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4 Reasons Why Working For Someone Else Won’t Get You Rich

4 Reasons Why Working For Someone Else Won’t Get You Rich

A lot of people have big dreams of running their own business and being their own boss, especially in this economy where small businesses are flourishing. Do you have an idea for a business, store, or service you’d like to start? I’ve had many ideas, but something always keeps me from acting on them. Usually, it’s initial capital. I always feel like I need to bide my time working at my current job, saving up as much as I can, then try to launch my own business once I have my savings built up.

This seems like a practical approach, right? So why am I still not working for myself? Because I’m not taking risks. To get rich, I have to be my own boss. And to be my own boss, I have to take a risk, put myself out there, and make my money work for me.

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Bill Gates dropped out of Harvard to start a software company. He was in school, learning technology without a definite study or career plan, until his friend wanted to open a business with him. So Bill became a partner in a company; then… well, you know the rest. You know what happened because he became one of the richest, most successful people in the world, all because he took a risk. He left one of the best universities in the world to start a business, and look how that paid off!

Amanda Hocking wrote novels in her free time, and had 17 written by 2010. Instead of just letting these idle on her hard drive, she started self-publishing them as e-books. In just a year, she had sold over one million copies of nine books, and had made over two million dollars. This was unheard of for a self-published author! She sold an average of 9,000 books a day, which caught the attention of a big publishing house, who signed her. All of this happened because she just decided to take a risk and put her writing out there. Pretty inspirational, right? What can you do to make this type of success happen for you?

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1. You become too comfortable to take risks.

My main problem is that I have a job, which means I have income. I can pay my bills. I have a little left at the end of each month to put into savings. It’s comfortable! I don’t need to change anything. Which means I haven’t. You have to push yourself to make a change in a comfortable lifestyle. If I lost my job, I’d have no choice but to kick-start my dream in order to have a job and income! So do something to shake up your life, and see how one change can push you to take charge and change everything.

2. You’re building someone else’s assets.

When you’re working for someone else, you’re helping them. This is well and good if you believe in the cause and just want to get by in life; but if you want to get rich, you’re only hurting yourself. You’re spending at least forty hours a week focusing on someone else. What about you, and what you want to do? Imagine if you have 40 free hours to work on something for yourself. It’s a lot of time, right? Once you get out of your comfortable career rut, you’ll have those forty hours to dedicate to yourself and your own assets. Everything you put into yourself and your business will come right back to you. The money you spend for the business can be deducted from your taxes, and any income is yours alone!

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3. Time is more valuable than money.

Money is something you can save, something you can get more of (if you know how). But time is fleeting. You’ll never be able to make up time you’ve already spent. And, as we just mentioned, when you spend time working for someone else, you’re not able to use that for yourself. Sure, you’re making money while you work, but what if you finish your duties before lunch? You’re wasting the other hours of the day doing nothing, just to get that paycheck. Or, if you’re on salary, you might be working way more than forty hours, and not getting paid what you’re worth. The company you work for is in charge of your time. They dictate your schedule, they tell you when you can leave early or have to stay late, and they tell you if you can take vacation time. When you work for yourself, you might have to work harder, but you’re working for yourself, in charge of your own time.

4. You grow too focused on saving for a rainy day.

Saving is smart. We’ve all learned that, and it makes sense. But saving money isn’t helping you make money. Skipping Starbucks and making coffee at home might save you 5 bucks, but did it earn you 5 bucks? If it did, I want your coffee maker! You’re making a fixed income, and just putting money aside. Invest your money in your business, instead! Or if you’re not ready yet, invest in the stock market to watch your money grow.

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Yes, it’s hard to get something started, but you have to take the chance! And maybe it won’t take off immediately, but that doesn’t mean you’re a failure. Be patient, let your business find its footing and and follow through on things that will help you grow. Don’t expect everything to happen all at once, and don’t get discouraged — you can do it!

Featured photo credit: Nick Ares via flickr.com

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Last Updated on September 2, 2020

How to Set Financial Goals and Actually Meet Them

How to Set Financial Goals and Actually Meet Them

Personal finances can push anyone to the point of extreme anxiety and worry. Easier said than done, planning finances is not an egg meant for everyone’s basket. That’s why most of us are often living pay check to pay check. But did anyone tell you that it is actually not a tough task to meet your financial goals?

In this article, we will explore ways to set financial goals and actually meet them with ease.

4 Steps to Setting Financial Goals

Though setting financial goals might seem to be a daunting task, if one has the will and clarity of thought, it is rather easy. Try using these steps to get you started.

1. Be Clear About the Objectives

Any goal without a clear objective is nothing more than a pipe dream, and this couldn’t be more true for financial matters.

It is often said that savings is nothing but deferred consumption. Therefore, if you are saving today, then you should be crystal clear about what it’s for. It could be anything, including your child’s education, retirement, marriage, that dream vacation, fancy car, etc.

Once the objective is clear, put a monetary value to that objective and the time frame. The important point at this step of goal setting is to list all the objectives that you foresee in the future and put a value to each.

2. Keep Goals Realistic

It’s good to be an optimistic person but being a Pollyanna is not desirable. Similarly, while it might be a good thing to keep your financial goals a bit aggressive, going beyond what you can realistically achieve will definitely hurt your chances of making meaningful progress.

It’s important that you keep your goals realistic, as it will help you stay the course and keep you motivated throughout the journey.

3. Account for Inflation

Ronald Reagan once said: “Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hitman.” This quote sums up what inflation could do your financial goals.

Therefore, account for inflation[1] whenever you are putting a monetary value to a financial objective that is far into the future.

For example, if one of your financial goal is your son’s college education, which is 15 years from now, then inflation would increase the monetary burden by more than 50% if inflation is a mere 3%. Always account for this to avoid falling short of your goals.

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4. Short Term Vs Long Term

Just like every calorie is not the same, the approach to achieving every financial goal will not be the same. It’s important to bifurcate goals into short-term and long-term.

As a rule of thumb, any financial goal that is due in next 3 years should be termed as a short-term goal. Any longer duration goals are to be classified as long-term goals. This bifurcation of goals into short-term vs long-term will help in choosing the right investment instrument to achieve them.

By now, you should be ready with your list of financial goals. Now, it’s time to go all out and achieve them.

How to Achieve Your Financial Goals

Whenever we talk about chasing any financial goal, it is usually a two-step process:

  • Ensuring healthy savings
  • Making smart investments

You will need to save enough and invest those savings wisely so that they grow over a period of time to help you achieve goals.

Ensuring Healthy Savings

Self-realization is the best form of realization, and unless you decide what your current financial position is, you aren’t heading anywhere.

This is the focal point from where you start your journey of achieving financial goals.

1. Track Expenses

The first and the foremost thing to be done is to track your spending. Use any of the expense tracking mobile apps to record your expenses. Once you start doing it diligently, you will be surprised by how small expenses add up to a sizable amount.

Also categorize those expenses into different buckets so that you know which bucket is eating most of your pay check. This record keeping will pave the way for cutting down on un-wanted expenses and pumping up your savings rate.

If you’re not sure where to start when tracking expenses, this article may be able to help.

2. Pay Yourself First

Generally, savings come after all the expenses have been taken care of. This is a classic mistake when setting financial goals. We pay ourselves last!

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Ideally, this should be planned upside down. We should be paying ourselves first and then to the world, i.e. we should be taking out the planned saving amount first and manage all the expenses from the rest.

The best way to actually implement this is to put the savings on automatic mode, i.e. money flowing automatically into different financial instruments (mutual funds, retirement accounts, etc) every month.

Taking the automatic route will help release some control and compel us to manage what’s left, increasing the savings rate.

3. Make a Plan and Vow to Stick With It

Learning to create a budget is the best way to get around the uncertainty that financial plans always pose. Decide in advance how spending has to be organized

Nowadays, several money management apps can help you do this automatically.

At first, you may not be able to stick to your plans completely, but don’t let that become a reason why you stop budgeting entirely.

Make use of technology solutions you like. Explore options and alternatives that let you make use of the available wallet options, and choose the one that suits you the most. In time, you will get accustomed to making use of these solutions.

You will find that they make it simpler for you to follow your plan, which would have been difficult otherwise.

4. Make Savings a Habit and Not a Goal

In the book Nudge, authors Richard Thaler and Cass Sunstein advocate that, in order to achieve any goal, it should be broken down into habits since habits are more intuitive for people to adapt to.

Make savings a habit rather than a goal. While it might seem to be counterintuitive to many, there are some deft ways of doing it. For example:

  • Always eat out (if at all) during weekdays rather than weekends. Weekends are more expensive.
  • If you are a travel buff, try to travel during off-season. You’ll spend significantly less.
  • If you go shopping, always look out for coupons and see where can you get the best deal.

The key point is to imbibe the action that results in savings rather than on the savings itself, which is the outcome. Focusing on the outcome will bring out the feeling of sacrifice, which will be harder to sustain over a period of time.

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5. Talk About It

Sticking to the saving schedule (to achieve financial goals) is not an easy journey. There will be many distractions from those who are not aligned with your mission.

Therefore, in order to stay the course, surround yourself with people who are also on the same bandwagon. Daily discussions with them will keep you motivated to move forward.

6. Maintain a Journal

For some people, writing helps a great deal in making sure that they achieve what they plan.

If you are one of them, maintain a proper journal, where you write down your goals and also jot down the extent to which you managed to meet them. This will help you in reviewing how far you have come and which goals you have met.

When you have a written commitment on paper, you are going to feel more energized to follow the plan and stick to it. Moreover, it is going to be a lot easier for you to track your progress.

Making Smart Investments

Savings by themselves don’t take anyone too far. However, savings, when invested wisely, can do wonders.

1. Consult a Financial Advisor

Investment doesn’t come naturally to most of us, so it’s wise to consult a financial advisor.

Talk to him/her about your financial goals and savings, and then seek advice for the best investment instruments to achieve your goals.

2. Choose Your Investment Instrument Wisely

Though your financial advisor will suggest the best investment instruments, it doesn’t hurt to know a bit about the common ones, like a savings account, Roth IRA, and others.

Just like “no one is born a criminal,” no investment instrument is bad or good. It is the application of that instrument that makes all the difference[2].

As a general rule, for all your short-term financial goals, choose an investment instrument that has debt nature, for example fixed deposits, debt mutual funds, etc. The reason for going for debt instruments is that chances of capital loss is less compared to equity instruments.

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3. Compounding Is the Eighth Wonder

Einstein once remarked about compounding:

“Compound interest is the eighth wonder of the world. He who understands it, earns it… He who doesn’t… Pays it.”

Use compound interest when setting financial goals

    Make friends with this wonder kid. The sooner you become friends with it, the quicker you will reach closer to your financial goals.

    Start saving early so that time is on your side to help you bear the fruits of compounding.

    4. Measure, Measure, Measure

    All of us do good when it comes to earning more per month but fail miserably when it comes to measuring the investments and taking stock of how our investments are doing.

    If we don’t measure progress at the right times, we are shooting in the dark. We won’t know if our saving rate is appropriate or not, whether the financial advisor is doing a decent job, or whether we are moving closer to our target.

    Measure everything. If you can’t measure it all yourself, ask your financial advisor to do it for you. But do it!

    The Bottom Line

    Managing your extra money to achieve your short and long-term financial goals

    and live a debt-free life is doable for anyone who is willing to put in the time and effort. Use the tips above to get you started on your path to setting financial goals.

    More Tips on Financial Goals

    Featured photo credit: Micheile Henderson via unsplash.com

    Reference

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