Am I Rich?
Time to count the coins and look at the money beast straight in the eyes.
With that, the goal is to air the blame, mockery and cavilling critics, with the simple three steps of the MOMI-AIR method. Each should take 45’, not more: otherwise you’re at risk of becoming Scrooge, not less: otherwise you’re not paying the attention you need to make progress.
We start with the Uses of Funds and Assets, aka "Money Out", MO.
We then review the Sources of Funds and Liabilities, aka "Money In", MI.
Last we reflect on the output and evaluate “Am I Rich”, AIR.
Money Out is the most painful and you want to just rip the band-aid.
Put a timer for 30' and scan your bank account(s) for the money going out for the past 6 months. Categorise it across 20 categories max. You can do that by downloading all the information in a good old spreadsheet, or by using one of the many budget apps on the market. Start with the big ticket items, and then go granular.
After 30' review what expenses are left uncategorised. If that's more than 20% of the total, then rinse and repeat Money Out weekly until 80%+ of what you spend is clear to you. You may also decide to plan 10' every week to categorise weekly expenses going forward, or use less cash.
Add the total of the assets you own: cash on hand, real estate, stocks and bonds, pension capital.
Next up: Money In.
Scan your bank account(s) for the money coming in for the past 6 months and separate by where it's coming from: salaries, dividends, rents, interests and reimbursements.
Take a look at your salary slips, investments statements, or any contract relevant to understand the money inflow. Separate out taxes and participations that are often taken out at the source and include them in your expense tracking.
Add the total of the money you owe: debt at the bank or outstanding invoices and taxes.
Take the last 5' to do your bespoke ritual money dance, and celebrate how far you've come by taking the reins. Take note of what you've learned in the process.
Finally: Am I Rich?
Put the MOMI in front of you, as in the output you created with your Money Out Money In efforts. It could look somewhat like THIS. Look at it closely. See where your attention goes naturally. Feel when you react to the numbers.
When there is resistance:
Hear the judgments out, for instance by closing your eyes for just a minute and listening to the thoughts that come to your mind
Air the judgments out, for instance by writing them down with pen and paper in free writing format, without interruption
Hash the judgments out: what criteria are they based on? Are they your own, or somebody else’s?
Hammer them out: which are serving you - inspiring hope and progress; which aren’t - breeding resentment or despair. Also, make a point to specifically look for gratitude, pride and (self-)compassion
When there is acceptance, then you can assess with the stress test eight ball, going through the following questions quite quickly:
Do I own more than I owe? “Yes, my assets are 2.4 times the value of my debts”
Do I earn more than I burn? “Yes, my savings decreased only because I decided to invest them in real estate, the stock market or direct participations”
Does the cash I have on hand create security? “Yes, it covers for about 2 months of expenses which is enough time for me to liquidate assets if I need to”
Does the balance of my spend between my needs and my wants foster responsibility? “Yes, about 2/3 of my expenses are for things I need (housing, food, transportation) and I still allow myself to spend enough on what I want”
Does the ratio fixed vs variable spend allow for flexibility? “Yes, committed costs are about half of my expenses, which means I can have direct influence on the other half”
Can my passive income level free up my time, with a rent/dividend strategy? “Not quite, as 75% of my income still comes from my work: I would like to explore ways for me to diversify my sources of income”
Does my equity grow towards building a legacy, with a capital gain strategy? “Yes, my portfolio of investments is diversified and growing in value”
Does my Debt to Equity ratio leverages my credibility? “No, my debt is currently about 2/3 of my equity, so I could use more credit as a way to create leverage”
From there, identify what the key objective might look like for you so that you can confidently say I Am Rich: with the example here “How might I leverage debt to increase the share of my passive income?”
Lastly, if you still have 5’, list all the ideas that you would want to explore to further characterise where your money focus should go:
gain more insights on… “various sources of passive income”
experiment with… “putting a little bit of money on real estate crowdfunding”
delegate… “loan evaluation to a financial advisor”
start… “focusing more investments decisions on a rent/dividend strategy”
stop… “spending so much time on maximising my income from work”
Voila! If you don’t know, now you know. I’d be happy to know as well (and maybe share a few goodies) if you’d like to share here.
Time to go and listen to the masterpiece Juicy by Notorious B.I.G. and celebrate.
You know very well
Who you are
Don't let 'em hold you down
Reach for the stars
You had a goal
But not that many
'Cause you're the only one
I'll give you good and plenty
