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The Lazy Person's Guide to Building Wealth (Part 2): Investing for Beginners by Paco de Leon

Welcome to part 2 of “The Lazy Person’s Guide to Building Wealth.” If you missed part 1, get caught up here. If you’ve ever been curious about investing in the stock market but are honestly puzzled about how to get started, this guide is for you. If you question whether investing in the stock market is a realm reserved only for Wall Street moguls or the already rich, this guide is also for you. By the end of it, you’ll have everything you need to know to start investing.

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How to Have a Year-End Personal Money Review by Paco de Leon

The end of a year is a time for reflection. As you plan your end-of-the-year celebrations and start to plan your new year resolutions, you may want to consider taking some time to take a closer look at your finances. A year-end personal money review can help you reflect on the choices you made over the previous year and help guide you to make better financial choices in the new year.

Let’s take a look at what a year-end personal money review is and how it can help you have a better relationship with money:

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How Much Does It Cost Your Business to Earn Each Dollar? by Paco de Leon

Do you know how much it costs your business to earn each dollar it makes? Unlike traditional employees, when you're a self-employed service provider, every dollar you earn has a cost beyond your time and energy. How much do you need to pay for employee payroll, taxes, operating costs like marketing and insurance, profit, and personal pay?

Even if you’re a one-person freelance practice, understanding how much it costs you to earn each dollar in your company is a valuable shift in perspective that can help you build a sustainable, efficient business.

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How to Break the Cycle of Making Bad Financial Decisions by Paco de Leon

Even if you have all the right practical, rational information, when you're in a state of fear, anxiety, or stress, it is impossible to make sound, rational decisions. These states are innately emotional states where cognition is bypassed. When you're afraid, a part of your brain (amygdala) releases hormones that prepare your body for a "fight or flight" response. Humans struggle with having control when we're in these states because the amygdala has few connections to the rational parts of our brain, like our cortex.

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How to Pay Yourself From Your S Corp: What is a Reasonable Salary? by Paco de Leon

So you’ve discovered that tax saving wonder known as the S Corp. You’re ready to start kicking the tires by learning what this “Reasonable Salary” thing is all about. Let’s discuss what it means, why it matters, and the best way to find yours.

A reasonable salary for an S Corporation's shareholder-employee is the part of their compensation that must be treated as employee wages. The IRS requires you to be paid an appropriate wage for the services you provide your corporation because provides needed funding for Social Security and Medicare. It’s best to work with an experienced tax professional to set your optimal reasonable salary, but this article will be a great primer to get acquainted with what a reasonable salary is.

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How to Feel Better About Spending Less by Paco de Leon

In 1930, John Maynard Keynes, who is considered the father of modern economics, wrote an essay titled, Economic Possibilities for Our Grandchildren. In that essay, he describes his prediction for what life would be like for future generations. He predicts that economic prosperity will be so great and abundant that our need to work across all of society will diminish. And since the vast majority of people will no longer need to "sell themselves for the means of life," he warns that humanity's next great challenge will be how to look forward to and not dread the "age of leisure."

While he predicts there will be some people who have an "intense, unsatisfied purposiveness" that causes them to continue to pursue wealth blindly, he goes on to imagine that the vast majority of society will have a shift in moral codes. That we will recognize that loving money as a possession, as opposed to as a means for the realities and enjoyments of life, will finally be collectively viewed in the harsh light of truth; that it is disgusting, morbid, semi-pathological and semi-criminal.

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How to Absorb Inevitable Financial Shocks by Paco de Leon

Imagine that your financial life is a sandcastle you’re building on the beach. You can learn what works for building it up, and in the good times, when the threats to your progress are manageable, you take for granted that it’s easier to build in those conditions. Now imagine the tide rising, the waves start coming in, getting closer and putting your sandcastle in danger of being damaged or worse, being washed away. In this analogy, the tide is a financial shock. The thing about the tides - and economic shocks - is they will always come in. Sometimes very quickly and suddenly as if out of the blue and other times, you can feel it gradually creeping in. Experiencing a financial shock is not a matter of if; it’s a matter of when and to what severity. Shocks can come in the form of global recessions, pandemics that freeze the economy, you lose your job, your kid getting very sick, a parent dying, the industry you’ve worked in for decades slowly getting cannibalized by new technology or war.

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How Not to Freak Out About Your Finances During a Global Pandemic (or Any Crisis) by Paco de Leon

In the financial world, we call things like the current pandemic a black swan event. A black swan is an unpredictable event with potentially severe consequences. The name comes from the rare sightings of black swans in nature. They exist, but seeing them is exceptional. So while the financial world has terms for these types of events, how we deal with them isn't always the same. Take the 2008 housing crisis. It was the result of a perfect storm of things: sub-prime mortgages, derivatives, hubris, and the lax, or often fraudulent practices within the real estate, mortgage and lending sectors. Finding a way out of the crisis was terrifying, but pointing to the causes gave us a sense of certainty.

I want to be clear: what we're experiencing today is very different from the housing crisis of 2008. Although there is one similarity: we didn't have a playbook for dealing with the crisis then, and it goes without saying, we don't have one today. While it's true, the world has experienced pandemics in the past, our modern economy, in all of its globally connected glory, has not experienced something of this scale. I have no idea what is to come in the approaching days, weeks, or months. I'll do my best to help you all understand our changing reality through the lens of money, finance, and economics.

Here are my thoughts on how to not freak out about your finances during a global pandemic.

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Here's How to Outsource Your Bookkeeping: A Practical Guide by Paco de Leon

Bookkeeping isn't that fun. Seeing how much money your business made and watching profitability grow can be fun. But the actual act of accounting is mildly satisfying, at best, and frustrating to the point of tears, at worst. Even though bookkeeping software has become user-friendly, you still might end up making costly mistakes if you don't have some accounting chops to help you understand how to troubleshoot and fix things.

It's probably time to outsource your bookkeeping if any of the following are true:

  • You've tried to set up your chart of accounts, only to quit after getting stuck deep inside a Google hole.

  • You can't figure out why the bank balances don't match, and so you never reconciled your accounts.

  • Your business is doing so well that you don't have time to sit down and focus on the bookkeeping.

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