In my previous post I mentioned The 4 Prosperity Pillars. These 4 Prosperity Pillars pick up where Time, Expertise and Money left off. The proper accumulation and management of Money is key to achieving financial Independence. Before I share these 4 Prosperity Pillars, I’d like to first propose a shift in how you think about Time, Expertise, Money and the things that money can acquire. Instead of thinking in terms of ownership, think in terms of “Stewardship.” You have a stewardship over your Time, your Expertise, your Money and the things that you can acquire with your money. Here’s a paradigm shift that has served me well: “Owning” is “Buying” and “Stewardship” is “Investing.” It’s easy to buy something without giving thought to its overall value; and how what you buy will best serve you, our family and others. But when you invest your Time, your Expertise and your Money, you’re more aware of the return on investment you’re getting.
I try to approach how I implement my Time, my Expertise and my Money in this way: As a steward of my Time, is this activity a good investment of my Time? As a steward of my Expertise, is this application a good investment of my Expertise? As a steward of my Money, is this purchase a good investment of my Money? I then ponder on the reasons why and why not for each question before making the investment of my Time, Expertise and Money before making a decision. This approach helps me to be more disciplined and temper the human weakness of wanting immediate gratification. Start thinking of yourself as a “steward” rather than an “owner” and it will greatly change your perspective of how you interact with those things that you Invest your Time, Expertise and Money in.
The 4 Prosperity Pillars are what support Financial Independence. In turn, these 4 pillars are supported by 3 Systems: Belief Systems; Learning Systems; and Operating Systems.
Click on the link above to see a graphic representation of the The 4 Prosperity Pillars.
Earn. The first Prosperity Pillar is Earn. You must have an initial earning mechanism to begin building your Financial Independence. This initial earning mechanism is usually a job. It can be an entry level, menial labor, low paying job. Many fortunes have been built by hard working industrious people who started with low paying jobs and understood and applied the 4 Prosperity Pillar concepts. In the early years, it sometimes requires having more than one job to give you enough money to live on and have enough money to build the second pillar.
Save. The second Prosperity Pillar is Save. The biggest challenge most people have to saving money is spending everything they earn. The #1 enemy to achieving financial independence is DEBT – which is spending more than you earn. And the “disease” that kills a person’s dreams of living a financially secure life and enjoying financial freedom is immediate gratification. To be financially independent you must discipline yourself to live on less than you earn. You see, it doesn’t matter what you earn. What matters is what you save. You can earn a million dollars a year and if you spend every penny you make on things that depreciate in value, and go deep into debt on homes, cars, boats, etc., you will never achieve financial independence. Whereas if you only earn $24,000 a year and put 10% in savings and adjust your lifestyle to live on what’s left, you will eventually become financially independent. You see, it’s a mindset, your belief system, that matters most, not how little or how much you make. To learn more about this principle, I recommend that you read the book, “The Richest Man in Babylon” by George Clason.
Invest. The third Prosperity Pillar is Invest. Investing is why you’re saving. What you invest in will be different at different stages of your journey towards financial independence. When you’re first starting out your financial resources may be small so you will be investing more of your Time to increase your Expertise. You may also be investing what Money you do have in education that will also help build your Expertise. By investing your Time and Money into education, training, internships, on-the-job training at low or no wages (in a sense subsidizing your own internship or apprenticeship) you increase your expertise. By increasing your Expertise, you increase your Earning ability. As you increase your Earning ability, you increase your Savings ability. By increasing your Savings ability, you increase your Investing ability. By increasing your Investing ability, you’re creating financial Independence.
Now you can see how applying your resources of Time, Expertise and Money to Earn, Save and Invest creates an upward moving spiral of financial independence. Although you should always continue investing your Time and Money into increasing your Expertise, to achieve financial independence you will also need to invest in passive income generating investments. The three investments that you want to consider, which are the top three wealth creators in America, are:
1. Business Ownership – investing in owning your own business is the quickest way to leverage your Time and your Expertise to increase your Earning ability, increase your Savings ability and increase your Investing ability.
2. Financial Markets – investing in stocks, options and other financial vehicles is something everyone should be doing at some level to build long-term wealth and financial security.
3. Real Estate – investing in real estate that can create positive cash flow and build long-term wealth through appreciation should also be a part of everyone’s investment portfolio.
The key to success in all three of these investments is first investing your Time and your Money into either gaining some level of Expertise in these three areas or Investing your Money in acquiring someone else’s Expertise in these areas.
Protect. The fourth Prosperity Pillar is protect. Early in my journey towards financial independence I thought there were only 3 pillars, Earn, Save and Invest. It turned these 3 pillars do not create a strong enough support for achieving financial independence. I learned about the fourth pillar, Protect, the hard way – by losing a lot of what I had saved and invested. After having this experience I observed that many people who had achieved great financial success in their lives have also lost much (if not all) of their fortunes by not having the fourth pillar in place.
There are many “wealth robbers” that you need to protect yourself from. The first is yourself. A common mistake that successful people make is to think that because they are successful – that they’ve built their Expertise in an area that has enabled them to become financially successful – that they are Experts in everything and will succeed in everything they do. Our own egos can be our greatest enemy to achieving financial independence. As you become more successful in whatever you do, keep your ego in check. Remember: “Pride goeth before destruction, and an haughty spirit before a fall.” (Proverbs 16:18)
Other wealth robbers you need to protect yourself from are good intentioned relatives and friends who usually have not invested their Time, Expertise and Money to Earn and Save and therefore don’t have Money to Invest in their own ideas. They’re looking for a shortcut and see you as their shortcut. You’ve paid the price; you’ve disciplined yourself and you have built your Savings and Investments up over time. People close to you will see this and see you as a source to Invest in their ideas. There will also be people who are not close to you who may hear of your success and want you to invest in their business or idea. In these instances be even more careful to protect yourself from being robbed by someone who is charismatic and persuasive. It’s been my observation that if someone has not been a good Steward of their own Time, Expertise and Money then they’re not going to be a good Steward of your Time, Expertise and Money. Whenever approached by anyone asking you for an investment of any kind, it’s good to keep in mind: “By their fruits ye shall know them.” (Matthew 7:20)
Other wealth robbers include government through poor fiscal policies and taxes and litigious people and lawyers. One of these wealth robbers created by our government is heading at us fast, and that’s inflation. Hyper inflation can wipe out your wealth quickly. Inflation is not an increase in prices, although prices do increase. It’s a decrease in the value of your cash. Inflation is a heavy tax that no one gets to vote on. It’s a tax that’s imposed upon you and it transfers all of your wealth to the government. Protecting yourself from these robbers, and similar others, fall under the category of “Asset Protection.” Asset Protection is too big to cover here. But at some point on your journey towards financial independence you will need to Invest in the Expertise of someone who can help you protect what you have worked so hard to acquire. Without good asset protection you can lose great wealth acquired over many decades literally overnight.
Poor health is also a common wealth robber. It’s been said that we spend all of our health to acquire wealth and end up spending all of our wealth to regain our health. It doesn’t have to be this way. Study and apply the principles of maintaining good health through proper diet and exercise and you will be able to maintain more of your health and your wealth on your journey to financial independence. For me, it needs to be physical independence along with financial independence. I would not give up my health for wealth – good health is a greater wealth than money.
The foundation that supports The 4 Prosperity Pillars are 3 key systems: Belief Systems; Learning Systems; and Operating Systems.
Belief Systems. I have shelves and shelves of books, including the Bible and other religious books, that teach the importance of having the right mindset, or belief system, to succeed. Henry Ford summed it up when he made this statement: “Whether you think you can or whether you think you can’t, you’re right.” To succeed at anything you have to: First, believe you can do it; and second, believe it’s worth doing.
Learning Systems. I covered the importance of Learning Systems in my previous post Time, Expertise and Money. The key to accelerating your success in anything you do is to: 1. Have a Learning System; 2. Have a Practice Discipline (System); and 3. Have a Feedback Mechanism (System).
Operating Systems. Another shortcut to accelerating your success is to implement a proven Operating System whenever you can. There is no need to re-invent a process when someone may have already Invested their Time, Expertise and Money in developing an Operating System. Investing in a proven Operating System can save you both Time and Money. An Operating System is a proven process that produces the same result over and over again. Ray Kroch’s most valuable contribution to business was not McDonalds hamburger stands. His most valuable contribution was developing the turnkey franchise business Operating System. It was the Operating System, not the hamburgers, fries and milkshakes that made McDonalds – Ray Kroch – hugely successful. Developing, or implementing an existing, Operating System is the key message in Michael Gerber’s landmark book “The E-Myth.” If you want to gain a deeper appreciation for the value of a great Operating System, read John F. Love’s book, “McDonald’s Behind the Arches.”
Whether you’re looking to Invest in your own business, in the financial markets, or in the real estate market don’t try to figure things out on your own. Instead, look for a proven business Operating System, a proven Stock Investing Operating System, or a proven Real Estate Investing Operating System. And look for proven Operating Systems that also incorporate a proven Learning System so that you can accelerate your Expertise as well.
You will always learn some things through trial and error on your journey to financial independence, but you don’t have to learn everything through trial and error. Take advantage of the trial and error other people have gone through in developing their Expertise and leverage their Learning Systems and Operating Systems whenever possible.
Next week I will share with you my “Lucky Break Factor” – a proven Operating System for using luck as a key strategy for achieving success in both your business and personal life.
Best of Luck Always,
D. Scott Elder
(c) 2011 Cosmic Bridge, LLC