As we come upon the end of another year, I’ve been thinking about what I’ve done this past year and what I want to do this next year. And in the process my thoughts turn to what I’m going to be writing to you all. And I find myself hoping that many, if not most of you will go out in 2012 and take big risks, chase your dreams, and really put your all into getting what you want out of life.
You are probably many times more capable, talented, and resourceful than you give yourself credit for. These last few years have been hard with the economy repressed as it is and we’ve seen so many people– friends, family … even ourselves—feeling it in our businesses, the loss of jobs, the difficulty in finding work. But you know, you can make the present and your future what you want it to be regardless of all that. The route to your goals may not always be so fast and direct, but there is always a way.
This year, promise yourself you will take chances, push yourself, and find a way to make significant progress towards, if not attain, the goals you have. You’ll be amazed by what you can do and will feel energized and more alive just for making that great effort and even more so when you see what you can accomplish!
I hope you and yours have the most wonderful and bright New Year.
How often do investors think about what is involved in their investments besides money? If you’re handing your money over to a stock broker, the time it takes to invest is small but you also take on significant risk. In real estate investing, there’s both money and time involved in getting it into shape to sell or rent. In a small business investment, the common approach is to put in as little money as possible but all your free time. So considering everything, what investment makes the most sense?
The answer lies primarily in the risk level of the investment and how much your time is worth. For instance, investing through a broker takes little time but the pay back is either very uncertain or very small. Small businesses often take years to turn a profit and your time investment, which may seem cheap or free initially, can be very expensive if you consider how much you could have made working more hours or a second job. Just think, if you could have gotten $25/hour working a second job, then that 20 hours a week you spent over 6 months getting the business up and running cost you $12,500 in lost income! How long will it take you to recover that investment through your business?
In real estate, you invest both a significant amount of time and, sometimes, money (see last week’s post and page 184 in my book “How to Ignite Your Passion for Living” on how to get others to fund your investments) but the outcome is far less risky. The added bonus is that real estate will not continue to suck your time the way a small business often does, and the returns will inevitably be greater and more secure than stocks. This is why I really encourage you to look at real estate if financial freedom is a primary goal of yours.
I’m not saying you shouldn’t open that storefront you’ve been dreaming about or support your favorite budding green business with a capital investment—there are many factors beyond time and money to consider when deciding what investment is right for you—but just don’t pour your all your time and money into something that is not going to help you reach your financial goals in the near future. Keep an eye on the big picture. Because after you make your first million in real estate, you can pay someone to do all the hard work to get that business off the ground or invest in whatever you like. That’s the beauty of financial freedom.
Last week I talked about the 10% method for building the capital you need to get into what is today’s top investment opportunity—real estate. The only issue with the 10% method is that it will take some time to pull enough from your paycheck to have the seed money for your first real estate investment. So how can you take advantage of the great opportunities out there right now?
Simple. You have other people put the money in for you.
The best “super leverage” method I’ve seen is what I call the “Hansen model” after a particularly ingenious investor by the name of Dell Loy Hansen. You can read about Dell and his method in detail starting on page 184 of my book How to Ignite Your Passion for Living, but I’ll give you the gist of it here.
To start, you need a few people looking to invest in a safe, reliable project that will give them a regular and consistent return. Get them to collectively fund a down payment of 20% or more on the property you want to purchase and promise a reasonable return–say a 10% APR, an amount that is presently 500% higher than the best CD can offer. If you can put in some of your own money as well, it makes the investors feel much more secure as you’re backing your confidence in the investment’s potential by also putting your money at risk.
Then when you flip that house or rent those office spaces, get the best return possible and get the money back to your investors with a higher than expected rate of return. When they see that you not only lived up to but exceeded their return expectations, you will have created a enthusiastic group of investors for future projects as well as getting wonderful word of mouth that could bring even more money flocking to you.
There are plenty of people out there right now who have cash to invest but don’t want to bank on the unpredictable stock market and aren’t getting anywhere with the meager CD returns. So start working on cultivating those investor relationships and get access to the “leverage” you need to gain financial freedom sooner than you thought possible.
The recession is still being felt in many parts of the country and the depressing talk about how bad things are continues. Real estate prices are still depressed, interest rates are still uncommonly low, and jobs are still on the scarce side, but those indicators aren’t actually signs of doom and gloom, they are shining signs of opportunity. It is unlikely that you will see better deals on real estate or find lower interest rates on loans in your lifetime and if you are stuck in a job you aren’t happy with because you can’t find a new one, start your journey to financial freedom by investing now and investing wisely.
Of course, the first question you are asking yourself is, where do I find the money to invest? The common belief is that you need to be making big bucks in order to have extra money to invest. But the fact is, it doesn’t matter how much you make. All you need is a plan and a little discipline.
If you have ever had a big jump in salary you may have been amazed 6 months into getting those fat paychecks that you were not able to save any more money than before. That’s because we tend to spend at our income level or beyond it so if you make more, you feel like you can, or even should, spend more. Nicer dinners, more expensive clothes, a few more nights out, a pricier car or vacation and the “extra” money you are making is gone. So how do you get around this tendency?
You can do this by putting away 10% of every paycheck—automatically, without exception, every pay day–then pay yourself (i.e. pay your bills as well as earmarking money for essentials like groceries and gas) before spending on any non-essentials. This will keep you within budget and on track to gathering a sizeable sum that you can then invest and start making even more money from. In today’s economy, real estate is an accessible and wise investment opportunity that you should really be taking advantage of. And starting with this smart savings tactic will get you there far sooner than you think.
You can read more about the potential of real estate investments on pg 191 of How to Ignite Your Passion for Living as well as on page 31 of Waking Up The Financial Genius Inside You (write me directly to order this book for just the cost of shipping).
Mark O. Haroldsen appeared on Fox 13 television station this week (click the link to view now) to talk about Ignite My Life Now – his new book. The interviewers asked him how to avoid getting discouraged over the economy. The first thing he said was “stop listening to the news.” I had to laugh.
You’ll see from the video that you really need to read his book – not just watch his appearance! And thanks for plugging the web site where anyone can get a free copy.
Of course Mark talks about goals and his BRAM formula which is to look over the – Benefits, Reasons and Motivations for a goal. Write down the benefits of your goal and the reasons you have it. Read those notes again when you’re weak and it helps you keep your focus.
“It is hard to maintain vitality when you are always hungry”.
- Aristotle Onassis
A question that people ask is how to follow passion for living when you are barely making a living. When things are difficult and you’re hanging on just to survive. Now the economy around the world is in turmoil. You could argue that it’s just about impossible to find passion in life, especially if you were already struggling. It’s true that it’s much more difficult to live in the present or have passion for life if you’re worried about basic human needs.
One way I approach difficulties is through mindset. I look at situations relatively. There are families in our country who are in tough situations right now. For example: a husband and wife with two kids, no savings, who are behind on their rent payments. Then the husband loses his job and they wonder how they will make it.
“You need to stand back from the masses because the masses almost always get it wrong.”
Some might wonder if because of my lifestyle I’m somehow immune to feeling the effects of a slow economy. I’m not saying I haven’t been hurt by it, I have. I’m not immune to it. But my take is that we’re not at the bottom yet – but we’re near.
I talked to people on my trip about it. World markets are being creamed. Many are worried. Some blame the U.S. for problems with the economy, though they have made some of the same mistakes. There is no question that a person living hand to mouth is in a bad situation and this economic downturn. It scares them — and it should scare them.