We all get busy with our day-to-day lives. One day runs into the next, one year into another… Before you know it we are down a road wondering what happened. I’ve met many people that are at a point in their lives where they are not happy. The sad part is they often have no idea how they got there. Their lives are completely different than how they thought it would be.
So what happened? The simple answer is that they lost sight of the ball. They got caught up in mundane tasks without keeping their eye on the big picture. The goals they set when they were young were put aside while they focused on the little stuff like getting the TPS report out, mowing the grass, taking the kids to school… We all have important things to do, but we also have a finite amount of time on this planet. It is important to manage our time effectively and prioritize what we should be doing right now. If we don’t, we will be that person wondering what went wrong…
Changing your life – Step one: Where are you now?
I am a big believer in visualization techniques, which is basically seeing something in your minds eye to the point that it feels real to you. Visualization can be used in many ways. You can practice your golf swing while laying in bed, you can calm yourself by imagining that you are walking on a beech, and you can even see yourself in the future.
The Rocking Chair Test
The Rocking Chair Test is what I use to keep myself grounded while helping me objectively access where I am. RCT is basically a method of looking forward in the future and imaging where I’ll be in 10-20 years based on what I’m doing in life now. I try to be as detailed as possible. What type of house will I have, will I be retired, where will I live, what will I look like, will I be wearing reading glasses, will I still live in Chicago, etc.
After visualizing where I will be in the future, I turn the tables and look backwards while sitting in the rocking chair thinking about my life. What did I do to get there? Am I where I want to be? Am I proud of what I did to get there? Did my life have meaning? Did I make the world, my company, my family, etc. better? It is important to be honest with yourself.
Sometimes it helps to start by looking back to things that really happened and think about how they changed the course of your life (e.g. getting married, your first job, graduating from collage, a loss of someone close, etc). Then look at imaginary things that may happen if you keep doing what you’re doing and their effect on your life.
There are two points of this exercise. The first is to get a real picture of where you are in life and if you are on the right course (Psychologist call this self actualization). The second is to help you see what you can change and the likely outcome if you do. Having these two pieces of information is very powerful. It helps you realistically gauge where you are in life and what you have to do to get to where you want to be.
Changing your life – Step 2: Change what isn’t working.
What’s great about self-assessment is that you have the power to change anything. If you don’t like who you are then change what you don’t like. Loose weight, color your hair, start being nice to people around you, etc. If you don’t like where you will be in the future then change it! Start by imagining yourself in the future you want. Then reverse the process to get to where you are now. What had to change to get you to the life you want?
Money is not the answer to this question. Money is a thing, making the money is the action you need to identify. In other words, if money is your limiting factor then you need to change what you are doing in order to make the money you need.
Changing your life – Step 3: How much money do you need?
The key to achieving to your money goal is to figure out what you have to do to get there. Let’s say you want $1 million dollars cash in 10 years. 10 years is 120 months/3650 days. Assuming zero interest, you will need to put away $8333/month to reach that goal. This is a huge number if you are working for someone else since the majority of the money you need to save has to be after taxes.
My success has been in building a business to a viable point and then selling it to someone that has a portfolio that the product or service I created fits into. Typically, businesses sell for 3 to 5 times revenues. BAM! $3MM to $5MM in your pocket from a $1MM/yr business overnight! And it doesn’t take anywhere near 10 years to do it!
Businesses, on the other hand, are much easier to grow into multimillion dollar money machines than an individual can. Even if that one individual is the only person running it. Why? The short answer is taxes. Unlike the general working population, a business has a completely different tax structure. Businesses pay taxes on profits; whereas, individuals pay taxes on earnings. In other words, if you personally make an income of $150K/year you will pay about 1/3 in taxes leaving you with $100K of working capital to pay your rent, put into savings, etc. Businesses write off their payroll, interest, depreciation, rent, car payments, health insurance, internet connections, phone lines, etc. and then pay taxes on what’s left.
The income a business is taxed on is what is left out of the $150K, which also lowers their tax bracket. Businesses clearly have the advantage. On the same $150K income, the business would have $50K more to work with than the individual. And if they don’t make a profit they don’t pay a dime in taxes!
I can’t say this enough…You have the power to change your life! You just have to decide to change it and then work every day to get it where you want it to be. Here’s the action plan to get you going:
- Get real about your life. Where are you right now?
- Visualize where you want to be in the future.
- Map a plan on how to get to where you want to be.
- Start a business and build it to a revenue level of 1/3rd of your target income goal.
- Sell the business and cash the check.