Awakening to Wealth by Janna Jungclaus - HTML preview

PLEASE NOTE: This is an HTML preview only and some elements such as links or page numbers may be incorrect.
Download the book in PDF, ePub, Kindle for a complete version.

 

Part Two: Financial Literacy

 

If you think money will solve problems, you’ll have a rough ride. Sure, money can buy us lots of things from the bare necessities to the ultimate luxuries. But beyond money there is a lot more to being wealthy.

 

I love a saying that I heard at one of the first wealth courses I attended back in 2007.  “Wealth is not how much money you have, but what you have when all your money is gone.”

 

This includes your relationships, your health and your spirituality of course. But it also includes the knowledge you have about money and what do with it. That is what this part of the book is all about; introducing you to the basics of money management or financial literacy.

 

Depending on where you are at in your life and whether, and how, you have managed your personal finances before, this might be easy for you, or it might be a total surprise!

 

Because you will all be at different levels with your financial literacy, I have included two exercise levels: beginners and advanced. I would recommend to always start with the beginners exercise. Even if you are experienced, it might hold some surprises for you. Once you are ready you can move on to the more advanced exercise.

 

If the advanced exercise feels too big or too daunting to you, let me know.

It’s likely you’re not the only one experiencing this – maybe I can create a video to make it easier or we can arrange a Webinar or a Skype coaching session to help each other.

Taking Stock: Starting Where You Are

 

It is important to start where you are, not where you want to go. Imagine how you would plan a journey, without knowing where your starting point is. You wouldn’t even be able to plan with a map, and it is very unlikely that you would be able to go where you want to go.

 

Even though we are talking about something external (money) here, it is very important that you assess where you are at, both internally and externally.

Internally

Assessing where you are internally reveals how you truly feel about money and wealth. At this time it is absolutely essential that you are honest and authentic with yourself.

 

I speak from experience when I say that being honest with ourselves is not always as easy as it seems. Be open to looking at yourself as you are; the perceived good, and the perceived bad. If you feel jealous but you pretend to be happy for someone, you will not break through this barrier or belief that is creating jealousy in you and blocking you from having more abundance in your life.

 

Simply see it this way: every perceived negative emotion, charge or belief is an opportunity for you to become aware of yourself and to possibly clear a charge and allowing abundance and prosperity to flow freely into your life.

 

 

Exercise

1. Write down how you feel about wealthy people in general. Keep writing until the inspiration stops.

 

 

 

 

 

 

 

 

2. Write down how you feel about wealthy friends (more emotions may come out in this exercise). Again, keep writing, even if your emotions start to come out.

 

 

 

 

 

 

 

3. Write down how you would feel if your best friends, brother/sister, ex-spouse (whoever holds the most charge) were to have 1 million dollars. Keep writing until your inspiration stops.

 

 

 

 

 

 

 

As you become aware of your emotions and even as you read through your notes afterwards, start to become aware of any patterns that reveal themselves to you. For example, jealousy, not feeling deserving, feeling useless or lazy, feeling as if you don’t need or don’t want the money, etc.

 

 

Externally

We assess where we are internally to clear charges and blockages, so that we may receive the flow of abundance, wealth and prosperity uninterrupted in our lives.

 

But we also need to assess where we are externally so that we may actually grow our physical wealth, our finances to achieve the goals we desire.

 

Regardless of the goal that you might like to achieve, here is a general assessment of your finances. When it comes to a particular goal that you have, such as getting out of debt, or saving a deposit for a house or creating financial freedom for yourself, you should be doing a more in-depth assessment that is aligned to your particular purpose.

 

Exercise Beginners

 

If you don’t know your monthly income and expenses, make it your exercise to write this down.

 

 

Monthly income:

 

 

 

 

Monthly expenses

1. Each day

 

 

2. Each week

 

 

3. Each month

 

 

Start with each day and review your expenses at the end of the day. To keep track you all your receipts from the day or you could make notes in your diary or on your phone.

 

This exercise might feel nit-picky to you and you might be tempted to dismiss it as silly and to skip it. Some of your charges might even come up. Great!

 

Let’s look at those charges and write down what makes you feel so uncomfortable about this exercise. Then, let’s clear those charges and continue with the exercise. You might be surprised with what you see!

 

Exercise Advanced

 

Write down

  • Your monthly income
  • Your monthly expenses
  • Your net gain/loss each month (be honest!)
  • Your assets
  • Your liabilities

 

I have created a spreadsheet template which you can download at www.awakeningtowealth.comto fill in.

 

What Money Type Are You?

 

Having completed these first exercises and assessed where you’re at internally and externally, might already give you a sense of the money type that you are.

 

Our personality, along with our beliefs and programs, has a big impact on our ability to earn, hold and grow ourwealth. Olivia Mellan, a money psychologist from the United States, has developed four distinct money types and how they typically deal with money.

 

Reading through these money types, chances are you will be able to identify yourself fairly easily with one or two of these types. If not, you can go to Olivia’s website and take a money personality quiz.

 

Here is a brief overview of the four money types adapted from Olivia Mellan.

Spender

 

As the name suggests, Spenders love to spend their money. They like the immediate pleasure that comes from buying things for themselves and they are often generous with others as well. This could mean shouting dinner for friends or buying gifts “just because”. Spending money to accumulate things or to indulge themselves makes Spenders happy.

 

On the other hand, Spenders may find it difficult to prioritise their spending and to put money aside for savings or investment. Spenders tend to focus on living in the moment rather than looking at the bigger financial picture and they may find themselves in debt because of their spending habits.

Saver

 

Savers love to hold on to their money. Savers tend to be very organized with their finances, often having a clear, written budget and they often know how much money is in their bank account.

 

Savers watch their spending carefully, often to the point where they have a hard time justifying purchases that seem “frivolous” such as vacations or entertainment.

 

Many Savers are anxious and tend to worry about their future financial security and they tend to be very conservative with where they choose to put their money, often preferring the safety of a high interest savings account over investments such as mutual funds or stocks.

Avoider

 

Chances are that if your money personality is Avoider you stopped reading at the first mention of the word “money”. If you are still reading it’s probably because your Saver friend is making you!

 

Avoiders avoid dealing with money as much as they possibly can. They never know how much is in their bank account and are often late with bill payments; not necessarily because they don’t have the money but because they don’t make paying bills a priority.

 

In many cases, Avoiders consider money to be challenging and complicated and prefer to devote their energy to more interesting things. They tend to be hit with late fees and bank charges simply because they don’t pay attention.

Money Monk

 

The Money Monk feels that amassing money or giving it undue importance is wrong on a spiritual level. Money Monks tend to give away as much of their money as possible either to good causes or friends/strangers in need.

 

They don’t feel right about having money when others don’t and so they find ways to benefit others without building wealth for themselves. Money Monks will often avoid investing their money because they don’t want to be perceived as greed and the idea of building wealth doesn’t sync with their spiritual, political and human values.

 

Maybe you started reading this book because you are a money monk, but you would like to pay more attention to your wealth?

 

Exercise

 

 

1. Which money personality type or types best describe you? If you don’t identify with any of the above, take the money personality quiz on Olivia’s website.

 

 

 

 

 

 

2. How has it impacted your financial situation in the past?

 

 

 

 

 

 

3. How can you use this awareness and understanding to take actions that will help you build a stronger financial future?

 

 

 

 

Learning About Money

 

In this section of the book, I’ll introduce you to the basics of money. These will be helpful for you, if you’re interested in building more wealth for yourself, your family and your community.

 

All information provided here is for informational purpose only. When making serious financial decisions you might like to consider consulting a financial planner or advisor, or somebody else you trust with this matter.

 

Before I go into more detail here, I want to be upfront with you. I am not a millionaire, and wouldn’t consider myself “wildly wealthy”. However, I do live a life that I consider to be very abundant and I have had the amazing opportunities to learn a lot about money from people in my surroundings.

 

I continue to learn new and more facts, as I put them into practice, make mistakes and start again.

 

So I am definitely not an expert. Here, I simply share the basics of money that have helped me on my journey so far and that help me in planning for my future.

 

The basics we will look into are the different types of income and budgeting.

 

Active Income, Passive Income

 

There are two different types of income.

 

There is active income, which means you have to actively work to get paid. You have to show up somewhere at a certain time, provide a product or service and you get paid the agreed amount.

 

Then there is passive income. This income does not require you to be there to earn the money. Often times you have already completed the work but get paid continuously from it. 

 

Building up your passive income frees you up to spend more time doing things that you love to do, whether you get paid for them or not.

 

Here are some examples of active and passive incomes.

 

Active income:

  • Your salary from a job
  • Contract work
  • Consulting work
  • Sales income (including commissions) that requires you to be present for the sale

 

Passive income

  • Real estate income such as the rent being paid to the landlord
  • Dividends from shares and/or other investments
  • Royalties, for example from books, music, other recordings, etc.
  • Business income that does not require your continued presence, for example if you own a share in a business or are involved in multi level marketing (MLM), if you own a membership business where your members pay a monthly or yearly subscription fee, etc.

 

For a long time I thought that passive income was something that came to you regardless of whether you worked for it or not. Just like the word “passive” seems to indicate. But in my opinion passive income is a misnomer because you still have to work for your income, and in addition you often have a responsibility to your client or customer.

 

For example, if you own a house or an apartment that you rent out, then the rent you receive is considered “passive income”. At the same time, you have the responsibility to make sure the property you rent out is in good condition and everything is as agreed with the tenant. If something is broken it is generally your responsibility to fix it.

 

Similarly, if you own a membership website for example, your members might pay you a monthly fee. In return you want to give them something of value, otherwise they might not stay a member for long.

 

If you are too passive with your passive income sources, then you might be replaced and lose your income. For example your tenant might move out, readers might stop buying your books or your members might quit their membership.

 

In my opinion it is good to have both types of income. If you are looking to actively build your wealth, you will probably want to build up your passive and active income sources.  This will give you a lot of flexibility in the long run, for example if you ever want to take some time out to have a break, develop new products, etc. Your passive income could then sustain you, in addition to any savings you might have.

 

 

Budgeting

 

Even though for most people budgeting is not a fun topic per se, it is important to at least devote a short section to it.

 

There is a lot of information out there on budgeting along with thousands of books, spreadsheets and apps. A long running joke with some friends of mine was based on a book where a woman had described how she managed to purchase ten investment properties in ten years by “eating old boots for dinner”!

 

Of course we don’t want to eat old boots, purchase everything in bulk or compromise our lifestyle. However, we do want to implement some easy tips and routines that can help us build our wealth and keep an overview of our money.

 

That’s where a good budgeting system comes in. I love implementing systems like this, because they are simple and take a lot of the thinking out of budgeting. It basically automates it for you.

 

I want to introduce you to two simple budgeting systems: The 50 / 20 /30 System by Alexa von Tobel and the Jars System by T Harv Eker.

 

The 50/20/30 budgeting method is based on Alexa von Tobel’s book Learnvest and is very simple. Once you’ve taken care of your Essentials (50% of your take-home pay) and your Future (20% of your take-home pay), the remaining 30% is yours to enjoy.

 

1. Essentials(50%). This is your food, clothing, rent. The essentials. This should be 50% of your income. Note that “clothing” includes the basics for clothing. Any fancy, must-have, new season items should be budgeted in your 30% enjoy category.

 

2. Future (20%). This is money that goes towards building your long-term wealth, passive income and securing your future. If you have a financial plan, you have probably already decided what types of investments are suitable to you and what you want to invest in. If you don’t have a financial plan yet, you might enjoy reading about the wealth profiles and the different types of investments and start thinking about what is important to you.

 

3. Enjoyment (30%). The rest of your money, 30% goes towards your enjoyment. You might like to spend this money on your car, fancy clothes, entertainment, travel or whatever makes your heart sing.

 

 

When I was looking for a good way to budget a few years ago, Alexa’s book wasn’t out yet. Instead Iwas introduced to the “Jars System” by T Harv Eker.

T Harv Eker is a Canadian financial educator who travels the world teaching people about money. (You can find his most recent book here.)

 

By implementing this system, I was able to save a nice amount of money that allowed me to travel the world and have some quiet time to myself when I was going through a difficult time in my life. At the same time, I knew I had put money away for my future and didn’t need to touch it to finance my time out.

 

The Jars System is so called because it refers to dividing your income into sixjars. If you want to be old fashioned you can use jars of course, or alternatively you can open sub-account for your existing bank accounts (make sure you don’t get charged additional fees!).

 

Divide your income into six categories with the following percentages.

 

1. Necessities (55%). This is your food, clothing, rent. The basics. This should be 55% of your income at most. As you progress or as your income increases, you might aim to bring down the percentage of your income that goes towards necessities. As with Alexa’s system,“clothing” includes the basics for clothing. Any fancy, must-have, new season items should be budgeted in category 4 or 7.

 

2. Financial Freedom Account (10%). This is money that goes towards building your long-term wealth. 10% goes into this “jar” or bank account. If you are using a bank account for this, try and find a savings account that pays you a decent amount of interest without locking the money in long-term (unless your investment strategy is based on a long-term savings account).

 

3. Education (10%). Putting aside 10% of your income for education might be foreign to a lot of people. But I have certainly found it useful. I love learning and educating myself. And the more I grow, the happier I become and the more I can contribute to those around me. You can invest this money in books, coaching, workshops, courses, seminars. Topics can be anything from meditation to personal development, improving your relationships, learning about money, etc.

 

4. Play (10%). This is your play money. This money MUST be spent on FUN, every month (or at least every quarter). Think going out, massages, events, entertainment. 5% of your income should go into your play account. Making sure you spend money on fun things will help you to enjoy money and build a positive association. This is especially important for savers and money monks!

 

5. Contingency fund (10%). This is a just in case account. If your car needs to be fixed, your roof is leaking, or all hell breaks loose. It’s good to have a little bit of spare cash. 5% of your income goes into your contingency account.

 

6. Donation (5%). This is your money to donate. Give it money to a charity or cause you believe in and that makes your heart sing. See the notebelow for the powerful practice of donating regularly. 

 

Exercise Beginners

 

1. Decide which of these two budgeting systems most suits your circumstances. Then get out your last paycheck or your income statement and divide your income up into these categories.

 

 

 

 

 

2. How do you feel about the money that is allocated to each category? Can you see yourself living like this?

 

 

 

 

 

Exercise Advanced

 

1. Set up separate bank accounts (most banks will allow additional accounts to be opened at no extra cost) for each of thecategories in the budgeting system you chose.

 

 

 

 

 

 

2. Set up either automatic distribution of your income into each of these accounts or make a conscious effort every time your paycheck comes in to distribute money into each account.

 

 

 

 

 

 

 

 

 

 

The Power of Donations

Donating money is one of the most powerful practices you can implement to grow your wealth. Donating money will help you see the impact you can have beyond yourself. Tithing, or giving away a percentage of your income is an ancient tradition that is very common with people who are spiritually or religiously oriented. It is very common in many religious traditions ranging from Islam to Christianity.

It also helps you to feel good about the money you earn and about supporting a cause that is important to you. In addition, the thought of donating 5% (or even 10% or more) of your income will certainly bring out charges in you if you are someone who tends to hold on tight to their money.

If you believe in the law of “The more you give, the more you get.” or in accumulating good Karma, you won’t even need any further explanation on the practice of donation.

Finding the right cause to donate to, can be harder than it sounds. Certainly, I have donated to many different charities and causes over the last 7 years, but I always felt that I was missing the connection to the cause.

I tried to approach the subject analytically by finding a project that connected to my values. I tried to approach it selfishly by choosing projects that I could go and visit on my travels. I tried to donate to causes that were important to my family and friends. But none of the charities and causes ever really touched my heart.

One day, a friend started a GoFundMe campaign, where she shared her story of illness and obstacles that left her stranded on her way to become a Yoga Teacher. Straight away I knew in my heart that she was a person I wanted to invest in. If she fulfilled her dream of becoming a Yoga Teacher, I was  certain she would make the world a better place and have a huge impact on the people she would come in contact with.

In making this donation, and in her receiving this donation, there was a deep and profound connection. Since then I have made more donations through GoFundMe and Kickstarter Campaigns to either friends or friends of friends, whose causes speak directly to my heart.

However, be aware of your ego coming into play! We all like to be acknowledged for doing a good deed. But once we donate the money, we have to let go of it. The control is no longer ours and we don’t know what the person will end up doing and whether they will achieve the dream we wanted to support. See the joy in giving, rather than controlling the outcome.

Another ego-trap to become aware of is to praise and profile yourself with the donations you make. When you start to see donations as a way to boost your own ego, you might want to make anonymous donations instead.

 

Sidenote: Private donations (such as to GoFundMe or Kickstarter campaigns) and anonymous donations are usually not tax deductible. You should consider this when choosing where to donate, and potentially discuss it with your financial advisor or accountant.

 

Your Wealth Profile

We are all different people with a unique personality and a unique set of skills. Just as we might chose different hobbies and friends, our personalities also influence what type of work, or what type of investment could be most suitable to us.

 

One of my very first introductions to wealth and money education was through Roger Hamilton who developed the profiling system called Wealth Dynamics. Wealth Dynamics is based on 8 different wealth profiles. Finding out which wealth profile you are can help you find the “easiest” path to growing your income and your wealth, simply by choosing work, projects or investments that are suited to your personality and nature.

 

Here is an overview of the Wealth Dynamics profiles, as developed by Roger Hamilton.

 

  • The Creator

The Creators can't help creating! They are good at creating profitable ideas and businesses, but not so good with the day to day running of a business. Successful creators will delegate everything, except the creative process. Example: Walt Disney.

 

  • The Mechanic

Mechanics are perfectionists who like to finish things, rather than create them. They want to make everything better - fine tune them. Example: Henry Ford.

 

  • The Star

It is easy to spot a star. Obviously, you have film, music and sports stars, but high profile CEOs can also be thought of as stars. They rely on the strength of their personality and are aware of the pressure of always having to deliver. Example: Oprah Winfrey.

 

  • The Supporter

Supporters are great networkers with loads of energy and enthusiasm. Their greatest wealth can be achieved when they join forces with a Star, Creator, Deal Maker, or Mechanic. Example: Steve Ballmer.

 

  • The Deal Maker

A deal maker relies on relationships, connections and being able to react intuitively when the best opportunities present themselves. Example: Donald Trump.

 

  • The Trader

A trader is someone who naturally hunts out bargains, naturally loves haggling and gets immense satisfaction from a great deal. They are equally as good at finding high price buyers. Example: George Soros.

 

  • The Accumulator

Incremental growth is the key to this wealth dynamics profile. They are patient and disciplined and will stick fast to a successful system. Example: Warren Buffet.

 

  • The Lord

The Lord likes to control everything. You can find a lord where there are fixed assets generating cash. They don't want attention like the stars and like to create wealth quietly. Example: Ingvar Kamprad.

 

If you are curious to find out which wealth profile you are, you can take a test on Roger’s website for a small fee (I am an accumulator, by the way).

Investing

 

There are many different types of investments. If you are interested in starting to invest, I recommend you start your own research on what types of investments are available and suitable for your situation.

 

Here, I will introduce you to the basics of investing and why it is something you might want to consider to create wealth for yourself, your family and your community.

 

To start with, let’s look at the meaning of the word investment. In the dictionary it is defined as:

 

“To put money, time, or energy into something, especially for some benefit or purpose.”

 

I like this definition because it is not only about money. You equally invest your time and your energy, just as you are doing by reading this book. And if you’re interested in building up your financial investments, then you will certainly be investing time, money and energy, both in your own education and in the actual investment itself.

 

Generally people invest to make their money work for them. In Rich Dad Poor Dad, Robert Kiyosaki explains how every dollar you invest can go working for you. The resulting idea is that eventually your money works for you, instead of you working for your money.

 

I like the analogy of financial investment to the “Golden Goose”. You feed your golden goose, so it can lay golden eggs; as long as you take care of your Golden Goose, it will provide you with eggs. You could just as well use the analogy of looking after your garden or planting an apple tree.

 

The “Golden Goose” is your financial investment account (Future in Alexa’s 50 / 20 / 30 system and the Financial Freedom Account (FFA) in T Harv Eker’s system) which you feed every month by putting money aside. The golden eggis the passive income that is generated once this money is invested (for example through dividends or rent from an investment property).

 

2 Types of Investment Returns

 

With financial investments, there are two distinctive returns that people might be looking for:capital growth or passive income.

 

Capital growth means that the value of your investment increases and you can sell it for a higher amount at a later time to make a profit. This could be anything from a property investment to antiques, a stamp collection or your favourite sport star’s autograph. (Just to be clear, I am not advising to invest in any of these, I use them simply as examples of something that might increase in value).

 

If you buy it for $1 and then you sell it for $3 five years later you have tripled your money and made a profit. If you purchase an investment with the intention of selling it later at a higher price, then you are investing for capital growth.

 

Investing for passive income means you purchase an investment that pays money to you on a regular basis. An example of this could also be property where you receive rent, or shares where you receive a dividend, or buying into a business where you get paid a part of the profit. When you are looking to buy investments that pay you money on a regular basis, then you are looking to invest for passive income.

 

Of course there are cases where people will find both of these, capital growth and passive income, in one investment, but in my experience most investors will start to put their main focus on either one or the other at some stage in their investment career.

 

Now, I can hear you asking the question, which one is better? Investing for capital growth or investing for passive income? Both certainly have their advantages and disadvantages.

 

What kind of investment strategy you choose should be carefully considered and aligned with your personal goals and circumstances. You should consider whether you have a family to support, in what kind of job you work, how your investment impacts your tax payments, and many other factors.

 

That is why I recommend doing your own research and finding a financial planner or financial advisor whom you trust and who is well versed in your countries’ investment possibilities ,to develop your personalized strategy.

 

Exercise

 

  1. How do you feel about your financial future after reading this book? Do you feel excited, curious, empowered? Or confused and discouraged? I would be very grateful if you wanted to provide some direct feedback on how reading this book has affected you.

 

 

 

 

Next Steps

Congratulations! In reading this book you’ve made a big step towards your financial future. Whatever your goal may be: being debt-free, earning a particular amount of money, supporting your kids or simply living in abundance – it is all possible.

 

Before you put this book down, or mark it as “finished”:take some time to review the exercises you’ve completed.

 

When you go back and look at these exercises it should be fairly clear where your next steps are. Maybe you can identify some charges around money, or negative beliefs or programs that are holding you back. In that case you might consider working with a counselor or coach, or attending a workshop to help you clear these blocks.

 

Or maybe you’re just not sure how to continue building your finances and where you can learn the information you need to know. In that case, you might like to pick up a book or two from the recommended reading section.

You might also like to register on my website for additional information. Through the newsletter you will be informed of future updates of this book, free coaching calls or webinars and special offers for coaching and workshops.

 

Whatever your goal is, my heartfelt wish is for it to come true. I believe we can all live in abundance and give in abundance and make the world a better place – one step at a time.

 

If you’ve enjoyed reading this book, I would love to hear from you. And if you have any suggestions or feedback for an updated version, please let me know too!

 

Exercise

 

1. Review the all the completed exercises in this book.

 

 

2. Write down your 3 next steps that will take you closer to your compelling future.

 

1. Register on the Website at http://awakeningtowealth.com/sign-up/

 

2.

 

3.

 

 

 

3. Do you have any unanswered questions or feedback? Please let me know, so I can incorporate them in an updated version or address them in a future group call or webinar.