System legacy planning. A nice big term that simply means, start with the end in mind when designing a new system for your life. I love the concept of system legacy planning. You basically draw out a system on paper, do the math, and graph out the results. Answering the question; where will you be in ten years? Where will you be in twenty? How about fifty?
Let’s take a look at some examples.
Real Estate Investment System.
Let’s say we want to create a lifelong real estate investment system. Many of the world’s most successful people have started this way. It’s not glamorous, and it can be tough to stick to in the early going, but if you can manage with a system like this, great rewards can come in a relatively short time.
The basic premise is this. Buy a house in a growing area and pay the mortgage off in as short a time as possible. Then rent the paid off property out and purchase another home that meets your investment criteria. After thirty or forty years you’ll have paid off properties with enough rental income to replace your salary. Some key factors to make the system work.
- Buy the smallest house in the best neighborhood.
- Take out a 30-year loan for flexibility, but pay it off in 10 or 15 years.
- Find areas with an upward growth trend versus ones that are declining.
- Find a good management company that knows the area and market.
This system works best in growing areas with low taxes. For example, In the United States, this system would be almost impossible to set up in an expensive state like California or New York. Property prices are too high as well as the tax burden.
Many of the world’s most successful people have started this way
However, in growing areas such as the satellite cities around Nashville or Charleston South Carolina, the outlook would be much better. Expanding job markets, relatively affordable housing, and lower taxes make these areas more ideal.
While real estate can be a good investment, proper constraint and current market considerations are very important. Tough questions need to be asked before this system clicks on.
Value Cost Averaging Investment System
Another lifelong system that can be easily set up and has worked well over time is long term stock market investing. Here again, this isn’t glamorous, and it can be nerve-wracking in
Here is how it works. Value cost averaging is a simple way to help you buy and sell in the stock market using predetermined criteria. You just set a return that you want on your investments and set a predetermined date/time that you will buy/sell. One of the best systems I’ve seen is Jason Kelly’s 3% system. You basically put money in a stock index fund and then evaluate your holdings every quarter of the year.
The plan is to make 3% return each quarter. If your funds haven’t made three percent, you buy additional funds to equal the three percent you planned for (This basically sets you up to buy low.) If you made more than three percent, you sell excess shares over the three percent (Effectively having you sell high) and put the money into a money market or bond fund.
Over the course of market ups and downs, this system has historically done better than the traditional dollar cost averaging approach.
Proper system design is critical.
Unfortunately, stock market investment is fraught with danger. Short term investing schemes, market timing, broker commissions, and world events all come into play. Yet a properly designed lifetime investment system with limited diversification can be very beneficial in the long term. Proper system design is critical.
The Daily Uniform System
Here is a fun idea. Imagine wearing a uniform to work every day. You can buy your clothes in bulk, and since you wear the same thing over and over, you never have to make decisions about what to wear. You create a straightforward system for your working life that allows you to speed through your morning ritual. Clothes aren’t a problem anymore.
You’ll save money. You’ll save time.
This type of system was used for years by Steve Jobs of Apple. He devised a basic work uniform. He wore the same Levi’s 501 jeans, black mock turtleneck, and New Balance shoes every day. It became his iconic signature. Other famous people have done the same thing.
This system is based on the concept of decision fatigue. This is a psychological condition when a person’s productivity suffers as a result of becoming mentally exhausted from making irrelevant decisions.
Simply by stressing over things like what to eat or wear every day, we become less efficient at work and in life. Think about how much time you spend standing in front of your closet each morning. Imagine just getting dressed and going to work.
For me, the thought of wearing a uniform was repelling at first. As a creative person, the lack of imagination sounded horrid. But that was the twist. No one else was doing this. Maybe I could adapt this in
I’ve simplified my wardrobe over the years. I’ve found more comfortable clothing and stopped worrying about having to wear something different each day. But I haven’t boiled it down to a uniform quite yet.
Here is a system idea. Imagine building your signature brand around a simple unchanging wardrobe. Something you are known for. Then change one little thing every day. Imagine how much time and effort this could save, not only at work, but shopping for clothes.
Imagine building your signature brand around a simple unchanging wardrobe. Something you are known for. Then change one little thing every day.
For men, wear the same black sports jacket, but choose a different pocket square each morning. For women, wear the same black dress but choose a different necklace or scarf. Change up each day with a different belt, or socks or even shoes. Make one simple decision, instead of many.
Here are some of my questions . . . If I could only wear one pair of pants what would they be? What type of shirt? What kind of shoes? What would I change up?
- Comfort would be a must.
- Quality would be a concern
- Image would be important
Something to think about.
System Design Questions
The three long term systems above all create a legacy. When we think about creating a system, it’s important to do the math and consider what this legacy will look like. Will it be successful or will it bring pain and disappointment?
While there is nothing certain in life, I’ve found four questions to be critical in system planning.
They are simply . . .
- What is the best thing that will happen if I implement this system?
- What is the worst thing that will happen if I implement this system?
- What is the best thing that will happen if I don’t implement this system?
- What is the worst thing that will happen if I don’t implement this system?
One of the easiest ways to research a particular system is to look at others that have adopted a similar plan. Look for historical evidence. Look at polls, surveys, and statistics.
Ask yourself, can I design a system that has a good chance for success? Be honest with yourself. Get the advice and counsel of others.
Let’s look at some concerns we might have about implementing the systems above.
Real Estate Investment Questions
- Can we truly afford the house? Is the payment more than 30% of our income?
- Do we have enough money set aside that we can make payments if we lose our job?
- Where are we in the real estate cycle in this area? Is this a buyers market?
- Is the housing trend in this area positive or negative?
- Is this a good rental area? Are there restrictions on rentals?
- What is the total cost of ownership? Include taxes, upkeep, maintenance.
- What is the crime rate in your investment area?
Talk to long term real estate investors in the area. Patience is a virtue. Ask the four questions. Research, research, research. Beware of real estate investment seminars. Check with real investors and property management companies in the area you want to invest. Be sure the system pencils!
Dave Ramsey’s book Total Money Makeover is a good place to start to prep for a system like this before taking on debt. If you live in a place where real estate investing doesn’t make sense, David Greene’s book about Out of State RE Investing may give you some insights.
Stock Market Investment Questions.
- What is the company, broker, or system track record?
- How did the investment do in good times as well as bad?
- Do you have time in your life to make up for investment losses?
- What are the tax consequences? Can you set up an IRA or 401K?
- What is the trend? Is it up or down?
- Is this a good time to invest?
- Are there safer options? What are their returns?
Investing in general takes a lot of research. Do your homework. Read different opinions. Start small. Get your feet wet before jumping in. A couple of good resources that I can recommend are Mr. Money Mustache and Dave Ramsey
Creating a Daily Uniform?
- What are your brand considerations?
- Does your uniform help you dress for success?
- Does your uniform fit well?
- Is your uniform practical and comfortable?
- What does your uniform say about you?
- What are your uniform variables?
I really like the idea of simplifying my wardrobe. As someone who has worked with a number of brands, your look and your presence are very important. Check out this informative article by Val Crisp on Becoming Remarkable and see how a uniform can rock your personal branding.
Creating a system for success starts with system legacy planning. Knowing what you want and where you are going is very important. But knowing how your system to get there works and what the profits and pitfalls are is crucial. Start with the end in mind!