Mind Over Money... Which is Worth More?

I believe it doesn't matter how much money you have. How happy you are has more to do with you mindset regarding money than how much money you actually have at any given time.

As the gurus often remember, I think it was Henry Ford who, when someone asked him what he would do if he lost all his money, said something like, "I'd make it all back in 5 years."

However, I think there is a difference between having a healthy attitude toward creating wealth and believing you have a bottomless pit of money to throw around on "Doodads", as Kiyosaki calls them.

In fact, it seems to me that when it comes to money, the less you can live on, the happier you'd be, no matter what the circumstances.

(Note: I drafted this post a few weeks ago, before the post about Feast or Famine. Even though I'm now technically in the Famine phase, I feel like it's an opportunity to take actions that will benefit me both in making money and in saving money through good times and bad. )


... Scott

Your NIQ... or Network Income Quotient and NWQ

You'll hear this in most guru seminars and books. Things like "Your Network is Your Net Worth". I wasn't sure what this meant when I first heard of it. I thought it just meant that the more people you knew, the more you were worth... well, sort of.

But I have learned a bit more about what they mean. In one of Robin J. Elliott's bootcamps we discussed the exercise where you place a dot in the middle of a page. Then draw a small circle around the dot and place 4 dots on the circle. Name the dots with the names of the 4 people you spend the most time with. Then draw another circle just outside that one, with the names of the next 4 people you spend the most time with... and so on.

Now, the important thing is to estimate the income and/or net worth of the people on the circles around you. I'm not sure how the rest of the exercise went exactly, but it helps you put into perspective what the financial capacity of the people closest to you is.

It makes sense that as the income or net worth of the people closest to you goes up, you will be influenced by them in ways that changes your mindset on money and finances. It's a good exercise.

Being an engineer, I like to try to quantify things, so I think of it as a "Network Income Quotient" or NIQ.

So, try this. After you've labelled the incomes of each of the 4 people around you, take their average income.

For example, Joe ($45K), Fred ($40K), Alice ($55K), Mr. Boss ($100K) have incomes totalling $240,000.

Now, divide that total by 4 to get $60,000. That's the average income of the people you spend the most time with.

Now, your NIQ would be that average divided by your income. If the number is greater than 1, then your NIQ is hopefully increasing your net worth. If you spend more time with people who make 2 or 3 times your income, you can get NIQ values of 2, or 3. If you can get that number to be closer to 10, you will find your knowledge of money and finances becomes much greater.

Then, once you see where you are, try making a conscious effort to increase your NIQ by spending more time with people who have higher incomes.

But is Income the Best Indicator?

If you do the same exercise with net worth (total assets minus total debts), you will also learn things about how the people around you are affecting your attitude on money. I would call this your NWQ (Network Worth Quotient).

You can do it both ways NIQ and NWQ. You may find professionals who make a lot of money (high NIQ), but may not be increasing their NWQ. Try to find people with NIQ and NWQ that are much higher than yours to spend time with and learn from.

Just be careful if you hang around people with a high NIQ but a relatively low NWQ. These people don't seem to know or care how to manage their money, since they have not managed to put much of their earnings to work on building their assets. You will probably pick up their poor spending habits without having the income to sustain them. That can be very dangerous.

... Scott

The Rat Race - we learn it at a young age

I talk a lot about Robert Kiyosaki and his books. That's because he's been one of the biggest influences on me. If it wasn't for the book "Rich Dad Poor Dad". I would probably still be working in a permanent full-time position, barely getting by, and getting deeper in debt (bad debt, that is).

One of Robert Kiyosaki's biggest initiatives has been educating not only adults, but kids, about the subject of money. I think this is extremely important, and something that has been lacking in most school programs.

Kiyosaki has developed a number of games that aim to teach while entertaining. We purchased the "Cashflow for Kids" game a couple of years ago, and our kids actually enjoy playing it. I think it has started getting them to think of where money comes from and where it goes.

If we can start to break the cycle of "keeping up with the joneses" (what he calls the Rat Race), by teaching our kids about it, then maybe they have a chance of retiring earlier than we do.

Just a note about the links that I put in this Blog. When you see the ads in the Google box at the top, they are chosen and placed by Google. When I place text links on my site, it may be informational, or it may also be an affiliate link, which is another part of my recent education about making money. I will write about affiliate programs as a source of income in future posts. I have started to join some programs, but I only plan to link to affiliate programs of merchants that I believe have good quality and value.

Here is the link to the Cashflow for Kids game...





... Scott

Starting Your Own Business -

Ever since I was young, I always sort of assumed I would someday have my own business. I remember going with my parents to a relative's house that had just been built, and seeing their new 3 car garage with new cars in it.

My Dad said, "You can't afford this kind of lifestyle when you're working for someone else." I think that was the moment when I implicitly decided I would have to have my own business. This was one of the few times I remember someone trying to give me career advice that I actually believed. Most times since then, when people have said things like, "You need to do a Master's degree immediately following undergrad, or you'll never do it at all...", I sub-conciously set out to prove them wrong.

I guess I must have let the dream slide a bit, because in university I chose to do more technical courses than management courses when I had the chance. Computers were just too much fun to give up for artsy courses like "Organizational Behaviour".

But shortly after graduating, I decided that I needed to prepare for being "management". I saw too many unprepared technical people being put into management positions they weren't ready for. So, after 3 years of fulltime work, I "retired" and went back to school for a Masters in Business Administration. This actually disproved the advice I had been given; that I'd never do it if I didn't do it immediately after undergrad.

Anyway, after finishing my MBA, I still had no distinct idea of what kind of business I would own myself. I kept working my way up in management of small software companies.

The day I figured it out was when I attended a Product Management course and saw a guy with an independent consulting company who charged $1000 per person for a 2 day seminar. There were about 50 people in his average class, which he ran twice a month rotating through several cities, plus on site seminars for $10,000 each. Let's see, nice hotels, work 5-10 days a month, earn $100K per month (minus hotels, airfare and conference room costs). Now I'm glad I took that MBA course!

I haven't got there yet, but I am still working on building the content for seminars.

During the next 6 years, I couldn't help but realize that all the time and effort I was spending as an employee was helping someone else become successful and wealthy. On top of that, I found it harder and harder to buy in to the visions of senior management when I often had doubts about their strategy or tactics. Mostly, I didn't feel my skills were being used as effectively as they could have been. I was drying out on the vine. I had very little control over my own destiny.

I felt that the simplest way to start building my own business was as a consultant in the areas of technology that I knew. This would also allow me to quickly build up experience with multiple clients and technology challenges.

I just started by looking at the list of partners on my employer's Web page. Then, I looked at the partners' partners, until I got a good view of what kinds of companies might need consultants with my knowledge. It didn't take long to narrow down a few candidates in the local region near where I lived.

Next, I prepared a short introductory telephone script and called the president of each one (they were relatively small companies, with fairly accessible executives).

I set a 3 month minimum limit on my first contract opportunity. Either that, or a full-time position for a while just to get familiar with consulting. It took 2 years of constant calls and emails before I got an offer. In fact, it never rains, it pours. I got two full-time offers and a 3 month contract offer that would probably have renewal possibilities. That's what I did.

Immediately, the excitement of running my own company took over. I did whatever I could to show I was thorough and giving good value to the client. Then, word began to spread among client contacts to the point where I am confident of being able to sustain demand.

I have no regrets after 2 years of independent consulting. The most significant advice I can give, in hindsight, is to:

1. Have a long list of potential clients to call on;
2. Have enough of a cash buffer (whether it's in savings or a line of credit) for those "long receievables cycles" (they do happen) and downtime between contracts;
3. Try to pay yourself on a regular, fixed budget;
4. Get an accountant you trust, and don't haggle over his hourly rate. Just make sure he is professional and has integrity (and uses tax software - my first accountant did tax returns by hand!);
5. Listen to your accountant's tax advice but don't expect him to be your big picture financial planner. They are most valuable in planning for taxes;
6. Get a financial planner who can help with your retirement plan (check the yellow pages)