Plant Those Seeds!

Plant Those Seeds!

What the heck am I talking about, you ask?

The other night at dinner, I was trying to explain to my 20-year-old son why he never has any money. I said, "If you keep eating your seeds, you will never have any crops!"

My wife and the kids just looked at me as if I had two heads. I could almost hear my kids thinking, this is just another one of dad's weird sayings. I couldn't believe they didn't know what seed money was all about... especially my wife Pattie who watched these principles in action over the last 25 years in our lives.

I realized that even the people closest to me didn't fully understand this concept. Wow! Given the state of our country's economy, I felt compelled to explain it to them and to anyone else who might benefit.

My understanding of "seed money" came from my dad. He began teaching me the basics of money management when I was about the same age as my kids are now. (And I was about as interested in what he was trying to teach me then as my kids are now. Not very!) Nonetheless, this information did sink in - and when I decided to apply it to my life, it was profound.Dad always said, "It's not what you earn, it's what you KEEP that counts."

In order to accumulate wealth, you will need to apply the Law of Sowing and Reaping to your money. Here is my spin on this: once you have a small amount of money saved (seeds), start investing it immediately. As your money grows, reinvest your gains (your new seeds) into another commodity. Think about it...if you continue to consume all of your money (seeds) every week, and leave none for saving (planting), how can you expect any growth-or in this case, wealth?

It sounds so simple, yet few people ever start planting the seeds that will grow into the wealth they desire. As you begin to do so, remember diversity is key. You don't want to plant only corn; what if it's a lousy year for corn? Investing in a variety of "crops" makes more sense. I have planted seeds in real estate, the stock market and several businesses of my own. All of them have paid handsome dividends over the years. Some crops do better than others, but as long as you keep planting those seeds in a variety of places and reinvesting the growth, you will be far ahead of the pack!

Many well-educated people believe that wealth is a result of having a higher income. This is absolutely not the case.

If you want to stop having to work for money and have your money start working for you, remember:  Wealth is created by investment, not income!

So... where do you start to acquire your seeds?

There are only two tried-and-true ways that I know of:

1. Save your money.

Pay yourself first; the typical millionaire saves at least 10% to 20% of his/her income. Start setting aside a min. of 10% of your income and put it into a "seed" savings account. As soon as you have enough to start investing, do so. No waiting, no excuses, no withdrawing money for any other reason-invest it! Time can either be your enemy or your friend... meaning that, over time, you will either live beyond your means (see #2 below) and dig your hole deeper, or you will learn how to make your money earn you more money.

Here is a great quote from one of the richest entrepreneurs of his time:

"I have found the Midas Touch. Pay yourself first. Save 10% before making your budget, instead of after, as I used to do. I never had anything left after making my budget."~ Andrew Carnegie

2. Spend less than you make.

No one likes to think about doing without certain luxuries or giving up things they enjoy, but if you want to thrive-not just survive-during uncertain economic times, Accept a little short-term pain (discomfort) in order reap huge long term gains. Take a serious look at every single one of your personal expenditures and then make a decision to free up some cash to put into your seed account so it can start growing. The truth is that most self-made millionaires are very frugal and only spend money on what is necessary and of value to them. That is why they are able to accumulate and multiply their wealth so much faster. For instance, I refuse to buy a first class plane ticket or pay $300 for a pair of shoes or purchase brand new cars because I think that it is a complete waste of good seed money. However, I will happily pay $15,000 a year to send my daughter to private high school to prepare her for college, because that is an investment in her future and well worth the price to me.

Reducing your expenses and buying fewer things does not send out the message that you don't have enough money. On the contrary, I believe it paints a picture of someone who is fiscally responsible and likely to have even more money to manage with each passing year.

Cutting expenses is often an easier way to save than trying to earn more money. Taking into account your time, work related costs, and paying more taxes on that money, every three dollars you earn as income only really nets you about one dollar to invest. In other words, for every dollar you can cut in expenses is worth three dollars in income!

The principles behind seed money are easy, but the application, for most, is anything but. Many people think they don't need to learn more about money management until they have more money. The truth is, if you don't learn to manage the money you have now, chances are you'll never have more money to manage.

I encourage you to think about putting together some seed money, keeping in mind the basic Law of Sowing and Reaping: it's not what you earn, it's what you keep and invest that counts. You will be well on your way to having multiple crops yielding enough wealth to enjoy life on your own terms.

Tip: In spite of the daunting headlines, there could not be a better time to invest your seeds. The notion that you should always buy low and sell high is one most would agree with, but unfortunately that's not what people tend to do when they are scared. Be proactive. Learn the ins and outs of investing so you don't have to rely on advice from others. Choose investments you are comfortable with, and soon you will see those seeds grow.              Good luck to all you new farmers!