Archive for ‘Money, Finance and Economy’

November 3rd, 2009

Values, Prices and Riches

One of the greatest ambitions of most people seems to be the desire to be rich. We want to have enough money to buy ourselves a good life, be happy and not have to endure the drudgery of a 9-5 living. But what is being rich, anyway? When does one start being rich and how does one stay that way?

After giving this some thought, the way I see it is like this. Riches aren’t about having a specific sum of money. You don’t get rich by winning the lottery or by selling your expensive house and moving into a small apartment. None of those sources of money are sustainable. Riches are rather about putting yourself into a situation where you’re constantly living below your means while not having to worry about unexpected costs.

A truly rich person will not have to worry about sudden medical bills or repair costs because he or she will have money set aside in case such an event happens. The rich person will not be spending the extra money every month on down payments, expensive clothes, jewelry or cars. After all, the $19 pair of jeans and the $15 sweater will cover you up just as well as the $500 branded suit. The $9 wristwatch will tell the time just as well as the $1400 one on the ad with George Clooney. Also – buy it in cash; don’t spend money you don’t have yet. I learned that lesson the hard way.

Riches also come from putting your money in perspective, seeing things in terms of their value rather than their price. If a can of Coke costs 10 units of currency and a book costs 200; you can see how they relate to each other. Will twenty cans of Coke or the book give you more value for your money? I’m not arguing that Coke is bad – quite the contrary, I’m still a heavy Coke drinker! – but once you’re done with the 20 cans, they’re over. They are no longer giving you any value. You can’t even sell them to regain some of your costs. The book, however, can be re-read, lent to friends, placed in a bookshelf, sold to others and even gain value if it turns out to be rare at some point in the future.

Once you start to look at things this way, you’ll quickly find that you’re spending money on things when you would be better off spending it elsewhere. Putting so much of your salary on consumables (expensive food, drinks, cigarettes, parties, alcohol, etc) might be a lot of fun while you’re at it but won’t really add any considerable value to your life.

Try it out; write down a couple of things you’ve bought the past couple of days or weeks and see how they compare to each other. See if you can’t figure out a value to currency conversion table for yourself, something like “Ten dollars of price should give me the same value of entertainment/joy/self-improvement as doing activity X”. Later on, if you’re wondering whether or not to buy an energy drink for two dollars, ask yourself if five energy drinks would give the same value as doing activity X which you’ve set as a baseline.

CategoryMoney, Finance and Economy | Comment2 Comments »

October 25th, 2009

Laws of Marketing

I recently finished reading The 22 Immutable Laws of Marketing, a book that I found to be both fascinating and eye-opening. Even though it is quite dated – it’s from 1993, and you can tell! – most of the suggestions are still highly relevant. The twenty-two laws are the laws of:

Leadership, the Category, the Mind, Perception, Focus, Exclusivity, the Ladder, Duality, the Opposite, Division, Perspective, Line Extension, Sacrifice, Attributes, Candor, Singularity, Unpredictability, Success,Failure, Hype, Acceleration, Resources.

Naturally, I won’t be able to cover all of them in this blog entry, but let me go through a couple of examples to highlight the points that really resonated with me.

Let’s take the first two laws, regarding Leadership and the Category, for example. In these two laws, we learn that to truly reach out to your audience and to capture their attention, you need to be the first. It’s not enough to just copy somebody who is already doing a good job, you have to be the first one out there. If you can’t be first, then find a new category within that group to be in. Charles Lindberg was the first person to fly across the Atlantic, but nobody remembers the second person to do so, even though the second person to do it actually did a far better job of it. However, everybody knows the third person – Amelia Earhart – because she was the first woman to fly across the Atlantic.

Another important law is the Law of Duality. You have to set your self up to have an opponent or a reasonable opposite. It may seem strange and counter-intuitive at first, but it doesn’t make sense to market your new drink as “the best drink in the world”. No company in their right mind would want to take a contrary position and market theirs as the worst. Instead, you want to find a feature that one can take an opposite point of and market your drink as, for example, the most sugary drink, the saltiest drink, the most caffinated drink, or something on those lines.

The Law of Line Extension is equally interesting. It tells you, basically, to find one thing to be good at and stick to it. Too many companies have failed because they’ve tried to expand their horizons too wide and tried to do too much. IBM is a perfect example of this, but there are plenty of others. If you have a brand name that’s closely associated with frozen foods, don’t try to expand your business into drinks and plastic utensils. If you really feel there’s a market for these things, use completely different brand names so that people won’t make the connection.

It’s a great book, and definitely one that I would recommend to anybody that is interested in marketing.

On a side note, this blog may experience some slow update times over the next two weeks. I’m flying off to Tunisia tomorrow and will be going straight to South Africa from there. I’ll try to write something from there, but I can’t be sure if I have the time, energy or motivation. We’ll see.

CategoryBusiness Ideas and Product Evolution, Money, Finance and Economy | CommentNo Comments »

October 7th, 2009

Designing your Freedom: Passive Income

This blog falls into a particular part of the self-help niche called Lifestyle Design. Wikipedia defines this as: “the design of a lifestyle, especially an unconventional one, providing good opportunities for personal fulfillment, leisure and adventure. Detailed methods include: career planning, entrepreneurship and travel”. So what does it mean to be a lifestyle designer? What is a lifestyle and how does one actually begin to design it? This is something that I’m going to be looking at in detail in the next couple of entries.

Like so many others, I first became aware of the term Lifestyle Design in Timothy Ferriss’ book The 4-hour Work Week. While the book itself didn’t promise to automatically create gold and riches for any of us, it asked a series of very relevant questions and showed us by means of an example how people can make a good life for themselves. It was inspirational, to say the very least.

To me, the term Lifestyle Design comes from the observation and recognition of a flaw in the old philosophies of how to make a good life for yourself. In the past, people (and I was no different) would focus on the goals they had. They would set up targets and milestones and eventually the results they were going for; something similar to “I want to earn $200,000 a year” or “I want to own a beach house in Malibu”. While the actual contents of these goals are all fine and good, I think that by doing this, people were avoiding the main issue and what their actual goals were. While I am sure it’s well within the reach of many people to earn $200,000 a year, I am equally sure that most people would need to be working double or triple shifts, have no family and no social life to speak of if they wanted to pull it off. If people want a beach house in Malibu, I’m sure that if they save money for long enough – or take a large enough loan – they can afford the beach house.

What these people actually want, and what they’re failing to ask for in their wishes, is the lifestyle associated with that beach house or the money. Instead of working 40 hours a week – or more – and feeling like there is no sense of control and direction, the Lifestyle Designer will set out to actively control the way that his life looks and works. We want to be able to spend hours of quality time with our friends and families, pursuing our hobbies and catching up on reading. What we usually don’t want is to be waking up early, hurrying to eight hours of sitting in the office waiting to go home for the day. We want to have the benefits of working five hours a week without the disadvantages. Enter Passive Income.

The first step towards Designing your Freedom is, unfortunately: Money, money, money. To be able to design an optimal life, we need to be able to afford to do this. Since most people are already earning money in one way or another, it is usually not enough to just find a new job. What Lifestyle Designers usually look for is a passive income. This usually falls into one (or more) of these categories:

  • Advertisement revenue on a homepage
  • Selling a product of some sort
  • Affiliate marketing
  • The inevitable “other”

I don’t need to spend much time on these, as they are so well covered in other places. For example, Pat and his Smart Passive Income Blog does a great job at covering the way he set up his very own group of income streams. The important thing to note here is that the various passive income methods are not goals in and of themselves. The goal is not to be earning large sums of money without any major effort but to be enjoying the life that the money permits.

That, I suppose, is the key issue here. So many people start trying to earn extra money from blogs, micro-niche pages, affiliate marketing and typing up a simple e-book, so why aren’t all of them earning massive amounts of money? While I don’t have any proof on this, I feel that many people fail because they focus too hard on the actual earning of money. I’m not ready to accept many of the old axioms – “If you build it, they will come” or “If you write good content, you will get readers” – but I do believe that trying too hard quickly becomes transparent. Nobody wants to click the affiliate advertisement of the guy screaming the equivalent of “CLICK HERE SO I GET MONEY”, but they’d be happy to click a link if it appears in combination with something that they find interesting.

Generating a passive income is, for many people, the first and only step in their Lifestyle Design. They feel that if they only had the money, everything else would be great. In a future entry, we’ll look at how important it is to have something to fill your new-found freedom with.

CategoryMoney, Finance and Economy, Time Management | CommentNo Comments »

« Older Entries