“In the long run, we shape our lives, and we shape ourselves. The process never ends until we die. And the choices we make are ultimately our own responsibility.” ~ Eleanor Roosevelt
Money is an interesting indicator of our state of mind. Emotions like paralyzing fear, envy, revenge, resentment, scarcity, hatred or bitterness usually reflect less than desirable state of financial affairs in our lives. On the other hand, emotions like peacefulness, kindness, contentment, appreciation, happiness, joy, love and serenity reflect the state of mind that is open to receive the abundance that Universe has for everyone…. Among many things, money is a language we use to express the best in us and the worst in us. (more…)
I recently saw the statistics that 60 % of baby boomers are more afraid of running out of money in their retirement than they are afraid of death. Millennials are buying cryptocurrencies, often using their credit cards, with hopes of become overnight millionaires.
Over 70% of businesses fail within the first 5 years because of cash flow problems.
From my personal experience and observations, awareness of your money habits, planning your financial future, and having financial discipline are the most critical factors for creating a comfortable retirement.
As Robert Kiyosaki once said, “It’s not how much money you make that matters most, but how much money you keep. How hard it works for you and how many generations you keep it for.”
Making a good living does not automatically put you in the “more than enough” or “affluent” category. Because it’s not just about how much you earn but also what you do with what you earn. Do I hear “Yes”?
Now let’s go over different ways you can choose to manage your competing financial priorities.
If you want to become financially independent, one of the most important skills you must acquire is managing your money intentionally, so that regardless of your current income, you become richer every month and every year.
How do you accomplish this?
By managing your competing financial priorities while saving and growing your money.
When it comes to managing your financial priorities, it’s a good idea to be aware of the three human biases that may affect you financial choices and decisions.
The Present Bias
As a human being, you are wired to take care of immediate needs first, making sure your essential requirements for food, shelter and security are met. So it’s understandable that when current, short-term financial needs and goals compete for your attention, saving for the future gets neglected. For example, when you focus on car and home repairs, your kids’ day-care or private school, or a new heating/cooling system, your long-term savings for big purchases such as education, financial emergencies, or retirement go to the back burner.
The famous Hierarchy of Human Needs by psychologist Abraham Maslow outlines the progression of human needs and human awareness as we ascend from meeting our immediate survival needs to the need to feel fulfilled and self-actualized.
We like to say: “Live in the moment”, right?
Right, but not when it comes to your money; with money you must be intentional.
Most people have difficulty envisioning distant events. It’s easy to envision, associate with and express immediate financial needs. This is something that financial professionals refer to as “the present bias.” The “present bias” makes you handle competing financial goals by assigning your highest priority to immediate needs and nearest goals, and overlooking the long-term financial priorities.
The Availability Bias
The availability bias is another mental pitfall when you are very comfortable with your current available income and assume that you will always have it. So, why bother thinking about long term financial goals?
While this bias pertains to all humans, it’s especially common among new entrepreneurs and famous sports figures, who often go through feast/famine experiences and some end-up in financial ruin. Many of the currently well-off folks treat their businesses or contracts as their piggy banks that are available to cover any and all desires.
The Busy-bee Bias
The busy-bee bias is very common among highly paid professionals who are so busy making money that they don’t make time to plan how they can grow it, let alone how they can make their money work for them!
These people rely heavily on the easily available information and often don’t do their due diligence on the accuracy of the advice and integrity of the source from which they receive their financial advice. As the result, they put more value on the easily available solutions rather than more strategic ones and end up disappointed.
The tendencies and biases I have mentioned often cause people to spend everything they are currently earning. They want to enjoy their money to the fullest while they can, or save and invest first for their family’s educational goals, rather than diversifying their savings across different financial priorities like planning their financial future, retirement, health-related needs, and creating financial independence.
More often than not, goals like buying a new car or a house, financing private school or college tuition for your kids, become top priorities relative to retirement or financial independence goals. However, you don’t want to burden your kids by depending on their financial support when you get older, right?
So, how can you manage competing financial priorities, the immediate and the upcoming ones? The solution may be as simple as asking yourself if the financial priorities you’re focusing on now are really the most important ones, given your overall goals in life, not only your immediate needs.
Here are two simple questions you can ask yourself:
What are my short and long term priorities in life?
What are my core values that help me experience more joy and fulfillment in life?
The answers to these questions will help you sort out your financial priorities.
For example, one of my core values is FREEDOM. I can be content driving an older car, leading a modest lifestyle and wearing stylish but not necessarily designer clothes and shoes. However, I am willing to do whatever it takes to achieve financial independence so that I can have the Freedom of Choice in my life.
Now, pause and write down answers to the two questions above.
Share your experiences in the comments. I would love to know how you manage your competing financial priorities.
And here’s the recording of the mini-class on this topic
Do you fight with your partner every time you talk about money?
Or do you have open, candid “money conversations” with your partner?
Or do you avoid talking about money with your partner so you can avoid fights and frustration?
Research has shown that couples that avoid fights about money, often end up having less wealth and not being prepared for a successful retirement.
No one wants to fight, of course. Howevere, money is the #1 thing couples argue about. And you probably heard that fighting about money is often an early predictor of divorce.
So, why would couples get sucked in into the argument about money when it causes so much stress, tension, and destruction?
While nobody wants conflict, avoiding communicating and working through disagreements with your partner can hurt the relationship and put your future financial security at risk.
I’ve met many women who shared their frustration about not being able to “talk money” with their partner in a constructive and candid way.
“I love my husband and don’t want to get into big arguments over money. So, I stopped talking about money with him all together. And now I have my secret money accounts.”
“I was sick of fighting about money. Now we both avoid these conversations.”
“We can’t ever agree when it comes to investing. He does his thing and I do mine.”
While many couples default to “not talking about money”, this solution usually comes back to haunt them.
Here’s why.
Men in a couple tend to have higher confidence and higher appetite for risk than women.
Because men usually have more risky investments and higher balance, women tend to keep substantial amount of cash in case of emergencies. In other words, to balance her husband’s high-risk investments, a wife often compensates it by keeping a high balance in FDIC-insured bank accounts, which provide safety but little or no return. This allows her to sleep at night and avoid arguments.
While it may work for some couples, this strategy may cost couples loss of opportunities in the end. If they invest $100,000 in a super-safe bank account earning 0.5%, rather than a conservative balanced index fund that may have earned 3.5%, they would have passed up 3% per year in earnings for each year the funds are invested.
On a $100,000 account, that’s $3,000 a year, and $30,000 over 10 years (not including reinvested dividends and capital gains.)
On the other hand, husband’s high-risk investing strategy may lead to significant loss of family wealth that he is trying to build by taking higher risk.
I believe, there are better ways to managing money as a couple than fighting over it or avoiding talking about money. Here are a few tips to get couples started on the road to creating wealth together:
Communicate
I believe in candid and transparent communication in the relationship. Have a candid ‘money talk’, be open about your concerns, and share your preferences when it comes to investing ideas. Don’t avoid ‘difficult conversations’ – find a way to have them in a constructive and respective way.
Work through your financial conflicts (rather than fighting about them or avoiding them altogether). If this seems daunting, you may consider talking to a financial planner, even if you are a do-it-yourself investor. If you can’t seem to work through financial arguments and have very different risk tolerance with your partner, get independent help to work through your differences and overcome communications’ challenges.
Set financial goals as a couple
Determine the return you’ll need to get on your investment in order to meet your financial goals. You may not need to take on additional risk to reach your financial goals. Calculate your annual lifestyle spending to determine what your rate of return on your investments needs to be, based on the amount you are currently saving. Don’t take more risk than you need, however, don’t be overly conservative either. Your investment returns must be adequate to meet your goals.
Set goals as a couple and develop investment strategies around those goals. For example, are you going to invest in the stock market? Rental real estate? In your growing business? If so, what percentage of your total assets you want to invest in each asset allocation?
If one of you wants to trade or invest in high-risk investments, limit the amount you allocate into high-risk investments and integrate these investments into your overall plan.
Compromise
I like to remind women that they should “pick their battles.” While some things are definitely worth fighting for, some things aren’t worth the argument. Your financial future is definitely worth fighting for.
When you have a “money talk”, listen to your partner, really hear his point of view when it comes to investing family money, and see if there is a way to find a common ground. Willingness to compromise is important for the healthy relationship. However, never compromise on your core values in life.
For example, if Freedom is your core value and you feel that your current employment is totally draining your energy and health, although paying you a very good salary, leap your way out of this situation even if your partner feels it’s wrong for your family finances.
When you force yourself to do something that you utterly resist, you compromise on something that is deeply important to you and can make yourself seek. Money is important, but your health and vitality are more important than money.
Dream together
Your money talks don’t need to be only about bills you have coming up and debt you need to repay. These conversations do need to take place, of course. But you can also share your aspirations that require you to save and grow you money – maybe a new house, or a trip, or a business that you’re passionate about. Whatever it may be – dreaming together, having common goals will help you get closer and inspire you as a couple to work toward your goals.
Do the “Five-Year Exercise.” If you only had five years to live, what would you like to do, have or experience?
Don’t overthink or censor yourself. Just start writing it down. If you are married or in a relationship, each of you should write your lists separately. Then, as a couple, choose what you’d like to do, have or experience, both together and individually. It’s hard to fight or argue about money when you are working together toward important goals. Don’t give up on your dreams!
Become Financially Empowered
Invest in yourself – let go of your inner blocks, become equipped with knowledge about strategic investing.Although having a MBA in finance might be nice, you don’t need it to be financially successful. Having a solid base of financial knowledge will take you a long way. Couples who both understand financial fundamentals, can make better financial decisions, especially when they make them together.
Besides, it’s quite likely that at some point you may be 100% responsible for your own investment and money decisions. Now is the time to upgrade your skills and knowledge about savvy money management and investing.
As excited as you may be about this idea, you need to recognize that there is an inherent risk in cryptocurrencies. This is a brand-new market. So, I want you to remember that the risk of a 100% loss is ALWAYS present in cryptocurrencies. That’s why I urge you to go small should you decide to invest in this space.
Investing $100- $400 is small enough to cause you only minor financial pain if one of your cryptocurrencies goes bust… But it’s still big enough to create real wealth for you if only few become a major success.
The smart approach is to build yourself a “basket” of different cryptocurrency plays. Some of them will become superstars. Others will be good winners. And a few will go to zero.
So, don’t go crazy!! Don’t invest all your investing funds in one particular cryptocurrency – diversify with well respected cryptos. Do your research. Join cryptocurrencies forums. Be calm. Be rational. Stick your toe in the water with just $100, or $200 in each of ideas you want to test. Get started, and see where the game will take you.
The blockchain technology is young… the cryptocurrencies market is young… and it’s changing every day. That might make you a little nervous. Usually, conservative, rational investors like to stick to known, stable, predictable investments. Warren Buffet publicly shared his distrust of this new digital money.
However, there is another side of the story. Blockchain is a budding new technology. It’s an exciting, massive new movement and a trend that you may want to be part of. After all, when you can get in at the ground level of such an opportunity (and I believe that we’re still at that phase), you have a chance to plant seeds for the life-changing wealth.
You can do that… while being smart about it. All that means is that you need to invest sensibly, start small, and avoid risking more money than you’re willing to lose.
I recommend allocating no more than 3-5% of your total net investing money in cryptos. In other words, of all the money you have to invest, only put 3-5% of that toward these investments. From there, you can take even smaller positions in each individual cryptocurrency.
Remember: It doesn’t take much to turn a small stake of $100, $500, or even $1,000 into the life-changing wealth.
As I write this post, the stock market in the US had one of the biggest day declines in the history (4.6% in one day), then turned around and jumped up the next day. Bitcoin price too fell below $7,000 from its highs of $20,000 in 2017. Does it mean that the cryptocurrencies are heading to the graveyard?
If you’re really interested in learning more about cryptocurrencies, sign up for my 4-day Masterclass “Bitcoin, Your Money and Building Wealth” and get a lot of specific details about investing in Bitcoin and other cryptocurrencies while managing your risk.
I want you to see the big picture of building wealth. Cryptocurrencies could be part of your portfolio but very small part. The key element to building lasting wealth is to diversify your investments.
I recently heard about a report that stated that 30% of millennials would invest in bitcoins instead of stocks (I refer to established, successful publicly traded companies) in order to secure their retirement. Not only that… they would be willing to use their credit cards to buy the bitcoins! This information was quite shocking to me and I felt compelled to write this article.
But before I get into specifics of Bitcoin and cryptocurrencies world, I want to curb your ambition to become a cryptocurrencies millionaire. I am not saying it’s impossible (yes, there are Bitcoin millionaires). I just want to show you a bigger picture of where Bitcoin and other cryptocurrencies fit into your investment portfolio.
Role of Bitcoin and Cryptocurrencies in your Investment Portfolio
Cryptocurrencies like bitcoin, ether, dash, blah, blah, blah can be considered to be chaos hedge. Chaos hedge is a portion of your investment portfolio that acts as a form of insurance against things like market crashes, financial system collapse (when banks are closed/insolvent), global economic shocks caused by wars, massive natural disasters, etc. Having some chaos hedges, such as gold, silver, and cryptocurrencies, provides downside protection for your investment portfolio.
However, most cryptocurrencies are very speculative investments because out of 1000 or so existing cryptocurrencies, likely over 90% are Ponzi schemes according to a few savvy investors I follow. So, you’ve been warned: If you want to dive into a super-speculative world of cryptocurrencies, especially outside of Bitcoin (which is currently considered to be the most recognized, “reserve currency” for buying other cryptos), you must do your due diligence before buying them.
On the other hand, there are setups in the cryptocurrencies’ market that could give you high gains within next six to 12 months. I call it smart speculation. When used correctly, smart speculations offer the opportunity for substantial gains, even in conservative investment portfolios. The key here is to allocate a small percentage of your investment portfolio into the smart speculation holding.
Now, a brief overview of what Bitcoin is and why you may want to consider owning some.
Bitcoin: Brief Overview
Bitcoin is the most widely used open-source (not proprietary owned) peer-to-peer cryptocurrency that you can send over the Internet without a bank or a middleman. It is also a storage of value, finite value to be precised. Only 21 million bitcoins will ever be created. They have value somewhere between zero and a very large number (some predict $500K per bitcoin) and the value is determined by the demand of the Bitcoin network users.
Bitcoin is a “native of the internet”, and thus it is digital in its entirety, although very few physical bitcoins were manufactured by Casascius, the coin company, before they were stopped by regulators. There are technical reasons why it doesn’t make sense to use bitcoin to pay for small transactions. However, owning bitcoin does make sense as an asset for people who want to store value of something that can be traded for something else in the future.
For example, you don’t trust banks or you’re worried about a natural disaster and want to have some cash available. Some people put cash in a mattress, or in a safe. But you can also put it in something attributed to you that shows that you have something of value that you can use in the future. Yes, it’s somewhat similar to gold, the traditional storage of value. And similarly to gold, you can store value in bitcoin by converting fiat currencies into bitcoin.
With Bitcoin, the original alleged developer Satoshi Nakamoto, set out to create a “peer-to-peer electronic cash system”. There is much mystery around the true identity of the original Bitcoin creator. There are rumors that whoever Satoshi Nakamoto actually holds roughly 1 million bitcoins, worth approximately $11.6 billion based on the recent prices ($11, 600/Bitcoin).
One of the big innovations of Bitcoin was creating a system that did not rely on trusted third parties to process electronic payments; instead it relies on the consensus of the “bitcoin miners” on the network (sometimes referred as computer nodes).
Bitcoin is a currency which supply cannot be altered by any central bank or government. That might not seem like as big of a deal in countries like the U.S., or U.K. but in places like Zimbabwe and Venezuela that have experienced hyper-inflation due to excessive money printing by corrupt governments, this is of greater concern.
Blockchain technology
The truth is that cryptocurrencies’ rise in popularity is largely attributed to a new innovative technology that is used for trading cryptocurrencies – “blockchain”, which is considered to be revolutionary, just like the Internet was in the 90-s.
Many people say “I don’t know about bitcoin, but I believe in blockchain.” That could be because many people don’t believe in bitcoin but believe in Blockchain technology. So, what the hell is Blockchain?
Blockchain is a digital distributed public ledger, but it’s really a strong cryptography (based on mathematics). And just in case you are not familiar with the word cryptography, it’s the art of protecting information by transforming it (encrypting it) into an unreadable format. Only those who possess a secret key can decrypt the message into plain text. Cryptography is used to protect credit card information, corporate data, etc.
Recent advance of Bitcoin and recognition by financial communities
On December 17th,2017, the CME (Chicago Mercantile Exchange), the world’s largest futures (future contracts) exchange, launched its own bitcoin futures contract under the ticker “BTC.” One CME futures contract represents five bitcoins.
You may know that there are plenty of well-known critics of Bitcoin in the banking and business worlds. Specifically, Jamie Dimon, chief executive of JPMorgan Chase & Co., called the cryptocurrency a “fraud” and said it would blow up. However, Mr Dimon recently said in a TV interview on the business cable network that he regrets calling it a fraud.
There are more and more investors and even hedge fund managers jump on the Bitcoin wagon. Bitcoin has had a phenomenal bullish run in 2017, rising from $966 at the start of the year to a record high of over $20, 000. While the price of the Bitcoin failed since its highs in 2017, many expect that the cryptocurrencies prices are going to climb up further.
If you want to learn more about Bitcoin and other cryptocurrencies as well as how you can buy, store, send and receive cryptocurrencies, I invite you to join my upcoming masterclass Bitcoin, Your Money and Building Wealth.
This training offers a comprehensive approach to investing in cryptocurrencies – from understanding what it is and how it works, to how to buy, store, send and receive it, to how to manage your risk. While I cannot give you a specific advice or promise profits from any of your investments, I can promise that by the end of this masterclass you will be in a good position to make a decision weather you want to invest in cryptocurrencies and what to do next.
To Your Health, Wealth and Freedom.
With Love and Gratitude,
Millen Livis
P.S. I have a crazy good offer for this training if you sign up for this masterclass before February 1st, 2018
My intention and my mission is to shift the money game from an “adviser-centered” model to a “customer-centered” model. Let me clarify what I mean here.
You have likely used, are currently using or plan to use a financial adviser or a financial planner. And I am not saying you shouldn’t – it’s not my place to say what you should or shouldn’t do. However, I know too many people who got burned by using financial adviser and lost thousands, some even hundreds of thousands of dollars… So, why is it happening?
Well, one of the reasons is that when these people went to see the adviser, they were not really financially educated about their investment options. They delegated managing their money to a person who presumably is trained and licensed to give the best available financial advice as a fiduciary of their money. Right? Well, in theory… yes. In real life – rarely.
You see, the current financial services model has a financial adviser at the center of the financial services’ sphere and a customer – outside of it. When the customer doesn’t know her/his available options or doesn’t even know what questions to ask, the natural inclination is to listen and follow the adviser since s/he ‘knows better’ by the fact that it’s what the advisers do.
However, the caveat here is that financial advisers are no really impartial since they get paid by the financial institutions (banks, brokerage companies, other financial service companies), who issue the financial products that the advisers are selling to you. Unfortunately, it’s not uncommon that financial advisers recommend financial instruments that’s/he will receive the most commissions for.
Not only I know many people who had such experiences with financial advisers, I myself had such experiences. At first, when I met my adviser, I liked him because he listened to me, he proposed to review my estate plan, my retirement goals, etc. This liking made me feel relaxed and… buy the suggested financial products (variable index annuity) and outsource the management of my investment portfolio to his team…
Well, after losing thousands of dollars and realizing the discrepancy between his promises and my actual experience, I got back the control of my financial portfolio yet was still stuck with the multi-year contract on the financial products I bought through him. by the way, advisers are often get paid for each year you hold the financial product they sold you.
This frustrating experience and my frank conversations with some advisers made me realize how much power regular folks give away because they lack basic financial education and feel ‘not good enough’ at managing and investing their own money. An assumption that ‘financial professionals’ know best how to invest your money often leads to tremendous frustration and financial losses.
You see, each of us develops patterns – patterns of thinking and acting – including money-related patterns. Every pattern is caused by a set of assumptions. For example, your assumption that you are not good at managing your money (e.g. because someone told you that or because you mismanaged your money in the past) will likely create a pattern of thinking and acting according to this assumption.
And assuming something as a fact, whether it’s true or not, is caused by your perceptions of past experiences. For example, you’ve saved money and owned financial assets, then you got into a relationship with a person who has unhealthy money habits, which led to a loss of all your savings. As a result, your perception could be that you are not a smart money manager or that you are not meant to be wealthy.
Another example: you’ve invested money in the stock market that you saved for the down-payment on a house because you wanted to grow it, but market dropped, and you lost a lot of money… As the result, your perception could be that investing in the stock market is a gamble and you’re better off keeping all you money in cash.
As you can see from these not so hypothetical examples, your perceptions of your past experiences lead to assumptions, which then lead to your patterns of thinking and acting, and ultimately, to your experiences.
That’s why I am convinced that before you get into the “outer game” of money (dealing with your debt, your spending, savings and investing), you must attend to your ‘inner game’ – take a close and honest look at your current beliefs about money, your abilities to manage it and your beliefs about becoming financially free.
Strengthening your inner ecology – your belief system, your inner monologue, your self-confidence and self-competence – will seamlessly shift your energy from a state of repelling money to a state of attracting wealth effortlessly. You’ll get equipped with making savvy money decisions and taking smart decisive actions.
And if you’ve tried different money mindset boot-camps, seminars, all kinds of affirmations and afformations yet nothing worked thus far… it’s because your heart and soul are not there…because you don’t really believe that these affirmations are true for YOU. Your perceptions of previous experiences led to erroneous assumptions that might be slowing you down or even preventing you from living the life you want, deserve and are capable of.
That is exactly the reason I’ve created the Activate Effortless Wealth mentoring training. This is a compilation of my decades-long knowledge and experience about mastering the “inner game”, which affects your financial situation, your relationships, your work and health. Yes, the inner game is the foundation of your success in life.
And not only you’ll get access to the valuable information I offer (no, you cannot google it LOL ), you’ll have me by your side for over 10 weeks and 3 full days during the LIVE Workshop in Florida. And from my personal experience, having an empowering mentor, guide and supporter by your side on your journey to creating the life you want is priceless. Yes, you may get there on your own… eventually. However, working together with me as a team, will accelerate your results 10X.
And here is the final thought. I can certainly help you become unstoppable in your pursuit of more ease, more money, more peace of mind, and more abundance in your life. However, I cannot choose it for you. You need to decide whether YOU are ready to CHOOSE YOURSELF and up-level your life situation. Life is too precious and too short to postpone your plans until next month, or next year, or when XYZ will happen.
