5 Keys to Wealth

from "The 5 Lessons a Millionaire taught me about life and Wealth" by Richard Evans.

I always enjoy a good book and I always have this compulsion to rummage through a booksale whenever I see one at the mall. One such side adventure lead me to an astounding little book by Richard Evans. Its hardbound tome decorated by 5 keys on its cover and shares the author's message of building wealth through 5 simple lessons. What's more fascinating is that at the end of the book Evans encourages the reader to share these five lessons to as many people as possible so that the reader may internalize the lessons and enjoy their fruits. To all the bloggers out there I hope you find these "keys" to wealth as enlightening as I did.

The 5 Keys to Wealth.

1. Decide to be Wealthy.
A journey of a thousand miles begins with a single step. In the case of building wealth the "first step" is committing to the becoming wealthy. For Richard Evans , the main reasons why most people fail to achieve wealth is because they don't decide to be wealthy. Commitment is a very powerful force and the mere act 0f deciding to become wealthy causes reality to conspire to make you successful. How do you take that first step? Simply declare your intention by saying it out loud and write it down on a card.... "Today I decide to be wealthy" (piece of cake).

2. Take Responsibility for Your Money.
There is a French proverb that goes " Money makes a good servant but a bad master". If you don't take control of your money, It will take control of you. Before you even take control of the money that you have, you have to take responsibility for it.

You can take responsibility for your money through the following four steps:

First, You have to Know How much Money You Have. Just as in any project, you have to take stock of the your current resources. Begin by calculating your current monetary value. This is the equivalent of stepping on a scale at the beginning of a diet or ticking of a checklist at the beginning of an arts n' crafts project. Second, Know Where Your Money Comes From. Ultimately, the income that we earn can be divided into 3 categories: earned income, passive income or portfolio income. If most of the income comes from earned income, it should cover ongoing expenses. And if you have little or no portfolio and passive income. You should take steps to increase them. Third, Know Where Your Money is Going. This can be summed up in one word: cashflow. Is your money accumulating in your bank account or is it blowing out through an unnecessary luxury or expense. Find the holes in your leaking ship and plug them before you sink. Fourth, Know What your Money is Doing. In order for you to take advantage of the money that you earn, you must also make sure that it is working hard for you. Keep tabs on where you invest your money and what the rate of return the investment is generating.

3. Keep a Portion of Everything you Earn.

Probably one of the most underrated books ever written about building personal wealth is "The Richest Man in Babylon" by George S. Clason (see "5 rules of Gold" in earlier post). Clason stated multiple times in his work " I found the road to wealth when I decided that a part of all I earned was mine to keep". This might at first, sound like a bizarre statement because we definitely keep all that we earn. However , if you think about it we don't usually "keep" what we earn because it all goes to our expenses like clothes, rent, cellphones, etc. So the best way to ensure that we Keep a portion of everything we earn is to pay ourselves first every time we receive our paycheck. How much should we pay ourselves? According to Evans ,"You should shave a minimum of 10 percent of your own going salary and 90 to 100 percent of your side earnings." This translates to 10% of your paycheck and 90%-100% of your Midyear bonus/Project bonus/13th month pay etc. Take note that it's not the size of the paycheck or bonus that matters. What matters is the habit of putting money away.

4. Win in the Margins.

You can win in the margins by either reducing your expenses or by increasing your source of income . Evans recommends that you do both. Reducing expenses is easy. All you have to do is to make a monthly budget and get rid of your unnecessary luxuries. "Unnecessary Luxuries" may sound like a redundant term but it also good to keep some sort of balance in your life. It's OK to keep a few personal luxuries as a reward for sticking to your wealth building activities. In the end it will pay off because you'll be motivated to achieve your goal of financial freedom.

The second way to win in the margins is to increase your source of income. This may be a little trickier for most of us. Here in the Philippines one example would be John Gokongwei Jr. In his now famous speech at Ateneo on entrepreneurship, he mentions how he sold soap ,thread and candles in his early days. He would "win in the margins" by finding a need in the market and meeting that need. I also observed that some co-workers here at the office also make the move to "win in the margins" by selling pre-paid SMS credits . The point of this key to wealth is to increase your "personal profit margin" by finding multiple streams of income. Once you set up multiple streams of income you can then allocate this to high yielding investments.

5. Give Back.

Some people might think that tithing is a wealth subtractor , when in fact it is a wealth multiplier. On a spiritual level, giving money away makes perfect sense because being generous defeats the emotion of greed. Furthermore , it gives meaning to your goal of becoming wealthy.

On a more pragmatic level, giving money way also makes sense because the more money that is tithed translates to more money circulating in the economy. When more money circulates , and is available to people , more goods and services will be bought. This then results to lower prices , economic growth and investment growth. A nation that has a growing economy and low prices will generally have a population of wealthy and happy people. So, if you're part of that nation, you'll be one of the wealthy and happy people =) Isn't that a great reason to donate to a worthy cause?

Antione de Saint-Exupery, the author of "The Little Prince", said: "A designer knows he has achieved perfection not when there is nothing left to add, but when there is nothing left to take away." If this is true the 5 millionaire lessons of Paul Evans must be pretty close to perfection in the way that it brings all of us closer to unlocking great wealth.

I think that we all deserve a shot at wealth and happines; it is my hope that by sharing my thoughts on these 5 keys you'll be able to take YOUR shot.

Good luck on your first step!!

Larry Buan

Money Management 101

Money Management Made Easy

T. Harv Eker, in his best-selling book, “Secrets of the Millionaire Mind” said: “Rich people manage their money well. Poor people mismanage their money.

He took the point further by saying that wealthy people are not any smarter than poor people because they just have different and more supportive money habits. The difference between a financially successful person and a financial failure is how well that person manages money. So in order for you to master money you must manage your money.

How can we manage our money?

T. Harv Eker suggests that in order for us to manage our money effectively we should have separate accounts in which we will funnel our monthly pay check. See break down of accounts below:

10% Financial Freedom Account
10% Play Account
10% Education Account
10% Long-Term Savings for Spending
10% Give Account
50% Necessities Account

Allow me to give you a play-by-play of Mr. Eker's Account Scheme:
Financial Freedom Account. This is the center piece of his money management Scheme. All you have to do is to put 10 percent of every peso or dollar you earn (after taxes) into this fund. This money is only to be spent for investments or passive income generating assets. Take note that this money is NEVER to be spent! It will only be invested so that the principal will NEVER be consumed and you can live of the interest/dividends/profits from the Financial Freedom Account.
Play Account. This is what sets Eker apart from other financial gurus. He says that we must spend at most 10% on luxuries every month. I know that this might raise a few eyebrows out there but Eker explains that One of the biggest secrets to managing money is balance. The “Play account” serves as a balance to the “Financial Freedom Account”. He stated that Since your want to save as much money as possible so you can invest it and make more money; you must also balance this self discipline by REWARDING YOURSELF. This was really good news for me when I read it. I’ve been doing this for the past year and every month I would step out of the office and splurge on a Grande Latte!!! My friends would see me at Starbucks and I would say, “Don’t mind me I m just managing my money”. Definitely a stroke of brilliance on T. Harv Eker’s part. By setting an account where you blow money away every month it satisfies the “deprived” part of you that manages money. The effect is astounding because since you are rewarded for managing your money, the tendency is that you want to do it again next month. What a concept!!
Education Account. The education account provides for your financial education. This money is to be used for seminars and courses that would help you learn more about business, money and investing. Personally, I use this account when I buy books on personal finance, accounting and business. It’s very effective because knowledge is leverage. This January I spent my Education Account to take short courses in the Philippine Stock Exchange. The courses offered taught value investing which is very useful when determining which Stocks are priced at a bargain. With this new knowledge I was able to take advantage of the Global Sell of last February 28, 2007. This month I plan to spend My education account to attend the Real Estate Investing seminar of Larry Gamboa (Author of Think Rich Pinoy).
Long-term savings for spending. This Account serves as my buffer account. I use the Long-term savings for “rainy days”. This is where I get the money for unforeseen expenses such as medicine or accidents. It is very important because it is the first , last and only line of defense that protects your Financial Freedom Account.
Give Account. The give account is the “Charity” account. It is needed to balance out our “inner self” or spiritual side. Usually a person who manages and accumulate money feels guilty because he or she has money and other people do not. A person who is overwhelmed by these feelings of guilt usually go on a spending splurge that ruins all their hard work in managing their money. So in order to counter act this, a simple act of charity every month affirms that persons commitment to managing his or her money. Just as having a fun account satisfies the “fun-loving” side of a person. A Give account satisfies the person’s soul.
Necessities Account. Finally, half of your paycheck is allotted for your normal expenses. This includes expenditures for your electricity, water, food , rent and clothes. I suggest that you just spend it normally. If you have any money left over you can put the excess cash to your Financial Freedom account thus making it grow faster.

There you GO! That’s T. Harv Eker’s Basic Money Management Scheme. Bear in mind that the percentages are not etched in stone. Feel free to adjust the allocation to tailor fit you needs. It doesn’t matter whether your paycheck is 100 Pesos or 1Million Pesos , what matters is you develop the habit of managing your money. The habit or the act of segregating you paycheck is more important than the size of the paycheck because if you cant manage 100 pesos I assure you that you cannot manage 1Million pesos.
The system is so simple and elegant and has worked for me. I suggested it to my Friend Feline13 and she was able to start building her own FFA account so I know It’s not a fluke.
So take the next step!! Start by opening an extra ATM account that will serve as your Financial Freedom Account and manage your money.

Yours in Abundance,

Larry Buan

Why Play Cashflow 101?

Recently I’ve been lugging a game board around searching for Players in my new Alabang Cashflow Club. More often than not I come across friends and co-workers whom I ask , beg and practically bribe to play Cashflow 101. Frequently , I’m asked the usual questions ; It that like monopoly? What does it do? Will playing it really make me rich? Sometimes explaining the game to them and how it can be a benefit is fun in itself.

Cashflow 101 is the board game developed by Robert Kiosaki, the best selling author of “Rich Dad ,Poor Dad.” It was specifically developed to teach what the books cannot. Ultimately the goal of the books and the Game is to teach people basic investment skills. Investment is simply skill of converting earned income (money you acquire thru your job) into passive income (income that you acquire without having to work) or portfolio income ( income from stocks , bonds or mutual funds). These basic concepts ultimately separates the rich from the poor, the “haves” from the “have nots”. The rich have the advantage of generating money without having much effort . This is what the Game Cashflow 101 teaches. So , If you feel that you are ready to take on the challenge becoming financially free. Don’t hesitate to contact me so that we can get started on your first CASHFLOW 101 Game.


Hope to hear from you soon,

Larry Buan

The 5 Laws of Gold

From "The Richest Man in Babylon" by George S. Clason

George S. Clason is a genius. His work” The Richest Man in Babylon” is the must read for anybody who wants to get started in getting out of the rat race and into the fast track. I bought myself a copy Last year, May 23 2006, and I’ve been applying his principles ever since. I can’t even begin to describe the drastic changes that occurred in my financial situation since I read “The Richest Man in Babylon”. What makes the “Richest Man in Babylon” stand out among other Personal Finance books is the fact that Clason disguised his Financial principles in the form of Parables. The he chose ancient Babylon as his setting which is perfect because the rules that govern our money today was established in the City of Babylon centuries ago. Since the rules of money then are the same as the rules that govern our money now, all we have to do is to follow the basic principles of wealth building so we can all become financially free.


I have summarized a portion of the Richest Man in Babylon in this post. I hope this will encourage you to seek this extraordinary piece of work so that it will provide you with the astounding benefits that I currently enjoy.



THE FIVE LAWS OF GOLD
(taken from “The Richest Man in Babylon” by George S. Clason)


1. Gold cometh gladly and increasing quantity to any man who will put not less than one-tenth of his earnings to create an estate for his future and that of his family.
2. Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks to the field.
3. Gold clingeth to the protection of the cautious owner who invests it under the advice of men wise in its handling
4. Gold slippeth away from the man who invest it in business or purposes with which he is not familiar or which are not approved by those skilled in its keep.
5. Gold flees the man who would force it to impossible earnings or who followeth the alluring advice of tricksters and schemers who trusts it to his own inexperience and romantic desires in investment


I highly recommend everyone to get a copy of this book. It cost around 400++ pesos in PowerBooks or national bookstore. Ask for assistance in finding the book. The book is classified under “classics” so you will not find it under the business and finance section. This may be the reason why “The Richest Man in Babylon “ is so underrated. Reading this book is probably the smartest investment decision you’ll ever make.

In my opinion this, book is one of the greatest forms of leverage because the small amount of wisdom contained in this tome can propel anybody to financial success.


Happy Investing,

Larry Buan