Want more Millennial to Millionaire??? Visit us at our new website and continue on your way to wealth at:
www.frommillennialtomillionaire.com
The new website has a new "The Review" section, featuring my thoughts on all the finance books I'm reading (and my recommendations on how to read them.. Kindle isn't for everything!). Also, it has a streamlined question & contact page where I will be taking both topic requests and submissions from any guest bloggers.
To help launch the new website, I have written FOUR new posts on "How To Out Think Your Budget" including:
- The Truth About Debt
- Why Millennials Should Start Investing NOW
- How Crayola Can Make You Wealthy
So click & read away! www.frommillennialtomillionaire.com
See you there!
-Katie
Wednesday, July 15, 2015
Wednesday, July 8, 2015
Lesson 5: How to Build a Better Budget & Top 3 Budget Myths
Ah, so today is the day we talk budgets.
It was bound to happen eventually. I know many were hoping we could avoid the subject all together. Even my father commented that he's wealthy and has never made a budget in his life. (Hope!!)
However, when I asked him how, he simply said that he's always made more money than things he wanted to buy.
...I'm taking a guess that situation isn't really going to resonate with many of you...So alas, yes, we are here today to talk about budgets.
There are 5 steps to creating a budget that you LOVE and helps build wealth:
Today we will tackle the first one:
The thing with budgets is, they get a bad rap. In fact, I think budgets have got to be one of the most misunderstood tools in the personal finance tool kit.
If we were in a traditional classroom, I would invite everyone up to the chalk board to write down what comes to mind when they think of budgets/budgeting. I imagine it would look something like this:
This makes me sad, because everything above is false..except helpful, they are helpful.
Myth 1: Budgets help you track your expenses
Never want to be wealthy? Then keep focusing only on your expenses.
Budgets have 4 parts:
If you've only been looking at expenses, you've been missing the majority of the puzzle. Also, with the exception of taxes, you've been spending time on one of the least fun parts too.
Wealthy people make sure to look at the whole picture. There are techniques you can use to manipulate all of these items every month - even taxes. Getting creative on all these elements is what makes budget building a fun exercise.
Myth 2: Budgets make sure your expenses equal your income at the end of the month
This is my favorite myth. People think budgets are a way to balance their financial life, much akin to a see-saw with income on one side and expenses on the other. Now that we know there are more than 2 sides in a budget, this simile is no longer accurate.
Secondly, it's frustrating as sh*t.
Why would anyone want their financial life to resemble a perfectly balanced see-saw? IT DOESN'T GO ANYWHERE! It just goes up and down, up and down. Sound like your current financial situation? Perhaps this is why many people get frustrated about finances; they never feel any momentum. Remember, wealthy people are always moving forward. They never strive for balance and they always want the income side to overwhelm taxes and expenses.
A properly built budget will get you off the see-saw and into the financial Ferrarri - and that is a much more fun ride, I assure you :)
Myth 3: Budgets help you know what you can afford
If you only focus on what you can afford today, you will never be able to afford what you want tomorrow.
You see, when properly used, budgets are a way to afford anything you want.
There are 3 ways to fulfill the "anything" part of the above:
First, stop planning your budget based on what you did last month. Hey! Last month, you weren't wealthy or you wouldn't be reading this blog! Budgets are forward looking and in the future, you can do, buy, or behave any which way you want to get what you want.
Second, now that you know you can manipulate income, taxes, and expenses as part of your budgeting process you have full financial freedom to set & achieve any goal you like. Want to buy a boat, then move around the variables until it happens. Make more money, spend less money, or give away less money to the government.
Third, just in case you forgot Lesson #1 already, don't plan your budgets on what the "average" person or family spends in a given category. Many budget apps & software programs do this as a default, but we've already agreed that the average American is broke, so... stop that.
-----
So there you have it, the budget myths. Now instead of always saying, "Well, we can't afford that," you can finally begin asking the question all wealthy people ask when making budgets...
"How?"
It was bound to happen eventually. I know many were hoping we could avoid the subject all together. Even my father commented that he's wealthy and has never made a budget in his life. (Hope!!)
However, when I asked him how, he simply said that he's always made more money than things he wanted to buy.
...I'm taking a guess that situation isn't really going to resonate with many of you...So alas, yes, we are here today to talk about budgets.
There are 5 steps to creating a budget that you LOVE and helps build wealth:
1. Debunk The Budget Myths
2. Get Your Head In The Right Spot
3. Leverage Technology to Do the Heavy Lifting
4. Be Selfish & Pay Yourself First
5. Spend The Rest...All Of It
Today we will tackle the first one:
Step One: Debunk The Budget Myths
The thing with budgets is, they get a bad rap. In fact, I think budgets have got to be one of the most misunderstood tools in the personal finance tool kit.
If we were in a traditional classroom, I would invite everyone up to the chalk board to write down what comes to mind when they think of budgets/budgeting. I imagine it would look something like this:
This makes me sad, because everything above is false..except helpful, they are helpful.
Myth 1: Budgets help you track your expenses
Never want to be wealthy? Then keep focusing only on your expenses.
Budgets have 4 parts:
1. Income
2. Taxes
3. Goals
4. Expenses
If you've only been looking at expenses, you've been missing the majority of the puzzle. Also, with the exception of taxes, you've been spending time on one of the least fun parts too.
Wealthy people make sure to look at the whole picture. There are techniques you can use to manipulate all of these items every month - even taxes. Getting creative on all these elements is what makes budget building a fun exercise.
Myth 2: Budgets make sure your expenses equal your income at the end of the month
This is my favorite myth. People think budgets are a way to balance their financial life, much akin to a see-saw with income on one side and expenses on the other. Now that we know there are more than 2 sides in a budget, this simile is no longer accurate.
Secondly, it's frustrating as sh*t.
Why would anyone want their financial life to resemble a perfectly balanced see-saw? IT DOESN'T GO ANYWHERE! It just goes up and down, up and down. Sound like your current financial situation? Perhaps this is why many people get frustrated about finances; they never feel any momentum. Remember, wealthy people are always moving forward. They never strive for balance and they always want the income side to overwhelm taxes and expenses.
A properly built budget will get you off the see-saw and into the financial Ferrarri - and that is a much more fun ride, I assure you :)
Myth 3: Budgets help you know what you can afford
If you only focus on what you can afford today, you will never be able to afford what you want tomorrow.
You see, when properly used, budgets are a way to afford anything you want.
There are 3 ways to fulfill the "anything" part of the above:
First, stop planning your budget based on what you did last month. Hey! Last month, you weren't wealthy or you wouldn't be reading this blog! Budgets are forward looking and in the future, you can do, buy, or behave any which way you want to get what you want.
Second, now that you know you can manipulate income, taxes, and expenses as part of your budgeting process you have full financial freedom to set & achieve any goal you like. Want to buy a boat, then move around the variables until it happens. Make more money, spend less money, or give away less money to the government.
Third, just in case you forgot Lesson #1 already, don't plan your budgets on what the "average" person or family spends in a given category. Many budget apps & software programs do this as a default, but we've already agreed that the average American is broke, so... stop that.
-----
So there you have it, the budget myths. Now instead of always saying, "Well, we can't afford that," you can finally begin asking the question all wealthy people ask when making budgets...
"How?"
Monday, July 6, 2015
Lesson 4: What Millennials Can Learn From The Greeks
Happy Forth of July!!
Now let's talk Greece.
Sorry America, but Greece and its impending fiscal doom has filled up our twitter feeds this week, and as the responsible Millennials we are, we ask ourselves, "what in the world am I supposed to learn/do with this information?" (If only we asked that question of all our tweets...)
After all, your bank account is likely not held in Euros, but in a strengthening American Dollar (#'Merica). So does this Greek default actually mean anything for you?
While newspapers & CNN headlines will lead you to think disaster may be around the corner for the global economy (after all, panic sells papers), several experts have poignantly shown that Greece's economy has roughly the same impact has Missouri's. Which means in the long-term for you, the young investor, last week's news is inconsequential (Sorry Missouri..).
So what then can we learn?
I pondered this over the past week and went down several paths. Should I talk about the origin of currencies such as the euro and how to leverage agreements to make investments? Perhaps talk about how one actually makes money when you buy, not when you sell, as seen by the rebound in stock markets on Tuesday after Monday's sell-off?
When I asked my parents, they kept bringing up the muddy republican stance that the main thing to be learned regarding Greece is what happens when there are "too many people in the wagon." I rolled my eyes. How was a conservative viewpoint going to help Millennials build personal wealth?
And then of course, I realized that they were right (...seriously, at what age does that stop happening...).
Lesson 4: Wealthy People Enjoy Pulling The Wagon
Greece has a major wagon problem. Its not just lamentable, its unsustainable. Greece's debt is 175.1% its GDP and its easy to see how it got there.
However, what Millennials can learn has nothing to do about the number of people in the wagon, who they are, or how they got there. Its not even about how the wagon got built in the first place. Its all about the mentality of the people pulling.
In my last post, I put forth the premise that 50% of building your personal wealth came down to Mentality. Mentality covers a long list of facets, from values & beliefs, to mind-set, to perspective and more.
When it comes to the proverbial wagon, most people believe the wealthy should pull the wagon as they are rich, but what they fail to see that it was the act of pulling the wagon that made them wealthy in the first place.
Wealthy people understand that success is a daily journey, not a destination. That it takes a dream, time and persistence fulfilling that dream, and a relentless desire to learn along the way that creates the wealthy. It's even been said that to become an "overnight" success, one must work 20 years first.
Wealthy people know that success is always connected with action. Successful people keep moving forward.
Did you notice that in our definitions, I said the rich spend lots of money? They don't give it, they spend it. They hate the wagon. But wealthy people are wealthy in many ways - generosity included. And they are smart. Which is why I think it was the wealthy, not the rich, who gave the wagon wheels. After all, if they are bound and determined to move the world forward, they might as well find a way to do it better than before.
So on this Millennial to Millionaire journey, when you find yourself begrudging the weight of the wagon, relish the fact that you are building fiscal muscle, becoming a lean, mean, wealth building machine.
Still dislike the fact that now that you are officially a wagon puller for the rest of your life? Well just remember what John C. Maxwell said about becoming successful:
"Do something you hate every day, just for the practice."
Or build a better wagon.
You pick.
Now let's talk Greece.
Sorry America, but Greece and its impending fiscal doom has filled up our twitter feeds this week, and as the responsible Millennials we are, we ask ourselves, "what in the world am I supposed to learn/do with this information?" (If only we asked that question of all our tweets...)
After all, your bank account is likely not held in Euros, but in a strengthening American Dollar (#'Merica). So does this Greek default actually mean anything for you?
While newspapers & CNN headlines will lead you to think disaster may be around the corner for the global economy (after all, panic sells papers), several experts have poignantly shown that Greece's economy has roughly the same impact has Missouri's. Which means in the long-term for you, the young investor, last week's news is inconsequential (Sorry Missouri..).
So what then can we learn?
I pondered this over the past week and went down several paths. Should I talk about the origin of currencies such as the euro and how to leverage agreements to make investments? Perhaps talk about how one actually makes money when you buy, not when you sell, as seen by the rebound in stock markets on Tuesday after Monday's sell-off?
When I asked my parents, they kept bringing up the muddy republican stance that the main thing to be learned regarding Greece is what happens when there are "too many people in the wagon." I rolled my eyes. How was a conservative viewpoint going to help Millennials build personal wealth?
And then of course, I realized that they were right (...seriously, at what age does that stop happening...).
Lesson 4: Wealthy People Enjoy Pulling The Wagon
Greece has a major wagon problem. Its not just lamentable, its unsustainable. Greece's debt is 175.1% its GDP and its easy to see how it got there.
 |
| Greece's economic history & future (should nothing change) in 4 pictures |
- Greece has just over 11 million people and its been said that 9 million of them rely on the government for their livelihood.
- Just shy of 800,000 public servants enforce and regulate this well-fare state, and all those government employees receive tenor.
- Across industries, Greeks retire earlier around age 59 vs a global average of 65.
- The Millennial generation, aka the young people who typically pick up the wagon pulling positions vacated by the old, have immigrated to countries with less corruption and greater business freedom and opportunity for growth.
However, what Millennials can learn has nothing to do about the number of people in the wagon, who they are, or how they got there. Its not even about how the wagon got built in the first place. Its all about the mentality of the people pulling.
In my last post, I put forth the premise that 50% of building your personal wealth came down to Mentality. Mentality covers a long list of facets, from values & beliefs, to mind-set, to perspective and more.
When it comes to the proverbial wagon, most people believe the wealthy should pull the wagon as they are rich, but what they fail to see that it was the act of pulling the wagon that made them wealthy in the first place.
Wealthy people understand that success is a daily journey, not a destination. That it takes a dream, time and persistence fulfilling that dream, and a relentless desire to learn along the way that creates the wealthy. It's even been said that to become an "overnight" success, one must work 20 years first.
Wealthy people know that success is always connected with action. Successful people keep moving forward.
Did you notice that in our definitions, I said the rich spend lots of money? They don't give it, they spend it. They hate the wagon. But wealthy people are wealthy in many ways - generosity included. And they are smart. Which is why I think it was the wealthy, not the rich, who gave the wagon wheels. After all, if they are bound and determined to move the world forward, they might as well find a way to do it better than before.
So on this Millennial to Millionaire journey, when you find yourself begrudging the weight of the wagon, relish the fact that you are building fiscal muscle, becoming a lean, mean, wealth building machine.
Still dislike the fact that now that you are officially a wagon puller for the rest of your life? Well just remember what John C. Maxwell said about becoming successful:
"Do something you hate every day, just for the practice."
Or build a better wagon.
You pick.
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