There is no easy way to move up the terrible ladder from poverty to prosperity and power. This post is all all the advice that I can possibly gather to help someone along that path in America.
Yesterday my best friend told me that America is the most stagnant country in relation to moving up the caste system- the poor stay poor and the middle class is shrinking. That was a hard belief for me to swallow- I am guilty of idealism and redeem myself by constantly searching from the truth of all things. So I wanted to know- is it really that difficult to become wealthy in America? This country, was the greatest- I supposed- for the pursuit, and the safest as well. That is the optimistic state of mind that I am in as I dive into another adventure of research about the true availability of opportunities in America and how they compare to other countries.
For now, I am going to write without the sway of that research, and discuss a great deal of the advice that I have garnered about becoming rich in America from relatively nothing.
You must be able to asses where you are now. Regularly ask yourself how much you owe, and when those debts are owed and to who. Prioritize debts. When do you get money, how much of your debts does that satisfy, and are you in the positive or in debt or breaking even. I must say that breaking even was some of the scariest times in my life. Any out-of-the-ordinary expense could potentially devastate my precarious existence. Then that happened- I lost my job. I rebounded from that, with great help from my support system, and I help people to avoid those things now.
Great understanding of your current financial position comes from organizing your bills and income into a balance sheet.
Also, develop and stick to a personal budget. Reduce expenses where ever possible. My first budget lead me to realize as a teenager, that I was spending at least $300 per month on bottled water! I’d get a bottle everywhere- at school, at the gas station, at work several times- so I saved a significant amount by investing in a Nalgene bottle and keeping it with me everywhere to refill at water fountains.
Really examine your food choices. What is your a average cost per meal? Do you eat out often- that is an easy cut back. Do you buy items that are extremely cheap? I have noticed that buying extremely low cost had unintended consequences. I sacrificed nutrition and taste. I have found it to be much more cost effective to buy certain items in bulk, and create meals that I can eat many times and really enjoy- at a very low cost. Some communities do this- it’s called meal share, where each family pitches in an item in bulk, a ton of food is cooked, and a lot of people are fed at a very low cost to each family.
The ability to reduce or eliminate expenses is a huge step toward prosperity.
It is then imperative that you increase how much you make. As a short term measure, you can take on a second job- or find a better paying job. Many experts advice that you value a job with good medical benefits over high pay because medical complications are such a high contributor to bankruptcy. Also, consider your commute. Working for more money can be offset by very high gas costs. Changing occupation presents many complications, and should be approached strategically and with caution.
As you increase your regular income, aim to get to a place where you have more than enough to cover your expenses.
Set an amount or percentage of what is left over, and save for a rainy day. This is the first cushion. Having a savings that can cover many months of your regular expenses can provide you great peace-of-mind. It is also important that you make regular investments in preventative maintenance on the items you rely on most. Add the expenses into your budget. If you rent, work with your landlord on upkeep that will save you major problems in the future. Take exceptional care of your vehicle- learning to do as much of the needed work yourself- like a simple oil change and putting air in your tires, and bring the rest of the work to the experts as regularly as you can afford. At the same time, it may be wise to set aside funds to invest in your next vehicle.
Now I would Iike to back-track here, because many are so poor, and despite trying and trying they can’t find a job, or can’t find a job that pays them more than enough to cover their expenses. I have been there a few times, and it is scary and frustrating- not to mention demoralizing. I overcame that situation by aggressively seeking help. I also moved into a city where my skills were in higher demand- but I realize that moving is an expense that is not possible for many people in this predicament. At a time that I really needed more money and could not find a job, I sought out help very aggressively. There are worksourse programs and similar initiatives at colleges and government links. There are temp agencies, and day job facilities. There are sources online for gaining odd jobs and temporary work. These options are not attractive. I know. But I have found that it is better to be able to feed yourself from luster- less work than search tirelessly while you can’t fulfill your basic needs. It is important to be very careful with money earned from temporary work- it’s so tempting when you are suffering in that way, to “reward” yourself and spend on entertainment or sweets, or other wasteful avenues. If you can develop discipline with money when you have very little, than you can be very effective when you have a lot! Sacrifice a small pleasure for great joy down the road.
With time, hopefully you can work from not making it, to making more than enough. From there, hopefully you save and have a rainy day fund- a way to cove your bills for a period of time in case of an emergency. My savings goal is three months- to cover my vehicle payment, rent, electric and phone for three months. Set your own goal, and push for it.
When you have saved your goal, I suggest that you reduce how much you save, and begin to invest.
Here are some ways to invest with very small amounts of money.
When I reached my first saving goal, I put $50 a month into savings and had $200 left over. I’d spend $20-$40 on cheap entertainment to add to my quality of life. The remaining $180-$160, I would invest. I was 18 and pretty well-networked in the club industry. One easy way that I could grow my money was by buying tickets to concerts at clubs early on, and then re-sell them at a very high rate on the day before and day of the show in the scarcity. So I could turn $100 in tickets on a conservative time into $300, or in a very lucrative time into $700. There are many ways to do deals like this- wholesaling. The risk lies in your ability to sell your items at all- and then at selling your items for a profit. I like opportunities to sell items when I know there is going to be no one else that will have them. But by simply buying an item in bulk at a discount, increasing the price and reselling the you can grow your money.
Another instance of wholesale that I have seen become very lucrative was with a photographer friend of mine. He bought a thousand camera memory cards at an extremely low rate of $0.37 apiece. He traveled quite a bit, and taught workshops. At the end of his workshops, he offered his 16gb memory cards for $5 apiece. The photographers went crazy over the deal and cleaned him out in less than three months. So he spent $370 on 1000 memory cards and sold them for $5 apiece, making $5,000 and a profit of $4,630. Now as far as investments go, some may criticize that making a return in that long of a time is not worth it. I think that finding ways to profit, and offset expenses that you are already incurring is admirable. Another consideration when wholesaling is your responsibility to pay taxes. Judge risk and constantly educate yourself. Be sure you weight the possibility that you can loose all that you put in.
Wholesaling is a balance of making educated decisions and jumping on opportunities quickly.
Many poor people know this concept and start to see growth of their small investments $100-500 become $1,000-$5,000+… But they failed to first master discipline of their money, and an understanding of their debts/liabilities versus their profits. Then they think they are doing so well for themselves and make impulsive decisions. They upgrade their housing expenses or buy a nicer car- increasing their car payment. Do not make a little money and think its a lot. DO NOT UPGRADE BEYOND YOUR MEANS. Spend less than you make. This may be a harder time to be disciplined with money than if you are close to destitute poor. This is not a time to get comfortable. This is not the time that I think you should quit your job. New doors are open to you if your financial situation looks like this: you have a job that more than covers your expenses. You have a savings that can cover you for a few months. You also have additional funds coming from wholesaling or another source of small investment. When you start to have $1,000 to $5,000 in investment capital, you can take more risks, and potentially see a higher return. This might be a time to invest in a financial adviser- one that primarily works with people in your income bracket, with smaller amounts to work with. This may be a time that you can open an investment account of some kind, and work with penny stocks or very small bonds. If you are interested in starting a business, I would suggest joining strategic networking groups, like your local chamber of commerce, and finding mentors. Attend short and concentrated workshops, held by people that are very successful- that have lots of good reviews online. Do not start a business without a business plan, and a good investment is hiring help from market research firms, marketing firms, accountants- experts that you can find in your budget- that will help to make your start-up more safe. Build your business plan with your audience in mind. How are you going to get funding? If you are going to work on crowd- funding, then focus in how you are going to market your crowd-funding campaign and reward your contributors. If you are going to look at partners, how much control are you willing to give up? I am not willing to partner with investors and give up any control. This is just my own young stupidity, or wild intelligence- I like to try wild things and learn from making lots of mistakes. That isn’t attractive to any investor, and that isn’t my long-term plan, but one that helps me to learn tremendous amounts very fast. But if partnering is the direction that you take, I commend you and I hope you are able to negotiate for the capital you need to safely get off the ground without loosing too much of your company. No matter what route you take to funding your company, I think there are two things that you should absolutely do before you start, without any exception. Build a very strong business plan- one that thoroughly covers market research and your marketing plans at all phases. Your business plan can’t really cover all phases- you don’t know what you don’t know. But the more effort that you put into your business plan, the more you will be able to learn where the need is, and how you can best satisfy it. You may learn in the process of building the plan, that there is not enough need, and that point you have to be strong enough to stop working on that business and determine your next move. I met a man that was very excited to start a business providing DJ services in the very niche market of gospel house music. After significant research and sampling to focus groups, we kept finding that people just did not like this music. Gospel fans found the club style off-putting, especially since the club and alcohol scene conflicted with their beliefs. The club scene found the gospel music was “killing their vibe”. There is a market for that music, but we could not find it in our city. So, regardless of how much the DJ might love the music, if there is no market, it is probably a financial drain to start a business in that market.
Before you get anyone involved in your business, before you even start telling people your idea, I strongly suggest investing in a business attorney, even better a business attorney with experience in your market. An attorney can help you with non-disclosure contracts or what ever is necessary to protect the privacy of your idea. An attorney can consult you on the best structure for your business- such as a C-corp, S-corp, LLC or partnership. An attorney can teach you many things that you don’t know, but very much need to know.
The most powerful people in the world control assets. So if you want to become powerful, you also need to start purchasing and negotiating for ASSETS so that you can control assets also. Warren Buffet suggests that you master a certain thing, and only invest in that. His success shows how this idea can work for you. Most investors suggest that you invest in many different things, DIVERSIFICATION, so that you do not have all of your eggs in one basket if that basket becomes under attack, so to speak.
So, First: Afford your bills. Spend Less. Make more money.
Second, Save for a rainy day.
Third, Invest in assets and/or start a company strategically.
For more advice, visit Your Business Allies on Facebook.