Friday, June 27, 2014

Life is a game of Inches

Life is a game of Inches.

Monday, June 23, 2014

The Go Giver: Accepting payment for Value

I read the Book The Go Giver a few years ago and I really liked the message it had to offer.  In fact, its probably one of the best books I have read on over-delivering and reaping the rewards of doing so.  But although I think the book had some great points, I also have some serious issues with it.

I don't entirely agree with the First Law and Premise: 

"Your true worth is determined by how much more you give in value then you take in payment".  

As business owners, the goal isn't to provide much more value then our price point.  This is just bad business.  For example, I'm not going to sell you a brand new Ferrari for $20,000.  This is madness and its throwing money down the toilet.  No one will value what we do if we give things away free severely discounted.

I think this premise really needs to be changed to  "Provide great value and price your rates accordingly."

The reason why we don't want to over-deliver severely is because we have no guarantee that our buyers will come back or will buy more and we shouldn't place ourselves in a bad situation by setting  rates lower then they deserve.    Anyone who believes this should stay far far far away from business.

The Second Law, The Law of Compensation I think is incomplete.  It should be changed to "Your income is determined by how many people you serve and how well you serve them and how wide your profit margins are."  

Again, the problem is in providing much more in value then we ask for in payment.  I don't agree that our true worth is determined by providing as much excess value then our price rates demand.  If we accept this premise, we may as well work for free and see where that gets us.

If the author of the Go Giver thought a bit more about how this applies to the financial statement in business this book would have been a real knock out.  None the less, it was a great read with a great message.

Wednesday, June 11, 2014

Win big through Compounding Interest

Here is the concept of how compound interest increases over the years(2 min video) as applies to 401K plans.

When I became self employed I learned even small business owners can benefit greatly with a I401K plan and with little restriction.  My best tip on the whole thing?  Start young because 401K plans work off compounding interest and gains momentum over time leading to a big payoff latter down the road.

The short video below explains the many details about the I401K plan and its benefits for business owners.

  “Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.”
Albert Einstein 

In the link provided below, you can easily use a compound interest calculator to figure out how much money you will have around retirement by using the I401K plan.  Once you open the link, enter all your corresponding numbers for dollars and years till retirement.  In the field marked "Annual Addition" simply enter the amount you can invest annually into the account.

Many also set up a Simplified Employee Pension Plan (SEP) IRA, which allows them to contribute up to 25% of their income, up to $51,000 (2013) per year.  

Wednesday, June 4, 2014

Get ahead by Saving (keeping) Money

The first step to wealth is often resourcefulness(read it frugality) and actually saving some of that money that you make in your paycheck.  Its not sexy, but in many cases its true.  Here are a few tips on how to get ahead even when earning less then we could be.  Cut off any reoccurring costs that you don't need or you can't get somewhere else for less or for free.

Saving money, stretching the dollar

  1. Go rural.
    It is far, easier to make a living on minimum wage in a rural area. There are many small towns where you can find a room to rent for rent or an apartment for under $350.  Try sharing a room with a friend or splitting costs with a someone else.
  2. Don’t drive.
    A car is a giant money waster on low incomes. No ifs, ands, or buts about it, if you’re working minimum wage, your car isn’t going to be worth it over the long run. Ditch the car and get whatever cash you can for it. Choose a place to live where you can get to work by foot or by bicycle. Being able to get to work reliably and for free will  cut costs, and also will also ensure that you don't lose hours due to car problems, taxis, or missed buses.  
  3.  Buying stuff and sell it for more.   Craigslist is very useful and easier to use then ebay as people are local and seem more attached to the purchase when they come by to pick up the object.  All you need is a working camera to capture a shot of the object you are selling.
  4. Spend no more than $300 a month on household necessities (food, toiletries, etc). The only way to pull this off is to cook pretty much everything yourself, or get help from a friend or family member.  Plan your meals appropriately with the goal to save.
  5. Cut cellular and cable costs. Cellular plans usually cost about $30 a month if you find the best deal in town. If you don't use all the minutes in your cell plan, a prepaid or pay-as-you-go phone may save you a lot of money. Consider not getting a cell phone at all.  Do you have a friend who can answer or screen phone calls on their phone for you?