That’s not a typo in the title. I will make $12,000 in 2012… not $120,000.
So far this year I’ve paid myself $500.
What I’m talking about is my personal “take home” income. My company will bring in many times more than what I will pay myself.
See, I don’t just tell you to keep your expenses low because it sounds good. No…
I keep mine low, too.
Expense Control Is The First Step
But it’s not to be cheap, frugal or minimalist (though, I practice two of the three — don’t ever be cheap).
There is a strategic reason for me to pay myself very little (relative to the rest of the US) and I learned this reason a few years ago from a very rich man.
My mentor, Joe Polish, let me sit in on one of his Genius Network mastermind sessions and one of the guys there spoke about how he manages his wealth (he also managed over $1 billion for others).
He said he paid himself $250,000 from his company which was a small fraction of what his company netted each year. The rest of the money his company earned was invested into income-producing assets.
This fund manager said his company served as a holding company for assets such as other companies, real estate and financial instruments.
What he said wasn’t exactly new. Robert Kiyosaki wrote about this concept in his book, Rich Dad, Poor Dad. Read it if you haven’t and read it again if you have.
Don’t Be A Lifestyle Creep
Essentially, you shouldn’t earn more money just to spend it on doo-dads — I call it lifestyle creep (you make more money and it goes into bigger mortgages, car loans, vacations and designer clothes). What you should be doing is living off the money earned by the money you made.
You’ve heard the saying, “make your money work for you,” but do you? In Internet Marketing, you’ll hear a lot about getting VAs to work for you, but you don’t hear about getting your assets to work for you.
Here’s how making your assets work for you works:
1. You sell an info-product (maybe an ebook) –>
2. You invest that money into an income-producing asset (maybe a business or real estate or debt instruments) –>
3. Assets pay you interest, rent or dividends –>
4. You buy a new car or whatever you desire.
You gonna do it? Probably not.
Break Free Of The Earn-Spend Formula
I’m not saying this to be a jerk. It’s taken me nearly all my life to get to this point. I was good at making money, but even better at spending it. Hooo boy, could I spend!
Some people are natural savers and some love investing their money, but for most of us all we know is the Earn Money, Spend Money Formula.
If you’re not putting a significant portion of your earnings into income-producing assets then you’ll always HAVE to work. (You should always want to work — on things you love, but you shouldn’t have to work.) The Internet Marketing “make money online” world is all about make tons of cash so you can spend it.
This will just move you from one trap (your job) to another trap (your business) except this trap will have a ton more responsibilities and risk.
I don’t want that for you.
Hell, I didn’t want it for me, but I was still running on that old earn and spend model that we’re encouraged to live. I spent most of my life creating money from businesses and products, but never keeping any. I was worn out, unhappy and broke — even though I was making money.
Just because you have a business doesn’t make you wealthy, successful, smart or happy. You can be just as miserable as if you’re living paycheck-to-paycheck in a dead-end job.
I know you don’t want that and that’s why I’m sharing this embarrassing aspect of my own past. I want you to turn into more than an entrepreneur. I want you to also become an asset manager so you’ll always have income-producing assets.
Once you take asset management seriously, you’ll see your business and your income in a different light and you’ll see your wealth grow rapidly.
Personal Asset Management Blogs I Read
I’m not the guy to tell you what to invest in (personally I like investing in creating more businesses because I understand them and can control them). I’ve been on this path for a few years, but have recently been introduced to two great sites on this topic: Early Retirement Extreme and Mr. Money Mustache (thanks Dan & Ian for sharing them with me).
Read these blogs to see what is possible when you manage your assets properly.
Enjoy your Foolish Asset Management,
Tim “Keeping My Cash” Conley