Financial Serenity Month - Chapter 3

Last week we discussed about the retirement ideas that pertain to entrepreneurs. This week we will also include the employees in our conversation. I would like to share some scary statistics, with the hope that you take them seriously and act on the information we are sharing here.

For someone who has a job, the retirement planning is set in place by the employer, and all they have to do is follow the system. Even with all the steps already planned, a large number of Americans do not take advantage of the offers. And the scary part is that among solopreneurs and the self-employed (without the path already designed for them) the numbers are even higher.

There are some really scary statistics I want to share: only 2 out of 3 Americans save for retirement currently (according to a statistic from 2017). And if this is not bad enough, more than half of the ones who save, have less than $10,000 in their retirement account. Yet, surveys say that 51% of Americans feel they are saving enough. The article I was reading was stating that “Transamerica found that only about half of workers feel they are building a nest egg that will sustain them in retirement” (The Motley Fool, April, 16^th, 2017). While the article implies there are not enough people who are comfortable with their level of savings, my first reaction is: how can that many people even feel they have enough? Reading the statistics, I realized that only about 30% of the U.S. population has more than $10,000 in retirement savings. And with that being the case, where does the extra 21% of people get their feelings from? Did I scare you yet?

As entrepreneurs, solopreneurs and self-employed increase in numbers all across America, this is a unique opportunity for them to change these statistics. I’m not saying it is easy but it is simple: there is no other way to be and feel secure in retirement. Even employees who see their retirement coming from the employer diminish, have to also set aside money. Entrepreneurs don’t even have that luxury. There is no cushion that can provide a feeling of security. For those who can sell their business, there may be a stress-free retirement in sight. But the majority of small businesses – the solopreneurs and the home-based businesses – will probably never have that option.

If you own a sellable business and decide to sell it, the first thing you need to find out is the value. And you need to understand that the value you think it is worth and the amount of money that someone is willing to pay may be two different things – as is most often the case. After having a valuation done by a third party, such as a CPA, the next best step is talking to a financial specialist who can educate the seller in a few options – financial and insurance products – that can be set up by the buyer in order to increase the amount received by the seller through this transaction. This is a way to increase either the retirement income or the family protection, or both.

When selling the business is not an option – or if you want to have more money in retirement to ensure enough income – the best idea is to start saving as early as possible. Now, I understand that most entrepreneurs reinvest the majority of their income in order to grow their business. Even so, retirement savings must be a priority. And if the 10% that financial advisors advocate sounds like too huge and intimidating of a number, it is OK to start with a lower percentage. The main goal is to start. You can always increase the amount. Plus, something saved is always better than nothing saved. One of my favorite quotes is a Chinese proverb: “the best time to plant a tree was 20 years ago. The next best time is now.”

Saving – for retirement, for a big-ticket item, or for a rainy day – works the same way. The younger you are or the earlier you start saving, the more time you have for it to grow.  But it is never too late to start, and you are always better off starting to save NOW than Never, or even Later.

Financial Serenity Month - Chapter 2

Let's continue our conversation regarding financial serenity with some ideas for business owners this week.

For the business owners who want to grow their business to the point where it becomes their retirement vehicle, while reinvesting all their earnings back in the business might seem like the smart thing to do, it may prove a disastrous financial sacrifice in the long run. According to the sensible principle of diversification, you should never put all your eggs in one basket; and when that basket is your own business, especially if it is a service-based business that relies heavily on you, that may be a very dangerous path to follow.

A wiser decision may be to save some of the money earned through the business in a retirement account – either pre-tax or after-tax – that will accumulate over time and be there when the business owner is ready to retire. Besides the tax advantages of this plan, the main benefit consists in the fact that the retirement money is not directly tied into the business, and it is protected from any hardships that the business may encounter, plus it will be available when the owner of the business wants or has to retire.

Most people are familiar with the term “compound interest” but that is usually in an abstract sense; they are familiar with the fact that it is important, that it can work in one’s favor or against them. And for the majority of people, that is where their knowledge gets blurry. They do not understand that the more time they have, the more they can benefit from the effects of the compound interest. 

Some of the most frequently used examples show friends who save for retirement at different times. While one starts in their 20’s and only saves for about 10 years, the other starts saving at the same time the first one stops and continues saving until retirement age. Even so, the first friend ends up with more money at the time of retirement – depending on the amounts used and the interest percentage used in the example, the difference can be from a few tens of thousands to some hundreds of thousands.

The difference between the two friends comes not from the amount saved but from the time they invest. The more time you give the compound interest to work for you, the more your savings grow, while the interest gains interest upon interest.

I’m not going to get on my soap box lamenting the lack of financial education from the US school system. Even though it is important to raise the level of understanding for all the people growing up in an economy so very different from the one experienced by their parents and grandparents. While the good news is that more and more people start businesses and/or become self-employed, the bad news is that these people’s financial security and safe present and future is in their own hands, since their employers are no longer present to provide the benefits that will take care of them in the long run.

Most solopreneurs make the decision to put all of their income back into the business in order to build the business. They think that it will all pay off in the future because they will make more money and, in the end, can sell the business. Unfortunately, most of the time, this is not a solid exit strategy. Nobody wants to buy your job. Therefore, the only way to have a sellable business is by building systems that can be followed and duplicated.

For the business owners reading these lines, I would like to suggest a great book that gave me a lot to think about, and made me tweak a few things in the cash flow of my company: "Profit First" by Mike Michalowitz. He uses the principle of "pay yourself first" - so often used in personal finances - and adapts it to the set up of a company. I would encourage anyone who wants to find their financial serenity, to read Mike's book and apply the knowledge he shares. It will change your life - literally!

And if you are an employee, don't despair, there is also a path to financial serenity for you! We will talk about it next week.

Financial Serenity Month - Chapter 1

There are so many financial gurus who advocate for financial freedom – the ability to maintain your lifestyle without having to work – either by accumulating a certain amount of money that is invested to generate the income, or by generating a passive cash flow that is equal or higher to the salary/commission received from the current work.

I started my financial education in the US with Suze Orman and Robert Kiyosaki, and I always thrived to achieve the financial freedom they taught me about. And through my journey toward financial freedom I heard Tony Robbins explaining about “the science of achievement” and “the art of fulfillment”. And this cemented my commitment to achieve financial serenity.

What is financial serenity to me?
Financial serenity is a combination of financial freedom and the serenity brought on by feelings of accomplishment and fulfillment. This is the result of achieving worthy goals and reaching significance by being able to give freely to a cause one is passionate about (may that be time or money). I learned from Zig Ziglar that financial independence means you can do what you want when you want. My goal then became taking women – and a few good men – to the next level, and guiding them to financial serenity: a step beyond freedom and independence.

According to statistics, getting out of debt or saving more money – or even financial freedom – is a popular New Year’s resolution, second only to losing weight. The problem with setting this as an annual goal – over and over again – is that it really is wishful thinking, and not a well thought out plan. Therefore, the resolution is renewed the following year, rarely with any significant success. Most people want to make a leap from the have-not to the have column when it comes to their finances. They feel that they can triple their income, or annihilate their debt within the year. Tony Robbins wisely said that “most people overestimate what they can do in a year and underestimate what they can do in a decade”.

The most likely approach to achieve a financial goal is the “slight edge” – per Jeff Olson, in his book with the same title. He talks about doing small things every day that will compound over time to achieve big results. While this approach can work with any goals, from health and fitness, to relationships and personal improvement, I believe it is the only sustainable path to achieve lasting financial goals.

It is my hope that more people will have financial goals for this year than the previous, and that even more will have these goals the next year. While anyone can achieve his/her financial serenity with proper planning and a focus on the long term goal in order to stay on track, I believe that the most likely path to lead to this accomplishment is through your own business.

I'm not suggesting that an employee cannot achieve such a goal, I'm merely expressing my opinion that self-employment or business ownership can be a simpler path to it. And with that, I must explain that I am by no means saying it is easy - just a simpler formula because you hold all the cards when you own your source of income.

Let's look at some ideas on how to accomplish such a goal next week!

New Year Resolution... again?

This is the last time we talk in 2016, so I will keep it nice and short. And I first want to wish you a VERY HAPPY 2017!

As we are getting closer and closer to the end of the year, it is perhaps the best time to reflect on the good, the bad and the ugly for 2016. It is a time to make plans for the New Year – what most people call RESOLUTIONS. Well, this is also your chance to make a choice: the choice that this time you WILL do those things you have been promising yourself you will do.

Do you know how many people decide there are going to lose weight or get out of debt in the New Year? Though I don’t know the exact number, I just found a statistic that shows the top 10 resolutions for 2016, and “Spend less, save more” is number 3, behind only “Lose weight” and “Getting organized”. Wow, by comparison, “Falling in love” and “Spend more time with the family” are the bottom 2 in this top. Does this surprise you? For me the surprise is that I was right. I thought that the HARD WORK type of resolutions top the list.

The other scary statistic is that only 45% of Americans even set a New Year’s Resolution, while about the same number (39%) say they never do it. And what is even more scary is the fact that from those 45%, after 6 months, almost half (46%) even keep track or work towards achieving those resolutions.

All things considered, my wish for you is to make your MONEY RESOLUTION for 2017 your last attempt at achieving it. I want to talk to you in 2018 and beyond about how you are maintaining the great systems you set up, and not how you are starting to save.  And in order for this to happen, I would like you to start working on your financial goal NOW. Remember, the Chinese said “The best time to plant a tree was 20 years ago; the next best time is now”. 

What is your goal for 2017? Please share, and I promise to hold you accountable for it to be the last time you set that exact goal - because it will be accomplished.

Thanksgiving dinner conversation

If you just spent your holidays with your aging parents, you probably worried (or maybe even talked about) the set up for their final arrangements. Maybe you are already in charge of their affairs because they cannot take care of certain things by themselves anymore…

If you are one of the few lucky ones to know what is going on with your parents’ estate planning, and where their documents are located, I would like to congratulate your parents! Most of the people I have spoken to were not that fortunate when something happened with their loved one. This is a topic that we don’t usually talk about. However it is very necessary, since death is the only certainty we have in life. And whether we talk about it or not, someone still has to deal with it -  either us while we are still of sound mind and body, or a loved one, when we are not around anymore.

So, let me ask you: when was the last time you talked to your family about your estate or your wishes (should you not be able to express them)? And if you told them what you wanted in case you become incapacitated, did you put that in writing? And, most importantly, do they know where the paperwork is (if you have it)?

Most Americans don’t have their wishes written down. And, unfortunately for the families left behind, of those who have it in writing, many don’t tell their family where the paper are.

If you are a grown child of an aging parent who mentioned a long time ago that they want to be cremated, or that they don’t want to be kept on life support… maybe you can ask them if they still feel that way now. And maybe the next time you see them, you ask them to put it in writing. Also, make sure to ask where the papers are located.

When adult children move out, the parents move things around the house, and some of the things that get moved, are the important papers. Once you move out, you may not know where your parents keep their paperwork. It is always a good idea to check with your parents where their papers are now located.

If you are participating in the gratitude challenge from earlier this month, maybe something to be grateful for is the fact that you are still capable to take care of all your important documents and don’t have to leave your family to deal with everything in their time of grief. And then get it taken care of NOW.

What are you grateful for TODAY?

This is the month of Thanksgiving – the month of Gratitude. Not that we should not be grateful all year long… But in case you kind of forgot this year… let’s talk GRATITUDE today. It is not too late to start now. And if you read this post, I hope you take me up on the challenge I will issue at the end of it.

For now, let’s get started on what is the connection between money and gratitude. And how can your gratitude and appreciation for the things you have and the things you are able to do in life can translate in more money for you.

Tony Robbins often says “Where your energy goes, that grows.” That is true. We are beings made of energy and can influence the energy of our surroundings. Therefore, if you focus on plenty you will have plenty, and if you focus on scarcity, you will have scarcity. I know that I always say that my focus on sharing my thoughts is more on the practical side of money and I will get to that in a second. Though I need to make clear the fact that if you believe you have enough, that there is enough out there for you, then you will have it. Sometimes it may not seem like it, and that is the toughest time to believe. However, that is necessary for you to achieve.

When you believe it, then you can achieve it – may IT be money, a career or any personal goal. So that is why it is important to not just do the mechanics, but also get our brains and our feelings involved. When we start the day off with a good thought and happiness for the things that will come our way, we get more things that can make us happy. When we are grateful for what we currently have in our life – and we all can find at least one thing that we like and we appreciate – we will attract more things that we like and appreciate.

Zig Ziglar always said that if you want to lose weight, you cannot think like a fat person. Your brain does not understand the word NO, so it will bring into your life more of the things you are thinking about. So you cannot think like a poor person, and I believe we are all rich in our lives. You may say that is not the case with you but I know that money is not the only thing that measures the riches. And I will be the last person to tell you that you should not focus on money – after all, this is a blog about MONEY. All I’m saying is that you need to start somewhere.

Think about the things you have in your life that you are grateful for, and not the debt or the bills or the worries. Think of the good you will do with the money coming into your life, and be grateful you are here today to have a chance to work towards that good. And more good will come your way.

So my November challenge for you is to write down 3 things you are grateful for. And not just one time but every morning before starting your day, for the rest of the month; or the rest of the year if you are even more courageous. And then, come back and leave a comment with the 3 things that are on your list that day, or the most frequent ones. I would like to know and be your cheerleader.    

Money Mondays Episode 6

spreaker.com/show/money-mondays

Check out the new episode to learn more about a topic you might find scary... Budgeting. We are helping you make friends with your budget, so you can achieve your goals and take confident steps toward your financial serenity. Emerald Sparks shares her money story, and you can learn how a young woman was able to buy her first car while in college, without having to take on a car payment. Can you learn anything from her story?