If you have followed this Weekly PeHRspective for very long, you know I love Jim Rohn and the simplicity he brings to the complex. In the video below, Mr. Rohn explains to “children” the advantage of not only investing, but the plan for investing. In his characteristically simply, yet intriguing and attention grabbing way, he explains the concept of wealth attainment by way of the dollar, your first dollar. As I listened, the parallels between the “first dollar”, the basic principles introduced to young people as they begin their financial lives, and the dynamics of a healthy business model became apparent. Might it be time that we go back to the basics, track every dollar as though we are just starting, and get back on the simple plan that’s been proven to build wealth time and again? Could it be as simple as he suggests? Might the complexity we bring to the table when building our financial lives (both personal and professional) be a bit overrated? I think so…
Points to consider:
· Life’s challenges include:
o The development of our full potential
o The wise use of all of our resources (time, money, talent, skill, potential, leverage, etc…)
· Never spend more than 70% of every dollar. This allows for 30% of your income to work toward your financial goals. By starting this with your 1st dollar, you will add strength to all other dollars you earn thereafter.
· Financial Plan Components:
o 70% is budgeted for expenses
o 10% should be given (How might this translate into employee incentives, benefits, or community involvement initiatives for your business? How might these investments relate to additional return (revenue) for your business – productivity, reputation, employee involvement/commitment, etc..?)
o 10% should be allocated for active capital investments (think stocks)
o 10% should be allocated for passive capital investments (think mutual funds)
· It’s less about the amount of money you have to invest, and more about the plan you have to invest what you have – regardless of the point in life at which you start working your plan. Is this not true about all organizational objectives? Without a plan we are without direction and as Ziglar said, “If you aim at nothing, you’ll hit it every time.”
· If you will change, everything will change for you.
· Don’t buy the second car until you’ve bought the second home. What a great analogy!
And here is a great article explaining active vs. passive investing!