Dear Dad,

On this Father’s Day, I’m writing to thank you for being there for me throughout my life.

You’ve supported me when times have been tough, celebrated my successes and growth, and taught me some invaluable lessons about success, work, and life.

Here are some of the things I’ll always remember in my life:

Your Work Ethic

Each and every day, there’s work to be done.

Grinding through life and making things happen is never an accident – it’s a conscious effort that becomes routine overt time.

Growing up, whether it was for your small business, your day job, or work around the house, it was never “I’m not feeling like work today” or “it’s Sunday, it’s my day off”.

Each and every day is a concerted effort to keep things rolling, in line and in your control.

Something I’ve embraced in my life is a quiet and unstoppable energy – which I believe everyone can tap into.

You showed me the way and inspired me with your work ethic, something I will never forget.

It’s possible to balance family, fun, and business

Your true resume is pages and pages long: corporate executive, small business owner, coach, dad, son, teammate, friend, and I’m sure I’m missing some titles as well.

Work and being productive always was number one, because that’s what put bacon on the table and a roof over our head.

BUT! I can’t remember you ever missing a practice, game, graduation, birthday party, or anything because of it.

You always prioritized family and fun and made sure to be there for us kids.

Being my coach in baseball and basketball, taking me to golf with you, and showing me the ropes in my first job all showed me first hand that being present in the moment, but also remembering the priorities of life is possible.

At the end of the day, FAMILY is all a person has to fall back on and because of that, it’s so important to be involved and active.

I can’t wait to coach my kids, influence them to become the best they can be, and apply many of the things you helped me do in my life.

Your ability to balance family, fun and business is something I will never forget. It inspires me to do the same in my life with my hustles, work, and desire for fun with family and friends.

“Keep your head down, and your eyes up”

A few years ago, we were in the car talking about career progression.

Becoming a corporate executive in the 90s at a regional company, you know a thing or two about success in a person’s career.

You told me, if you want to progress in your job, “Keep you head down and your eyes up. Focus on your day to day tasks, but make sure to keep knowledgeable of the team, department, and organization goals to see if you can play a part in bringing those to fruition.”

Both of these parts are key: if I don’t have my head down, I won’t get my work done; this isn’t good for performance. If I don’t keep my eyes up, I won’t be able to spot an opportunity to grow and influence.

Both are key, and this is something I won’t forget.

Pay attention to the details

An accountant by trade, you know how to dig in to the details and made sure to instill this same habit and skill into me.

It’s interesting. Growing up, I didn’t consciously think about these things, butthe habits and mindset formed over time and came out in adulthood.

I remember, around age 13, we would go to the batting cage to work on my hitting for the upcoming baseball season.

“Knob to the ball, you want to extend your arms in such a way where the knob is brought to the ball and boom!”

I struggled at the time because I struggled to focus on the details, but over time, it’s become one of my best skills.

You told me to pay attention to the details, and I won’t ever forget it.

Keeping composure might be the most important skill of all

Growing up, I had emotional issues when it came to frustration towards myself.

Displaying my emotions and frustrations on the pitching mound had its effects on the rest of the team and the opponents.

“We are in the pitcher’s head, we got him!”

Ugh, those days were not good.

When I got wrapped up in my emotions, I was never successful.

Keeping cool and calm is incredibly important in all areas of life: business, sports, communication, and fun.

By keeping composure, rational and critical thinking can occur to drive results and bring success. It’s something many people can work on, but you instilled in me at a young age.

Keeping my composure is one of the skills you taught me was important and after working on it for years, I’ve become better at it and used it to my advantage in my work and play.

Thank you for showing me how to be successful

I am thankful for all of the time you’ve taken over the years to influence and help me become who I am today.

What I’ve written here is what I will always remember about success in all areas of life, and what I plan and hope to pass down to my kids.

Thank you again for inspiring me to become better, for being the rock of our family, and showing me first hand what success looks like.

Happy Father’s Day!

Love,

Erik

Readers: what have your parents taught you that stuck with you into adulthood? What habits and sayings are you looking to have your kids grow up to?

“Let’s go out to eat!!!”

I had just played in a college kickball tournament on a Sunday afternoon and the team was hungry.

“Sounds good, where are we going?”

“How about Potbelly’s? It’s close and a lot of us really enjoy it.”

“Okay, I’ll join – but I don’t think I’ll eat and get something at home.”

It was sophomore year, and I only had $50 in my bank account. After paying for my Spring tuition and making some dumb decisions, I was down to my last dollars.

There was no way I could justify spending $10 at dinner when I had a meal plan and other bills to pay.

I sat there in the booth at the restaurant while I saw all of my friends and fellow teammates eating their fun sandwiches and shakes.

I swore to myself that day I wasn’t going to ever put myself in that situation again. It was that day, 7 years ago, when I told myself, “Erik, you are going to become financially literate, and you are going to have savings and be able to afford fun if/when it comes up.”

Since that point, I’ve read many personal finance books and blogs, talked with many personal finance experts, and gotten my financial house in order.

Now, I’m here to share with you some finance tips this month to help you get out of debt, build wealth, and get your financial house in order.

Welcome to Financial Literacy Month!

April is Financial Literacy Month in the United States, and on this site, The Mastermind Within, I’m embracing this and bringing to you targeted information on personal finance, ALL MONTH.

Last week, I gave you a little preview into the type of content you will read this month in my article What Makes You Happiest and Why Money Matters.

In this post, I will be sharing with you why financial literacy matters and why you should care about getting your financial house in order.

The Current Financial Situation of the Average American

Back in 2015, a research team at Wharton published a paper called The Economic Important of Financial Literacy: Theory and Evidence.

In it, they propose and show that there are 3 main questions that can show a person’s level of financial literacy:

1. Suppose you had $100 in a savings account and the interest rate was 2% per year. After five years, how much do you think you would have in the account if you left the money to grow?
   • More than $102
   • Exactly $102
   • Less than $102

2. Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After one year, how much would you be able to buy with the money in this account?
   • More than today
   • Exactly the same
   • Less than today

3. Is this statement True or False? Buying a single company’s stock usually provides a safer return than a stock mutual fund.
   • True
   • False

How did you do?

In the paper, only 34% of participants were able to answer all 3 correct. (The correct answers are more than $102, less than today, and false).

These questions are tricky, but with some financial literacy, these shouldn’t be too tough to answer correctly.

Diving into Some More Statistics

Here are a number of other statistics on personal finance:

• 59% of Americans could not cover an unexpected $500 bill.
• 69% of Americans have less than $1,000 in their savings account.
• The national savings rate at the end of February was 3.4%.
• The average American has around $250,000 in various debts.
• The government is $21 trillion (21,000,000,000,000) in debt. (I’m still baffled at this, and WHY THE HECK ISN’T EVERYONE INCREDIBLY UPSET AT THIS??? This is irresponsible… okay I’m done with this mini rant… leaving this here for another day)
  • Could financial literacy have helped this out? I don’t know.

All of these numbers lead to the conclusion that on average, Americans don’t understand how to manage their money.

Are people spending more money because they are stressed? Is this the millennial mindset of spend today and push off tomorrow in play? Has depressed income growth and increased inflation crushed any opportunity to save?

I’m not smart enough to answer any of these questions, but I’m feeling inspired to improve my personal situation (and I hope you are too.)

In 2017, I saved nearly 50% of my income and this year, I’m saving at roughly about the same clip. I want you to be able to save money for the future as well.

Let’s change this – it’s time to get our financial houses in order!

Why Financial Literacy is Important

My money epiphany happened in college as I shared with you in the introduction of this article.

Maybe you’ve had a similar money epiphany, or maybe not.

Unfortunately, it’s a sad place to be.

With bills to pay, mouths to feed, and fun to have, not having the cash or means to do what you want when you want is painful and uncomfortable.

Financial literacy is important because without it, we can get into a lot of trouble with credit card debt, not having an emergency fund, or simply not being able to do what we want with our time!

With financial literacy, we can start to build wealth for the future, get ahead in life, and be able to do whatever we want with our time and money.

I live with an abundance mindset, and as a result, my take on financial literacy will not be so much on frugal tips and how to cut costs. While I believe these are important subjects, I’m naturally frugal and cheap, so I don’t have too much direct experience in this area.

Instead, I will be sharing with you how I’ve escaped my own financial prisons through simple living, increasing my income, tracking my income and expenses, and building wealth month by month.

There is so much money in this world – all you have to go do is just get a little bit of it and you can be wealthy.

Conclusion

Let’s get our financial houses in order together this month. There are certainly areas of improvement that I can work on, and I will be sharing with you what steps I’m taking to get better with my finances…

It will be raw and transparent – I’m a little bit uncomfortable just thinking about sharing with you my information.

But, because we all know that true results and learning comes from the raw details, it is necessary.

I’m very excited to join you on your journey, and I hope this Financial Literacy series this April helps inspire you to crush your debt, build wealth for the future, and become a financial expert!

Readers: have you ever had a money epiphany? Did you say to yourself something like, I’m never going to be in that situation again? What area of personal finance do you need help with?

Erik

I built a Node.js Twitter bot! I’m super excited to share with you all the details of how to build a Twitter bot using Node.js for your own personal benefit.

Last Thursday night, I was pretty tired. After a week of grinding, I had hit a wall. I took work off Friday to sleep in and relax.

Friday morning, this was me:

At the same time, this was my Twitter account:

I didn’t tweet this out using Buffer or some other Twitter automation tool. I sent it out using my own Node.js application.

One of the reasons I didn’t get much sleep over the last 2 weeks was because I have been working on fully automating my Twitter game. I was sick of the lack of customization of the Twitter share plug-ins I was using, and wanted to learn a new technology.

I’ve had an absolute blast these last two weeks, and am very excited to continue to build cool applications like the Twitter bot I’m going to share with you in this post.

In this post, I’m going to be sharing with you what Node.js is, how you can build a twitter bot using Node.js, and finally how you can deploy it on a virtual machine.

How to Build a Twitter Bot using Node.js

The rest of this post is going to be laid out in the following way:

• Why I wanted to build a Twitter bot
• What is Node.js?
• Using the Twitter API
• What are the actions possible with Node.js and the Twitter API?
• Building a Twitter Bot for Yourself to Tweet out the Most Recent article of an RSS Feed
  
  • I’m going from start to finish: from installing Node.js and a text editor, to writing the code, to running the code.
• Deploying your application on a virtual machine to run 24/7

Why did I want to build a Twitter bot?

With any project or action, we should start with why. Why did I want to build a Twitter bot? For a couple reasons:

• I wanted to learn a new technology and programming language to add to my repertoire
• I’ve been disappointed in the “free” tools around the web
• I’m of the mindset that I can create something as good or better than other free solutions

About 3 weeks ago, I started learning Node.js. I had never heard of it before, and was suggested by a good friend to take a look if I was interested in building web applications.

This set off a very fun 3 week… over the last 3 weeks, through YouTube, Googling, and doing tutorials, and finally, doing different things on my own, I’ve created something awesome.

To comment on the “free” tools around the web, I’ve employed 3 different tools and plug-ins which my blog interacted with: Buffer, Revive Old Post, and a standard Jetpack sharing tool. Buffer was fine, but the free version only allows 10 scheduled tweets – which required manual input on my part at the end of the day. I’m trying to decrease the time I spend on things like this, not increase them!

The Revive Old Post and standard Jetpack sharing tools were too rigid for me. The old posts were nearly the same every time it seems, and were never the ones I really wanted to share.

All of these are limited for what I was looking to do with my Twitter account. I wanted to be completely automated: tweeting out various quotes, old posts, and sharing other people’s posts, all without my involvement. For me, I wanted to send out about 60 tweets a week at specific times. To do so in Buffer would have taken quite some time, and possibly some money.

There is probably something out there that can do this, but I wanted to create something myself – I wanted to create something awesome.

With that said, let’s get into it.

First, what is Node.js?

What is Node.js?

This next sentence might be a little alarming.

Node.js is an open-source JavaScript run-time environment for executing JavaScript code server-side.

Okay, let’s try to break that down a little bit for you if you are not a coder.

• Open-source code is code that any programmer can contribute to, making it community-based.
• Javascript is one of the core web programming languages.
• Run-time environment for executing code server-side is saying there has to be a space or location where the Javascript is being performed. You can think of it like a pan on a stove. The pan is Node.js – it allows us to be able to cook safely over a gas flame.

Putting it all together, we get a language which is highly capable, flexible, and easy to use with many technologies on the web.

How Can Node.js and Twitter interact?

At some point, we have to connect to Twitter.

For developers, the company, Twitter, created an application program interface (API) which provides numerous endpoints to build programs and solutions using Twitter.

What kinds of actions can we perform programmatically with the Twitter API?

There are a number of actions we can perform programmatically with the Twitter API.

I won’t list them all here, but you can do almost anything you could think of:

• Tweet
• Follow or unfollow a user
• Send direct messages
• Change your profile picture

With these simple actions in mind, we can go to the next step and actually learn how to build a Twitter bot with Node.js.

Getting started with our Twitter Bot

Okay, now we know what is possible with Node.js and the Twitter bot. – let’s get to the coding.

First though, we need to prepare our computer to be able to write the code and run our programs.

Step 1: Download and Install Node.js

Go to the Node.js website and download the LTS (long term support) option.

After downloading and installing Node.js, we can begin writing code.

Step 2: Download and Install a Text Editor of your Choice

Next, we need some software to help us write code: we need a text editor. There are a number of text editors out there, from Notepad (the most basic and simple text editor) to other solutions which are specifically used for programming.

I’m using VS Code, because it’s free and supports many different computer programming languages. Again, you may have your own favorite text editor, VS Code is just the one I use.

Step 3: Opening our Text Editor

At this point, we are ready to go. Our computer is able to run and execute Node.js code, and we have a place to write our code. I created a folder called “twitter_bot_example”, and opened that folder in VS Code. Here’s what our screen looks like at this point:

We are almost to the part where we connect to Twitter, but not quite there. The first thing we should talk about is Node.js packages.

Remember in our Node.js definition when it said something about being open-source?

Node.js packages are pieces of code which are created by various community members. These packages can be installed through the Node.js package ecosystem called npm and are completely free to use.

This is the beauty of open-source programming languages. We are going to use a number of packages for our Twitter bot.

Step 4: Getting Ready to Connect to the Twitter API

Let’s connect to Twitter.

First, we need to do 2 things. Let’s bring up the integrated terminal in VS Code (View -> Integrated Terminal).

The first thing is initializing our project with npm init. In the terminal at the bottom of the screen, type “npm init” and press enter.

npm init initializes the project and creates a package file for our program which will contain a bunch of information.

The command prompt asks for a few pieces of information:

• package name: (twitter_bot_example)
• version: (1.0.0)
• description:
• entry point: (index.js)
• test command:
• git repository:
• keywords:
• author:
• license: (ISC)

At this point, a lot of this doesn’t matter since we are just testing. You don’t need to enter in anything if you don’t want to, using npm init is just good practice for creating a Node.js program.

Now, we are finally ready to go.

For the second thing we need to do, let’s install the Twitter Node.js open-source package we are going to use.

At the command line, enter in “npm install twit”. This will install the twit package. We are almost ready to go!

Step 5: Getting Access to the Twitter API

Okay, we need one more thing. We need our config file.

Go to the Twitter Apps page, create an account, and find the following pieces of information: consumer key, consumer secret, access token, and access token secret.

In the same folder as your program, put these pieces of information into a json object and save it as a .json file like so:

{
    "consumer_key":"xxxxxxxxxxxxxxxxxxxxxxxxxxx",
    "consumer_secret":"xxxxxxxxxxxxxxxxxxxxxxxxxxx",
    "access_token":"xxxxxxxxxxxxxxxxxxxxxxxxxxx",
    "access_token_secret":"xxxxxxxxxxxxxxxxxxxxxxxxxxx"
}

We do this for security and flexibility reasons. We don’t want to hard code these values in.

Step 6: Connecting to the Twitter API

Okay, we are finally at the point where we can actually start coding and get tweeting!

Open a new file and save it as a Javascript file. I’ve called my file “index.js”.

In your file, we can now connect to Twitter and tweet. Let’s connect to Twitter through the Twit package. The following code will allow us to connect to Twitter:

const Twit = require('twit');
const options = Object.assign({'timeout_ms':60*1000}, require('./credentials_example.json'));
const client = new Twit(options);

Let’s walk through this code to get a little bit of an understanding of what’s going on. (also, as an aside, for non coders who want to learn how to code, I’d recommend Code Academy – it’s free)

The first line, we are telling our program we want to require that it uses the “twit” package we installed earlier.

The second line is reading in our credentials we got from the Twitter Applications website.

The third line is creating the connection between Twitter and our program.

It’s as simple as that! Now, let’s tweet from our program!

Step 7: Sending a Tweet

Sending a tweet with the Twit Node.js package is very easy. I’ve written a function which takes in a message, and will send a tweet with that message in it!

Here’s the code, and we will go through it in the paragraph after:

function sendTweet(message) {
    client.post('statuses/update', {status: message }, function(err, data,response) {
        if (err) {
            console.log(err);
        } else {
            console.log('Tweeted: ' + statusUpdate);
        }
    });
}
sendTweet("Hello World!");

First, I’m defining a function called sendTweet which takes in a variable called message. I can use this function later on in my code (and I do – in the example, I have a tweet which sends “Hello World!”)

In the Twit package that we installed before, there are functions (or also called methods) called post, get and delete. Computer science people are fairly simplistic: you use the get method to get information, you use the post method to send information, and the delete method to delete information (You can learn more about HTTP methods here, as going into these is beyond the scope of this article.)

To send a tweet, we want to use the post function, as we are going to be sending information to our Twitter account to create our tweet.

In the post function, we specify, in the first argument, that we want to send a status with the ‘statuses/update’ variable, and then we say in the second argument we want to use the user defined variable called ‘message’ for our status.

The rest of the function (the part inside the curly brackets { }) is something specific to Node.js – a callback function which can capture any data sent back to use. For our tweet, we will receive back a confirmation that the tweet has successfully been added to our account.

To run this code, in the terminal, type “node index.js” and you’ll send a Tweet saying “Hello World!”

Step 8: Reading a Website’s RSS Feed

The goal of this tutorial was not to just be able to send a tweet from the terminal. While that’s cool, let’s go another step. We are going to read a website’s RSS feed and tweet out a link to the most recent article.

We are going to install another Node.js package which will allow us to easily interact with the RSS feed of any site.

In the terminal, type “npm install feed-read-parser” and press enter. This will install the package.

Next, let’s make sure our program will use this package by including the require package statement at the top of our code:

const Twit = require('twit');
const rss = require('feed-read-parser');

Now, we want to use this rss feed parser to read a site’s rss feed and extract that information. At the end of the next step, we will be sending out the most recent RSS entry.

Step 9: Tweeting out the most recent RSS entry

Let’s put our RSS package to work.

Here’s the code to get the RSS entries from The Mastermind Within, select the most recent one, and then send a tweet with the title and link.

function tweetArticle() {
    rss("https://personalfinanceblogs.com/feed/", function(err,articles) {
        if(err) {
            throw new Error(err.message);
        } else {
            statusUpdate = "Check out this awesome post! " + articles[0].title + ' ' + articles[0].link;
            sendTweet(statusUpdate);
        }
    });
}

Again, I’ve created a function called tweetArticle, so we can use this over and over if we so choose. Inside the function, we are using the RSS package object (Object is the correct word to use here – the package is the actual code, and the object is the use of that code in the program).

The RSS object takes in the RSS Feed URL of whatever site you are looking for (https://personalfinanceblogs.com/feed/) and then returns the articles in that RSS feed.

Inside the callback function (the function which returns any data back to us), we get back the articles from the RSS feed. This articles data object contains things such as the content, publish date, title, author, and link. This articles object has a number of articles.

We want the most recent article. How can we get it? In Javascript, we can access the first entry of our article list by typing articles[0] (some programming languages start at 0).

Let’s create our message. We want to create a message which has the title and the link, and then send it out. We have the most recent article (articles[0]), and to get the title and the link, we do articles[0].title.

After storing our message in a variable called statusUpdate, we call the sendTweet function. Congrats on sending a Tweet with dynamic information!

Step 10: Scheduling Tweets for Certain Times

Congratulations! We are almost done automating this thing completely. At this point, if you want to run your application, like I mentioned above, type in the terminal “node index.js” (or whatever your file is called), and you will send a tweet.

Unfortunately, this will only send 1 tweet, and then the program will terminate. What if we want to do a certain action at 3 PM Every Monday? What if we want to tweet something out at 9 AM every day? We can use a scheduler!

Let’s install another package: node-schedule. node-schedule allows us to schedule things simply based on the time or day of week. In the terminal, type “npm install node-schedule” and then in our code, we will require(‘node-schedule’).

Let’s schedule our tweet to go out on Monday at 8 AM. This is as simple as the following line of code:

var tweet = schedule.scheduleJob({hour: 8, minute: 0, dayOfWeek: 1},tweetArticle);

As long as our program is running, we will be sending tweets out on Monday at 8 AM! We tell our node-schedule object (called schedule) to schedule a job at 8 AM, Monday, and this job executes the function “tweetArticle” at that time.

I scheduled the code we have written above to tweet at 2:30 PM this past Sunday. Here was the result:

There’s still one problem. What if I don’t want to run my program all day long on my computer? That’s where a virtual machine comes in.

Step 11: Setting up a Virtual Machine and Running the application continuously

At this point, we are 99% of the way there. This is where most tutorials stop online, as it’s almost like the writer knows you know can get to this next step.

It took me a week to realize this was the next step. I was running my application on my desktop and just keep my computer open. For security reasons, I don’t think this was the best idea, but I did it because I wanted to test my code.

It worked, but this past weekend, I went to visit a friend and wanted to bring my computer… if I shut down my laptop, then I’d have to terminate my program, and I wouldn’t want to do that!

Enter virtual machines.

What’s a virtual machine? A virtual machine is a server or computer you can remotely connect to and have running all the time. Microsoft Azure and Amazon Web Services are two of the leaders in this space.

For my application, I went with Microsoft Azure and got a $200 credit. My virtual machine is one of the lowest tier ones, and will end up costing about $13 per month. With a $200 credit, I will be running for free for the next 15 months – not bad!

I’m not going to go into the details here, because that would be another 1,000 words, and there are plenty of great resources on the Microsoft site.

After setting up your virtual machine, you can then go through the above steps (or just send your code to yourself via email) and run it continuously! Here’s my terminal (on my virtual machine) now running my Twitter bot!

Next Steps

For me, I’ve done a couple more things for my Twitter bot, and now am running the application continuously with Microsoft Azure.

For you, it’s really dependent on what your goals are with the project. You are able to do a lot with the Twitter API: following, unfollowing, creating lists, analyzing the engagement of your tweets, and the list goes on and on! There is just so much!

As I’ve recommended a few other times on this site, check out Code Academy for free interactive Javascript interactive tutorials.

Also, Google is amazing for information. As you gain more experience, you will become better at this, but a simple google search of “how to read text files with node.js” (or whatever you want) will give you plenty of resources to check out.

Conclusion

I’m really excited to see where this takes my Twitter account. I’m learning so much about web development and absolutely loving it.

I think web development is my true calling. Hours pass without a care in the world. I’m creating some amazing things, and I’m really just getting started.

I hope you’ve enjoyed this tutorial and I’m looking forward to sharing with you the next application I build.

Readers: Did you find this tutorial on how to build a twitter bot using Node.js useful?What could I have done better explaining? Are you interested in programming?

Erik

P.S. here’s the full code from our example above:

const Twit = require('twit');
const rss = require('feed-read-parser');
const schedule = require('node-schedule');

const options = Object.assign({'timeout_ms':60*1000}, require('./credentials_example.json'));
const client = new Twit(options);

function sendTweet(message) {
    client.post('statuses/update', {status: message }, function(err, data,response) {
        if (err) {
            console.log(err);
        } else {
            console.log('Tweeted: ' + statusUpdate);
        }
    });
}
function tweetArticle() {
    rss("https://personalfinanceblogs.com/feed/", function(err,articles) {
        if(err) {
            throw new Error(err.message);
        } else {
            statusUpdate = "Check out this awesome post! " + articles[0].title + ' ' + articles[0].link;
            sendTweet(statusUpdate);
        }
    });
}

var cf = schedule.scheduleJob({hour: 16, minute: 30, dayOfWeek: 0},tweetArticle);

This article is about the importance of financial modeling for startups and small businesses.

When you own a company, managing your finances can be difficult without the right tools and knowledge. With a lot of uncertainty these days, understanding the financial outlook of your company in different scenarios is critical to the survival of your company. Forecasting can be a great tool at your organization’s disposal.

To build a financially stable business, for example, you must understand how the price of your product affects profitability, or whether a different cost structure will increase or decrease your profitability.

In other words, accurate financial modeling is required and necessary to help build your company and ensure that you that your growth and expectations for growth are in alignment.

What is Financial Modeling? 

Financial modeling is the process of making financial projections and forecasting earnings and expenses based on past performance, expenses, and revenue assumptions.

The idea of financial modeling is to first define the different components of your business. Then, you can test each of these components against different scenarios. After you’ve designed the different scenarios and events, you can plan on how you’d handle different events.

Your financial model should be able to handle these different scenarios and calculate the business impact of these different extraordinary events.

Before creating your financial model, you should consider a wide range of details, such as how the model should reflect your company’s goals so that you can create a format that addresses all relevant financial aspects of your business.

Building a solid financial model takes time and effort, as well as extensive knowledge of several technical and non-technical skills. That being said, anyone can do financial modeling with the right education and knowledge.

Why Startups and Small Businesses Need Financial Modeling

There are three reasons why startups and small businesses need financial modeling: fundraising, building a business plan and gaining detailed knowledge of your business.

1. Fundraising 

Raising funds is an important process that ensures the availability of working capital needed in your business’s day-to-day operations. Additional advantages of funding for your business include the necessary monetary support to test ideas and develop concepts, as well as the support of marketing and promotional activities.

A financial model is a standard requirement for any company seeking to raise funds. Financiers and investors will typically request a detailed financial report before funding your business, so developing a model to provide them with high-level data is prudent.

Put another way, if you don’t know how much money your company requires, then how are you going to put together a fundraising pitch?

2. Business Planning

To determine your company’s economic viability, you must quantify your business plan and validate your assumptions and ideas to see if they can be turned into a profitable business. The truth is that understanding all of this requires a solid financial model.

Your financial model will not only help you plan for the future, particularly when things don’t go as planned, but it will also predict how the worst-case scenario will affect your cash flow, funding, and profitability.

The model will account for a variety of scenarios, such as underperformance, hiring new talent, increasing revenue, and marketing spending, all of which can be critical to your company’s survival and scaled growth.

3. Gaining Detailed Knowledge of Your Business

A financial model accounts for likely changes in business conditions, allowing you to be better prepared for unexpected events.

It will also demonstrate to lenders and investors that you have a concrete plan in place for what it will take to remain successful in the face of adverse or unexpected circumstances.

They will also be able to use the information provided by your financial model to establish benchmarks for your business, as well as gain insights into how you are spending their money and whether you are performing as promised.

Types of Financial Modeling 

Startups frequently face the challenge of determining what data to use as the foundation of their financial models because they have little to no sales history or metrics on customer satisfaction.

Fortunately, there are a lot of different templates available online. So, luckily for you, as long as you have someone in your team familiar with Excel, creating one will be simple.

Below are 5 types of financial models that you can use to help you model and forecast in your business.

1. Three-statement model

The three-statement model is the most fundamental financial model, intending to connect all the accounts and a set of assumptions that can drive changes in the entire model.

2. Discounted Cash Flow (DCF) Model

The DCF model values a business based on the Net Present Value (NPV) of its future cash flows. It takes the cash flows from the three-statement model, makes any necessary adjustments, and then discounts the cash flows back to today at the company’s Weighted Average Cost of Capital.

3. Budget Model

This model is designed for financial planning and analysis (FP&A) professionals to create a budget for the coming year and is typically based on monthly or quarterly figures.

4. Forecasting Model

The forecast model predicts costs within a company’s budget and you can use it for financial planning and analysis. It can assist your startup in estimating future expenses and developing a forecast that compares to the budget model.

5. Initial Public Offering Model

This financial model shows how much investors will pay once your company goes public. It entails conducting comparable company analysis for investors to determine the value of your company.

Hopefully this article has been useful for you for learning why financial modeling is important for startups and small businesses.

Today, I want to share with you why it doesn’t matter how much you make, but that it matters how much you save.  I could make $1 million dollars in a year, but at the end of the year, if I’ve spent it all, it doesn’t matter. It matters so much more how much you save, and I’m sure you will be convinced by the end of this post.

Saver Sally vs. Spender Sam

I want to share with you a story. I have 2 friends, Saver Sally, and Spender Sam.

Saver Sally makes $60,000 a year at her corporate job. She has a husband and a family, lives in a nice neighborhood, and drives a dependable car. She saves $10,000 a year in her retirement accounts.

Spender Sam makes $150,000 a year through his entrepreneurial efforts. He’s single and loves going to the bar to show off his most recent Rolex. Driving his new BMW to work, and hitting the clubs each weekend, he believes he will be able to save once he cashes out of his equity holdings, and only puts $1,000 a year towards his retirement.

Who is Wealthier: Saver Sally or Spender Sam?

If you saw Sally and Sam at the same time, you’d guess Sam was the wealthier one. With a nice car and great taste in the way he dresses, he has to be the wealthier one… right?

WRONG.

After one year, Sally has $9,000 more than Sam. But, Sam has a nice Rolex and a sweet BMW!

Yes, that is true, but does it really matter? With $150,000 in income, that’s great, and I’m sure he is having a lot of fun. What happens if his business goes belly up? That BMW won’t feel as nice to ride in without his paychecks rolling in!

The Power of Compounding

“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” – Albert Einstein

Compound interest is an multiplier of wealth. Let’s see the impact if Sally keeps saving $10,000 a year, and Sam saves only $1,000 a year. In 30 years, the results are shocking. Sally will be nearly $900,000 richer than Sam. Take a look at the calculations below:

Still not convinced? Who do you think is wealthier now?

Practicing What I Preach – How I Saved 48% of My Income in 2017

I track every dollar I earn and spend. Last year, I made just over $107,000, I saved roughly $51,000, I spent about 33,000 and paid roughly 23,000 in taxes.

While my taxes will be adjusted up a little bit because of my withholding’s on my W2, I can safely say my pre-tax savings rate was roughly 61% and post-tax savings rate was roughly 48%.

Of the $51,000 saved, I was able to put $36,000 of that towards retirement and various other investments (business and taxable account). $18,000 of that went towards paying down various debts of mine (my mortgage). I had a decrease of cash by $3,000 throughout the year.

Breaking Down My Savings into 3 Buckets: Cash Savings, Debt Reduction and Investments

I consider there to be 3 ways to save: reducing my debt, putting money into a checking or savings account, and investing in my retirement accounts, investing in my taxable account, and my business.

Last year, I reduced my mortgage by a little nearly $18,000. This was above and beyond the roughly $6,000 I would have eliminated through the monthly principal pay down. Last February, I thought it would be a great idea to pay an extra $25,000 of my mortgage and get rid of PMI. After starting a business, and putting my money to work elsewhere, I’ve put this goal to the side. I have a 2.625% interest rate, and while $144 in private mortgage insurance adds up, I’m still about $13,000 shy of getting rid of private mortgage insurance. We will see if I get rid of it this year.

Putting Money to Work For the Future

Last year, I ended up putting about $36,000 to work for the future through my investments in my retirement, business, and taxable account.

I ended up doing my Roth IRA contributions in full, and as well as contributing a decent amount to my 401k.

With overall savings of nearly 50% of my income, I’m very pleased with my performance. Obviously, this can be improved, and I’m going to look to save at least 40% of my income in this year. I’ve already maxed out my Roth IRA for this year, and will be looking to max out my 401k. We will see if I can get there!

My Tips for You to Increase Your Savings

There are 3 tips I have for you to increase your savings:

1. Look at your expenses and identify any areas of weakness you could work on
   • Tracking your income and expenses is the first step to financial success. Even finding savings of $10 a day can add up over time. $10 a day is $3,650 a year. $3,650 a year for 30 years at 7% compounded is over $300,000!
2. If you are employed, set up your retirement account and increase your contribution
   • At the end of last year, I was saving roughly 6% of my pre-tax income in my 401k. Bumping it up to 20% only resulted in a decrease of cash to me of $300. I was able to up my investment amount by over $500, while only losing out on $300 in cash, for a net gain of $200 in the long run (ignoring taxes in 34 years).
   • Try bumping your contribution up by 1%. I know you can do it.
3. Look for Unique Ways to Save Money Every Day
   • There are many different ways you can save money just by being opportunistic or doing something yourself. For example, if you are planning a birthday party, there are many ways you could save money. One possibility is filling helium balloons yourself. If you have a lot of balloons, you could save a decent amount of money.
   • Just by considering different options, you could save a bunch of money!
4. Destroy Your Debt!
   • Debt is typically the biggest deterrent of saving cold hard cash. That being said, I consider debt reduction to be savings, even if it’s technically paying back your lenders for previous purchases.
   • Use your identified savings from step 1 to up your debt payment over time.

Two final resources would be to read my article for other ideas, 9 Ways to Save Thousands Each Year. There are so many ways to save money. Hopefully this article provides you some ideas to implement in your life.

It Doesn’t Matter How Much You Make, It Matters How Much You Save

At the end of the day, end of the year, the true winners are the savers, not the spenders.

I hope this article has inspired you to save more. It’s very possible to improve your financial situation through income creation, but also expense reduction and paying down debt.

It doesn’t matter how much you make. It matters how much you save.

Readers: how much were you able to save last year? Do you have any savings goals? Do you have any super saving tips?

Erik

Reading books about personal finance is a great way to learn more about how to improve your financial situation.

I love reading and furthering my understanding of the world.

In the first 6 months of 2017, I read 29 books. By the end of 2017, I had read over forty.

I’ve talked about personal finance podcasts, videos, and personal finance blogs to consume to further your understanding, but really, there’s nothing like a good book.

Today, I present to you 12 personal finance books to read to further your financial education.

12 Personal Finance Books to Read

There are so many great personal finance books to read out there. I’ve picked 12 which I believe are superb, very informative, and helpful:

1. The Simple Path to Wealth

2. Think and Grow Rich

3. The Millionaire Next Door

4. The Richest Man in Babylon

5. Rich Dad, Poor Dad

6. Your Money or Your Life

7. How to Think About Money

8. The Bogleheads’ Guide to Investing

9. The Automatic Millionaire

10. Money: Master the Game

11. How to Win Friends and Influence People

12. The Slight Edge

 

I’ve provided a brief summary of each of these below:

 

 

 

 

 

 

 

 

 

 

 

 

 

Personal Finance Books The Mastermind Within Community Members Are Reading

One of the great things about having readers is being able to ask them about their strategies for financial success.  A number of people contributed to the question of which personal finance books they are reading to further their financial education.

Grant, a blogger and friend of mine likes The Millionaire Next Door!

My favorite personal finance book is a little outdated, but ‘The Millionaire Next Door‘ was very eye opening. I also liked ‘The Science of Getting Rich‘.

Dom, a blogger from Gen Y Finance Guy, loves The Slight Edge:

The Slight Edge. It really covers personal finance and overall personal development all in one.

I completely agree with you Dom!  ‘The Slight Edge’ had the biggest impact on me of any book I read this year. Thank you for contributing!

 

Conclusion

Learning personal finance early in life will alter your perspective forever. The book recommendations above will get you to your financial goals and beyond.

Whether you’re looking to learn about investing, or want to understand the philosophical properties of money, there’s a book in this list for you.

You could experience financial success beyond your wildest dreams! Being financially free is a great feeling, will you get there?

There’s a wealth of information that can be provided through video.To give us a little break on the reading, I scoured the internet for eight great, silly, informative, amazing, and cheery personal finance related videos for your enjoyment.

Grab some popcorn, a refreshing beverage and sit back and relax! Hopefully you learn something! 🙂

 

8 Great Personal Finance Videos

Below are 8 silly and fun personal finance videos for you to watch. I’ve included a short summary of each in addition to embedding the YouTube video into the page.

 

A Day in the Life of a Financial Advisor

I can only imagine being a financial advisor full time. People are irrational and don’t always think critically about their situation. I know I don’t always take a step back to think about what I’m saying some times.

The following video is pretty funny and is a meeting between a 45 year old person who wants to retire in five years, has $100,000 in savings, hates fees, wants to invest in gold, but doesn’t want to listen to the financial advisor.

I laughed quite a bit watching this one!

 

The 12 Days of FI Christmas

On the 1st day of FI Christmas, my true love gave to me!  An awesome music video for you and me!

My friend, I Dream of FIRE, came out with this music video just last week, and let’s just say, it’s amazing.

Combining Legos with anything is a great combination – but to then add personal finance, financial independence, and Christmas to the mix, and you definitely have a winner.

 

Santa Baby for Money Savers

“Santa Baby, please max out my four oh one K, all the way!”

Another great video that combines money and Christmas! My friends from Northern Expenditures have put a spin on Santa Baby.

If you’re a personal finance nerd like me, please give this a listen – I know you’ll love it.

As a bonus, this couple came out with another video this year! Here it is: Don’t Have to be Old to Retire

 

Everything You Need to Know About Finance – Presented by William Ackman

Do you want to be an investor in the stock market or in businesses? If so, it’s a requirement to understand the in’s and out’s of finance – particularly, the income statement and balance sheet.

In the following video, William Ackman, CEO of Perishing Square, breaks down everything you need to know about finance – going through an example of starting a lemonade stand business.

Regardless of what you think of hedge fund CEOs, this video has a ton of information, and helped me understand how businesses are valued and how finances are calculated and viewed to investors and business owners.

 

 

How the Economic Machine Works – Presented by Ray Dalio

Why does the economy experience booms and busts? Why do events like 2008 happen, when a credit bubble forms, and subsequently pops?  What are the main inputs to the economic environment?

Ray Dalio, Chief Investment Officer of Bridgewater Associates, answers all of these questions and more in his video, How the Economic Machine Works. Combining this video with the previous video by William Ackman will instantly make you smarter than 90% of the population when it comes to personal finance, economics, and the world.

 

Personal Finance Basics – Presented by Ramit Sethi

Building a solid personal finance foundation is essential to financial success.

Getting the basics from a personal finance expert will only add to your knowledge of the space – and will make you that much more potent as a budgeter, saver, debt destroyer and investor.

 

7 Simple Steps to Financial Freedom – Presented by Tony Robbins

We previously featured Tony Robbins in our post on the seven steps to financial freedom.

I included this video because I love the way Tony Robbins inspires me to be a better person with his anecdotes and way with words.

Watch the following video for inspiration and motivation, but also for his message.

 

Calculating Numbers on a Rental Property – Presented by Brandon Turner

For all you real estate enthusiasts out there, here’s a great video from Brandon Turner over at Bigger Pockets that you can add to your personal finance toolbox.

Many people, including myself, are interested in rental properties. I think real estate is an amazing way to build wealth through the appreciation, cash flow and tax benefits the investment class provides.

However, when buying a new rental property, it’s important to run the numbers to make sure it’s a good investment. Without further ado, I’ll let an expert show you how to calculate the numbers on a new rental property:

 

Conclusion

I hope these eight personal finance videos have been helpful! After watching these videos, I know I feel a little happier, but also ready to tackle my finances.

There’s so much to learn in the world, and it’s great to combine the information with some jokes. I like to keep things light here at The Mastermind Within – pure information is boring. Spicing it up is the way to go!

I hope you enjoyed these eight personal finance videos – maybe you’ll learn something new! 🙂

 

Personal finance is just that, personal.

Personal finance is not about what your friends are doing with their money, what your parents are doing with their money, or what some celebrity is doing with their money.

Personal finance is the science and application of how you earn, spend, save, track, invest, and build your wealth over time. It’s personal – taking control of your finances is totally on you.

Personal Finance is Personal

When thinking about personal finance, thousands of questions can come up:

• How much should I save?
• How much should I invest?
• What should I be investing in?
• What companies or assets could give me the best return on my investments?
• What banks or credit cards should I be using?
• Who can I turn to for advice with my finances?

Before asking any of these questions, we should first turn inwards and realize it’s crucial to realize that personal finance is personal. We must first ask ourselves the right questions and figure out what our goals are.

Some questions to get started are below:

What kind of lifestyle do you want to live? What do you love to do? Do you want to travel around the world? What about spending more time with your family? Do you want to spend Minnesota winters in Florida? Do you want to go to the Super Bowl? Would you want to eat out every week? Do you want to start your own business? What about retiring at 45, 55, or 65? Do you want to pay for your children’s college?

The most crucial question you need to ask, and one that will have the greatest effect on your finances, is:

What is your relationship to money?

Once you’ve figured out where you want to go in life, and what lifestyle you want to live, then you can start crafting a plan, and finally start building the life of your dreams.

Crafting a Personal Finance Plan

It’s so simple, and yet, so many people don’t actually put in the time to first ask themselves the necessary questions and then put their plan into action through tracking your financial progress each month – be that through budgeting, saving X% a month, or paying down debts for the future. Again, it’s all up to you on how to put your plan into action.

Writing out your goal as a SMART goal can help in this situation:

SMART = Specific, Measurable, Attainable, Realistic, and Time Frame.

Specific:  What dollar amount is attached to your goal?

Measurable:  Can you measure your goal in some way?

Attainable:  Is the goal possible, like, “I’m going to get one new client a month for my side hustle”?

Realistic:  Is it realistic?  For example, we know I’m not going to make 1 billion dollars next year.

Time Frame:  Can you accomplish it in the next X months, years, etc.?

Write your goal down, work backwards from your goals, and create a plan.

Make a list: what is the smallest actionable item you can do today to get you going towards your financial goal?

By doing these 3 things, asking yourself the right questions, figuring out your wants and needs, and making a plan to reach your goal, you will be better off financially than before.

You will understand what your personal needs are financially, and can make adjustments over time to better align your actions with your goals.

My Money Story

When I was a young boy, I was exposed to personal finance through my parents and my grandparents. My mom showed me how to balance a checkbook, budget, and how making a list for the grocery store can save money.

During the summertime, I’d visit my grandparents, where my grandma would give me $12 for the week to spend on whatever I wanted. She would make sure I understood that the $12 was all I got – if I spent the $12, I wouldn’t get any more.

From a young age, I understood the value of saving and building wealth for the future. Going into high school and college, I realized the power of saving over time, but now I needed to focus on building my income.

In high school, I was working as a lawn mower and trimmer for a local business, and refereeing basketball on the weekends. I was getting paid $9/hour cutting lawn, and $15 per basketball game.

I was using all of my earnings to go towards paying for college and not saving too much. Luckily for me, my parents had helped save up a little bit for my college education and I was able to get through my undergrad degree debt free.

Increasing my Income through Higher Education

During my senior year of college, my father’s company needed some help in the accounting department. For $12 an hour, I was offered to help out with bookkeeping, invoicing, and payroll. In the Fall, I would be pursuing a Master’s of Financial Math, and wouldn’t be looking for a job in the meantime, so I took the offer and started work.

In 2.5 years of working in the hotel management industry, I increased my pay to $16 an hour, and was able to leave my Master’s program with just $8,000 in student loans.

Before graduating with my Master’s degree, I took a job in the risk management department of a regional bank, which paid $63,000 a year, plus an 8% bonus.

In 5 years, I went from making $5,000 a year, to $20,000 a year, to $63,000 a year.

Building Wealth through Real Estate and Growing my Income

After graduation, I aggressively paid down my student debt, and started house hacking as a way to continue to build wealth.
In the summer of 2015, I bought a 3 bedroom house and had 3 roommates paying me $1,650 total a month. With a mortgage of $1,820, I effectively paid $170 in “rent” and banked the equity.

In the past 2.5 years, I’ve received more than $39,000 in rental income! This has helped me grow my income to nearly $100,000 a year.

While all of this was happening, I bought a used 2014 VW Jetta for $13,000, and promptly paid off the auto loan I took out.
In addition, I was proving my worth at work and in the past 3 years of working, I’ve increased my salary from $63,000 to $88,000.
Finally, I’ve been starting to hustle more on the side to increase my income. I’m blogging, performing statistical analysis and consulting for doctors, and doing various things as a small business owner.

Now, I’ve positioned myself in a great spot to pursue my goals.

My Goal and How I’m Applying the #1 Rule of Personal Finance

My goal is to build wealth for my future self, my future family, and to learn and grow over time in order to impact the lives of others.

For me, I’m looking to increase my income. I track my expenses each month, and identify where I’m succeeding and where I’m failing, but for me, increased income will help me save more and invest more. This will be much more impactful than reducing expenses each month.

I save about 35% of my income a month. I spend a little more than I should on housing, and eat out a little bit more than I should, but personal finance is personal. Yes, I could save 45-50% a month, but that would force me to adjust my lifestyle to move houses (potentially leaving a good commute situation), or start bulk cooking and packing lunches for work. In both cases, I’d only be saving a few hundred bucks more a month.

Through my hustle, I can add a couple hundred bucks a month in income much easier than cutting my expenses.

This is in line with my goals as well: increasing my income can help me increase my wealth. I’m adding many skills to my toolbox and learning a tremendous amount. These skills will translate into my ability to provide value to future employers and business partners. This value will be compensated for in a higher income in the future.

I know my goal, and I’m living it. I’ve identified my goals, and I hope this will inspire you to do the same.

My goal is to build wealth for my future self, my future family, and learn and grow over time to be able to impact the lives of others.

Other Potential #1 Rules of Personal Finance

When I was thinking about the number one rule for personal finance, there were a number of things that popped up in my head:

• Live within your means
  • “Living within your means” means spending less than you make. If you never spend more than you make, you will never be in a situation where you are strapped for cash. Over time, your nest egg will increase, since you’ve had a net positive cash flow throughout your life.
• Save X% a Month
  • Saving X% a month is similar to living within your means, but it puts a mathematical spin on the situation. If you are saving a certain percentage of your income a month, theoretically, you are living within your means. You aren’t spending more than you are making if you are saving.
• Track all of your income and expenses
  • This is my #2 rule and a piece that is overlooked in many areas of life. What gets measured gets managed. The simple act of pulling in your transactions and categorizing them into an organized fashion to identify weaknesses and strengths of your spending habits can lead to improvement.

Here’s the thing though: all of these can be summed up with the statement, “personal finance is personal”. Really, if you want to be someone who travels the world, then you will start to adjust your budget, live within your means, and track your expenses to optimize your money situation to be able to do that.

Start with the why, and go from there!

The #1 Rule of Personal Finance According to The Mastermind Within Community Members

What’s great about having readers and being involved in the personal finance community is I can ask for help in gathering what others believe is right for their situation. I asked others what their #1 rule of personal finance is.

Grant, a blogger from Life Prep Couple, said the following:

Find an important reason why. Once you have a why, then you will figure out how.

A succinct and powerful thought in alignment with personal finance is personal. Thanks, Grant, for your contribution!

Diego, a regular reader of The Mastermind Within, says:

What gets measured gets managed. It brings self-awareness, which is quintessential in personal finance. But a few other rules I follow are: don’t share numbers with anyone, don’t brag, don’t envy, stay focused, and celebrate all milestones.

I love it – what gets measured gets managed is so important! Thanks Diego.

Trail to FI, a blogger focused on Financial Independence, says:

Automate your savings. For example, setting up your IRA contribution to be withdrawn from your bank account each month is great as it removes one more thing to worry about. It also keeps you from seeing extra cash in your bank account that you might be tempted to spend on stuff you don’t need.

I completely agree with this advice as well. If you never actually see the money, because it’s automated away from you, you can’t spend it! Thanks Trail to FI for your contribution.

These few contributions prove personal finance is personal. Everyone has a different spin on what’s important to their situation!

Conclusion

By starting with why, and figuring out what you want to do in life, you will be able to improve your financial situation.

It’s so simple, and yet, so many people don’t actually put in the time to first ask themselves the right questions, and then following up by putting their plan into action – whether that’s through budgeting, saving X% a month, or paying down debts for the future.

After reading this, I’d like you to assess where you are at financially. What is your dream? What kind of lifestyle do you want to live each and every day? Are your financial habits and actions in alignment with your goals?

Once you are done with this assessment, then you can make adjustments and changes to get you going towards your goals and dreams.

Today, I have a guest post from a special friend: The Grounded Engineer. The Grounded Engineer has been on the financial independence path for a few years now and has amassed a solid portfolio before 30 years old. In this post, he is going to share with us how furthering his education has affected his income, savings rate, and investment portfolio for the future.

Thanks, Erik for having me on to guest post today. I tailored my post based on the inspiration I get from reading your blog. I’m thoroughly impressed with what you’ve been able to accomplish at such a young age. Specifically, increasing your income close to 6 figures, purchasing a rental property right out of college and making a nice income from it, and watching how you set goals and tackle the goals you set are awesome feats.

As a fellow math/engineering nerd that has about 5 years on you, I want to discuss my journey for increasing my income and how a high savings rate coupled with a high income is an ideal recipe for achieving financial independence.

The role of education on income

I’ve experienced a strong correlation between my education and my income. Let me walk you through myjourney of how I ended up in my current position as a Technical Sales Engineer.

I started working at age 12 or 13 picking strawberries. I got paid by the pound of strawberries picked and because I’m a naturally competitive person, I did quite well.

Also, getting paid was great.

Picking strawberries in Wisconsin is a seasonal job. After strawberry season, I had to go out and find a full-time job. I landed a job at a catering company as a jack of all trades. I washed dishes, served food, and mowed lawn – I did pretty much anything that was asked of me. My starting pay was a whopping $5.15/hour until I turned 18, when I got a raise up to $6/hour.

Now, at the time, I worked hard because that was how I was raised. I wasn’t trying to increase my income; honestly, I worked hard because I wanted to get more hours and with more hours, I would make more money. The thought of asking for a raise never crossed my mind. I held this job for about five years and eventually left after going off to college.

Entering college

As I finished up my senior year of high school, I contemplated becoming a math teacher or electrical engineer. I took an electronics class my last semester of high school and I really enjoyed it. Additionally, I found out that I was accepted into the Technology Institute (engineering school) at the University of Minnesota. This meant that I didn’t have to start in the College of Liberal Arts and apply for the Institute of Technology after my freshman year. This made the decision to pursue electrical engineering easy.

During college, I worked as an audio-visual technician during the school year because the job had a flexible schedule. There was also a lot of downtime, so I was able to work on my school work (or watch Lost). I made a little over $8/hour at this job. In the summers, I had a few different internships I worked while also working as an audio-visual technician.

For my first internship, I worked for a manufacturing company and increased my hourly rate by almost 30%. The following summer I only increased my hourly rate by a dollar, but I followed that up with another 30% increase at my last internship (making $16/hour). My last internship was technically a COOP position through the University of Minnesota. It was great because I not only was making money, but I received a total of 5 upper-class credits.

My first job

I graduated in 2010 and the job market was still pretty soft. I could have stayed on as an intern at the COOP position I had. But, I also received two job offers. One job was for an Electrical Engineering position at a company that makes hearing test equipment. The second job offer was a Sales Engineer position with a small manufacturer’s rep.

A manufacturer’s rep is a sales company that companies hire as their sales force in a given territory.

I really had no idea if I would be good at sales, but the job sounded exciting and the people were more upbeat than the hearing test equipment company. Also, the offer at the manufacturer’s rep was about $2k more in salary per year.

So, I took the Sales Engineer job! The salary was in the range as a normal engineering position, which at the time was in the $55k – $65k range.

In addition to a nice starting salary, the sales position had the upside for quarterly bonuses. Interestingly enough, a friend of my wife’s minored in Engineering Sales – a minor I never knew existed. Check out Iowa State’s program here.

The college education definitely paid off. I increased my salary almost 40% with my first post-college job.

Leaving my job in less than a year and then coming back!

I really enjoyed the Sales Engineer position. But I also enjoyed the company where I had my COOP position (even though they were not able to offer me a full-time job). After about 10 months working as a Sales Engineer, I received a call from my old boss at the COOP informing me they had a full-time engineer spot open and they wanted to know if I had interest.

This was a very difficult decision for me…

I decided to switch jobs because I wanted to try my hand as a real life, full-time Electrical Engineer. Now, I’m sure you’re thinking: typical Millennial. Switching jobs to increase your salary.

Well, I actually took a little bit of a pay cut switching jobs, which is not common.

I enjoyed my Electrical Engineering job, but I didn’t like the miniscule raise I received at my yearly review, even with high remarks in every area I was scored in. Right around the same time I had my yearly review, the manufacturer’s rep company had come back asking if I was happy and if I wanted to return to sales…

Those pesky student loans

One thing that I should mention is the significant amount of student debt I had after graduating college. I finished undergrad with my electrical engineering degree, very little money saved up, and roughly $65k in student debt.

I am proud to say that I did have a plan to pay down my student loans. Many of my friends strung out their payments over 30 years, meanwhile, I had a plan to pay off my debt in 10 years or less.

Getting back to the job decision – stay in a design engineering role or switching back into technical sales. It was almost two years that I had been out of college and aggressively paying down my student loans. By now, I realized that the more money I could make the more I could put toward my student debt.

I vividly remember going to a local coffee shop to meet my old boss from the manufacturer’s rep company and discussing pay. I recall fighting for a high salary because I knew if I worked hard the bonus part of the package could have significant upside.

By the end of the discussion, I was able to negotiate a sizeable salary increase and within a year and a half, I had increased my total income by almost 40%… for the second time in my career!

Graduate school

After being back at the manufacturer’s rep company for two years, I decided I wanted a more formal training on the business side of things. The typical path that most people in my shoes would take is to pursue an MBA.

Instead, I found a more technical program called Management of Technology. Basically, this is a fancy name for an MBA that is tailored for folks with an engineering background and are looking to couple the technical and business side of things together. This program was great and it positioned me to move into Sales Management in the last year and a half.

Additionally, I’ve been included in more strategic discussions about how to position my company for the future. And I’ve been included in the discussions for the future leadership of my company.

I started school about three years ago and I graduated last May (2016). During this time, my income has increased almost 30%. I’ll let you run the numbers to get a rough estimate of where that puts me 🙂

How I eclipsed $100k in my 401(k) before age 30

If you are pursuing financial independence, you know that you need to save your money. The best way to save you money is to not spend it on useless things. You can really crush your pursuit of FI if you combine saving money with a high income.

Don’t follow the norm of saving 10% of your income. Break out of what is considered normal and start saving a significant amount of your income. If you are in debt, develop a plan to eliminate your debt so that you can start to save more. Create a debt snowball or avalanche plan. Once you eliminate your debt, take what you were paying each month for debt and start to save.

Trust me, your nest egg will start to grow and it will grow quickly.

In December of 2015, I was introduced to the FI community by Scott Alan Turner. I followed the debt snowball method and I paid off $97k of debt (student and car loans). Once the debt was paid off, my family took that debt snowball payment and applied it to savings/investments each month.

The results:

• I was able to eclipse the $100,000 mark in my 401(k) shortly after I turned 29, and I didn’t really start saving until I was 24…
• My family’s only debt is our mortgage
• Once our debt was eliminated in 2016, we increased our savings rate to over 40% in 2017.
• In December of 2015, my net worth was around $34k. Today, it is over $250k in investable assets, not including $90k in home equity. That is over $200k upside in less than 2 years.

I turn 30 in a couple weeks. My family is on track to achieve FI in our late thirties and we are still discussing what our plans will be when that day comes. I really like the idea of giving back and going into teaching. Teaching allows me to continue to earn an income, save, let my investments keep growing, and taking the summers off to spend with my family.

So readers, did pursuing a higher education degree help increase your income?

Thanks again, Erik for letting me write this guest post for your audience. You can check me out on Twitter, Facebook, and over at my blog The Grounded Engineer.

Ahh, to win the lottery – what an experience that must be.

Not everyone is able to win the lottery, but at some point in our life, we will probably come into a large sum of money: a stock you picked goes wild, a family member who was smart with their money passes away unexpectedly, or maybe you just found $20 on the ground!

What would you do with that money? Would you save it? Invest it? Spend it? In this post, I want to present you with a windfall experiment: what would you do with $5,000,000?

First, I want to talk a little bit about windfalls in general, and second, I want to work our way up to $5,000,000 by first answering the questions: what would you do with $5, $20, $500, $2,000, $50,000, $200,000, and finally, $5,000,000.

What is a Windfall?

As defined in the Merriam-Webster dictionary:

Windfall: an unexpected, unearned, or sudden gain or advantage

For me, I define a windfall as any sum of money that I come into where I didn’t work for it and is unexpected. A windfall is something that I did not budget for and now am reaping the benefits of. Some examples include: finding a $20 bill on the ground, receiving a bonus at work, getting unexpected consulting work, etc.

What Most People Will Do with a Windfall

We have all heard the stories of how professional athletes have gone broke (see here) and how lottery winners aren’t much happier than before they won, and also go broke (see here and here). Most people’s natural tendency is to spend! You just got multiple thousands and millions of dollars? Why not spend it all:

BOTTLE SERVICE AT THE CLUB, LET’S GO!

A new car? Why not 3 new cars and a boat??

Sure, that house on the hill looks really nice!

If a person wants to keep up with the Jones’, then by all means, spend your money, but as someone focused on financial freedom, I’m going to take a different approach.

The Windfall Experiment: What Would You Do with $5,000,000?

The moment we have all been waiting for… The Windfall Experiment!!

Please follow along with me and answer the following questions. First, a few warm-ups:

What Would I Do with $5?

I find $5 on the ground. I put it in my wallet and save it for coffee or a drink later in the week. It’s not going to burn a hole in my pocket, but I will use it for a small expense later in the week that I already would have purchased. The key point here, is that I would use it on something that I already was planning on buying, not something that I didn’t plan to buy.

What Would I Do with $20?

I find $20 on the ground. I put it in my wallet and save it for lunch or coffee later in the week. It’s not going to burn a hole in my pocket. Similar to the $5 windfall, I’m not going to go and spend it right away.

Enough with the warm-ups, now let’s take a step up:

What Would I Do with $500?

Just this July, one of my friends from college stayed in the extra room in my house for $500. It didn’t change my spending or saving habits. I just kept on with normal life and put the $500 into my checking account for the mortgage payment.

What Would I Do with $2,000?

Now, we are getting a little higher..

With $2,000, I’d look at my debt situation and assess whether or not I should pay off some of my mortgage or any outstanding credit card balance. This August, I received a property tax refund for $1,417… again, I just put it into my checking account and used it for everyday expenses and my mortgage payment at the end of the month.

What Would I Do with $50,000?

$50k? Now I can actually do some damage!

With $5,000, I’d max out my Roth IRA. With $10,000, I’d prepay my mortgage to get rid of PMI. With the remaining $35,000, I’d have to figure out where I’m living, because I could do some serious home improvements with that money. Otherwise, I’d keep it in savings and look to wisely allocate some of it to taxable accounts or keep it for a future down payment.

What Would I Do with $200,000?

With $200,000, I’d do similar things with the $50,000 but could make a serious dent on debt and retirement accounts. $200,000 isn’t quite enough to retire on, but it would be a good start.

With $5,000, I’d still max out my Roth IRA. With $10,000, I’d prepay my mortgage to get rid of PMI. With the remaining $185,000, I’d still want to assess where I’m living. If I want to stay in my current house OR believe that it is a valuable use of my capital for a rental property, then I’d use some of the money for debt paydown and some of it for home improvements. My mortgage balance is roughly $250,000, so with $185,000, I could definitely make a dent and get close to becoming debt free.

At the same time, $185,000 is a lot of money for some parts of the United States. In some areas in the Midwest, I could buy 3-5 properties with 20-25% down and have positive cash flow. This is something I would have to consider.

Now… the moment you’ve all been waiting for:

What Would I Do with $5,000,000?

This is an interesting one. Enough with the small stuff – 401ks and IRAs? I don’t even qualify for you – I’m BIG TIME NOW BABY!!

With $5,000,000, I’d definitely leave my day job and probably stop any small scale entrepreneurial endeavors (except The Mastermind Within, because I love writing 🙂 )

With $2,000,000, I would look to buy Commercial Real Estate in vibrant communities, specifically, multi purpose buildings (think business space on the bottom floor, and apartments up top). Commercial real estate has all the tax benefits of residential real estate, but also can charge much higher rents, and is a benefactor of economies of scale since multiple units are under 1 roof.

I would put $500,000 into broad stock market index funds, $750,000 into dividend paying stocks for dividend income, and another $1,000,000 into various fixed income instruments for increased interest income.

With the remaining $750,000, I’d use $500,000 to buy precious metals (silver and gold) and then use the rest of the money to move to an energy efficient house that is to my liking. I don’t know if I want to live in my current house forever… with $250,000+, I definitely could find a great place to live!

Takeaways from the Windfall Experiment

I’m a natural saver and would hope that if I received $5,000,000, I would take steps to secure my financial future. Commercial real estate, done right, is a fantastic investment – buying apartment or multi purpose buildings in vibrant areas would help me grow my cash through income and appreciation (not to mention the tax benefits!)

Another thought is diversifying your investments is a lot easier when you have millions (vs. thousands). Throw a couple hundred thousand in a few buckets and you will probably be able to stay wealthy!

Some spending would be necessary as well. Traveling is something I want to continue to do more of. Lately, I’ve been driving all over the Midwest to see friends and family, and I even went to Las Vegas for the first time earlier this summer! As mentioned, I’m going to FinCon this October, and also going to California with my parents and sisters. Exciting times!

5 Steps for Managing A Windfall

Here are 5 steps for managing a Windfall:

1. Take a Step Back and Assess the Situation
   • What are your goals? Do you have debt that could be paid off? Do you want to make some investment contributions first?
2. Make a Plan
   • Figure out your financial needs.
   • Assign priorities to your needs and devise a detailed plan to allocating your new cash
3. Take Action on Your Plan
   • Ideas and plans are only worthwhile if you take action.
4. Track your Expenses and Distributions
   • My number 1 tip for personal finance is to track your income and expenses – it’s even more crucial to do so when you haven’t budgeted for unexpected income.
5. Go Back to Living a Normal Life
   • A windfall is just that, a windfall. Yes, it’s possible with enough money and planning, you could retire early or make massive lifestyle changes, but for most windfalls, they aren’t going to tip the scales. Go back to living within your means and be thankful for the fortunate event.

Conclusion

When getting a bunch of cash, so quickly, the best thing to do is take a deep breathe and assess your current situation. What are your financial and non-financial goals? What are your needs, not wants that should be addressed first? After addressing your goals, then take action to save, invest, and if you must, save a little bit on yourself 🙂

Readers: what are your results from the windfall experiment? What would you do with $5, $20, $500, $2,000, $50,000, $2,000,000 and $5,000,000? Have you ever received a windfall before and what did you do with it?

Erik

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