Category: Budgets

  • True or False? — It Takes Money to Make Money

    True or False? — It Takes Money to Make Money

    The short answer is YES; of course it takes money to make money. To make money in the stock market, you must have money to make the initial stock purchases. Starting a business requires money to buy inventory, marketing materials, office space and equipment. Even lottery winners have had to have the seed money.

    The ability to execute an idea

    Great inventors and industrialists became great, not so much because of their ideas, but because of their ability to execute. This is the crucial aspect.

    It Really Does Take Money to Make Money

    Now before discouragement sets in, I want to stress that it doesn’t necessarily have to be your money. As we all know, ideas have value. This value can be unleashed by using other people’s money (OPM). OPM, has launched many a fortune based on nothing more than a fine idea.

    What these great men had in common was the ability to execute, which as we’ve already determined, requires money.

    Ideas, however, are like sphincters—everybody has one (or more). Taking an idea from wishful thinking to a viable business enterprise requires (you guessed it) MONEY! In the not too distant past, finding the money to turn ideas into realties was an arduous task. Loans from friends and family, bootstrapping with your own assets and credit, angel investors and venture capitalists were the only available sources of capital.

    The process of turning an idea into a commercially viable product or service is known in the entrepreneurial community as execution. Great inventors and industrialists became great, not so much because of their ideas, but because of their ability to execute. Samuel Morse wasn’t the first to invent the telegraph; Thomas Edison was not the first to conceive the light bulb and the venerable Alexander Graham Bell wasn’t the first to envision the telephone. What these great men had in common was the ability to execute, which as we’ve already determined, requires money.

    History of these inventions

    If we delve into the history of these three inventions, we learn that an Italian, Antonio Meucci, was the first to develop a working telephone. He filed a temporary patent 5 years before Bell but poverty and poor health prevented him from paying the patent office the $10 fee required for the patent’s renewal.

    Heinrich Goebel was likely the first to invent the light bulb. In fact, he tried selling Edison on the idea but Edison wouldn’t bite. Goebel died a couple of years later and Edison bought the patent from Goebel’s impoverished widow for a song.

    A French inventor by the name of LeSage invented the telegraph 60 years before Samuel Morse. The idea didn’t take root in France but Morse brought it to fruition here in America.

    These examples demonstrate the important roles money and execution play.

  • Tips for Avoiding an Out of Money Experience

    Tips for Avoiding an Out of Money Experience

    Do you run out of money before you run out of month? Many do, but it doesn’t have to be that way! Wealth is the result of widening the gap between what you earn and what you spend. Most of us make the mistake of ramping up our spending as our disposable incomes rise. This is self-defeating. If you do not develop a respect for money, it will always elude you.

    You Need a Plan

    We call this a budget. That’s a four letter word to some people but if you count the letters, it’s really a six letter word … like friend. If thinking about budgeting makes you throw up a little in your mouth, try thinking of a budget as your friend.

    This friend will make sure that the month and your money expire at the same moment in time. This friend will rescue you from the endless cycle of debt that traps so many of us.

    You know the routine. You are out of cash with almost a week until payday. You hit the ATM for a cash advance on your credit card so you can get by until the end of the month, or worse yet, you sign-up for a payday loan, plunging yourself even further into the vicious cycle. This is not a plan! This is a band-aid!

    Establish Goals

    Goals are nothing more than a performance benchmark. Without goals, you have no means of measuring your progress.

    Make whatever goals you set realistic. Nothing torpedoes ambition like missing a goal. For this reason, in the beginning, set modest goals. Just getting through the month with no borrowing is a real accomplishment. Remember—budgeting and planning are processes, not overnight cure-alls. When you master one goal, more aggressive goals can follow, like setting aside some savings.

    Performance Benchmark

    Goals are nothing more than a performance benchmark. Without goals, you have no means of measuring your progress. Make whatever goals you set realistic. Nothing torpedoes ambition like missing a goal.

    Next Steps

    Living within your means, which is nothing more than making the money you receive on payday last until the following payday, is only the first step. Accomplishing this critical first step, as stated previously, requires a budget and the establishment of short term goals. But laudable as this may be, you are still living paycheck to paycheck.

    Oh, you’ve made progress—you are living paycheck to paycheck on your own money rather than borrowing money and increasing your debt. So what’s next? Next steps hinge on how you define your medium and long term goals. No one can define these for you, certainly not me!

    Maybe your end goal is a comfortable retirement, an early retirement, travel, a huge bank balance, a dream house, unfathomable wealth or all of the above. Regardless of your goal, you must have a plan, a roadmap to get you to the destination you have chosen, and this is much more complex than drawing up a budget. The following tips are critical ones, regardless of what your medium and short term goals may be, and will help you achieve success beyond your wildest dreams.