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Risk is Not for Herds

June 10, 2016 by  
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Last week I talked about risk taking and how the willingness to take risk when it comes to investing is critical.  Those people who really want to attain Financial Freedom or FF need to look at themselves to determine their tolerance for risk.

As a real estate investor working towards achieving FF, it’s important to understand your own temperament, and your ability to assume that element of risk.  It’s important to know your limitations and not torment yourself with sleepless nights by taking unnecessary risks in trying to keep up with others whose capacity to assume risk might be much greater than yours.  This decision may slow you down on the road to FF, but what is FF without some enjoyment, comfort and happiness along the way?

Everyone has a level and a threshold for tolerance and excessive and unnecessary risk will only create anxiety and tension and may well shorten your life.  So take a hard look at yourself and measure how much risk are you willing to take that doesn’t make you worry you to the point of causing pain, anxiety and suffering in your life.

But keeping in mind our objective, achieving FF, it is important to remember that the greater the potential risk the greater the inherent reward will be. It is also almost impossible to avoid every risk at any one time in selecting an investment. In order to achieve and maintain high rates of return, which are critical for achieving total FF, one must be prepared both mentally and emotionally to incur a higher than average risk. So look hard at yourself and measure how much risk you can handle.

Remember that “eagles don’t fly together in flocks.”  So if you are going to make it big you can’t just go along with the flock or the herd.  If you earnestly desire to achieve FF today, you must learn to assemble all the facts, calculate the risks, be decisive, and then act accordingly.  Statistics and history prove that the majority of people fail to ever become FF because they do not have a specific plan. They are content and willing to wait patiently throughout their lifetime for Social Security or they are looking for that one super great investment or the lucky lottery number to suddenly become super rich.  Don’t follow those kinds of people. Work on your plan that will take you to total FF over a reasonable period of time and you will reach the level of Financial Freedom that you set as your goal.

Avoiding Your Own Loss Aversion

June 3, 2016 by  
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Statistics indicate that the majority of people are security conscious. This fact has been verified in a number of studies which concluded that many people people’s fear of failure is twice as great as their desire to succeed. Some of these studies also noted that in general, there will be up to 5 times as many people choosing a stable situation than people choosing an option with recognized risk. In order to achieve FF (Financial Freedom) you cannot be afraid to fail or take a risk.

Our tendency to avoid risk is known as loss aversion. It means a person believes that if they lose something, say $50, their level of unhappiness with that loss will be significantly greater than the potential increase in happiness if they gain $50.  Its apparent in our everyday lives. People will order the same thing off the menu every time simply because they are afraid they might not like what they order if they try something new, even when there is a good chance they could find a new favorite. Similarly, people put their money in low interest bearing savings accounts rather than put any of it some kind of investment account that will most likely make them significantly more in interest, primarily because there is some chance of loss. So it sits in the banks making next to nothing.

The problem may come down to a belief that one has no control over the outcome of their circumstances, be it their food or their investments. A class of Harvard graduates was asked what they believed were the necessary ingredients to become financially successful.  Their conclusion was summed up in two words, “Greed, and Luck.” I couldn’t disagree more.

If you consider the statistics I mentioned, you might very well conclude that only one out of five people will ever have FF. But that is just a statistic and has no bearing on what YOU will achieve. You can decide to take the risk and be that much closer to FF. Next week I will talk more about risk taking and what you as an investor need to understand about yourself.

Real Estate Investing: The Advantages Never Change

September 12, 2015 by  
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Yesterday I was going through a bunch of old files and I came across a large envelope that my good friend Joe Sugarman sent me. Joe is the founder of the company that introduced the Blueblocker sunglasses that sold millions, making Joe a very, very rich man. In the package was a few of my old ads that Joe had kept.  On the old yellowed paper I re-read one of my first half page ads printed in the Wall Street Journal on January 25, 1977. The headline read “How to Achieve Total Financial Freedom”.  I am totally convinced that the reason the ad sold so many copies of my first book, How to Wake Up the Financial Genius Inside You, had less to do with the semi-catchy headline than the sub-header that read, “Millionaires Are Not 100 Times Smarter Than You, They Just Know The Wealth Formula”. I’m sure that most people read that and it rang true to them. Because it is true.

In the body of the ad I went on to say, “Millionaires are not 100 or even 10 times smarter than you , but it is a fact that millionaires are making 10 to 50 or even 100 times more than you.” Additionally, I should consider that millionaires are not working 100 or even 20 times harder or longer than you either. There are not enough hours in the day to work 20 times longer than your average worker! And now, 38 years later, I can clearly see that the formula to making big money and accumulating great wealth is basically the same today as it was way back then.

I can tell you for sure that if I were just starting out now as a young man without any money to speak of, just like I was years ago, I would pursue the same path as I did back then.  The only difference would be that I might be a little more aggressive today than I was then. Today’s market is ripe for the picking!  For the most part the only push back that I have had in recent years from readers of the Financial Genius book is that buying properties at the prices given in the book are just not possible in today’s market.  And those critics are absolutely correct, but the ratios are still pretty much the same.  In other words today you can’t find “dirt bag” properties for prices like $40,000 or $50,000 in most markets. And that’s correct.  But the ratios for what you can make on your investment are still the same.

In many cases, you can gain a 33% value increase on a dirt bag property you fix up. On a $50,000 property, that would be a little more than $66,000. But today, you may have to pay $120,000 or $200,000 dollars for a beat up property but after fixing it up, you could sell the $120,000 purchase for at least $159,000 and the $200,000 investment for $266,000 or more. Yes, these numbers don’t take into account the money you spent on fixing it up, but if you leveraged the deal with a mortgage–using someone else’s money to make money–you will find that the return on your investment goes up a ton and will usually more than make up for your fix up expenses.  So bottom line here is don’t get hung up on the lower price examples in the book, invest and pay attention to the percentages you can gain.

To help with that, I have recently updated my Financial Genius book. It will be going to the printer before too long and I will let you know here when it’s ready for ordering.

How to Live to be 142!

May 8, 2015 by  
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You no doubt have heard the rumor that all of us humans will die someday. Of course, I don’t believe every rumor I hear and this one sucks. I just don’t want to believe it! So maybe I’ll call for a huge boycott. You know, get a bunch of us older people together with big signs saying “We are boycotting death!” or “We refuse to die!” or “Death sucks and we won’t participate!” Well, it’s a nice thought but it probably won’t work. Oh yes, if we did it in front of a TV station they might put us on the news so everyone could get a big laugh out of it, but I don’t think that will help us avoid death or even prolong our lives by much.

However, there are things we can do to postpone the inevitable and live longer, stronger and in great health. In fact, there are some researchers that are “inching toward the seemingly impossible: a cure for aging,” according to the February 23, 2015 Time Magazine article. Maybe you saw that issue. On the cover was a picture of a cute baby with the headline “This Baby could Live to be 142 Years Old”. That headline certainly grabbed my attention and yes, I read every word of the several stories covering what the researchers have discovered and what we can do right now to postpone our own demise.

The main story was about “Mouse UT2598″ and the discovery of a compound called Rapamycin which seems to dramatically slow aging, at least in certain cells. If this compound works for humans it could increase lifespan to around 142 years. The research going on at the Jackson Laboratory and the University of Texas Health Science Center in San Antonio, is in its early stages and researchers don’t recommend that humans start popping Rapamycin pills just yet says David Harrison because there are some down sides they have discovered at this point in their research. But the good news for me at age 71 is that they have seen that, “Rapamycin is also neat because it works even when you start quite late in life”.

So if this compound isn’t for humans just yet what can we do about it now? The obvious answer, at least to me, is to do everything in my power to stay healthy, in hopes that science figures out how humans can safely take Rapamycin. And the most effective and proven ways to do that is by eating the best foods which, according to the researchers in the Time magazine article include fish, fruits, veggies and extra virgin olive oil as well as calorie restriction, periodic fasting and consistent exercise with maybe a bit of yoga and meditation.

Do all that and you will have a significantly better chance to live longer and maybe hang in there until they perfect Rapamycin for humans. If doing all those things that you can do and should do sounds like a tough challenge, then listen to the words of William James. What he said many years ago has helped me to better my life when I could see that I needed to make changes and knew that it was going to be a big challenge. “If you change your mind, you can change your life”. I have that burned into my brain and hope you do the same.

 

 

 

We All Age but We Don’t Have to Get Old

January 17, 2014 by  
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On January 8th I launched what I call my “90 Day Super Quest”. That quest is my ambitious goal to get myself into the best possible physical and mental shape of my entire life!  My birthday lands on the 90th day of this quest–and I turn the big 70 this year!

I am a week into my “super quest” and I’m right on schedule with my workouts which include tennis, weight lifting, sit-ups, push-ups and stretching.  As for the mental side of my quest, I’ve been doing pretty good keeping up with reading, writing, making new friends and spending lots of time with old friends as well as my family, of course.  But, I’ve noticed a problem.  It’s that old demon … that negative inner self-talk.  Since I’ve set the 90 day goal I’ve been way too focused on my age and the fact that I am getting older. That number 70 has dominated the chatterbox inside my head and not in a positive way.

However, today, I just happened to pick up a book that I’ve read and written about many times and it flopped open to page 55 where the word “aging” jumped out at me.  It’s the book that Susan Jeffers wrote entitled Feel the Fear and Beyond. This is the follow up book to Feel the Fear and Do It Anyway. Here’s what she says about aging and what your inner voice should NOT be saying about the subject:

“I am getting older now.  Aging is horrible. I wish my body were young again.  Look at those wrinkles.  Who could love a face that’s old? I hate it. Pretty soon no one will want to be around me.  When I was young, I could dance all night.  Now I don’t have the energy.  Why do people have to age?  I wish I could be young forever.”

And here is what she says we should be saying to ourselves:

“I love aging.  My children are grown and now I’m free to do the thing I put off doing.  I’m glad I joined the gym.  I don’t think I’ve ever been in such great shape.  I’m going to learn all I can about keeping myself in the best of health.  I have so much to look forward to.  I learn and grow every day of my life.  I wouldn’t want to go back one day.  Why would I want to go back?”

With all my focus on hitting 70, that number became set in my head, like a heavy, unmovable, concrete block.  I have now realized that I need to get rid of that and ask myself the question that I used to ask so often, something we all should probably ask ourselves whenever we think about aging: “How old would I say I am if I didn’t know?”.  When I ask myself this question I can honestly say I come up with the answer of 44.  So I guess on April 8th I will be in the best physical and mental shape of my life as a 45 year old. That sounds pretty good to me!

 

Don’t Retire–Keep Engaged!

September 20, 2013 by  
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A few weeks ago my message was all about how critically important “Work” is for every human being on the planet. Well, I was waiting to catch a flight from Paris to Salt Lake City earlier this week and when I saw the cover story on Fortune Magazine. It really grabbed my attention. Why? Get this … the story is all about a 72 year old guy who is still working his buns off and risking huge amounts of money. Shouldn’t he be retired and taking it easy?

Ok you could assume that maybe he needs the money and can’t retire yet. But no, he’s a multi-billionaire! So why then is he still working and on top of that risking mega money to develop what Fortune calls “America’s Biggest Real Estate Project …Ever”.

I will tell you at least one very good reason why. Because he knows that to retire and just sit by the pool drinking Mai Tai’s–which he certainly can afford to do–will greatly diminish, if not totally destroy, his physical and mental health and at the same time it will do major damage to his sense of self-worth. So instead of letting himself wither away, Stephen Ross, the 72 year old I’m speaking of, is working on a 20 billion dollar project that is set to reinvent a huge swath of New York City. That would keep someone as sharp as they can be and certainly engaged!

As anyone who has been reading my blog knows I am closing in on the big 70 (only 200 days now), and I find myself, even though I don’t need the money, looking for and engaging myself in more and more projects and adventures (like these last 3 weeks in Europe.) I find that the harder I push myself towards social, physical, and financial goals the better I feel. However, because I don’t need to do anything at all I need to push very hard to stay active and keep on working! But I always see the result and I can tell you, it more than just a little worth it.

I think you can probably tell that I am trying to push any and all of my readers to do the same. Even if you are still young and not facing the 65 year old retirement number or are already pushing yourself towards big goals you can probably still be much more engaged and excited by setting even tougher goals. Plus you could encourage your parents, siblings, friends and neighbors who might be on the verge of retirement or already retired and give them a gentle nudge (or a kick in the butt!) to encourage them toward enhancing their lives by more fully engaging in work and staying super active in all parts of their lives. They will reap such huge rewards if they do.

 

A Meaningful Life Means Having Meaningful Work

July 19, 2013 by  
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Last week I started talking about the importance of that one thing we all love to complain about but need so badly as well—Work! We don’t need it just for the money either!

In the book I brought up last week, “When All You Ever Wanted Isn’t Enough “, Harold Kushner lists  the many super benefits to working. He notes “that we work for meaning as much as for money. We work so that our days will not be empty of meaning … but the key to our happiness, to our being able to find pleasure in our work, is the sense that we are using our abilities, not wasting them, and that we are being appreciated for it. Whatever it is in your power to do, do it with all your might.”

Wow … there is real wisdom and truth in what he is saying and of course that’s a big reason we all should be involved in the kind of work that we have a real passion for, even if that kind of work doesn’t pay much. Kushner says “If we are lucky, we will find ourselves at a place in life where we can derive pleasure from our work. Some of us, if we are lucky, will see ourselves launched on new careers in mid-life which will give us that elusive feeling of pleasure”.

Kushner is a Rabbi and he loves what he does, even when the work he has to do involves a sad event. “In a strange way, I feel good when I am officiating at a funeral,” he says. “For years, I couldn’t understand that feeling. I thought there might be something perverse about me, to enjoy such moments. But I understand it now. At times like that, I feel alive and engaged. I know that I am not merely present but that I am making a difference.”

Harold Kushner, paraphrasing lines in Ecclesiastes in the bible, says “If you are not going to win a Nobel Prize for your work, if it is not going to make you rich and famous, it still can give meaning to your life if you take it seriously and do it with all your might”.

I am absolutely convinced that work is a powerful and wonderful thing for our lives and makes us feel so much better about everything. As the novelist Wallace Stegner said “More people than would probably admit it find in work the scaffolding that holds up their adult lives.”

So yes, after learning–or I should say re-learning–all this about work, I have begun to re-dedicate and re-motivate my life to the work I love to do. Of course, we all need a break and so I will keep playing and traveling but these will be part time activities, because let’s face it, you can’t realistically play tennis, work out, hike in the mountains, watch movies or even have sex for 8 to 10 hours a day but you can work that long! You can dump all of your boredom and find great fulfillment in your accomplishments with hard work. You can also meet more fascinating people, contribute to humanity and, as an added bonus, even make a bit more money along the way. That’s a win-win-win from every angle!

 

The Answer to Boredom: Work

July 12, 2013 by  
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Yesterday day I had lunch with a very good, longtime friend. He had recently retired from working at the business he owned and we talked a lot about that transition from being a full time worker into a retiree. We talked about some of the big challenges a person faces when they hit retirement. It’s something that most people look forward to their entire working lives, but it’s a huge trap or at least it can be and not a very nice one.

The bottom line of our conversation was summed up in my friend’s comment “I am bored out of my mind!” And believe me, I know exactly what he is feeling! Been there, done that–twice. The first time was when I had made quite a few million dollars and just turned 40 and thought “Wow, I don’t have to work anymore. I think I will retire.” So I did but quickly discovered that I was, yes, bored out of my mind! I found I craved that meaningful purpose that having an occupation gave me so I jumped right back into work and what a relief that was! I instantly felt so much better.

My second retirement was just about 2 years ago when I turned my company over to my kids and decided to play more tennis and travel more. That was great for the first 2 or 3 months but then I started feeling unfulfilled and constantly found myself wandering around the house and driving my wife crazy. I knew something was wrong and my brain kept saying “Ok … you are no longer an entrepreneurial business type guy and as you’re not doing much writing any more you aren’t much of an author, so just what the hell are you?”

I tried to busy myself with more tennis, workouts, mountain hikes and travel and, yes, that helped but it just wasn’t enough. Then quite suddenly something motivated me to pick up an old book that I had read a couple of times before. I did this as part of my philosophy learned from my late great mentor, Paul J Meyer, that philosophy being that you should pick a few dozen or even a hundred of the very best books you’ve ever read then read them multiple times. Since we all forget so much of what we’ve read and learned at any one time, rereading is necessary.

I began reading Harold Kushner’s wonderful book “When All You Ever Wanted Isn’t Enough: The Search for a Life That Matters” It was while reading this that the key to solving my struggles with retirement and boredom hit me full in the face. What was it that Kushner said in his book that was such a breakthrough for me? It was simply uttering that good ole four letter word “WORK”!

Don’t laugh. This really is the answer to boredom and does give one a major power lift to the soul, the mind, and the body as well as a big time enhancement to self-worth. And yet that was the very thing we think we want to leave behind. But that thinking is wrong. We need work. And for more than just a paycheck!

Next week we’ll talk more about this concept of work being so very important to us and why. But for now, whether you are still working or retired, realize that having a purpose each day is what makes life fulfilling and that the idea of retirement should be an opportunity to work as you like, not to stop working altogether.

You Need Work and Breaks to Appreciate Both

September 7, 2012 by  
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So many people retire and shortly after retiring they stop doing things, stop going places and stop pushing themselves. Then they stop permanently and totally. They assume “room temperature”. Yes … I mean they die, long before they should! Retirement doesn’t mean inactivity. Just the opposite.

Some people worry they might push themselves too hard. But the thing is, if you keep busy and then take breaks regularly, both the hard work and the time off will be much more rewarding and enjoyable and keeping a balance between them will keep you from pushing yourself too much.

Kimberly and I have been really working hard on her recovery from her surgery and a half dozen other projects.   In fact we’ve been so busy we almost cancelled a quick trip to Las Vegas to spend time with our great Swiss friend Reto Moro and his beautiful daughter Anna and her friend Anouk.  But thankfully we pushed ourselves to “take a break” even though it was only for 2 days. Wow what a great and refreshing break it was.  Not so much for the excitement that comes from that crazy city of action and shows and such but from getting together with great friends. I met Reto and his mom quite by accident, almost 30 years ago on the tennis court in Garmish Germany and we’ve been great friends ever since. It’s such a treat to spend time with them and the perfect break from our busy life.

The bottom line—and yes, I was chatting about this last week but it can’t be said too much—is never stop pushing yourself to stay active, regardless of your age, but also remember to never make “your pause” or “your break” a permanent state of living. You need both to appreciate either!

Getting Away from It All Should Never Be Forever

August 31, 2012 by  
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I think most of us know that busy lives are usually happy lives. But I think we’ve also been sold a bill of goods with our thinking that if we could only make lots of money then we could quit or retire and sit by the pool drinking Mai Tai’s the rest of our lives and be happy as pigs in slop. I am here to tell you that it just ain’t true!

We think this because when we are working hard and staying busy and then we take a break –going on vacation or a quick getaway–it makes us feel so good and refreshed that we mistakenly believe that if we could just do that all the time we’d have a permanent refreshed and a super great feeling.  But it doesn’t work like that. The fact is, if we don’t do the hard work then it’s really not a break and it doesn’t give us any reward or, at most, very little reward. We must all burn into our brains that the pause or the break should always remain as just that and never become a permanent thing.

Look at the recent London Olympics. Think of the four years of work that lead up to the moment we watched those young people step up on the award platform. Those award ceremonies were their break and their reward and you could see how immensely they enjoyed it. But what would become of those athletes lives if they sat back, doing nothing, trying to make that super reward moment last the rest of their lives without doing any more hard work? We can all imagine it, their lives going quickly downhill because each day there would be nothing to look forward to.

We all need to take a much harder look at our own lives and make sure we don’t ever turn the pause into a permanent state of living.  Passionate, fulfilled lives come from action and staying busy. Push yourself hard then, and only then, take a break and celebrate your hard work and accomplishments.

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