be counted on one hand, and one finger typically paints a more accurate picture. It wouldn’t be unreasonable to say the top ten bestselling authors in a week are selling 80% of all book copies sold. This is including all the thousands of other authors’ books for sale alongside theirs. The #1 bestselling author, the “superstar,” single-handedly captures the lion’s share of the sales. His or her book sales far exceed the number sold by the #2 bestselling author; are way, way more than the third-best seller’s; and exponentially more than those of the #4-ranked writer. The #1 bestselling author is rewarded so much more than the other authors also sharing the bestseller’s list. But why? Like everything following the principle of specialization, it all comes down to opportunity cost. Whatever makes a book “good”—be it quality of writing, entertainment value, extensive distribution, relevant topic, or author’s reputation—it can be assumed that to get in the top ten bestsellers list, the top ten books all can be considered “good.” As it is, the #1 bestseller is probably only marginally better than the other books, possessing just a bit more of the “good” characteristics. Maybe not by much, but enough to be viewed by readers as the “best.” Opportunity cost comes into play with the limited amount of money readers have, as well as a finite amount of time they can dedicate to reading. If a potential reader has only enough money for one book, then she has to choose which one to buy. She can’t have them all, and being a rational human being, she wants to get the most bang for her buck. Reviews, wordof-mouth, and looking at the books will lead her to buy the “best” book, the #1 bestseller, more times than not. The other books may only be slightly worse than #1, but the reader is a value-maximizer who will likely buy what’s “best” to get the most for her money.

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Chapter 7: Making Myself Indispensable to My Employer  57 So when the company is cutting back and keeping only a few sales positions... or there’s only enough work to go around for three designers... or there’s only one promotion available... I can be the last person standing if I’m the best at what I do. The cream of the crop will rise to the top! Being the best at something is all about the competition. Best of luck to me if I want to be the best swimmer, or the highest-earning salesperson in a multinational company. Not to say I can’t accomplish such lofty goals; it’s just I’m setting up for an uphill battle if my goal is to be the best in a broad category. By finding a useful but highly specialized niche, I am instantly eliminating competing against the world. Best-case scenario, I’ll discover an unfilled niche and specialize in that, thereby being a one-person monopoly. If someone needs my particular services, I’m the only one, and therefore indispensable. Superstar status comes with fringe benefits as well. People tend to associate excellence with the individual as a whole, rather than just their area of expertise. A star professional quarterback can be looked to as an all-American bastion of morality, when his ethics aren’t the footing for his fame. He plays football well, and many people will think of him as a star in whatever he does. Generalization is a positive externality when I’m a superstar because my success with my specialty lends others to attribute it to all-around greatness. A good reputation—even if inflated into a bit of a tall tale—can work in my favor in any variety of situations. These can include raises, bonuses, and promotions, but the list need not stop there. Finding a relevant specialty makes for a comfortable living. Being a superstar in my niche makes for a killing. The nothing-to-lose, everything-to-gain nature of the Superstar Effect makes a strong case for setting the bar at the top and doing what it takes to be the best. To be the Superstar.

I am a people person. I show how I make and save the company money. I prove myself to be a “superstar.”

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58  I Am Money’s Master

Earning  Spending... the Transition Earning, Spending, and Saving all feed into each other. They are the yin to their yang; the duck, duck to their goose! My earnings are hopefully driven by spending and savings goals (lifestyle picture). If my expenses are higher than my earnings, I need to try to reduce my spending while increasing my earnings. Saving more means I will eventually have higher overall earnings by adding distributions, gains, interest, or dividends to my regular income, so I will have a lower earnings requirement from my other revenue sources for the same lifestyle. Or, I can up my spending if I so desire. Something that needs to be said about the “Spending” part of this book coming up: It is not about cutting costs at every corner. Depriving myself of Starbucks lattes and hanging the laundry on the line will NOT turn everything around and solve my financial problems. Spending (better) is all about the BIG PICTURE, because that is what really counts. Eliminating spending waste is key. “Waste” is different from spending on enjoyable frivolities; it’s defined as spending more money than I have to for the same result, or using hardearned cash to buy that which doesn’t truly bring me pleasure. I need to learn to avoid being “Penny-wise, Dollar-foolish.” What will set me up for great financial success as Money’s Master is becoming “Dollar-wise, Doesn’t-matter-how-goodI-am-with-my-Pennies.”

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Section Two

Spending (less)

Book 1

Chapter Eight

Planning My Spending   

udgeting. Watching where my money goes. Stepping back to see the big financial picture. Whatever I want to call it. Earning money is simple to manage, since my income stream is usually sourced from only a few revenue tributaries. Spending and saving, on the other hand, both see money flying in multiple directions to any number of destinations. Stopping my money in hand from getting caught in the spending breeze, blown away toward haphazard and unknown destinations, is a keystone of my financial prosperity. Otherwise my hard work earning money is in vain. Planning my spending to manage my earnings is Step 2 on the path to becoming Money’s Master. Remember, money has to be earned to be had, spent wisely to be kept, and saved strategically to make it work for me. Planning my spending wisely is a short set-up process that’ll save me from a lot of work—and a whole heap of stress—for the rest of my life. Diligence in managing spending comes from the three pillars of personal finance I demand my earning, spending, and saving to all follow: automate, simplify, optimize.

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