Do you think like a Millionaire?
Well welcome back to “Your Life as a Business”. Where we introduce the First Part of a 5 Part Series on how to make your money work for you and to your first Million.
Today we will change your viewpoint of money. Showing you the different ways to make it work for you. By simply summarizing the positives and negatives of each. First off, let’s go over the two worldviews of money and how they differ from each other.
The first one is the one most people know because they enact it every day, the Consumer. The consumer views money as a dispensable item that comes and goes, but ultimately is made to be spent. The consumer sees the value of a dollar as a means to get things they want, but not for its other values such as tool to protect yourself and your family or a means to build wealth. Instead, they use it to consume things. The pros of being a consumer is to get what you want when you want it and experience the things you always wanted. However, many times the consumer buys things they can’t afford, are constantly broke, and spend money faster than they can make it. When seeing money as dispensable, it’s easy to fall into the mindset of easy comes and easy go.
The other worldview is the Investor. The investor views money as a tool. They don’t see it as a dispensable item to buy things they don’t need, but as a way to make things happen. Such as make more money or as a weapon and shield against the world to protect yourself, your family, and your interests. With this way of thinking, people use money not as a way to consume the “next best thing” but instead think strategically how they can better their lives with money rather than have it control them.
Therefore it’s time to get started in “Your Life as a Business’ and start thinking about money like an investor.
When thinking of money as tool, you have to imagine the different things you can do with money. Its many facets and uses. Of the many things you can do, here are the most common that most people never know about even though they are available to them every day.
Bank Offerings
Checking accounts
Everyone knows what a checking account is. It’s a transactional account where most of the money that graces its presence it’s swiftly spent to bills, consumables, or any other immediate expenses.
Pros:
1. Liquid - They are extremely liquid as you can have available to you immediately through ATMs, checks, and debits cards.
2. Services - Usually are a staple of big banks and come with branches so you can avoid pesky transaction fees from ATMs
3. FDIC Insured - They are also insured by the Federal Deposit Insurance Corp so if the bank fails, the government is supposed to step in and pay you out your funds
Cons:
1. No Interest Paid - Because of the liquidity of your funds in a checking account and the benefits you receive such as access to branches, they use you’re your interest to provide those services
2. High Required Minimum Balances – Many banks require minimum balances or they will charge you fees
3. Nickel and Dime Fees – Many banks make their money by finding ways to make your money theirs. This is why they will nickel and dime you in any way possible with transaction fees, penalties, and services. (Remember – Banks need your Money to Function and they Must Be Reminded of that Fact)
Savings accounts
Savings accounts are a more illiquid form of checking accounts and that was why they gave higher interest rates as there were less services and benefits associated with it. That is why most have only a certain amount of transactions you can have per month or they will charge you a fee. However with the advent of online banking. They can be just as liquid as a checking account. As you can easily move your funds from your savings to your to you checking with just a few swipes.
Pros:
1. Higher Interest than a Checking Account –less services and benefits equals more interest paid out
2. Low Required Minimum Balances – don’t need as big of a required balance, but negates the purpose of a savings account, which is to make interest on Big Money
3. FDIC Insured - They are also insured by the Federal Deposit Insurance Corp so if the bank fails, the government is supposed to step in and pay you out your funds
Cons:
1. Next to No Interest Paid – With the destruction of the financial system came the lowest interest rates the world has ever seen. This has created a new benchmark for savings accounts, which is next to nothing.
2. Restricted Transactions – Can only use it for a few transactions a month before they start charging fees to keep you from using it like a checking account
3. Illiquid/No Services – no debit cards, checks, or other ways to spend money out of the account
Online-Only Bank Offerings
High-yield bank accounts
High-yield bank accounts are the same as checking and savings accounts but give much better interest rates by eliminating all the frills of a normal bank such as ATMs, branches, and staff. This keeps overhead low so they can pay more out to their customers.
Pros
Cons
1. No Frills Banking – can be hard to get to your cash fast with no ATMs, debit/checking services, or branches
2. Money Coordination – can be troublesome when you need to transfer money back and forth from the online bank account to a normal account
3. Teaser Rates – Beware of limited-time teaser rates that they get you to sign up for that reduce in half after only 6 months.
Money market deposit accounts
One of the most restricted accounts is the Money Market Deposit Account. They are usually offered by banks, but require a minimum balance and only permit a few transactions per month before they start charging fees.
Pros
Cons
Both Branch/Online Banks
Certificates of Deposit (CDs)
Certificate of Deposits are illiquid deposits in a bank or brokerage. They work by you promising to deposit your money and promise not to touch it for the time until it matures. Where you get it back in full with interest. If you take it out early, you have to pay a penalty that usually offsets any gains you have made so you don’t touch it.
Pros
1. FDIC Insured - They are also insured by the Federal Deposit Insurance Corp so if the bank fails, the government is supposed to step in and pay you out your funds
There you have it for this first part in the series of thinking like a millionaire.
Please check back each week as we unravel the investor's mind.
Well welcome back to “Your Life as a Business”. Where we introduce the First Part of a 5 Part Series on how to make your money work for you and to your first Million.
Today we will change your viewpoint of money. Showing you the different ways to make it work for you. By simply summarizing the positives and negatives of each. First off, let’s go over the two worldviews of money and how they differ from each other.
The first one is the one most people know because they enact it every day, the Consumer. The consumer views money as a dispensable item that comes and goes, but ultimately is made to be spent. The consumer sees the value of a dollar as a means to get things they want, but not for its other values such as tool to protect yourself and your family or a means to build wealth. Instead, they use it to consume things. The pros of being a consumer is to get what you want when you want it and experience the things you always wanted. However, many times the consumer buys things they can’t afford, are constantly broke, and spend money faster than they can make it. When seeing money as dispensable, it’s easy to fall into the mindset of easy comes and easy go.
The other worldview is the Investor. The investor views money as a tool. They don’t see it as a dispensable item to buy things they don’t need, but as a way to make things happen. Such as make more money or as a weapon and shield against the world to protect yourself, your family, and your interests. With this way of thinking, people use money not as a way to consume the “next best thing” but instead think strategically how they can better their lives with money rather than have it control them.
Therefore it’s time to get started in “Your Life as a Business’ and start thinking about money like an investor.
When thinking of money as tool, you have to imagine the different things you can do with money. Its many facets and uses. Of the many things you can do, here are the most common that most people never know about even though they are available to them every day.
Bank Offerings
Checking accounts
Everyone knows what a checking account is. It’s a transactional account where most of the money that graces its presence it’s swiftly spent to bills, consumables, or any other immediate expenses.
Pros:
1. Liquid - They are extremely liquid as you can have available to you immediately through ATMs, checks, and debits cards.
2. Services - Usually are a staple of big banks and come with branches so you can avoid pesky transaction fees from ATMs
3. FDIC Insured - They are also insured by the Federal Deposit Insurance Corp so if the bank fails, the government is supposed to step in and pay you out your funds
Cons:
1. No Interest Paid - Because of the liquidity of your funds in a checking account and the benefits you receive such as access to branches, they use you’re your interest to provide those services
2. High Required Minimum Balances – Many banks require minimum balances or they will charge you fees
3. Nickel and Dime Fees – Many banks make their money by finding ways to make your money theirs. This is why they will nickel and dime you in any way possible with transaction fees, penalties, and services. (Remember – Banks need your Money to Function and they Must Be Reminded of that Fact)
Savings accounts
Savings accounts are a more illiquid form of checking accounts and that was why they gave higher interest rates as there were less services and benefits associated with it. That is why most have only a certain amount of transactions you can have per month or they will charge you a fee. However with the advent of online banking. They can be just as liquid as a checking account. As you can easily move your funds from your savings to your to you checking with just a few swipes.
Pros:
1. Higher Interest than a Checking Account –less services and benefits equals more interest paid out
2. Low Required Minimum Balances – don’t need as big of a required balance, but negates the purpose of a savings account, which is to make interest on Big Money
3. FDIC Insured - They are also insured by the Federal Deposit Insurance Corp so if the bank fails, the government is supposed to step in and pay you out your funds
Cons:
1. Next to No Interest Paid – With the destruction of the financial system came the lowest interest rates the world has ever seen. This has created a new benchmark for savings accounts, which is next to nothing.
2. Restricted Transactions – Can only use it for a few transactions a month before they start charging fees to keep you from using it like a checking account
3. Illiquid/No Services – no debit cards, checks, or other ways to spend money out of the account
Online-Only Bank Offerings
High-yield bank accounts
High-yield bank accounts are the same as checking and savings accounts but give much better interest rates by eliminating all the frills of a normal bank such as ATMs, branches, and staff. This keeps overhead low so they can pay more out to their customers.
Pros
- Better Rates – can be comparable in interest payments to illiquid assets such as CDs
Cons
1. No Frills Banking – can be hard to get to your cash fast with no ATMs, debit/checking services, or branches
2. Money Coordination – can be troublesome when you need to transfer money back and forth from the online bank account to a normal account
3. Teaser Rates – Beware of limited-time teaser rates that they get you to sign up for that reduce in half after only 6 months.
Money market deposit accounts
One of the most restricted accounts is the Money Market Deposit Account. They are usually offered by banks, but require a minimum balance and only permit a few transactions per month before they start charging fees.
Pros
- Liquid Account - Money market deposit accounts are very liquid. Most allow for easy access through checks, transfers, and even ATMs.
- Higher Interest than Other Accounts –More restrictions and higher minimum balances equate to higher interest rates
- FDIC Insured - They are also insured by the Federal Deposit Insurance Corp so if the bank fails, the government is supposed to step in and pay you out your funds
Cons
- Pay for Liquidity – the more liquid the account the less interest that is usually paid out
- The Restrictions – play by the rules and you will be fine, but if you allow your account to fall below the minimum required balance or use too many transactions, then you will given a fine.
Both Branch/Online Banks
Certificates of Deposit (CDs)
Certificate of Deposits are illiquid deposits in a bank or brokerage. They work by you promising to deposit your money and promise not to touch it for the time until it matures. Where you get it back in full with interest. If you take it out early, you have to pay a penalty that usually offsets any gains you have made so you don’t touch it.
Pros
1. FDIC Insured - They are also insured by the Federal Deposit Insurance Corp so if the bank fails, the government is supposed to step in and pay you out your funds
- Highest Interest Rates – Usually give the highest return depending on how long it is to maturity
- Illiquid - Your money is off-limits until the CD matures. If you must, you can redeem the CD early, but you'll pay a penalty.
There you have it for this first part in the series of thinking like a millionaire.
Please check back each week as we unravel the investor's mind.
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