There seems to be more and more people who are interested in owning their own business.  While that has always been a common piece of the American dream, I was reminded once again this weekend that the current economic realities are fueling this process.

This weekend I read an article in Market Watch entitled “Why You’re Not Making More Money than a Decade Ago”.  If you want to read the article click on this link http://finance.yahoo.com/career-work/article/110041/why-youre-not-making-more-money-than-a-decade-ago?mod=career-salary_negotiation.  There are a few parts of the article that I feel are worth noting.

1.  Median weekly income, adjusted for inflation, is lower in 2009 than it was in 2000 for both high school and college graduates.  (Economic Policy Institute).

2. Between 2002 and 2007, wages fell despite the country being in a period of economic expansion.

3. Planned salary increases for 2011 are at 3% for clerical, supervisory, middle management and executive positions.  That 3% gain is below the 4.5% to 5% increase seen at the beginning of the decade and the steady 4% from 2005-2008 (Hay Group, Global Management Consulting firm).

4. The last 3 years have seen the lowest salary increase that most employees have ever experienced.

For businesses, stagnant and decreasing wages can have a positive impact.  It allows them to lower costs and hire at lower rates.  It is important to remember that almost 50% of those unemployed have been unemployed for over 24months.  That means employers now have a large pool of potential workers from which to choose.  Also, the makeup of the unemployed has changed.  In the past a lot of the unemployed were people that simply didn’t want to work.  However, today that is not the case as more and more educated, experienced and hard workers are seeking employment.  I thought it was interesting that one of the attached articles to this article was titled “Lowball Salary Offers – Take it or Leave it?  In my opinion, it is simple macro economics.  If there are more and more people (demand) looking for less and less jobs (supply), then wages go down (price).

What about the “Expense Side of Life”?

To understand the complete economic effect, you have to look at both the income and expense side of the formula.  As noted above, the income side is stagnant and probably going to get worse.  However, if expenses followed the same path, then the net difference would be the same.  There in essence is the problem.  From 2000-2010, the Consumer Price Index (how we measure our cost of living) increased by 27%.  However, there were expenses that went up much more.  For example, the average price of a home went from $134,150 (2000) to $263,400 (May 2010).  That is an increase of 96% or almost 3.5 times more than the average cost of living expenses.  Another example is gas.  In 2000, the average price of gas was $1.26 per gallon.  As of July 2010, the average cost of gas is $2.73.  That is an increase of 116% over 10 years.  Keep in mind that gas was close to $4.00 per gallon not too long ago.

The Entire Economic Picture Going Forward

There are 4 components of the economic picture that impact all of us:

Incomes are likely to go down.  Deriving income is typically done from either (1) work, or (2) investments.  In challenging economic times, both areas find it harder to create income than in good economic times.  As for expenses, there are those we can control and those that are out of our control.  You can only budget so far.  It is the expenses we cannot control that will likely continue to increase (and at an alarming rate).  This would include taxes, fees and inflation on items that everyone needs (fuel, food, etc.).

I think the other challenging aspect of the economic winter will be how the de-leveraging of our society creates change.  I suspect we will continue to see decreasing values (deflation) with anything that requires debt for growth.  This would include cars, boats, homes, and businesses dependent on using debt to survive and grow.  Banks will likely drive revenue from fees vs. loan income (these are known as Zombie Banks).  In the end, as society changes, you have to change in order to survive and thrive. 

Taking Financial Control of the Future

Many new entrepreneurs are already taking steps to own their own business vs. depending on a job.  For many, the business model of choice is a “Plan B” business.  This allows them to work a full-time job while they build a part-time business.  For many, this is the only way they can have a business because (1) they don’t have the resources to work a full time business, or (2) they are not prepared to take the risk of starting a full time business and quitting work.  I would note that we are seeing a similar entrepreneurial movement around the world because the global economy is suffering from some of the same problems as the US.  In closing, there is a very critical message in all this data.  That message is that there has never been a time in our life where it is more important to take control of our financial future than right now.  Those who are proactive and play the game right will be the ones that prove a lesson seen in economic history – chaos and adversity are often a catalyst for opportunity.

This week the OECD released a report on “healthcare spending”.  The OECD (Office for Economic Cooperation and Development) is a recognized global organization helping governments around the world tackle the economic, social and governance challenges of a globalized economy.

Following are 2 charts that I thought you might find interesting.  One graph is from their report.  The other is from the Economist.

 

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Here are some important points contained in these charts:

1. Without exception, healthcare costs are going up everywhere. Average spending by each country increased from 7.3% of GDP in the 90’s to 8.3% in the 2000’s.  This was attributed to (1) technology changes, (2) population expectations, and (3) an aging population.

2. Total spending on healthcare is going up faster than economic growth in ALL OECD nations (31 countries worldwide inclusive of all the major countries around the world).

3. The speed at which it is going up has increased over the last two decades.

4. As you can see from most of the nations included in this chart, “public spending” on healthcare is a major part of all healthcare spending.  That means that governments control much of the spending decisions.  This can be problematic as governments around the world struggle to manage huge debt and economic decline.  This is a big problem where “public health” is a right for citizens of a country. 

5. It shows that healthcare costs continue to be a major (and increasing) cost to GDP of all countries.  This means that healthcare has a major economic impact on societies around the world.  The healthcare spending as a percentage of GDP has increased from 12% in the early 90’s to over 16% in 2008 (a new record for healthcare spending as a percentage of GDP).

6. Between 2000-2008 healthcare spending by individuals increased by 4.2% a year on average.  That means that healthcare costs are increasing faster than inflation. 

7. In the US, the average person spent $7,538 on healthcare in 2008.  That is more than DOUBLE the $3,000 average of all OECD nations. 

What Does All This Mean To You?

In my opinion, this is just more data to support that we have a global economic and social problem related to broken healthcare systems.  While some are more broken than others, it doesn’t change the fact that governments around the world are going to make significant changes because the economics of healthcare will destroy the global economy.  Much of this change is focused in 2 directions – better management of healthcare spending and movement toward prevention.  While both of these areas will make a difference, it will not change the reality for all of us.  Systems will change and we will suffer the impact of those changes.  In the end, we will all pay more to fix this problem whether it is through paying more on healthcare spending, taxes, or fees.

This is an important time to take a more proactive posture in managing your healthcare spending and health decisions (eating better, exercising, etc.).  Equally, this is more support that the Prevention and Wellness industry will continue to be in a long-term uptrend because they are a critical part of what is necessary to correct healthcare around the world.  If you are looking for a good industry to be a part of in the future, Wellness and Prevention will continue to grow regardless of the economic trends.

It appears that as a society we have moved beyond discussing economics in terms of billions and now the new paradigm is to discuss the overall economic picture in terms of TRILLIONS.  Considering that the US debt is now over $13 trillion, we cannot be surprised that the use of this word has become common in economics and society.  Since most of us have probably never seen a trillion dollars, I thought I might give you perspective on a trillion dollars and some examples of what it means to be $13 trillion in debt. 

What is a TRILLION Dollars?

Below are two examples of a trillion dollars that might help you gain perspective on the size of this number.

The first example is relative to time:

• One million seconds = 11.5 days
• One billion seconds = 32 years
• One trillion seconds = 32,000 years

The second example is relative to money (source: Google Sketchbook):

We’ll start with a $100 bill. Currently the largest U.S. denomination in general circulation. Most everyone has seen them, slightly fewer have owned them. Guaranteed to make friends wherever they go.

A packet of one hundred $100 bills is less than 1/2″ thick and contains $10,000.  Fits in your pocket easily and is more than enough for a week or two of shamefully decadent fun.

Believe it or not, this next little pile is $1 million (100 packets of $10,000).   You could stuff that into a grocery bag and walk around with it.

While a measly $1 million looked a little unimpressive, $100 million is a little more respectable. It fits neatly on a standard pallet…

And $1 BILLION dollars… now we’re really getting somewhere…

Next we’ll look at ONE TRILLION dollars. This is that number we’ve been hearing so much about. What is a trillion dollars? Well, it’s a million million. It’s a thousand billion. It’s a one followed by 12 zeros.

You ready for this? It’s pretty surprising.  Go ahead… Keep reading…

Ladies and gentlemen… I give you $1 trillion dollars (and notice those pallets are double stacked)…

So the next time you hear someone toss around the phrase “trillion dollars”… that’s what they’re talking about.

Getting a perspective of $13 trillion?

Right now our current debt to GDP (total value of the goods and services in our country) is 59%.  By 2012, the debt is expected to be greater than the entire GDP.  Currently our debt is at $13.057 trillion which is about $42,195 per citizen (adults and children).  As of April, our national savings rate was 3.6% (this has been going up).  With a median personal income of $41,056 (based on the average income for men and woman working full time), it would take the country’s 139 million workers 76 years to pay off the $13 trillion in debt if everyone put aside 3% of their income a year.

Did you know?…  Individuals can voluntarily help pay down this debt through a program with the Treasury.  In 2009, the Treasury received $3.063 million in debt-reduction contributions.  At that pace, it would take Americans approximately 5 million years to pay off the $13 trillion.  Keep in mind that this is only if debt remained at its current level.  The simple truth is that debt is actually increasing.  There is a KEY OBSERVATION in this data that I’d like to highlight.  That observation is that the main source of paying off this debt in the future will be additional taxes.  As I heard in a C-Span presentation from Congress a couple weeks ago, there is NO WAY for the economy to grow its way out of the current mess.  In other words, additional taxes and fees WILL be a reality for all of us.

Here is an interesting perspective on what $13 trillion could buy (taken from a recent Smart Money report):
1.  4 years at Yale including room, board and other costs is approximately $190K.  For $13 trillion, 68 million students could get a 4 year free education at Yale.

2. Every person in the US could buy one item from the McDonald’s dollar menu everyday for the next 115 years.  If you did the same thing with every person in the world, the money would last a little over 5 years.

3. As of April, the average home in the US costs $198,400.  With $13 trillion, 65 million families could get a new home.

4. For $13 trillion, every person in the US could see a movie every day for the next 14 years.

5. According to data from the Concierge Medicine Research Collective, $13 trillion could buy 10 years of round-the-clock medical care for more than 928 million people – or the entire population of the US for 30 years.

6. BP estimates the Gulf Coast Oil Spill will cost approximately $40 billion.  $13 trillion could pay the whole tab 326 times over.

7. A Disney Premiere Passport gives the bearer unlimited admissions to Disneyland and Disney World for one year.  For $13 trillion, the entire US population could spend the next 60 years at these parks.

What does this mean to all of us?

Public debt has been a part of our economic model for a long-time.  Clearly that model has been copied around the world.  However, there are two important questions to ask as it pertains to debt.  First, when do you have too much debt?  Second, if you have too much debt, how do you fix that problem?

I do not think that anyone feels the world has too little debt.  On the contrary, most economists feel the world is moving toward a “de-leveraging” process (paying down on debt).  Think about how much our lives are impacted by the ability to borrow money.  Clearly, as the debt becomes less of a tool to drive economic growth, it will impact all areas of society.  Consumers will learn to live within their means because using debt to enhance lifestyle will be difficult as society goes through this deleveraging period.  Businesses who depend on debt will suffer and many will end up failing.  That is why the “right business model” in this “New Economy” will NOT require (1) borrowing or (2) outside investments.  As entrepreneurs, you should align yourself with a business model that works as society goes through the deleveraging process.  Clearly business contraction will lead to higher unemployment.  I think many already understand this reality which is why the pursuit for entrepreneurship is at an all time high and growing.  Governments will default and things we take for granted will change.

As for fixing the problem, it begins with controlling spending.  As the old adage goes, you cannot borrow yourself out of debt.  Just as consumers have embraced the need to pay down their debt and increase their savings, governments also have to learn to live within their means.  If the future is defined by more overspending and the printing of additional money, I suspect the deleveraging process that is inevitable will just be more painful and longer.  Second, you MUST take control of your financial future.  Start a business.  Increase your value to the marketplace so you can keep (or get) a job.  Work harder to drive income and stay ahead of the increase in expenses that are out of your control (taxes, fees and inflation).  Finally, try to simply your life.  Learn to appreciate the simpler aspects of life and embrace this process.  While money might be a vehicle to happiness for many, there are things that are much more important.  As society changes, you have to change with it.  The simple fact is that for those that understand and embrace change, the future can be great.  Given the extent of the problems our society is facing, it is the wrong time and strategy to stick your head in the sand and hope this all works out.

While the focus of my blogs is generally on business and the economics that impact businesses, I wanted to share with you some data that has recently caught my attention.  It clearly shows that the financial institutions are positioning for a change.  Let me see if I can explain the charts in a way that helps us understand what they mean. 

Chart #1 – Swap spreads are the costs to swap fixed rate payments for payments based on floating rates in derivative markets.  It is expressed as a spread, in basis points, over yields on underlying Treasuries.  With that being said, a brief explanation may be helpful.  Swap spreads are indicators of how banks feel about doing business with each other.  When times are good and credit risk is low, the number drops.  That means that banks charge each other less money (or premiums) for doing business together.  Equally, when banks have concerns such as risk associated with other banks credit quality or volatility, the spread increases.  As you can see from the chart, the spread (costs and interest in doing business between banks) has exploded almost 700% from 9.6 basis points in March 2010 to 64 basis points currently.  That means that the concerns banks have regarding doing business with each other has all of a sudden taken a major NEGATIVE turn.  This spread is at a 13-month high.   

 

Chart #2 – This chart looks at the LIBOR rates banks charge each other to borrow money for short periods of time.  LIBOR is the European equivalent of our Federal Funds rate (what the government charges banks when lending them money).  When credit markets are functioning normally, short-term LIBOR tends to move in accordance with the Fed Fund rates.  However, when they are out of alignment, the LIBOR costs rise as banks take into account the risk associated with the possibility that the money they are lending may not be paid back.  As you can see, the LIBOR (borrowing costs) has more than doubled since December 2009 from 25 basis points to 54 basis points.  A lot of this has to do with Sovereign Debt concerns through the European Union.  Although this is still low, it is at the highest level it has been in over a year.  Most important, it is coming at a time when the European Central Banks and Federal Reserve have elected to NOT raise their interest rate.  To summarize, this is a sign that the markets around the world are perceiving a major shift in risk that will impact lending and banking globally.  Credit is going to get tougher and probably more expensive. 

  

There is one other important parameter that shows that the concerns over global economic risk are on the rise and moving very quickly.  That is the credit default swap market.  This is basically where financial players buy and sell insurance against credit risk.  When times are good, insurance is cheap.  However, the costs of this insurance are escalating at an alarming rate.  Right now the insurance to insure a benchmark portfolio of $10 million of investment grade corporate bonds against default is about $131,000.  In January 2010, the same insurance would have cost $76K.

Finally, there is one other piece of information I read this week that you might find interesting.  The IMF studied 122 global recessions and found that the recovery time for a global recession that included problems with financial institutions (which is considered a foundational component of all modern economies) was over 5 years.  That means the recovery for our current recession has a couple years left.  Their research indicated something very important to understand about economic recoveries – when structural problems exist, it takes longer to recover.  I would note that this research was done on recessions vs. depressions.   When the level of problems takes any economy toward a depression, then the consequences tend to be much greater and the recovery time tends to be much longer. 

 So what does all this mean and why am I sharing it with you?

1.  The last time these “credit crisis indicators” were flashing red was right before the stock market meltdown of 2007-2008.  If the market takes a big plunge, it will not only hurt investments but it will put a huge fear in the marketplace.  The fear will impact consumers and businesses.  That means it will show up in spending, hiring, investments, confidence, etc.  In reality, consumers have already begun adjusting their thinking.  The average amount owed on credit cards has dropped from $5600 per person to $3,900 per person.  In families with incomes over 50,000, they have cut their credit card debt in half.  The challenge is that the last time we had this level of unemployment (in the early 80’s), the per capita debt was $14K but has now exploded to about $44K.  Be smart with your debt and work hard to eliminate or decrease it over time.
2. Governments around the world have taken unprecedented steps (borrowing money, printing money, etc.) to avoid the global economy’s need to make some tough choices.  History has shown that bailing out, backstopping and popping up institutions and assets during a private credit crisis vs. letting the markets correct themselves, comes with consequences.  In essence, what has occurred is that governments around the world have replaced Wall Street debt with Sovereign debt (debt for each country).  The underlying problems of the global economy have NOT been solved but only delayed.  Even worse, the governments around the world have historical levels of debt which ultimately will come at a huge cost to consumers around the world (taxes, fees, inflation, job stability, etc.). 
3. In my opinion, the de-leveraging of the global economy will be a long and painful process.  Don’t make decisions as if our economy is going to be “business as usual”.  Understand this “new economy” will require you to think and operate differently.  As Japan showed us, long-term economic winters create paradigm shifts in thinking.    
4. Those that are NOT prepared will suffer the worst.  Equally those who are prepared will be an example of a lesson that history has taught us through economic winters – chaos and adversity are often the catalyst to opportunity.

Given this data, it is my opinion that the big institutions are getting positioned for the next level of awareness that the global economic winter is here to stay.  Don’t drink the Kool-Aid and think it will be “business as usual” anytime soon.  Of course societies will suffer but I suspect they will also grow.  Change is often tough but the end result of financial change will benefit society and economies around the world.  It is important to understand how to grow in this type of an economic shift.  As I often advise:  the most important strategy you can incorporate right now is to FOCUS YOUR ATTENTION ON MAKING MORE MONEY.  For those with income stability and cash reserves, the world will be filled with opportunities.  Now is the time to move in that direction. 

One final comment:  This is NOT a “Chicken Little” blog.  The sky is not falling and the world is not coming to an end.  Cycles are a part of every aspect of life.  Change is the only constant.  If you focus on what you can control and use awareness as a tool to make good decisions, solve problems well, and to fuel discipline, YOU CAN SUCCEED IN ANY ECONOMIC CYCLE!!!!!!!!!!!

As I read more and more about the challenges facing the world, I am brought back to some information that was sent to me about a year ago. It was called the “Enormous Amounts of Money to be Made Corrupted our Financial System”. It was broken down into two “Immutable Laws of the Universe” as they pertain to human behavior and money. They were as follows:

The #1 Immutable Law of the Universe

If you offer people a lot of money to do something, no matter how foolish, unethical or illegal, a large number of them will do it.

Corollary #1: The more money to be made, the more bad behavior will occur.
Corollary #2: The people engaged in such behavior will rationalize it such that they genuinely believe that what they’re doing isn’t foolish, unethical, or illegal.

The #2 Immutable Law of the Universe

Bad behavior leads to bad consequences.

What is the lesson to be learned?

Reading the information above is a reminder to me that the quality that matters most in business is CHARACTER. It can overcome weaknesses and inexperience. I define “character” as nothing more than a measurement of selfishness. Remember, selfishness is measured by different people in various ways (just think about how differently people measure integrity which is clearly a measuring component of character). I think impeccable character is the MOST IMPORTANT characteristic of any great leader. If you think I am wrong, then just look at our economic challenges as an example of what happens when leadership continues to focus on their needs even if the cost is damaging those who they are supposed to be leading. In my study of major economic cycles, all bad economic winters are preceded by a period of time when the lack of leadership at all levels of society take priority over leadership focused on serving society. That type of leadership creates so much damage that society often has to suffer in order for the correct type of leadership to take over. The sad part of these economic cycles is that the damage is often so great to society that it takes a long time to change course.

Often what drives bad character is too big of a focus on one’s needs in the short-term. Money is often at the root of this problem. Instead of realizing the value of a long-term relationship, people often view a relationship in the context of what they can get from someone in the present. For many, this is the core of sales. I have always said that sales (the promise) fails when the sale becomes an event vs. part of the process of earning a relationship (the fulfillment of the promise). Great sales people will ALWAYS put more effort into earning a relationship than the practice of selling something regardless of whether the needs or expectations of another are fulfilled in the future.

Let me take a moment and explain to you the path of earning long-term relationships in business. I have always believed that the path to long-term success is long-term relationships. However, to earn long-term relationships you have to have four things.

1. Good Character – You have to be a person who understands that the path to achieve one’s needs starts and finishes with serving others. The minute the fulfillment of your needs requires the destruction or abandonment of another’s needs, then your character should be at question. Remember, what you feed you become. If you feed good character, then you will have good character. Equally, when you feed bad character then that will be what defines you.
2. Value – Value is your ability to meet the needs of another. People keep relationships that serve their needs. You have to understand that to earn a relationship, you have to be willing and able to do the job of fulfilling the “relationship expectations” of the other party. Equally, if you cannot do the job, then this should drive your personal development path.
3. Communication – I have lost count of how many relationships I have seen fall apart due to poor communication. At the core of poor communication are a couple basic things. First, judgment and criticism take the place of understanding. If you are one to judge, I would suggest starting that process by looking in the mirror vs. pointing the finger at another. Criticizing others tears them down. Great relationship developers thrive off empowering others, not tearing them down. Second, earning your way in the relationship is often replaced with entitlement. This is when communication becomes about what others owe you. I find that entitlement is the path to taking from others, not serving them. Third, when complaining or negative communication replaces appreciation and gratitude, the relationship is often headed toward a major gap. Often just changing the nature of your focus and conclusions about others will be a catalyst for changing the way you communicate in relationships.
4. Relationship Selection – All the qualities above need to be present in both parties in a relationship. I am sure anyone who reads this blog can come up with an example of a “bad relationship”. I think if you sat down and analyzed how the relationship went bad, you would find at least one of the three items above missing in the relationship. Even if you have all three, if the other party in the relationship lacks one (or more) of the three things above, the relationship will likely be problematic at some point in the relationship.

Finally, character is easy to portray during the best of times. It is easy to look good when everything is going your way. However, you often never really know someone until a challenge in the relationship arises. It is then that you find out how destructive someone will be in an effort to fulfill their own needs.

So maybe it is time to look in the mirror and all ask ourselves a few critical character questions:

1. Am I doing what is necessary to serve others as a means to achieve my needs? Remember, it is OK if your needs are met by fulfilling other’s needs first. It is when they come at the costs of others that character comes into question, especially if it is intentional and done with deception or misrepresentation.
2. Am I the type of person that can earn long-term relationships with the right person? Do I have impeccable character? Can I meet the needs and expectations of the relationships in my life? Is my communication helping the relationship grow or causing it to suffer?
3. Is there a way to improve my relationship selection process so that I begin with a relationship that has the potential to evolve into a magical long-term relationship for all parties?
4. Is there some relationship in my life that lacks character and what am I going to do about it?
5. Is there a way to make my character more visible to others? Remember, you need to package yourself and your story so that others see your good character. In the future, you will find that in a society that suffers from poor character, people will naturally gravitate toward individuals and business cultures that demonstrate impeccable character.

Remember, character matters! It is at the core of the growth of a society, business and an individual. Compromising character, especially due to money, will ultimately create more consequences than benefits. I hope this blog is a reminder of the importance of character and to also make a proactive effort to (1) improve your character, and (2) demand that others with whom you have relationships have the character necessary to earn a long-term relationship with you.

Often fear is the greatest killer of momentum. As one of my mentors used to say, fear either paralyzes us or motivates us. I was reminded by this reality based on communication I received from various subscribers about my latest blog regarding the need to have an “Income Focus”. Given the level of fear that exists in so many people in society, I thought it would be useful to share some thoughts about fear and a few strategies to overcome it.

What is Fear?

I took a definition from the web that I think best defines fear – “to be afraid or feel anxious or apprehensive about a possible or probably situation or event”. If you look at that definition, you will notice some key components. First, fear exists in the mind and shows up as being “afraid, feeling anxious or apprehensive”. Second, fear requires a focus on how the future will have a negative impact on your needs. Often that fear grows and becomes paralyzing when (1) your fear occurs because you are focused on matters out of your control, or (2) your perception is that the consequences of the future will have a major negative impact on the fulfillment of your needs. Now that we have looked at the “pathology of fear”, let me give you a couple strategies that might help fear become your friend vs. an enemy to your momentum and happiness.

Strategies to Combat Fear

Strategy #1 – Change Your Focus to What You Can Control. If you focus on what you can control, it allows YOU to take control of your mind, thoughts and actions. Remember, focusing on what you can control is a key component to resourcefulness. I have copied a blog post from my economic article and my reply below to give you an example of how I deal with economic concerns and how I use them to fuel growth.

“Gordon,
Great job on the blog… 1 question re: making more money — what will it matter when the currency is devalued. I am assuming you may feel we are going to see the dollar continue to stumble. I understand the idea of making more to help sustain but in truth w/ the east rising and emerging with a new burgeoning middle class and the west suffering i only see major problems for the slumbering US population .. ex: commercial real estate crash will continue, we shall see more in residential situation as well plus commercial derivatives r coming due this year– please help me try and focus on staying positive because i am entertaining a healthy dose of fear.. Thanks”

As you can see, this person is very intelligent and brings up very real concerns regarding the economy and how it could impact the future. Below is my response.

“I completely understand the fear associated with economics these days given the severity of the consequences we face in the future. While the consequences are reality, I find focusing too much energy and attention on matters that are out of my control does nothing but fuel the fear. The major question we all need to ask is “What can we control”? We can control our thoughts and actions. While focusing on more money might not solve the problems of the future, it is the best strategy to put the probabilities in our favor.

For what it is worth, I find there is another important component of fear. Fear is often a result of focusing on what you can lose. I have found that living in a state of gratitude is a key component for peace of mind. The reality is that I can find peace from any challenge. I can grow from anything and contribute to others even in the worst of times. Understanding this reality, I also understand that if my needs are compromised from change that is outside my control, then there isn’t much I can do about it other than realize that they can be fulfilled with choices that are under my control.

I think they call Economics the “Dismal Science” for a reason . Don’t let it fuel fear or get your mind in the wrong place. It is great to have “economic awareness”. However, if it simply fuels fear or prevents action, then that awareness probably hurts momentum more than fueling it.”

This exchange demonstrates a few key points. First, often what fuels fear is very real. I find that accepting reality is the best path to awareness. Second, the focus on this individual’s potential loss of needs is so great that they wonder if even focusing on what they can control has any value. Often coming to the conclusion “what is the point?” is what accelerates the fear and shuts off resourcefulness. Remember, you CANNOT be resourceful if you are not in a resourceful mindset.

Strategy #2 – Recognize That Needs Can Be Fulfilled Through Various Means/Vehicles. Often fear from the perceived loss of needs is driven because the focus is on losing the “vehicle” that drives the needs. For example, one might focus on the potential loss of a job or even a relationship that fulfills their needs. As fear and uncertainty build around the vehicle, the perception is that one’s needs will be compromised or lost. However, when you begin to teach your mind that needs are met through various vehicles, then your mind moves from “fear” toward “resourcefulness”. If you proactively look to expand the vehicles that meet your needs, then you will find this is a great strategy to overcome fear.

Strategy #3 – Accept the “Truth” When it Comes to Needs. The simple truth is that you can have your needs met REGARDLESS of the obstacles you face in life. You can grow from any situation, even a major tragedy. You can contribute to others regardless of the curve balls life throws at all of us. You can find gratitude and appreciation from any event or moment in time. When you teach yourself to find gratitude in everything, you will find that fear will seldom find a home in your mind. The simple truth is that fear and excitement cannot occupy the mind at the same time. If you just move your mind from a negative place to a positive place, that process alone will help turn fears into confidence and paralysis into action. Remember, change can be your friend and if one vehicle that meets your needs is eliminated or compromised (a relationship, a career, etc.), you can always replace it with another vehicle. Not only can the need be fulfilled, but it can often be fulfilled at a higher level because of the journey that is often required with change.

Strategy #4 – Examine Your Beliefs to See if They are Fueling the Process. If So, it is Time to Change Your Beliefs. If you recall, it is my view that beliefs are nothing more than the conclusions we make in life. That being said, our beliefs are often the core of our fear. For example, imagine if you are selling a product and your belief is that if someone says no, they are making a personal judgment about you. This belief alone leads to a sense of failure, loss of love and even pain. As long as the belief is there, it will be a catalyst for fear.

Final Words

It is important to remember that fear can be your friend. But we must train our minds in order to achieve that result. Step one is awareness. So when you experience fear, ask yourself these two simple questions:

Am I focused on something I can’t control?
How do I get my mind back to a positive place?

I encourage all of you to recognize when fear is present and learn to change your thinking so that fear helps you advance momentum.

First, let me start this blog with a disclaimer. The goal of this blog is to educate you, not to scare you. I believe that understanding is an important step toward making good decisions. For some, understanding creates fear. And as we all know, fear can either paralyze or motivate people. I am hopeful that the information I share in this blog helps you understand the possibilities we face in the future and the importance of taking control of your financial future, especially focusing on income production.

Since the economic climate changed so drastically in the fall of November 2008, my message has been very consistent – the ONLY WAY to survive and thrive in the future is to focus on making more money. The simple truth is that you cannot budget your way to growth in an economic climate that will be defined by higher taxes, fees and inflation. There is an interesting article on CNNMoney.com entitled “What’ll They Tax Next?” It gives us a glimpse into a few of these taxes and fees that are currently being seen across the country as a way to earn revenue in response to budget shortfalls:

* Lawmakers in Maine are going after children’s entertainment to make a little extra money for the state. A bill proposing a 5% state tax on a slew of things, including comedians, clowns, jugglers, ventriloquists, petting zoos, paintball and even haunted hay rides.

* Kentucky is looking to raise $350 to $400 million a year by taxing high-end services such as limousine and hot air balloon rides, golf green fees, private landscaping, armored car services and professional laundry services.

* In Michigan, a tax on pet grooming, horse training, plumbing, fur storage, beauty parlors, funeral services, diaper services, massages, bowling, coin-operated video games, meat slaughtering, movie tickets, zoos and pest control have been proposed to bridge the state’s budget deficit.

* Yoga is currently classified as a recreational service in Missouri and is taxed along with athletic events like Cardinal games and fitness club memberships.

* West Virginia may impose a 5-cent tax on plastic shopping bags. The tax would make it more expensive for stores to let customers bag their groceries in plastic rather than paper and is estimated to raise about $23 million per year.

The core problem is simple. Our country, and countries around the world have too much debt and the de-leveraging process is going to create the “new economy”. Awareness is the first stage of the momentum process. As I was doing some research this weekend on the current debt situation in Greece, I felt it was worth sharing what I found because I think it gives us a picture of what this “new economy” could look like for everyone.

So let’s start with a simple economic fact. Debt can be both good and bad. If debt is used to accelerate growth, then the results can be very positive. However, when debt exists and is not fueling growth, then it has a negative impact. We are reaching a new paradigm in society with regard to government debt vs. GDP (GDP=Total Goods & Services of an economy). It is important to understand how this will impact all of us.

There was a statement I read this weekend that really jumped out at me. It read as follows:

“If the Greek economy survives, it will be the first economy in all of history to recover with a debt load of more than 90% of GDP which is considered “the fatal tipping point” by economic researchers.”

Given that piece of information, I began looking for the answers to 2 questions. First what is the debt to GDP ratios of other countries? Second, what happens when countries get in this position? I took the current situation in Greece as an example.

The Global Debt to GDP Picture

Below is a chart from the IMF (International Monetary Fund). As you can see from the chart, much of the world, especially the bigger countries, share a similar problem with Greece.

The IMF went on to highlight some other key points. First, the debt to GDP of advanced countries is rising at a rate higher than we have seen in decades. This debt is having “major implications for the public finances in most countries”. About 25% of the debt increase comes from “financial sector support packages”. It also pointed out that the largest countries (the Advanced G-20 countries) have the largest debt to GDP ratios. Keep in mind that these countries represent 90% of global gross national product, 80% of the world trade, and 2/3 of the world’s population. The simple fact is that we are dealing with a systemic problem. Like consumers, governments have to be able to pay their bills. The goal is to do it through a positive cash flow (revenues > expenses). When that doesn’t work they turn to borrowing or printing money. Both of those options come with consequences.

The Picture in Greece

As I noted above, when governments need money, they tend to (1) contract by cutting expenses and services, (2) reduce their obligations (debt, entitlement programs, (3) increase revenue (fees, taxes, etc.), and (4) print money. The question is what does this scenario look like for these countries and those living in them? Here are just a few of the things going on in Greece at this time.

• Greece has placed control of its financial choices in the hands of those lending them money. Others control their destiny.
• There is a 3 year wage freeze on public sector workers and also a recruitment freeze.
• The average retirement age would be raised from 53 to 67.
• There are various demands to trim public services necessary to cut the budget deficits by 10-11 points off the GDP in the next 3 years. This includes shutting down 800 state owned entities.
• The Greek government is required to sell state corporations and state-owned land and properties. In other words, they have to liquidate assets in order to pay down debt.
• There is an increase in the Value Added Tax (like a national sales tax) by 2-3% which currently averages around 19%.
• Unemployment is now over 10% and expected to get worse, maybe even reaching the level of Spain which is currently near 20%.
• There are riots in the streets from those who are required to sacrifice due to this bailout, questioning whether Greece will become “ungovernable”.

The Bottom Line

So what does all this mean? It means that when “bad debt” is part of a country, then those citizens will eventually suffer the consequences. Therefore, it is going to be even more important now than ever for us to focus on what we can control. We cannot control the world economy or the high probability that we will all face higher taxes, fees, and inflation. We cannot control that our economic world is changing and things we take for granted will change. What we can control are our choices. That is why it is so critical to “stay ahead of the curve” and focus your energy, resources and time on making more money. That is the path to survive and thrive in the future. For those that embrace change, the future can be bright. For those who fail to recognize the change that is coming or fail to do anything about it, then I suspect their lives will be defined by more consequences and less control of their financial future. I encourage everyone to pay attention and get focused on making more money now. If not, you might find the consequences of “sticking your head in the sand” are much bigger than you ever imagined.

I know that many of my readers have home-based businesses so I wanted to share some information I read last week about this segment of the business world.  Home-based businesses have become a major part of the business landscape and are now being referred to as “Homepreneurs”.  There has always been a perception that home-based businesses are small.  For many they are almost viewed like a hobby vs. a business.  However, the data seems to indicate that home-based businesses are growing and are a big part of the business community.  Today, about 50% of all homepreneurs have employees.  As you can see from the chart below, home-based businesses are often as competitive and successful as non home-based businesses.

According to the Network Solutions Small Business Success Index (SBSI), their recent survey indicated that home-based businesses are important contributors to employment and the overall U.S. economy.  Here are the basic components of society that are driving the trends. 

1.  The lower costs and risk associated with starting a home-based business – As I have noted in other blogs, access to capital is limited.  The businesses that will grow in the New Economy will be those that can be started and managed with very little capital.  Until investors and lenders change their current positions, low initial and fixed costs will continue to be a major tenant of small business opportunities in the future.

2. Demographics and social shifts – Aging baby boomers, women, and Gen Y business owners are all seeing the value of a home-based business as a means to (1) take control of their financial future, (2) provide an income to support their families.  People today are interested in a work/life balance and time flexibility which is something that home based businesses can provide.

3. A lack of corporate jobs – Large companies are battered by the Economic Winter.  Large businesses tend to require access to capital (investors and lenders) which are both on the sidelines these days.  Remember, almost 95% of the S&P 500 companies have debt.  Most large companies are part of the Global Economic landscape.  As much of the global economy struggles, US company sales are compromised by a Global Economy that is going through a massive de-leveraging process (it seems like everyone has too much debt these days).  Even people with good corporate jobs are looking at part-time, home based business as a means for additional income and a future for their family.  Too many have learned the costs of leaving their economic future in the hands of others, and are passionate about changing that reality in the future.

Below are the key findings from the SBSI report.  As you can see, the home-based business model is growing and should continue to grow in the future.

The Nutrition Business Journal recently released their 2010 Global Nutrition Report.  It is a 265 page research report on the Global Nutrition market.  The research is rather expensive but gives a lot of great insight on the Global Nutrition industry and where it is headed in the future.  Since I know a number of my webpage subscribers are in the nutritional business I wanted to share some of the basic points.  Remember, one of the easiest ways to succeed in business is to get positioned in an industry that (1) is driven by real demand and (2) is forecasted to be in a long-term uptrend.  Below is a picture of the current and forecasted global market and a summary of the key factors driving the Global Nutrition Market. 

Highlight #1 – The Global Nutrition Industry is Stable and Growing

Even in a tough economic climate, the nutrition industry is growing around the world.  As you can see from the chartbelow, the industry is forecasted to have continued growth, although they do expect the pace of growth to level off around 6% through 2014. 

 

 

Highlight #2 – The Factors Driving Nutrition Are Real Problems Facing Society

There are 3 primary factors driving the Global Nutrition Market:

1.  An Aging Population – In most of the industrialized world, society is getting older.  This is especially true in Japan and throughout Europe.  Even the US baby boomers are heading into their “retirement stage”.  What do we know about this older population?  First, health is a major factor in their life.  They want to stay healthy so they can sustain their quality of life.  In addition, health costs have a major impact on their finances.  More and more of this group of society is looking for ways to avoid being sick and incurring the massive healthcare costs that in turn impacts so many other areas of their lifestyle.  This group is a “momentum driver” for the Global Nutrition Industry.  Equally, for those who market opportunities in the nutrition area, you might find this group to be a great source for expanding your business.  Most of them are looking to make money in retirement and they have relationships with others who share their concerns and needs.

2. Continued Bad Health – Continued growth in diabetes, heart disease, cancer and other chronic health ailments linked to poor nutritional habits are a major problem around the world.  As consumers worldwide become more educated on Wellness and Prevention, they will look for solutions that will enable them to stay out of the healthcare systems.  Part of this education will be the realization that spending money to stay healthy is a better economic choice than the costs associated with being sick.

3. Changing Economics – Around the world, more and more people are moving toward the middle class.  The research indicates that people who spend on nutrition can afford to do it.  Countries like Brazil, China and India are examples of major global markets where there is a growing middle class.  As the masses have more money and become more educated on the value of health and wellness, they will drive the Global Nutrition Market.

Highlight #3 – The Regulatory Climate

There is a worldwide movement toward more regulation as it pertains to Global Nutrition.  Without having to explain the specific regulatory issues in each country, I wanted to summarize two basic issues that are going to change in the future.  The regulators are focused on these two areas because they feel these factors are critical to oversight of the Global Economic market.  For some, this news might seem a bit scary.  For others who are well ahead of the direction of the regulatory climate, this news will seem like a breath of fresh air.

Focus #1 – What is in your product?    There is a lot of controversy surrounding  what is being put into products.  In particular there is a major focus on botanicals and herbs.  There seems to be concern over products that could potentially damage health vs. promote it.  Therefore, the  more mainstream and proven the components of your products are, the better off you will be as the regulatory climate increases.

Focus #2 – What claims are you making about your product?    I think it is safe to say that regulators are moving toward science and away from salesmanship.  Regulators want scientific proof that your products work.  Some of the old sales tactics used to promote the value of a product are under great scrutinization by regulators around the world.  The level of scientific proof could go as far as to include the standards that are currently expected from pharmaceutical companies with their drug testing.  To give you a perspective on what that could mean, let’s look at Canada.  The new regulations in Canada resulted in a 33% loss of the nutritional players in that market, simply because they could not meet the new regulatory requirements.

Of course there are many, many highlights that could be extracted from this extensive report.  However, I felt it important to note a couple key features that can help those of you in the nutrition business understand the road that lies ahead for your industry. 

 

 

I did some research the other day that I felt was very critical to understand as it pertains to the economic cycle we are in at this time.  I noticed that in 2009 we had a “negative inflation” (also known as deflation).  I was curious about one question – when was the last time we had deflation in our economy?  I thought this question would help me understand if this economic cycle was different than a normal recession.  Below is a chart of the historical inflation rates. 

 

Table of Historical Inflation Rates by Month and Year (1914-2009)

So why is this important?  It is just another reminder to me of why it is so critical that you FOCUS ON DRIVING INCOME if you want to survive and thrive in the future.  2009 was a year when consumers changed behavior even when inflation was going down.  As consumers and families prepare for a different economic future, they understand that high inflation could be one of those areas of expense management that is out of their control (the others are taxes and fees).  Keep in mind that wages are flat.  Today, there are 6 people competing for every one job!!!!!!!!!!!!!!!

Rest assured, most people will make the cardinal mistake when it comes to creating more income – they will wait until they have the need or some financial problem.  I believe that being proactive in driving income is the key to staying ahead of the expense curve.  You CANNOT afford to wait until the economy changes or your personal financial situation gets worse.  Make the sacrifices necessary now to create more income in your life.  Trust me when I tell you that it will reward you even if my assumptions on the economy are wrong.

In closing, I want to remind my readers of one other critical distinction – you can win big in any economic cycle.  If you have the awareness of how to win the game, put the right plan in place, and have the resolve and “unwavering pigheaded discipline” necessary to drive the process of growth, you put the odds of success in your favor.  Equally, if you do nothing, you might find the consequences of inaction might be greater in the future than they have ever been in the past.  That choice is yours.