Get Your Weight up Thinking Black Man Part 2! Deciding The Best Money Philosophy and Plan
Before you dive into this installment I recommend you read Part 1 of the Series. In Part 1, I broke down the absolute necessity of you seeing money completely differently from what you may have and the necessity for you to start planning and moving way ahead from just doing and having enough to manage your current life. Your task is now to develop and execute a plan that will not only take care of your life now , but later as well.
Your Plan will be heavily dependent on your Income Potential and Money Philosophy
The statement above is the reality. There is a broad group of working and earning, Thinking Black men with widely varying incomes and expenses for their lives. So we all have to get to the fundamentals of what will work for us. I’ve thought and experimented on a fair share of plans both by thought and action and really there’s 2 fundamental ways to handle money based upon the Philosophy of how you perceive, risk, debt, and monetary value over time and economic policy changes. Here are the 2 basic plans with my take on the risks and drawbacks you may be exposing yourself to.
Plan 1: All Cash no Debt, Saving, Investing
This is the classic model. If you Hate Debt and want to live off of cash because you believe it to be secure, you see yourself in your job or business long term earning, then perhaps the all cash , no debt route for you. It’s less stress, money comes in and goes to all your essentials savings and investments (more on that in Part 3). If you do incur debt, which is almost essential nowadays, you double and triple up on your payments and shorten your notes and mortgages to get out from under it as fast as possible. Life is good… as long as your place of income stays intact.
To me The risks go up very fast when that income dries up , by unemployment or slow business. The Adage , “Live below your means “. really comes into play as a lifelong commitment with this . You are at the restriction of your income ability to confine your savings and investment capital within those means, unless you literally build a business from scratch that requires little to no capital. If you do not develop some business or investment beyond income from your profession, you may have to work well into an older age, which opens risk factors dealing with still having the ability to do the profession you are in, and that profession still paying well.
Ideally you want to be a HIGH income, LOW expense person to do this , so your Business or occupation has to Really Produce for you, along with having some form of guaranteed income , like a pension or high performing retirement plan, and in the event your occupation or ability shuts down for some reason , your ability to find another comparable position has to be on point. You definitely want to keep pushing the ratio of your savings up and live off of the most minimal of your income , because you have to make that money stretch well into your older age, retirement or not. If Savings will be your investment into your Future, you need to determine how much you will need to live out each year until your passing , factoring incidentals that may overrun your projections. You will have to be highly confident that the amount you plan for the future can either be drawn down upon out of your savings account or will produce enough interest from the saving to live off the interest, pending the bank you hold it keeps solvency.
There’s alot of nuances I have dropped here that most don’t consider in a very disciplined, long term plan. There’s alot you have to count on going right to stay in a good position with such a plan down the road , especially the more Cash Centered you are. Also remember the cash is only as good as other people and the general environment valuing it to be, so in other words , you have to really keep alot of high faith in the ability for the cash to convert at an acceptable value at the right time for you. So if Cash and at worst, minimal debt, seems like it can be a good route and you can mitigate those risks, Cool! Now on to Plan 2,
Plan 2: Cash, Investments and Income Producing Debt
The next plan is similar to plan 1, but it’s way more Debt Friendly and Flexible. You make your money, pay your expenses and save a sizeable portion, but with some of that savings you invest, you use it along with the right term debt to buy things that will produce income and pay its own debt, with the income it produces. This way you are not restricted to just your income , but now you can borrow to create more income. Ideally , with such a plan you can put yourself in a place where you make more, Save more proportional to your life, invest more or even pay down the debt! You can also reach a point where you Work way less for your primary income , because the income from your investments supplement you each month. What would you do with your time if you did not have to Earn every single dollar first, and you worked because you wanted to , not because you needed to?
Just like such a plan could really make you, yeah, it can really break you too. Your plans go BUST, you go bust. If you spend because the income keeps coming in but never consider properly managing the investments you buy , those investments will destroy your situation too. The flexibility in such a plan and the ability not to depend on being so restricted by your own personal earning ability, profession changes, future money value, and life changes due to old age requires a deeper understanding and respect for your money to be done effectively. If you reexamine what money really is on a grand scale and how Economic Policy and Time can affect your money, plan 2 allows you to be able to adjust more flexibly , later when you have to and when you are most vulnerable to change.
So what are these Investments that I speak of, that produce income? Part 3 is on the way….