Have you been mulling over whether or not you want to exit your business or professional practice?  Have you wondered if you’re ready?  How would you know if it was the right time to consider your options?

To make this decision easier, it is important to break down the major factors involved in your decision.

On one hand, are you mentally ready to exit the business?  I mean, is your head still in the game or are you ready to move on?  And on the other hand, is your financial house in order so that you can divest yourself of your primary income source and still pay for your lifestyle? 

The decision to exit -- whether you get out all together, take on a partner, or sell to someone and work as an employee -- should be worked out regarding your emotional readiness to move on and your economic readiness to give up your primary income source before you entertain any offers or negotiations.

Here are some questions to determine your emotional readiness:

1. Can you imagine retiring from your business or is there still a lot of work to do?
2. Do you find yourself less interested in business than a few years ago?
3. Are you getting burned out?
4. Do you have a plan to exit your business and are ready to get out?
5. Have you taken the time to work out exactly what you will do with your days if you’re not working in your business?
6. Do you have another purpose in your life that you would rather follow?
7. Are you still involved heavily in the day-to-day running of the business?
8. Is your business the only thing you know and wouldn’t know what to do without it?

These questions are designed to get you to really confront where your head is regarding your business.  If you feel burned out and frustrated, but still have a purpose to help people through your work, then that is perhaps a symptom of a lack of business management acumen and not really a strong desire to go on to something else.  This is really important -- many people who tell me that they are ready to sell are really saying that they don’t know how to manage their personnel, marketing, patient (or customer) compliance and strategic planning.  Of course, if these areas are not under control in your business, then it will not be valuable to someone else.  If this is your situation, get the training you need to manage your practice more profitably rather than quit.

The economic readiness questions address a very different situation -- can you afford to get out?  Here are some questions to consider:

1. Have you worked out exactly how much income you will need annually for the rest of your life to pay for your lifestyle?
2. Have you prepared yourself to pay higher income tax rates on your income in the future (no one has told me that they expect income tax rates to be lower over the next 20 years)?
3. Is all of your debt paid off including your house?
4. Have you made provisions for inflation and increased healthcare costs throughout your golden years?
5. Do you have other sources of income outside of your current business?
6. Are you comfortable in your preparation for future economic crises regarding the protection of your wealth and income?
7. Are you counting on the sale of your business to fund your retirement plan?
8. Do you have at least $1 million saved outside of the value of your business?

These can be tough questions to answer, especially with the economic realities we all face today.  But, they must be addressed to avoid the delusion that we are better off financially than we really are.  In short, the more financial resources you have, the more flexibility you will enjoy in the exit planning process.  You will be able to use more advanced exit strategies that can provide better risk control, income tax benefits and net proceeds over other commonly-used options.

Your emotional and economic readiness will give you a good starting point in the exit planning process, whether you want to get out yesterday or in 30 years.  You see, if you aren’t economically ready to get out but emotionally ready, then you have only a couple of options:  Improve your ability to manage the business and grow it (so that it is less stressful and a whole lot more fun), or sell it today at the highest price, being content with whatever that result is.  If you are economically ready and emotionally ready, then the world is your oyster.  You have the flexibility to use many different options to exit on your terms including management buy-outs, treating or consulting part-time, or planned giving strategies.

The key to this process is to sit down and take an honest look of where you are emotionally and economically.  Discuss these questions with your spouse.  The answers you get will help you greatly in your decision whether and under what circumstances you want to exit your practice.  It can be an incredibly profitable exercise to you since it clarifies the practice’s role in the accomplishment of you and your family’s most important life goals.  Give it the time it deserves since it probably will be the single largest business transaction of your life.

The PIE triangle is a concept that shows the interrelationship of different elements of one’s personal financial condition.  Think of it as a triangle where each of the following elements represents a point on the triangle.

P stands for Protection.  Protection of assets and income is critical to the long-term affluence of a household.  Protection comes in many forms due to the fact that threats of loss can occur in a multitude of ways.  This area of protection covers really any possible risk that can negatively affect the financial well-being including losses from inflation, market volatility, taxes, interest, ill health, premature death or disability, longevity risk, litigation, incompetence in business matters, imprudence, etc.  As one earns more income and expenses that income in the costs of living and investment, the need to protect those assets becomes more crucial because one has more value to protect.

The I is for Income.  To create abundance or an improved financial condition, an income must be earned as a first action.  One can only accumulate after one is compensated for providing products and services of value and exchanging them.  If a person or family wants to enjoy an improved financial condition, earning income must be made a first priority as it is the most important element in one’s financial plan.

The E represents Expense.  After income is earned, it is then spent or expensed on the costs of living.  Money comes into the household and is then allocated to expenditure for not only current living expenses, but also to provide for future expenses, such as education, retirement or healthcare.  The way in which expenses are made in relation to funding the immediate and long-term goals of the household and its members determines to a large degree whether those goals are achieved and the overall financial condition of the family.  If money is misallocated or malinvested, the funds may be lost, causing important goals to go unfulfilled.

What is important is the interrelationship of these three elements.  To reach an improved financial condition, one must raise all 3 corners of the triangle.  If one earns income, then he must spend intelligently within that level of income (including reserves) and protect whatever assets are used to create that income.  If one increases his expenses, income must go up to cover the increased expense and protection against debt or adverse economic conditions must also occur.  If one raises his level of protection, such as through insurance, business structure or reserves, one must earn a higher income to fund it and expense the money diligently to protect against loss.

Likewise, one’s financial condition can be lowered by lowering any of the corners of the triangle.  If one does not earn money, then one has nothing to spend or save, and one cannot protect himself against adverse conditions.  If one does not spend money on those things that earn more money, the income will decline and one will not be protected from loss.  If one does not protect what he earns and accumulates, sooner or later a loss will occur due to the nature of life.

Some believe that a real higher financial condition can occur just from earning lots of money.  While it is the driving factor one cannot achieve enduring financial prosperity if one spends more than he makes and does not provide for potential decreases in that income.

Others believe that one can achieve financial prosperity by thrift alone.  While one must spend within his income, just saving money on current expenses without finding ways to increase one’s means will create a future shortfall.  Making more than enough income to pay for one’s expenses is itself a form of protection.

And some believe that if they get the ultimate asset protection program set up that prosperity will come their way.  Unfortunately, without the production of income and intelligent expenditure of that income, a more optimum condition will simply not be achieved.

In the final analysis, the PIE Triangle is the route to financial prosperity.  As one raises one corner of the triangle, he must also raise the other two.  To do otherwise increases one’s risk of potential loss in the immediate to long-term future.

Understanding and utilizing this concept will assist you in achieving true financial prosperity.

Econologics could be considered the modern science of financial planning.  This is a coined word derived from the ancient Greek word for “economy,” oikonomos management of a household, -logy study of, and -ikos practices or skills.  So it literally is defined as “the study and practices of the financial management of a household.”  This coined word is necessary to avoid confusion with what consumers believe is “financial planning,” since that concept has not been standardly defined or practiced in the financial advisory profession today.
 

Financial planning, as a profession, has been around since 1969 as a process of establishing a consultative relationship with a client as opposed to a transactional relationship.  Prior to this innovation, people just purchased life insurance and investment products from salespersons without any attention on future planning needs.
 

In 1983, the Board of Directors of the International Association of Financial Planners (IAFP) defined the process by which a financial planner would serve his client.  The 6-step process is as follows:
1. Establishing and defining the relationship with the client (a fiduciary relationship)
2. Gathering client data
3. Analyzing and evaluating the client’s financial status
4. Developing and presenting financial planning recommendations
5. Implementing the financial planning recommendations
6. Monitoring

The most well-trained and professional financial advisor today, the Certified Financial Planner® (CFP®), utilizes this 6-step process according to Practice Standards defined by the CFP Board.  Additionally, the CFP practitioner completes a 6-course curriculum of study including Financial Planning Theory, Investments, Insurance, Tax Planning, Estate Planning and Employee Benefits. 

While the education in personal financial technology and this 6-step process is somewhat comprehensive, it is also quite arbitrary and incomplete.  This allows tremendous variation of application in each step of the process, multiplying the wide range of results experienced by the public, from the very good to the catastrophic.  While there have been individual efforts to standardize the field over the years, the average condition of our households demonstrates the lack of standard financial planning technology and its application, magnifying the omissions and inadequacies of the current standards.

Econologics seeks to create a new standard of financial planning technology by using a more logical and scientific approach to solving the financial challenges of our clients. There are many advances to the field, culminating in a more universally standard and codified subject:

1. A thorough study and compilation of the basic principles of financial prosperity has been done.  These are the fundamental truths of the subject that are not taught or applied uniformly today, leaving one attempting to act with competence in financial matters while lacking an understanding of the laws that regulate the subject.  Philosophical, religious, academic and historical sources from the last 4000 years were studied to isolate these natural laws that have proven true in all times and places and summarized in an upcoming book. The last book that addressed some these laws was in 1928.

2. The client has been defined.  For modern financial planning techniques to work uniformly, they must be applied to the correct entity.  It has never been defined who receives the services of a financial planning professional.  It is not individuals, nor is it companies.  It is a household as a unit—serving the needs of its individual members and the needs of a closely-held business as a subsidiary to the household entity.

3. The Household CFO™.  For a household to be properly managed, one of the adults of the family unit must assume the ultimate responsibility for the financial condition of the household.  This means that he or she acts as a fiduciary of that economic unit according to a standard code of conduct, called The Code of a Household CFO.

4. The Household CFO Course.  If one does not have the knowledge, policies and procedures to act as a household CFO, it is impossible to perform the functions of the position or work with financial professionals in the accomplishment of financial objectives.  A weekend workshop has been developed to teach the adults of the household the basic fundamentals and their most efficient application within the framework of our modern economic condition.

5. The Optimum Financial Condition for a household is defined.  In order to achieve an ideal financial condition for a household unit, one must be specifically defined.  This is a major omission in existing financial planning technology since no standard result has been defined by the profession for its clients.  The error is rooted in the belief that everyone’s financial goals are unique, yet closer inspection reveals that there is a much higher level of standardization that can occur due to the similarities of household units rather than their differences. The Optimum Financial Condition is the basic end result one should receive from engaging a financial planning professional’s services.  Once standard fundamental financial rudiments are achieved, individual and specific advanced planning techniques can be used to further the goals of the client.

6. The 9 elements of a financial plan.  The financial planning process has been redefined to include 9 areas, rather than 6.  They are:
• A fully implemented, written, comprehensive financial plan
• Training on basic principles, policies and procedures in financial planning
• A well-managed business or professional practice (for business owners)
• Planning and provision for future income needs
• Debt elimination and credit maintenance programs
• Estate planning – a complete and updated plan
• Tax optimization on current and future income
• Global protection on virtually all valuable assets
• Investment planning to safely fund financial goals
Every element must have its own ideal results; what would that area would look like if everything was complete, perfect and in exact alignment with the client’s goals.  When all elements are reaching their ideal conditions, an optimum financial condition for the household is attained. 

7. Econometry™.  This is a standard set of metrics to measure one’s existing financial condition compared to the optimum.  Current financial planning technology is not short of ways to measure various financial relationships.  These metrics measure tax or investment results, for example, but do not measure the overall financial condition of a household.  This is a major omission, since one cannot manage that which is not properly measured.  It demonstrates that the financial planning profession has concentrated on specific areas of one’s overall financial picture instead of the ultimate client experience.  Econometry includes 18 separate statistical and financial indicators that accurately measure the financial condition of one’s household.

8. Standard procedures.  Econologics seeks to find the most efficient methods possible to achieve the ideal conditions in each of the 9 elements of the financial plan.  While there is a multitude of ways to pay off debt, or invest, or create an estate plan, the most direct methods are sought to create the best result with the minimum cost or risk.  Due to the arbitrary nature of much of our modern financial system, greater simplicity is continually sought in the application of basic economic principles.

9. Certified Econologics Specialist™.  A CES™ is a practitioner who applies standard and unvaried Econologics methodology to his clients.  He is well-trained on the technical aspects of each of the 9 elements of a financial plan as well as the implementation of standard programs in its application.  He abides by the Credo of Econologics as well as the Code of a Certified Econologics Specialist, which operates as an extensive code of ethical conduct for a practitioner.

10. The Econologics Institute.  This is the organization that researches financial technology for inclusion or exclusion in Econologics.  Further, it creates and distributes educational products such as books, courses, etc. to teach both the public and financial advisor community on the subject and its application.  It also serves as the certification authority for both the subject itself and the practitioners who utilize it to assist the public.

These 10 points summarize the work that has been done thus far to evolve the profession of financial planning to a higher standard of methodology and application.  While the work is ongoing, these innovations have already improved the results attained by clients over less standard approaches.

Every private practice owner will transition out of their business someday.  That’s for sure.  And that exit can be a very exciting and profitable life event or a regrettable shambles, depending on how much foresight is used to intelligently plan and execute that inevitable event.

The reason a practitioner goes into private practice is to have more control over his most valuable assets: time and money.  Ideally, he would build a practice through blood, sweat and tears to earn enough money so that other life goals can be realized with the free time created, while gaining the most satisfaction out of the time spent building the practice and helping others. To be done effectively, the practitioner in private practice must realize that he has to wear three hats: the technician, the executive, and the investor/owner.

The technician role is easy to understand: provide services to your patients/clients with the highest quality possible.  The executive role ensures that the organization handles the business side of private practice with marketing, finance, personnel, sales and planning.  The investor/owner role demands that the company maximize its growth and profitability – its value – as probably the largest asset and main source of income to the practice owner’s household.

When a practice owner entertains the idea of exiting the practice, he has to look at the transaction from the perspective of the investor/owner or a fortune will be lost.  Unfortunately, this is not a common practice since private practice owners are technicians and not professional investors.  However, when you own a practice, there are successful actions that must be known and done to get your money out of your investment; if these are not known and applied, hundreds of thousands to millions of dollars can go unrealized.

Planning for your exit should start AT LEAST 10 years before you want to pull the trigger.  That’s right.  And if you’re within 10 years of retirement, start right now!  Why?  Because there are 7 different strategies you can use to exit the practice and plenty of time would be needed to explore each option or combination of options to maximize the results of the exit in alignment with your goals. 

Let’s take a look at the options:

1. Dying With Your Boots On.  This is the diehard technician or executive who loves the work and wants to (or has to) work full-time until the end.

2. Closing the Doors.  This is the practice that has little or no value, and the owner would just shut it down to go onto some other activity.

3. Outright Sale:  In this strategy, the owner sells all or part of the business to an unrelated buyer.

4. Management Buy-Out or Buy-In:  These are the strategies that focus on transferring the business to associates or management, usually over a period of time.

5. Recapitalization:  This strategy involves partnering with a larger firm that specializes in buying part of a practice now with the intention of growing it and selling the practice later at a greater profit.  For example, you may sell 80% of your practice now at the current valuation, work the clinic for 5 more years under the new majority owners, and then sell the remainder 20% at that future value.

6. Employee Stock Ownership Plan (ESOP):  The ESOP is for larger practices ($5 mil gross income or more) who want to sell all or part of the clinic to the employees.  This type of plan can be an incredibly versatile tool in the right circumstance.

7. Giving it Away:  Yes, you can give all or parts of your practice to charity and family members under a planned strategy. 

Each of these strategies has pros and cons, especially in the valuation method used, terms and tax implications.  At the end of the day, the goal is to realize the maximum after-tax result that best furthers the goals of the exiting owner, while providing a winning solution for the buyer as well.

The financial condition of your household will have the biggest effect on what strategies you will be able to use:  the less in financial resources you have outside the business, the less flexibility you will have in realizing value from the practice. If you have no money saved outside of your business, you may be relegated to the first 2 of the above listed options.  You may only have the option of selling outright, but the amount someone will offer you may be substantially lower than you feel your practice is worth.

I find it amazing that practice owners will spend the vast majority of their careers running the business but spend practically no time at all arranging their financial affairs to gain the maximum economic benefits from a lifetime of work.  This is unfortunate and unnecessary, and is the main reason for putting together a long-term financial and exit strategy plan right now.  If you start now, you will have time to save a substantial portion of your yearly income, eliminate your debt, and structure the practice so that it is worth the maximum value to another party that may want to purchase it in the future.

This may seem a bit daunting to you, but it’s easier than you think.  The first step is to begin to think about the ideal exit for you and what kind of lifestyle you want to have after practice ownership.  Get as specific as possible, then get to work taking on one detail at a time to create it.

The next 10 years of your life will happen anyway, so we may as well create another few hundred thousand dollars of wealth by proactively planning our exit rather than letting fate decide.  And besides, it can be a lot more fun.

In doing some research for my upcoming book, The Golden Route – 21 Principles to Financial Prosperity, I realized that as a financial advisor, my job is to help you create and implement a financial plan that will give you the greatest chance of realizing true financial prosperity in your lives, despite the overwhelming and concentrated effort by the banking institutions and government to execute their plan for the fruits of your lifetime of work.  In order to know the difference, it is imperative that we identify what their plan is and how to intelligently avoid the cleverly-set traps and pitfalls that are part and parcel of everyday financial life.

First, one must realize the goal of the banks and government:  to own it all.  That’s right.  Get your head around that one.  The plan of the banking folks and our government is to confiscate the value of your production through a series of machinations that will go unchallenged or undetected by the population as the wealth of those who produced it (you) gets gradually and ultimately transferred to those who didn’t produce it (them).

Check out this interesting quote attributable to J.P. Morgan, a leading financier, in a private communiqué only to leading U.S. bankers in 1934:

“Capital must protect itself in every way... Debts must be collected and loans and mortgages foreclosed as soon as possible. When through a process of law the common people have lost their homes, they will be more tractable and more easily governed by the strong arm of the law applied by the central power of leading financiers. People without homes will not quarrel with their leaders. This is well known among our principle men now engaged in forming an imperialism of capitalism to govern the world. By dividing the people we can get them to expend their energies in fighting over questions of no importance to us except as teachers of the common herd."

Huh.  That sounds like a plan to me!  Isn’t that what is happening today all over America?

And this leads us to the four primaryl ways that these guys plan to relieve you of your hard-earned wealth:

1. Interest on debt.  It is well known that we have been brainwashed into over-using debt for everything.  We get to pay a premium to a financial institution for the use of someone else’s money.  And that premium we pay is over and above the actual value of the things we bought.  In this way, your future production is already committed to the bank instead of yourself.

2. Inflation.  Inflation is the constant devaluation of the money you earn.  That means that the one dollar you earn today will be worth less than one dollar tomorrow.  The government benefits from this mechanism because with each new dollar put in circulation, they and the banks get to exchange it on commodities (real wealth) before you and I get to use it, when, with each exchange the money becomes worth less compared to the value of the commodities.

3. Income Taxes.  If you are a competent, skilled and successful business owner or professional, you get the added burden of giving away more of your income if you earn more this year.  And, not one person has told me that they expect tax rates to be lower in the future, so why are we being told to place all of our retirement savings into tax-deferred investments?  So we can pay lower taxes when we withdraw it to live on?  That defies common sense and the government will make a fortune on that one.

4. Market Manipulation. The last decade has proven rather plainly that trying to outperform investment markets is a fool’s game.  The answer is simple.  The banks and government make it a sport of misdirecting the public on the perceptions of the economy so that we get into a false sense of security by investing only to find out time and time again that things weren’t as they seemed.  We become poorer while those in power buy up depressed assets at “fire sale” prices, only to become richer after the dust settles.  The current housing crisis is a great example of this.

These are what I call the Four Horsemen, because it is through these tools that they are implementing their plan to take your wealth.  And their plan is working.  How do you know?  Well, if you have been in the work force for say, 20 years, how much money do you have saved to show for it?

Now let’s compare that to the total amount of interest you have paid over the last 20 years, the total amount of income tax, the fact that inflation has cut the value of your money in half, and how much wealth you have lost through bad investments and real estate.

Do you feel sick?  It’s okay. I bet no one clued you in on the financial plan that’s been set up for you.  And when will this plan end you may ask?  When they have all of it, of course! For there can be no other logical conclusion.

Well, now that you know, you can put together your own plan to overcome these Four Horsemen.  I’ll discuss that in Part 2 of this article….

Why your Knowledge of the Principles of Financial Prosperity Determines your Affluence

Hotel rooms are filled with hopeful attendees yearning to learn the real estate secrets of the wealthy.  Cable TV boasts infomercials every night that promise to show how one can successfully trade the stock market profitably through the use of some miracle computer program.  Countless emails suffocate our spam filters, showing us the path to riches if we just “click here.”

These, and many other “solutions” are sought after by a desperate population as an answer to why financial prosperity and abundance eludes us.  We know that we need to learn more about the subject of personal finances, so we try to find books, seminars and courses that will teach us what we need to know to successfully navigate the treacherous waters of our current economic system.  But, with an overabundance of personal finance information available, our household financial conditions seem to be getting worse -- and they are.

So what’s missing?  A knowledge and competent application of the natural laws that monitor one’s financial prosperity.   These are the basic ideas that guide our actions in the area of personal finance – the earning and spending of money.

Throughout the history of civilization, at least as far back as 5000 years ago, man observed that certain activities created prosperity and other actions brought about economic demise.  Certain authors wrote these concepts down in historical and religious texts, essays and academic papers.  If one studies these documents, these basic concepts repeat again and again with each new era.  They are true no matter the culture, political or monetary system.

Let’s take one such principle:  Stay Out of Debt.  In my research, no other concept was more repeated than this idea since the beginning of written language.  But let’s see in what condition the average household experiences today – according to the Federal Reserve Bank of New York, the average debt per household in America was $48,800 in 2010, and the average US debt per household was $545,668 in May of 2009, according to United Press International (that’s your share of the national debt).  With the median household income around $50,000, I cannot imagine a scenario where we could be in a greater violation of this basic truth.  Is it any wonder why we feel broke?  It’s because we are!

Yet, are you personally debt-free?  If not, then real financial freedom is not attainable for you to that degree.  And this is true no matter how many television commercials purport the virtues of buying now and paying later.  It’s a funny thing – we all know it’s true even though we choose to satisfy our immediate wants with greater long term expense.  If you get yourself out of debt, you will feel better.  I promise.

There are many more of these natural laws, and the discovery of them and mastery in their application is really the only barrier between your current financial condition and one of abundance and prosperity.  No factor outside your personal use of these principles – the economy, government, competition, etc. – determines your financial prosperity, only you and your actions do.

After reading hundreds of personal finance and business books, religious texts, academic and philosophic works, and historical perspectives, I have created a summary of twenty-one of these basic time-tested principles.  It is these simple truths that underlie every financial decision you make every day.  They are so fundamental, so integral, that they are consistently overlooked by financial advisors and educators, who evidently assume that one already knows them.  However, the current financial condition of our society proves that these principles are not at all known nor competently applied.

In the end, there are consequences to our use or neglect of these basic rules.  If we neglect them, the penalty will be more effort and emotional distress.  If we abide by these principles, then the rewards are less effort, more confidence and control, more joy and self-satisfaction.  I know -- I have personally lived the results of both sides of each of these principles.

My upcoming book, The Golden Route – 21 Principles to Financial Prosperity, will be published July 1, 2011 and will be available on Amazon.com as well as TheGoldenRoute.com.

How to Grow and Protect Your Wealth as the Dollar Loses its Value

As the old adage goes, “what goes up must come down.”  Here I’m not talking about the effects of gravity but currency values, namely the US Dollar.  For more than 100 years the US Dollar has enjoyed greater relative value than other countries due to the fact that America has been a land of producers and a world financial leader.

And, for more than 100 years, international banks and our government have systematically devalued the dollar through one catastrophic economic mandate after another, culminating in a multi-trillion dollar debt, volatile investment markets, a nation of consumers and general social decline.  As the printing press keeps churning, the American Dream flitters away.

We all seemed to be freaked out (or blissfully unaware) that prices for everything will go up, perhaps drastically, and our standard of living will decline.  It’s true, and it’s already happening.

Commodity prices are increasing rapidly, and since money is only a substitute for the commodities, the value of the dollars that represent those commodities are declining at the same time.  This is otherwise known as inflation.

What seems to be on people’s minds is—what do we do to overcome this inflation and maintain the value of the money we have?

The answer is to invest our money in something that’s going up in value!

The sage advice of the day is to buy commodities.  Silver and gold! 

Invest our money in emerging markets so we can own stocks in a lesser-developed country that isn’t as affected by the decline of the dollar.

Hold our money in other currencies.

All of these options are valid and may make sense for you.

But what I want to know is – what is your overall financial plan?  Here’s mine:

1) Earn as much money as you can.  Your job, no matter what you do for a living produces a commodity—your products or services are used by others.  The more money you make, the less inflation hurts you.  To illustrate this, let’s take a $200 grocery bill.  That $200 is a much bigger deal to a person on an income of $2000 per month that someone making $10,000 per month.  Do anything you can to make what you do more valuable to someone else.

2) Get debt-free.  Pay off all of the credit cards, personal loans and home mortgages and stay out of debt.  No matter what the lending institutions tell you, you cannot spend more than you earn.  Those who do not understand this will be the first ones down the chute when the rise of basic living expenses makes the debt payments unpayable. 

3) Save a portion of every dollar you earn.  As the cost of living continues to rise, the need for emergency funds for future expenses will also rise.  This will not happen if no money is set aside in the first place. 

Once these actions are done, then take a look at where to invest the money you’ve saved, according to your well-constructed investment plan and policy.

You see, those with a plan know how much they are going to invest, how much risk they are willing to take, when they will be investing and into what investments and with whom.  If you’re looking for investment advice without an overall plan and strategy, your experience and results will not be as favorable as they should be.

As a word of warning:  It is my experience that people haven’t saved enough.  And they know it.  In desperation, their solution is to take extreme risks to make as much return as possible on the little money they have saved.  Unfortunately, this ends in loss too often because they never really understood the risks they were taking.  And, buying commodities, emerging markets funds and foreign currencies are risky.  Don’t lose what you worked so hard to have.

In inflationary times, the best strategy is to get the greatest return possible out of your most valuable assets:  your ability, intelligence and hard work.  Just because the society’s standard of living is going down, that doesn’t mean yours has to.

During the last twenty years of working with people of all socio-economic levels regarding their personal finances, I’ve observed two uncompromising traits of those who are truly affluent and who enjoy a high level of financial success and abundance. 

The first uncompromising trait is that the affluent make abundant income.  Always. 

We all know people who seem to have “the magic touch,” or have referred to such successful people in that “everything they touch turns to gold.”  This isn’t magic or a knack someone has.  It is simply the understanding and execution of the natural laws that relate to the subject of how to make income.  The only reason why there aren’t more affluent people in the world is because this knowledge is not widely known or used, not because it’s a mystery or reserved for a select few.

Affluent people do not make excuses for low income; it’s not “the economy,” “people have less money to spend,” “insurance reimbursements are down,” “less clients are coming in the door,” or an infinity of other justifications.  For example, there is so much agreement that “the economy” is THE reason why the income is down that many people just accept it as reality and do not aggressively look for ways to increase it despite the current economic climate.  And that is unfortunate.  Of the many hundreds of people I’ve consulted over the years, I do not know one affluent person who believed that the economy affected their opportunities to make income.  As a matter of fact, these people acknowledge that the environment is tough but look for ways to capitalize on it rather than succumb to it.

The affluent look at what they can control (not what is outside their control) to increase their income.  This may include better marketing strategies, more efficient personnel, improved financial control, or a change in what products or services will be offered in the marketplace.  No matter what it is, they adapt and prosper.

The second uncompromising trait is that the affluent pay themselves first.  Always.

These people know that the only way to create long-term affluence and financial stability is to save a portion of everything they earn, for example, 10% of income.  This is a habit and it is the first expense they make each month, before their mortgage, utilities, entertainment—everything.  They know that if they pay everyone else first and themselves with what is left over, there will never be anything left over and nothing will ever be saved for their future.

They recognize that they have the right to reward themselves for having been so productive—the gift of a stable and predictable financial future.  And nobody ranks higher on the monthly expense list than their own family’s future well-being.

Sometimes the income decreases and paying the monthly bills becomes more of a challenge.  The instinct will always be to decrease our savings and use that money to handle our monthly commitments.  The affluent know that this is the exact wrong thing to do for one simple reason:  there will always be a reason not to save money today for the future.  They know that there will always be a problem requiring that they take their savings and divert it to something that seems more important today.  No matter what the problem is, it is not more important than paying themselves first. 

Now if you feel yourself saying, “but you don’t understand…..,” or “this is really different…,” or “you know, I have to pay this or we can’t stay open….,” then this demonstrates how the problem right now appears more important.  It isn’t.

The affluent know that the way to handle these problems is to make more money now while taking a portion and saving it.  They believe that the solution is not either...or, but both...and.

It is these two uncompromising traits that separate the affluent from the chronically financially challenged.

If you want to be more affluent, then get busy making more money.  Improve your product, your marketing and your sales process for starters, then learn the natural laws about the subject.  And, take the first dime of every dollar you earn and save it, starting today.  No matter how bad your current financial situation is, improvement will not occur if these steps aren’t done. 

The more uncompromising you are, the more affluent you will be.  And you deserve it.

Investors have always searched for the perfect investment--the one that generates high returns with almost no risk.  We have researched real estate, precious metals, stocks, bonds, currencies and a whole smattering of “alternative” investment opportunities to find the pot of gold at the end of the rainbow.

Before we hone in on the best investment in the world, we should know already that there is no perfect investment.  And we also know that there is no such thing as “risk-free”.

With that being said, just what is the best investment in the world?  Gold?  Real Estate?  Mutual funds?

No, not even close.  It is you.

It is your ability, knowledge and confidence in yourself.  Just take a look—all of the self-made wealthy people in our society have those qualities.  And if you are affluent, you have them too.

If you are a professional, you have become expert at your craft whether its physical therapy, veterinary medicine, the practice of law, or making jewelry.  You have worked hard to master the technical aspects of your job.  However, if you want to capitalize on the full economic value of your skills, then you are going to have to be equally proficient in another area – personal finance.

All professionals have unlimited potential for income.  This highlights the first problem:  the fact that people grossly underestimate the amount of money they need to make to pay for their lifestyle and goals.  If you want the lifestyle that goes along with a successful professional image:  the house, cars, clothes, entertainment, etc., then you need to be bringing home at least $200,000-$300,000 a year.  That means no debt and putting money away for retirement plus the costs of living that kind of lifestyle.  If you are an associate and not a practice owner, then it is highly doubtful if you will ever earn that kind of money – the economics just can’t support it.  Only a well-trained practice owner who really knows how to run a business profitably will reach that level.

This leads to the second problem:  lack of knowledge on the subject of risk management.  What is risk management?  It is arranging your affairs so that you can predict and proactively counter any threats to your wealth and well-being.

Unfortunately you were never taught about risk management but in actual practice it is one of the most important things you can know.  What needs to be known about risk management?  First, it’s knowing how to protect your business assets and income from potential future litigation and legal issues.  It’s protecting your family and business associates from unfortunate events such as premature death, disability, ill health, professional and personal liabilities.  It is about knowing how to protect your income and assets from adverse market conditions, unnecessary taxes, onerous interest costs and different types of fraud.  It’s knowing the basic laws of the subject that have been true since the dawn of time and how to profitably apply them to your life.

Without this knowledge and your ability to use it, the lifetime cost to you will be far greater year after year than you can ever lose on a bad stock or real estate deal.  As a matter of fact, ignorance of this information can wipe out your entire nest egg, as it has for so many.  Record numbers of personal bankruptcies prove the point.

The greatest risk you face in economics and personal finance is not knowing what you’re doing.  No matter what you do for a living you have to know something about money and how it works or you will have nothing to show for your effort in the end.  Financial problems are not necessary on the road of life.

To solve this problem, I have created a ground-breaking workshop called “The Household CFO™ Course.”  This is the financial education that every person should have received in the area of personal finance but never did.  Contact me if you would like to know more about it.

In the final analysis, there is an answer to being affluent, overcoming the ravages of taxes, inflation, uncertain economies and outliving your money.  It is your knowledge and ability in the areas of personal finance, and ultimately in yourself.  This will create more wealth for you than any other investment you can make. 

And that is the best investment in the world.

The 4 No-Fail Investments that Pay Off Big Time

Return on Investment (known in business and finance as ROI) is the fundamental concept of how money is made and how profit is generated in any business activity.  It is the idea that one invests money into an activity and gets more money out of that activity as value is created.

The concept is simple enough, but how does one go about getting an acceptable ROI in practice?  For starters, we take the money we have saved and put it into savings accounts, CDs, stocks, bonds, mutual funds and insurance policies.  The ROI of such investments usually ranges from 1-10% annually, so we are receiving one to ten cents on each dollar allocated each year.  And this is great and needful for money that has been set aside for future use.

But as a private practice owner, how can you achieve a really high ROI?  How do you allocate money to get the greatest risk-adjusted return possible?  Do you invest in a small start-up company stock promising a 500% return?  Or hitting it big with an up-and-coming real estate guru?  Or using the latest and greatest computerized investment trading system?  No, not even close (although it is amazing to me the number of private practice professionals who think this is the answer).

The answer is really more obvious and more mundane than that.

There are 4 no-fail places to allocate your hard-earned money that will give you the greatest ROI possible:

1. Paying off your debt.  If you pay 10% interest on a loan and pay that loan off immediately, you save yourself the 10% you would have otherwise paid to the bank.  Further, this interest savings is risk-free and tax-free.  So the first place to look to increase your ROI is to accelerate getting yourself out of debt and stopping the flow of your hard-earned money to the financial institutions.

2. Marketing efforts in your practice.  How much ROI can be achieved here?  Well, if you spend $10,000 on a well-organized and effective marketing action and it created new business of $50,000 in gross income to the practice that wasn’t there before, you achieved a ROI of 400%.  You got back your original investment plus $40,000. Now, if that happens every year from now on, you have an investment that will outpace just about any other option.

3. Your personnel.  Some of the greatest ROI should come from your personnel.  As a matter of fact, you should be getting a 5 to 1 ROI from your office staff.  In other words, your practice should be getting 5 times that staff member’s salary and benefits expense in measurable value (for example, a $60,000 total employee expense should be generating $300,000 in gross revenue to the practice).  If this is not the case, or you don’t know how to measure it, contact my office and I’ll help you figure it out.  Your personnel can be your greatest asset or greatest expense, depending on how competent and efficient they are.

4. Your own personal competence and ability.  Your knowledge of personal finance, how to operate as an executive and entrepreneur, and your ability to create value for others in your professional field is the greatest ROI you can possibly achieve.  Why?  Because it is unlimited.

In our modern economic environment, there are risks you face every day that can wipe out your investments and savings, your practice, your current standard of living.  If the world economy collapses, not even gold and silver or Chinese currency will be worth anything.  However, if you are educated in the natural laws of money and economics, know how to run any business, and have the know-how to create value for others in any environment, you then have the tools to survive any situation.

So, in the final analysis, your greatest investment is in yourself.  As a financial advisor, I can assure you that personal investment advice will come in the form of improving your competence and ability in economics and executive functions, and providing for all future contingencies.

We are all interested in wealth and wealth is created by getting the most ROI possible with every opportunity.