As I was crossing the street holding a small gift for my bookkeeper I was thinking about why I was bringing a gift. It was a small gesture that cost only $5 and five minutes of my time, but I felt good about bringing it, and I was hoping it would brighten up their day. Then it occurred to me: if someone came to my office with this small gift, it would sure make me happy.
1. Do unto others as you would have them do unto you.
Like Jim Rohn, I am also an amateur on the Bible. But with a little help from Google and Wikipedia, I do know that inside there’s a verse called Matthew 7:12, and according to Wikipedia it goes something like this:
Therefore whatever you desire for men to do to you, you
shall also do to them; for this is the law and the prophets.
This is also known as “THE” golden rule. On this same track, Zig Ziglar used to say, “You can get whatever you want, if you help enough people get what they want.” Think about this for a second. Can you trace any of your frustrations to times when you were focusing on yourself? For example, in traffic? I know I can! When someone is not driving to my expectations (drives too slow, doesn’t signal before making a turn, etc.) I get frust… fascinated! You can integrate this thinking into your business, your relationship, or your happiness in general. As you shift your focus from yourself onto the person or client you care about, you will not only feel better, but also achieve greater success. No matter how much our society and the media wants to convince us we are only focused on ourselves, real fire inside of us starts only when you start to give. Tony Robbins sums it up very nicely: “The secret to living is giving.”
2. Men are developed the same way gold is mined.
As I kept walking from the garage towards my bookkeeper, I thought about this golden rule and remembered another golden rule I read a while back in a beautiful, timeless bestseller: How to Win Friends and Influence People. I read it for the first time five years ago, and then two years ago I listened to an audiobook. I would recommend this book to absolutely everyone, and especially to business owners, CEOs and leaders in the making. There are some incredible gems inside this book! One of them is golden.
“Men are developed the same way gold is mined. Several tons of dirt must be moved to get an ounce of gold. But you don’t go into the mine looking for dirt. You go in looking for gold.” – Dale Carnegie
This was an eye-opener for me personally, especially since every leader is keen on personal development. Meaning, the same practice for developing your team, you can use to develop yourself. Play on your strengths, mask your weaknesses, and find someone or something to replace your weakness. Find someone whose strength can replace your weakness. Compliment your team when they do great work, as that will inspire them to do more great work. When they make a mistake, help them learn from it so that you have someone in place who has already made this mistake.
Looking for the gold will turn on your “reticular activating system” (RAS) which will help you find more gold. If you don’t know what an RAS is, the best and easiest way to explain it is for you to remember that time when you bought a car, or shoes, or brand of sunglasses and then you started to notice them everywhere. Those things were always there, but now you are noticing them because your brain now looks for them. Same with business opportunities, the perfect soulmate, and your goal in life.
Oftentimes, myself included, we fall prey to negativity and depression after we fail at a task again and again. We start to see so much dirt that we even neglect the gold we find. We justify it with, “Oh yeah, we were lucky,” “That’s the norm,” or “That’s still worse than xyz.” I once heard Arnold Schwarzenegger, in a motivational speech, say: “Nothing can replace hard work.” I can relate to him saying that because body building is a great example where you have to put in the reps, training, proper diet and whatnot to get the results. There is no amount of reading, talking, or motivational videos that can bring you results. You have to remove a ton of dirt so that you can get an ounce of gold. There are no shortcuts.
Once I thought of these two golden rules, I figured that if I could find a third one, that might turn into a nice little blog post. I didn’t have to think much, because even before I could open the door of the building I had the third golden rule.
3. Buy gold when it’s cheap. Sell gold when it’s expensive.
“Buy low, sell high” while having “asymmetric risk-reward” and “opportunity cost” in mind. It took me a few years to learn these terms, so I’ll explain them here just in case you aren’t fluent in the language of the sophisticated investor.
Buy low, sell high is pretty simple, and the simplest of the three concepts. That’s also why so many people lose money on it. They think they are “buying low,” until they realize they are not, and by then it is already too late. It took me a while to realize I have always been in the business of buying low, selling high! Oftentimes people classify this as value-added service, reselling, or investing. You can also buy a book or a course, acquire some knowledge (buying low), and then provide value to the marketplace by offering solutions and get your return with a much higher dollar sign (selling high).
I’ve learned that this concept becomes especially fun and powerful when you mix it with the other two: asymmetric risk-reward and opportunity cost. If, like me, you are not an economics major, there’s a good chance you’ve never heard of these two terms. After I learned some people made millions of dollars on account of them, it took me five minutes to understand them. Now don’t get me wrong, understanding something and doing something on a daily basis are two completely different things. You don’t get paid for what you know. You get paid for what you do. So what I can do here for you is help you reach the first step, which is to understand these two very powerful concepts.
It is what you do that defines you.
– Batman movie
Let’s start with the easier one, and the one you will need first: opportunity cost. If you don’t have any savings and are struggling financially, I am almost positive you don’t know what opportunity cost is. And even if you do, you are then ignoring this rule completely. I’ll explain by using an example of a smoker. I don’t have anything against smokers; I was a smoker for more than five years, and quit smoking almost 10 years ago. Why? My granddad died of lung cancer, and I was so broke that I couldn’t afford to buy my own cigarettes. I was sick and tired of being sick and tired. Cigarettes are a great example because most smokers buy them every single day. So hypothetically speaking, let’s say a pack of cigarettes that you would smoke that same day cost $4 where I am from. If you are in the US, this can go up to $6 or $7. But anyway, lets go easy, and say you would spend 30 times $4, a total of $120 that month on cigarettes. We both know that smokers don’t smoke for one month and then quit. Which is another reason why this is a great example for explaining opportunity cost. Let’s say a smoker smokes for 30 years (or 360 months). He would spend roughly $43,200 on cigarettes. And again, we both know that sometimes smokers buy more than one pack per day, AND that the price of cigarettes always goes up. If you used that money to start a business, acquire a client (with an ROI) or invest in the stock market, anything that could give you a return greater than $43,200, that’s opportunity cost: the cost of a missed opportunity. I think we can both agree that at only $4 per day, or $43,200, it’s pretty darn high!
If you are thinking, “Goran, that’s great, but I am so broke, I can’t afford cigarettes, or I am not buying cigarettes at all!” No problem. I was there; here’s what you do. Opportunity cost also applies to your time. For example, watching TV, playing video games, etc. Again, I was playing video games for 12 hours a day (if not longer), and watched so much TV as a teenager that it might be one of the main reasons why I dropped out of high school. So when I write this, don’t think I have anything against playing games or watching TV – I was there. Allow me to explain how opportunity cost applies to your time. Let’s say you are watching three hours of television every day. Or nowadays, people spend that amount of time on various social media channels, so you could use that as an example as well.
3 hours x 30 days x 12 months x 30 years = 32,400. That’s over 32,000 hours, and that’s IF you stop watching TV or browsing social media after 30 years. And that’s IF you only spend three hours doing it every day.
During that time you could learn several new skills, start a small business, become a better lover, make new friends, travel the world, plant a forest, help people in any kind of need, you name it. It is very hard to quantify and compare the return on investment from watching TV to that of becoming a brain surgeon (could you become a brain surgeon in 32,000 hours?) or a romantic lover, BUT it is a great philosophical question, and a great explanation of opportunity cost. I know I sound like a productivity junkie, and I am, but I am not saying you shouldn’t rest a minute in your day; rather, I am saying don’t spend over 60,000 hours watching TV during a 60-year period. I remember reading somewhere ( – and there is a heated discussion on who to attribute this quote to) – anyway, I think Gandhi said to his assistant that he would meditate today for 20 minutes. And then his assistant replied that he doesn’t have time in his very busy schedule for today! To which Gandhi replied, “Then I will have to meditate for an hour.”
Finally, the asymmetric risk reward. It sounds more complex than it really is. Since I am into SEO and Google AdWords and conversion rate optimization, I’ll use that as an example. Let’s say your asymmetric risk reward is 1:10. In a nutshell, it means you risk 1 for the chance of getting back 10. For the sake of this explanation, let’s say, U.S. dollars are in question. For example, your cost per click on your AdWords campaign is $1 (I know, very low, haha), and you know that if that website visitor converts to a paid client you will get $10. (For the sake of this example, let’s ignore customer lifetime value.) But this is where many people get it wrong! They think that this is asymmetric risk reward. The truth is, sophisticated investors are 100 percent sure that 1 in 10 will convert! So they spend $1 knowing that in 10 clicks they will get back $10! It’s not an idea that, “If the website visitor converts, I will get it”; they know it will convert. Those are the types of opportunities they are looking for! If you spend $11 for 11 clicks, and only 1 person converts with a $10 return on investment, sooner or later, you are going to be out of business. Unless you cross-sell, up-sell, ask for referrals, sell subscriptions and “work hard and smart,” but then you are just increasing your asymmetric risk reward from 1:10 into 1:20. This is still asymmetric risk reward, but it’s not the same comparison. A great asymmetric risk reward is 1:100, where you risk 1 for the chance of getting 100. That way, you can miss 98 times, and still come through.
Rich people plan for three generations
Poor people plan for Saturday night
– Gloria Steinem
In conclusion, I really think that by living these three golden rules every day, you are going to be exponentially better than you were supposed to be a month from now, a year from now, a decade from now. I know it’s extremely hard to plan for the future and look decades away, but that’s one of the traits that separates the ultra-rich from the mediocre and the poor. Long-term thinking and delayed gratification go hand-in-hand when it comes to securing wealth for yourself and your family. Thinking long term also has a nice spin with opportunity cost. You shouldn’t think of your $100 phone plan as “just $100 a month.” Instead, see it as stealing $1,200 from you every year and $17,300 from you every decade. Jim Rohn used to say that it’s not what the TV will cost in dollars, it’s what it will cost in time spent watching it.
Most of the time I am writing about buying domain names for your new or existing business, when really your business and domain name investments don’t stand a chance if your personal finances are wacky. I certainly made the same mistake, and that’s definitely one of the reasons why I wasn’t able to cash in on the four letter .com domains back in 2012 when I raised a lot of attention with WhoAPI research that found we were out of four-letter .com domain names.
I’ve been planning on writing a “personal finance” post for some time now, but I was hesitant because most of my friends and readers know me as the “domain and web hosting guy”. I was also hesitant because a lot of people have several “startups” and often when I write about something that’s not directly connected with WhoAPI someone asks me if I gave up on WhoAPI and what this new startup will be about. Geez… So relax, there won’t be a pitch at the end of this post, and I am still 100% committed to WhoAPI. Anyway, the truth is I became very passionate about personal finances at a low (financial) point in my life. Ever since I’ve read several books on the topic, and more importantly I took action! Now when I look back, I am extremely happy with the progress I’ve made since. Hopefully, this story will motivate you to take action, but also provide some valuable steps. For me, it all started with a Jim Rohn seminar on Youtube…
Sentence that improved my financial destiny
I was looking up Jim Rohn on Youtube, and I found an old seminar (video), and during the seminar, there was a part about personal finances. Jim Rohn joked about it how some people “don’t know where it all went” alluding to the fact that the person who isn’t aware of his expenses can’t really run a business. I felt ashamed because, at the time of watching this video, I also didn’t know “where it all went”. My bookkeeper tracked all the company’s expenses, and she was mad if I was late or failed to send an invoice when we purchased something with company’s money but I never tracked my personal expenses. Now bear in mind this was a few years ago, and the story has a happy ending since I’ve changed so much. (Side note, if you are a startup founder and you struggle with your personal finances, but don’t think these two are connected, I recommend my post on “Impact of personal finances on your startup“).What really started my financial renaissance weren't fancy cars or yachts or positive thinking. It was the fact I hated that I didn't know 'where it all went'! #finance #tips #moneyClick To Tweet
I decided to make a move on my personal finances because my startup was falling apart at the time (I promised a happy ending, so yes, I saved my startup), I was in debt (credit cards, 2 bank loans)! I remembered a while back I heard about a book about a past client of mine Financial Renaissance by Sanjin Frlan and I got some pretty good tips there and I was able to use them. More importantly, I got obsessed with “tracking where it all goes”! And as another personal finance expert Robert Kiyosaki says, I started treating my personal finances as a business. More than 3 years ago I started collecting every single invoice on every single expense I made (both business and personal). I am still doing it to this date. Yeah, I am crazy… Crazy about getting out of debt, and crazy about saving some money so that I don’t end up broke like more than half of the planet I am living on! That’s crazy if you ask me…
10 things I learned after tracking my personal finances for 30 months
- Spend less than you earn
Wow, what a revelation. Probably the best financial advice that absolutely everybody knows, but almost everybody ignores! After tracking all my expenses and incomes after first few months I quickly realized I was spending more than I was making! It was time to increase my income and reduce my expenses, fast!
- Habits and subscriptions are a bigger problem than one time large purchases
Before tracking my expenses I thought that if I stay away from large purchases I would be OK. But once you see the numbers crystal clear, it makes total sense to you. Jim Rohn said it best, “Success is a numbers game”. Details might be different in your case, but for me I realized I was losing way too much money on habits (cafe bars, coca-cola + chocolate) than when I was making a large purchase. I stopped drinking Coca-Cola (it’s bad for my health anyway), and I reinvested that money into customer acquisition for my business (win-win). This also goes into “opportunity cost”. If you are an economics major you probably know what this means. I am not, so I had to find out on my own. Wasting money on expensive coffee every day of the year could be instead reinvested in a Vanguard Index fund with an 8% return. The story goes that you lost $800 dollars per year on coffee, but if you invested that $800 in that fund, you would probably have millions in few decades. That’s opportunity cost.
- Psychology plays a huge role
You think you are in charge? If you don’t have any money saved, you are not in charge. People mostly buy things they don’t need, to impress the people they don’t like. Do you really need to get a new iPhone every year? How about your smartwatch? How about your perfume? How about that $2000 Louis Vuitton bag? I am not saying you should live like a Buddhist monk, I am saying plan your purchases and purchase only the things you will adore using every day, or at least every week! Even more importantly, invest in “something” that will increase your cash flow or create a secondary passive income.
- Tracking your income is equally important
If you have several sources of income, or several startup projects (oh no…) then you need to track how much profit or income you are paying yourself from these sources. After a few months, it will become crystal clear where you need to focus and spend time. This will also show you what is a hobby, what is your business and what is a complete waste of time.
- Separate your personal finances from your business
This probably makes total sense, but I made this mistake early on and tracked business and personal expense in the same sheet (because it was easier for me), but I improved this as soon as I got the opportunity. Track how your business is doing, and track how you are doing, just do it separately.
- Married? Track your spouse’s finances as well (or ask that they track it themselves)
Words can’t begin to describe how happy I am with my fiancée on topics of personal finances. Finances or should I say money problems are one of the most common reason for divorce (article 1, article 2, article 3, article 4). You can track and save all the money you can, but if the other side is on the wrong side of the equation you will either be broke or single. It is extremely important that all the members of the household are on the same page when it comes to personal finances.
- It makes sense to start saving, even if you are in debt
Why? Because habits are extremely powerful. Once you get that habit of putting that loose change in the piggy bank, there’s no stopping you. But don’t forget, at the same time, you need to eliminate your debt! Imagine you are Neo in the Matrix and loans start flying at you like the bullets. Just say no, and stop them. In Croatia besides a typical loan, banks often offer overdrafts that allow you to take as much as 3 times more money than your monthly paycheck. Once I understood interest rates on those and on the credit cards I renamed those services: “Highway to hell”. If you are paying for those services (and I know you are paying for them probably every month, then checkpoint #2 once more).
- Budget is the king
Set your budget and stick to it, or at least give it your best effort! If you don’t know your “restaurant budget” for this month, what do you think what are the chances of you missing that budget? Combine that with every other expense you can think of, and you have a recipe for disaster!
- Custom is better than a template
Although I will give you two templates for tracking your personal finances, have in mind that the best template is the one that you will use. For example, I might have created an expense box for traveling, while you might want to create a box for “John’s college” or any other priority. This is something that needs to evolve over time as your life changes.
- Lastly, contribution gives meaning
Being able to contribute money to a cause or a family member in need is far beyond any words can describe. I’d rather not go into the details of my contributions because I don’t do them to brag or to be significant. I do them out of love, respect and compassion. Both my fiancee and me give away almost 10% of our profits every month and every struggle we have is worth the opportunity and privilege of helping someone. Giving away without expecting anything in return truly is the greatest gift you can receive.
Two excel sheets you can chose from.
This is an old version of an excel sheet I created – https://docs.google.com/spreadsheets/d/1lHiT-0XDA5YIbCBOsD2z3z7UqjKv1BRfOKMuCSs7H-E/edit#gid=0
This is a Google spreadsheet template – https://docs.google.com/spreadsheets/d/14IpBxrUlJ2T6SycnbXDVH2FLk1wEEHmvEGZBH83daLw/edit
Whatever works better for you, start using it today!
I hope this was helpful, and that you start eliminating debt today, and start saving some money. Your future YOU and your community will definitely be very grateful. As for me, I’d rather not disclose how much money I saved, but I can tell you it’s the most I had in my life! Not to mention I have no credit card debt or loans (first time in my life)! To think that it all started with that thought that provoked me beyond reason! I was sick and tired of being sick and tired! “I don’t know where it all went!”. Remember, you don’t need more money to start saving, you need to start managing the money that you have and life will reward you! It will happen during that process, you will start eliminating debt, start saving money, and get new ideas on how to make more money!
If you liked what you’ve read so far, I recommend watching this video where I talk about 5 takeaways I got from listening “The Power of Ambition” by Jim Rohn. Spoiler alert, Jim Rohn talks about some of the same things in this audiobook, so one of the takeaways is that same sentence that took me on a journey of financial freedom. “I don’t know where it all went”.
At the beginning of this month, I read another book on personal finances and decided that same day to put some of the advice to practical use. Some of the stuff might make you laugh (using envelopes to control my expenses), but before I get into that in one of my future posts, I’d like to say how much I feel the personal finances impact your business and especially your startup!
I see personal finances as a set of habits. Do you:
– Measure something or not
– Plan something or not
– Stick to your goals and decisions or not.
Going broke, or being without money is a habitual pattern, nothing more. Unfortunately, I will also have to skip the importance of habits, will power, goal setting in life and personal finances for some other time, because that’s too broad of a topic.
Maybe you know someone who is really lazy, undisciplined with more than a few bad habits (smoking, alcohol, drugs) and still very successful under some definitions. Let’s say he has a great business, a lot of money, a great wife, a great body, whatever. He is winning in a certain field. Here’s the problem with that, when it’s going great, people think it’s going to be great forever. When it’s going bad, people also think it’s going to be bad forever. But that’s not how it goes. Every recession, depression, and war had an end. Ever economic boom, the revolutionary product had either an end or a major slow down. A lot of people are so successful in certain fields, but so remarkably unhappy in other parts of their life they go so far that they commit suicide. Remember Curt Cobain? You don’t have to go so far, I am sure you know Robin Williams. All the money and success in the world didn’t mean anything that day when he decided to commit suicide. Then again, if you ask 99% of the people what is their biggest problem, they’ll say, money (so it’s a personal finance problem, a set of habits). Money is not a problem. I’ll say that again, money is never a problem. The problem is you. To paraphrase George Carlin: “The money is fine. The people are fu**ed …”.
Those same people spend more than they earn. I am sure you heard this in the movie Fight Club,: “Buy stuff they don’t need, to impress people they don’t like”. So what happens when someone starts a company? Well, in the beginning, it’s just them (or perhaps one or two partners), and their habits and their personal finances have a major influence! Their ability to do budget planning. Skills to do personal finances. It’s the management that decides to buy a new chair, instead of investing in the product. It’s the management decided to buy a new car, instead of investing in research. It’s the management decided to go to a conference instead of doing a real lead generation.
When a startup is failing it takes some guts to admit that it’s the management problem. In startups, there are so few people that you have no one to point to, then yourself. But many people don’t. They point their fingers at the market, the problem they are solving, the money they don’t have, the people that surround them, and so on. It even gets worse. You don’t only “transfer” your habits to your startup, but since you are personally spending more than you are making, you have to suck out the money out of your startup! In return, more than cripples the startup that maybe had a chance if you didn’t have to buy cigarettes, travel, party, party, party. Who’s going to pay for all that? The fledgling business!
Amazing how so many people start “changing the world” and try to solve a huge problem in the world, and they don’t even know where their personal money is going! I know, I was certainly guilty of this. Right now, I am just mad at myself for being so stupid in the past. But just a little bit, because I know that it’s not important what happened to you, it’s important what you decide! You have to make a decision that from this day you will change your habits, which will have a strong impact on your personal finances, and ultimately on your startup! Yes, dear reader, I admitted my mistakes, I sucked it up, and now changing my habits.
Start small, start anywhere!
Skip one coffee per day. Skip one candy bar per week. Skip one dinner in a restaurant. Skip here, and skip there.
Make one more phone call. Do one more interview. Make one more sale. Send one more newsletter. A little bit here, and a little bit there.
Repeat each month, and add just one more. Just one.
Make it a golden rule to spend less than you earn! No matter what! If you make this your habit, so will your startup. Ultimately, that means that you and your startup are making more each month, which means that all you now need is time to pass. If there’s one thing you can be certain of, is that time will pass. Ten years from now, you will still be here. There’s a good chance that 50 years from now, you will still be here! The medical / biomedical, technological, psychological advances will surely improve people’s lives, and increase longevity. So start now!
Don’t be that guy or gal who has to suck the money out of startup, and because of that, pay more taxes. What happens next is that they complain about high taxes, and how the government is the problem. Taking the money out of a business in order to buy junk? Not really. Hey, if you want to buy expensive toys, you better be ready to cough up some dough. I heard the new iPhone 6+ is out, with a nice smartwatch.
Don’t fail. Don’t spend, more than you make. We need more people like you. We need people who build startups, who fight, who create instead of consuming. Will you be that person?