ONE TIP TO HELP GROW YOUR WEALTH
TIP : Know your burn rate.
Fortune published an article last week that generated a lot of buzz online and especially in the personal finance community.
The gist of the article is that $3 million is the new $1 million when it comes to the net worth goal for retirement or financial independence (FI).
The Fortune article requires you to register so here’s the Marketwatch article about the Fortune article if you prefer not register (welcome to the internet in 2020).
So is $3 million the new $1 million?
Well… maybe. Like most things on the internet, reality is more nuanced than a click-baity headline.
Here’s what I believe:
- Your situation is unique to you: We all live in different locations. We all have different financial and life goals. We all have different responsibilities when it comes to kids and parents. It’s impossible to say $X (in this case $3M) is the right amount of money needed to have financial independence without understanding your unique situation. So if $3M feels out of reach remember your situation (and FI number may be different).
- Know your burn rate: That said, it’s still a wise move to get a handle on your personal or family “burn rate“. An annual burn rate is simply the cash you’ll burn in a year. Think housing, cars, food, education, etc. Spend 30 minutes adding up your credit card statements, mortgage/rent, auto, and everything else to get a rough estimation of your annual burn rate.
- Understand the 4% rule: Even if you think you’ll want to work until you’re into your 70’s, your health, the job market, or your family situation may not make that goal a reality. It’s never too early to think about working towards financial security. The 4% rule is a rule of thumb that tells a person or family what they need in terms of assets to be financially independent. If your burn rate is $40k per year you’d need $1 million for FI. Knowing your burn rate and the resulting assets you need to stack up isn’t something anyone should obsess over but it is informative to understand, track, and update once or twice a year to help ensure you’re working towards financial security for you or your family.
- Wealth is more than money: There are many different ways to be “rich”. It could be having a job you love, being able to work remote, having the time for exercise and your health, having good relationships with friends and family, etc. If you’re making lots of money but sacrificing your mental and physical health, family, and friendships are you really better off than someone living a balanced life making half the salary?
SMART PERSON QUOTE
The definition of “rich” is having passive income greater than your burn. My dad and his wife receive about $50,000 a year from dividends, pension, and Social Security, and spend $40,000 a year. They are rich. I have a number of friends who earn between $1 million and $3 million, with several children in Manhattan private schools, an ex-wife, a home in the Hamptons, and a lifestyle fitting of a master of the universe. They spend most, if not all, of it. They are poor. By the time you’re thirty, you should have a feel for what your burn is. Young people are 100 percent focused on their earnings. Adults also focus on their burn.. – Scott Galloway (this is from a book I highly really enjoyed called ‘The Algebra of Happiness‘. It’s a fast and helpful read.)
ONE NEW BUSINESS IDEA
Content + Amazon FBA = MONEY!
Lots of people have asked me some variation of the following question: is Amazon FBA is dead?
The answer: No. Is FBA more difficult than a few years ago? Yes. Dead? Most definitely not.
Why is Amazon FBA more difficult today than a few years ago?
- Saturation: There are more sellers selling similar products making it harder to stand out.
- Chinese Sellers: Sellers from China have joined Amazon in droves. Often these sellers have a cost advantage compared to US sellers as they’re closer to the source.
- Reviews: It’s hard to start from zero when competing against established sellers.
IDEA: Content + Amazon FBA = MONEY!
INSIGHT: It’s much easier to win on Amazon if you can push traffic to your listing. Winning long-term on Amazon today majorly benefits sellers who have an audience or other traffic to drive to their listing.
HOW?: Here’s the play…
- Product / niche research: Spend some time researching niches on Amazon, Google Trends, etc. Helium 10 or Jungle Scout are great for this research.
- Start a blog (aka content site): Once you find your niche you can start a blog within the niche. This can cost less than $100. You can learn how to start a blog here.
- Start a FBA business: Now that you have traffic to your blog, launch a FBA product into your niche. I wrote a lot about starting a FBA biz here.
WHAT CONTENT SITE + PRODUCT APPEALS TO YOU?: There numerous niches where you could crush it with a blog and then bring in a product once you have some page views to crush it even harder. What niche seems interesting to you?
ONE QUESTION FOR YOU
What are you afraid of?
I flew out to San Fran to record the MFM episode with Shaan. As I was packing my suitcase I remember starting to feel pretty nervous about the whole thing. Do I have anything to say? What if I embarrass myself? Isn’t it a pretty arrogant move to talk about your own business success (which is minuscule compared to most of his guests)?
I was almost wishing for a mild flu bug so I’d have a convenient excuse to bail on the whole operation.
In the end I didn’t get the flu and recorded with Shaan. I’m glad I did. Why? I’ve connected with so many amazing people over email, on Twitter, and even in person. It’s been really fun to have these interactions and had I given in to the fear none of it would have ever happened.
Running towards your fears isn’t fun but it seems like the only way to grow, learn, and keep evolving.
What’s one thing that scares you? Maybe it’s taking an honest look at your burn rate and spending habits and seeing how close or far you are from financial security. Perhaps it’s starting a business. It could even be a hard conversation with a friend or loved one.
If you lean into something that scares you this month let me know about it and how it went.
Until next week!
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