What I have been focusing on is starting my own business. This sounds like a risky endeavour to most, but actually I am hedging my bet by doing it part time with the blessing of my employer. I am fortunate to have an employer that said “no problem” when I asked whether it was ok to start my own business on the side - but I think that most employers will be willing to listen as long as your business is not in direct competition and you still will be able to put in the same working hours as you used to. So if you have a dream of starting your own business, do not take it for granted that you will need to resign from your job. If you are doing a good job for your employer, most employers will want to keep you on board, rather than force you to quit in order to pursue your dream.

Starting your own business is an intense education in personal development. Unless you are a veteran entrepreneur, you are effectively jumping into deep water hoping that you will learn to swim before going under. Almost nothing that you will learn as an employee will help you when starting a business. It is a whole different mindset that you will need to acquire. For me, it is the second time that I am starting my own business and that is probably why it feels more like activating a dormant mindset than acquiring it. Do not think that this mindset is something that you need to be born with, or something that can be learned in school - it is a mindset available to everybody with an open mind and a willingness to “learn by doing”.

It is no coincidence that many successful entrepreneurs have a history of failed businesses behind them, they needed those “failures” (think of them as educations) to learn the proper mindset. When I started my first business I learned so much that I had to close the business instead of continuing, as I knew that I needed time to contemplate all that I learned. Since closing that first business, I have spent most of my efforts educating myself in the areas that I found severely lacking in my education at the time. This time I hope that my mindset is close enough that my business will prosper, even in the face of problems. I know that I am much better prepared this time, and this gives me the confidence to redouble my efforts in order to make it work.

The 10th of October 2006 my business was born. I wanted a name for it that was different and at the same time symbolized my intent of delivering real value to people. You know that warm and fuzzy feeling you get when everything goes your way? That is the feeling I want my customers to feel when dealing with my business. I settled on “The Cuddly Bear Group” or just “Cuddly Bear” for short. When I mention it, most find it really strange - but really, a name such as “Google” is just as strange until you get used to it.

The first sign of my business having been born is the website (in danish) www.cuddlybear.dk, where I advertise my consulting services concerning internet technologies. My ambitiousness makes me envision much more than just a consulting business though, so watch this blog for more announcements of my plans materializing!

Give your wealth away

Recently the world’s second richest man, Warren Buffet, decided he would give away 85% of his massive wealth (44 billion US dollars). This is a straight forward example of how others can benefit from your wealth - you can give it to them. In Buffet’s case it is coincidentally also a nice way to sell his stocks without sending a horrible signal to the stock market about his trust in Berkshire Hathaway. By giving away your wealth you will also enjoy the satisfaction of contribution and following Anthony Robbins’ idea of the 6 human needs (of which contribution is one) - contribution is essential in order to feel satisfaction in a deep and profound way.

Provide security for those you love

With massive wealth come benefits from the sheer size of your wealth. If you have set up a secure and diverse portfolio of investments that provides your income, you can be sure that if the worst thing should happen (that you die), your family will still be provided for - and you do not even need a life insurance! Financial security will also be a massive psychological benefit for both you and your loved ones - when fear of financial trouble is simply not an issue, it will become easier to relax and enjoy the other challenges of life, challenges that are probably a lot more rewarding anyway. This gift of financial security, even in the worst circumstances, is one you can give by becoming wealthy.

Spread happiness

Although you are in no way guaranteed to become happy by becoming wealthy, I think it is safe to say that money can be very useful for living your dream life and this in turn will lead to a happier life. Being happy and passionate about life is infectious and sharing your happiness with others is the natural thing to do. This is actually just another form of contribution and I think Mother Theresa puts it well:

Every time you smile at someone, it is an action of love, a gift to that person, a beautiful thing.

Spend your time wisely

Being wealthy also frees up time for you that can be used on altruistic activities. When you no longer need to work 9-5 just to keep yourself and your family financially afloat, doing activities for the common good instead of for money suddenly becomes a viable option. You can focus your intellect on developing a cure for cancer, you can teach children topics they do not learn in school, you can help old ladies cross the street, you can start a political career with a focus on helping the victims of our evermore hectic and cut-throat society, you can provide free consulting and investment money for aspiring young entrepreneurs. Probably you can come up with even better suggestions for what your activities will be when you become massively wealthy, but that was just a list to get you started

Speak up for what you believe in

When you have worked hard for your wealth, another benefit of being massively wealthy is that people will automatically associate you with wisdom and experience. This means that you will reach a wider audience when you say something and you might even get the media to spread your message. You can use this powerful fact to further the causes you believe in: by donating five-sixths of the 85% to the Bill & Melinda Gates Foundation, Warren Buffet also sends a powerful signal that he consider the foundation a worthy cause. This principle applies to all who are famous and if you become really famous through your wealth, all you have to do is show up at key events to show your support, the media will take care of the rest.

Wealth is not evil

With all these examples of ways to benefit others by becoming wealthy, it is clear that being wealthy can be a noble goal. All statistics show that it is when people are very poor that crime (and acts of violence in particular) is rampant, not when people are wealthy. You decide whether your goal of being wealthy is evil or noble by your reasons for wanting it. Even if your dream of becoming wealthy was at first born from egotistical reasons, you can still decide to make it noble - start to dream of all the worthy causes you can help instead of all the fancy bling bling you will get. For most people I think that is also a more empowering reason to become wealthy and you can still spend your wealth on material goods, just do not make that the sole reason for acquiring wealth. I consider my goal of becoming wealthy a noble one and you should consider yours a noble one too!

When I wrote my article Investing With Leverage For Wealth some were quick to point out that using leverage when investing can be risky business. I do not disagree that there is higher risk involved when using leverage but the whole point is that you also have a higher potential for return on your investment. Leverage can be a great tool for those situations where you have a good idea of the risks involved and are willing to accept those risks because the potential reward makes it profitable to do so. And this is key. Your focus should not be purely on the amount of risk but always on the risk in comparison to the potential reward.

A focus on personal development will in some ways reduce the risks in your life but in my opinion the best thing about personal development is not the reduced risk, rather it is the much greater potential for reward. If you have sucessfully reduced the risks in your life, chances are that you have also greatly increased your ability to mentally withstand hardships, you know that the “basics” are taken care of and you need no longer fear threats to those basics. With increased ability to withstand hardships comes the possibility of using the defensive power you have accumulated to accept greater risks in certain situations where it makes sense. Richard Branson and Donald Trump are examples of this, they are very different in style but both have made their names into such brands that even if they risked all of their wealth and lost it, investors would stand in line to finance their next big projects. Risking all your wealth when you got it by luck is very different from risking all your wealth when you got it by using your talent - you can always use your talent again, but you can never be sure to get lucky again. So from this we can conclude that all risks are not created equal.

Richard Branson is quoted as saying “If you don’t take risks you won’t achieve anything.” The key idea to extract from this is not that you should take a lot of risks in the hope that you achieve what you want. Rather if you look at risks as a sign that great things can possibly be achieved you gain an advantage compared to those with risk aversion. By focusing on your personal development to build up defensive power and remembering that all risks are not created equal it will become possible for you to take risks that others can not or at least should not take at their level of ability. This kind of intelligent risk-taking will really set you apart from those that view the world in a purely defensive “thou shalt not taketh big risks”-view.

At this point in your life you might not be totally ready to take big risks and that is perfectly ok. At any point in your personal development the risks you can intelligently take will depend on your accumulated abilities and defensive powers so adjust accordingly. Just do not fall into the trap of thinking that it depends on the monetary wealth you have, it really depends on the physical, mental and spiritual wealth you have accumulated. So do not listen to the nay-sayers, take intelligent risks from a place of personal power and energy, and have fun with it!

This principle is called leverage and you have probably learned about it in physics-class and used this moment of a force formula for your homework :

This formula says that using a lever the moment of a force (M) equals the force applied to the lever(F) times the distance from the object(d).

In everyday life you do not need to know this formula, it is sufficient to know that using such leverage can drastically increase the force you can apply to an object. You use this principle every time you open a door - if the door handle/knob was placed in the same side as the hinges, opening the door would become much harder but thanks to the leverage gained by placing the handle in the opposite side you can open even large and heavy doors effortlessly.

It should come as no surprise that leverage can be used in many areas of your life, including your personal finances. In financial matters you typically use leverage by borrowing some or all of the money you invest. Let’s use the example that you have saved up $100.000 that you want to invest in real estate in order to get a better return on your savings (and you do not mind the extra risk compared to for example bonds). For those 100 grand you buy a house which you will then rent out in order to get some cash flow from you investment, while at the same time you build equity in the house because the prices in the neighbourhood is expected to increase by 6% a year. Assuming this expectation to be correct, that you can get 800$ in rent and that your monthly expenses maintenance of the property are 100$, this is how your investment will evolve in a 10 year period :

So after 10 years your original $100.000 has grown to $179.085 in equity and given you $84.000 in cash flow for a combined worth of $263.085 - not bad! Now let’s try the same example using leverage. In order to leverage your $100.000 you find 5 similar houses each costing $100.000 but now you only put 20% down and mortgage the remaining 80%. Your mortgages have a fixed rate of 5% and lifespan of 30 years so in addition to your 100$ in maintenance expenses per house you will now have $2147 in monthly repayments on the mortgage. With these numbers the graph will look like this :

Yielding $570.055 in equity (after subtracting the remaining $325.369 of the mortgage) and $162.360 in cash flow for a combined worth of $732.415. This gives you an ROI (Return On Investment) of 732% over a 10-year period compared to 263% when not using leverage. This shows how leverage can be very powerful financially as well.

That you will get a better return by borrowing money might be common sense to you, especially in an example as obvious as this (equity increases 6% while the mortgage is only 5%), but the fact is that for a lot of people it does not come naturally to borrow money as part of an investment. If you have worked for many years, each month saving a bit of your pay check and paying off the mortgage on your house in order to finally have that $100.000 to invest, it will probably seem like a counterproductive move to immediately go into debt again in order to finance your investment. But hopefully it is clear from this article that borrowing for consumption (like a place to live) is financially very different from borrowing for investing.

Remember the example with the rusted nut? With a long enough lever it will either budge or something breaks. The same thing applies financially, by using leverage you will be much worse off if something disastrous should happen. If for example your tenants in the house for some reason trashes the place or the city administration decides to place drug rehabilitation centre next to it, your equity might go down by 6% instead of up. This will make the leverage work against you!

So the conclusion must be that given the right circumstances you would be foolish not to use financial leverage to your advantage, but you should always be cautious not to let the power of leverage turn against you and risk management should be at the top of your priority list.

When you buy a stock you are actually buying a piece of a company and the only way your stock will increase is if the value of the company increases in the eyes of the stock market investors. This might seem obvious but I am astounded by how much of the stock investing litterature that seems to forget this and instead treats stocks as mostly numbers and graphs like it was simply a math puzzle waiting to be solved.

Typically when the subject of stock trading comes up, the question that is asked is whether to invest money in stocks or not - but you can not answer that question without further information about the situation, it would be like asking whether getting a job would provide job security or not, which clearly depends on what kind of job you get and in what company. The same response is valid for investing in the stock market, your success will depend on your objective and the strategy you use to achieve this objective. You can choose to invest with a focus on high risk growth stocks and your investment will be risky, or you can choose to invest in a vast portfolio of stocks with low volatility and your investment will be very low risk, or you can choose a strategy somewhere in between.

What you will need to know as a private investor is that you are fighting a slightly uphill battle. In a given stock market there is a finite amount of money at any point in time, this means that if your investment pool is big enough and your investments amount to a considerable part of the entire stock market you have the possibility of “driving” the market a bit in the direction you want - if a large amount of stocks is traded in a short period of time the price of the stock will either drop (if a large amount of stocks is sold) or increase (if a large amount is bought) as a consequence of the law of supply and demand. The big institutions in the stock market have this opportunity but you as a private investor do not. Addtionally the big institutions will trade stocks so often that they can negotiate better trading fees (you pay a fee every time you buy or sell a stock) than you as a private investor can expect to get. Depending on which country you live in, you might also have to deal with odds that are stacked against you due to taxes on your winnings but no deductions for your losses (Casinos would love such a deal!).

All is not futile though, there is a reason why the statistics show stocks as a traditionally good investment. When you buy stock in a company you are not buying stock in just any company - since a company must be of a substantial size in order to get accepted on the stock exchange, and it is a huge achievement to grow a company to that size, you are in a sense already betting on a winner just by buying stocks on the official stock exchange. Another reason is that the increase in the value of companies in general corresponds closely with the technological progress in society (or more precisely the stock market’s view on the technological progress) as can be seen from this graph of the FTSE index (an index of the top 100 companies listed on the London Stock Exchange) :

I do not think that I am alone in my positive view on the future technological progress of society and even though we had the .com bubble, stock prices have continued to increase after the initial downfall.

Given these pros and cons it is not a clear cut answer whether you should consider investing your savings in stocks or choose another investment vehicle. Generally I would say that if you have an active interest in the stock market and have a good reason to believe you can outwit the market (this competitive advantage is important if you want to reduce the risk) then sure go ahead but remember to not invest money you can not afford to loose. If on the other hand you are interested in the stock market simply because you want to get a better return than bonds, and perhaps you would need to rely on a “market wizard” to guide you, I would definitely not reccomend it.

Instead, what I would reccomend to those without an active interest in the stock market is to invest their money in a mutual fund that specialize in low risk stocks with a slightly higher return than bonds. That way you do not need to become an expert on the stock market and can spend your time doing the things you are already good at - and probably sleep better at night too

In such a situation it is important to ask the right questions. If you ask yourself a question your brain will automatically focus on searching the “database” in order to find an answer to the question. This is a good thing as it means you do not need to spend much energy on solving the numerous small “problems” you encounter in your daily life. I think a common and very human thing to do when the desire for a very expensive object is awakened is to ask oneself “How can I afford it?” and the brain will try to figure out a way that makes it possible to afford it. What the brain will not do is try to figure out whether the question that it was asked was the right question to ask, so you must be very cautious, as asking such questions will probably give you answers that involve optimistic forecasts about how big a loan you can take and still have a nice lifestyle; in other words it can lead you astray and straight into debt and misery.

I could probably find a way to borrow enough money that I could actually buy the car I fell in love with, so asking myself “how can I afford this fantastic marvellous car?” will give me a solution that could in fact be used to buy this car; but that is the problem. If I borrowed that much money for an investment as bad as a car, I would not only ruin the graph of my net worth development but also stretch my personal finances to a point where unexpected and expensive events like if the car broke down would cause a serious headache and not just be annoying. That alone would be reason enough not to buy the car, as counterarguments like “you only live once” would not be valid if a future of financial headaches is to be expected - but what is even worse is that even though owning a really nice car (like the BMW) is one of my long term goals, I have other more important long term goals and the limited financial head-room for several years forward would cause a lot of those to be postponed many years into the future. That is a consequence I am not willing to live with and I am fortunate that I started asking the right questions, asking “how can I afford it?” fails to take into account what I would have to give up in order to afford it.

By asking questions in a conscious way and not simply as a response to your desires, and doing it persistently, you can dramatically change the amount of good decisions you make and this in turn has the possibility of changing the quality of your life dramatically. Asking the right questions is very important in all areas of your life and not just regarding finances. For an article with some more examples of ways to rephrase the questions you ask yourself, look at this one by Steve Pavlina.

The lesson to be learned is that for most people selling is not about doing certain selling techniques and then the product or service is sold no matter what it is you are selling. The passion and drive of the seller is important too and at least for me this passion is tied directly to my own view of the product or service; if I do not like the service I provide I feel that selling becomes more an act of persuation than an act of providing a product. To this day the word “sell” still brings forth associations of a slick salesman on a mission to bend the customer to his will. I do not like that view, not only is it against my moral principles; I also think that it is a fundamentally flawed way of interacting with customers. I am not saying you can not sell and earn money with this view of selling but there is no focus on a win-win situation and mostly the seller is better off while the customer is worse off. That is not making the world a better place. I want to make the world a better place, so that is why I have decided to stop using the word “sell” and instead use another term.

The term I have decided to use is “helping people in exchange for money”. If for example you are a used car salesman you are not selling cars, you help people by providing quality cars to those who need a better way to transport themselves. You are the mediator between people in need and services and goods that can fill those needs. What counts is not only how much you sell (help people) but also that you help them by providing the services and goods that are best for their specific needs. Of course selling is about earning money and not just about helping people but there is no shame in expecting money in return for your help. Also I believe that you can earn just as much money by genuinely wanting to help the customers as you can by trying the sort of “tricks” you often see in salestraining, perhaps more.

Another nice feature of the “help-people” perspective is that it makes you focus on how to effectively help people and a prerequisite to effective help is good communication. You will need to intimately know the needs of the customer and therefore establish a better relationship with the customer. The help-people perspective is one that encourages treating customers as real people and not just a potential source of money.

I am sure that I will some day start my own business (which will be my second attempt, the first time was not successful) and I am already looking forward to help a lot of people

Imagine a man who is dropped off from a helicopter in a forest and is told to find the watchtower. He has never been to this particular forest and he does not know where the watchtower is. To help him a bit, he is given a map of the forest with his drop-off position and the position of the watchtower marked - but there is a catch : the map is drawn by a 5-year old and is consequently very imprecise and perhaps even unreliable. Do you think he would have a hard time finding the watchtower? Do you think he would be faster and more efficient if he had a professionally drawn map with height contours, roads and pathways through the forest? You bet he would!

I think most people have a pretty good sense of where they are emotionally compared to where they want to be and this despite the fact that emotional awareness is neither simple nor easy to acquire. I think nobody has a good sense of where they are spiritually, as spiritual development tends to only reveal itself in hindsight. Financially there is probably only very few who have a good sense of where they are and that is really a shame as developing your financial map is more or less “a walk in the park” compared to the emotional or spiritual map.

One area I am focusing on in 2006 is to get more structured at handling my finances. I want to eliminate the idea that money is something to get (and spend!) every month, and instead develop the idea that money is something that should be used to design my financial map. I want to see progress in every area of my life and money is no exception. So the map I want to design is one that involves using money to continually increase my net worth and only sparingly for being a “good consumer”. If you are not familiar with the term “net worth”, just think of it as a number that indicates how much money you could get if you sold everything you own and paid off all your debt, this amount might be negative!.

I am currently developing a website to help me construct my financial map. It will be a place where I can weekly or monthly type in my assets, my liabilities, my positive cash flow and my negative cash flow - and in return the web-application will show me charts of my financial development and these charts will help me get a clear picture of how my finances have developed and where my finances are currently. I am not sure whether I will make this website public or just use it for my own personal use but if I make it public I will not forget to mention it in my blog

Of course you do not need a fancy website for doing this, you can use pen and paper or a spreadsheet like Microsoft Excel, but since I plan on using this application very often to keep track of my financial progress, I want a solution that is as easy and intuitive to use as possible and making my own is the way to go for me. Whatever is your preferred method, you should make it a high priority to get clear about your finances and get rid of the headaches and frustration money trouble can cause.