Re-training Your Habits

On January 4th I posted a blog about the great book called “The Power of Habit” and how it can change people lives for the better. The author, Charles Duhigg makes so many excellent points showing how habits are formed and how to change habits that you don’t like in yourself and are not good for you. You see, we all respond to certain cues or triggers which set us off to follow certain routines which then give us rewards.  If we want to change a habit we should think through and plan out, in mind and on paper, what our “new routine” is going to be when we face “the cue” again and then follow that new routine which also needs to have a reward attached.

Duhigg uses this example: At 3pm every day he eats a chocolate cookie. This habit has an obvious reward—the cookie. To change this he plans a new routine so when he is hit by the cue or trigger—the hour of 3pm—he takes a walk around the office building instead. This starts to form a new habit.  To make the reward more rewarding, if he can find a friend or co-worker to do it with him. Having someone to talk to adds to the physical exercise reward with this chance to socialize.

If you do this activity and reward replacement over and over again until you hardly even think about it, then you have a new habit!  So, if you have habits you’d like to change, take some time to think of new routines that may interest you that you can attach to these unwanted habits so when you are hit with the cue or trigger you can start a new and healthier habit. Try it. You will love it because it really works. Even though it sounds simple, it’s obviously not going to be all that easy because you will be facing a strong instinct to fall into the prior habit but if you stick with it you will end up with a new habit and soon you won’t even give it a second thought.

Making Friends with Your Inner Voice

Someone once said if you want to change your life, you need to change your thinking. Yes, most people have heard that and agree but changing your thinking is not an easy task. There are, however, some subtle but very powerful forces inside your brain that can work for you or against you. Sadly too many people don’t recognize it or at least if they do they don’t know how to direct those forces for their own huge benefit. This powerful force has various names and it can be the best thing in your life but it also can be very sneaky in sabotaging you.

This force is often called your “inner voice”. It also has been called self-talk or even your inner chatterbox. Some would say it’s just your sub-conscious. Others would say it’s God talking to you. The good news–or should I say even great news–is that regardless of the source, many super successful people have learned how to use and direct that inner voice and it has enhanced their life almost beyond words. Using and directing your inner voice to improve your life doesn’t happen overnight and even after you become very good at self-talk directing, you need to stay ever aware of that chatterbox inside your head and continue to step in and keep the self-talk positive so you continue to move toward your life goals.

We talked about this a bit last year but I thought this was about the time of year we could all use a reminder of this. We set goals at the beginning of the year. We’ve taken the first steps, perhaps made some progress but it is about now that the hard parts are coming up or we’ve hit a few snags and are starting to get discouraged. Remember, that negative talk is just your inner voice trying to talk you down because it’s getting difficult. But hey, the most fulfilling accomplishments are those you come to after overcoming the hard stuff, right?

So turn any negative talk into positive, supportive self-talk. Think of that inner voice as your cheerleader, the voice that will keep you going, remind you of why you are doing what you are doing and will help you get through the more challenging tasks. It’s always easier to move forward when you have good, positive friends along. Why not make your inner voice one of those friends?

 

Steps Towards Confidence

The last few weeks we’ve been focused on creating your fortune through real estate, leverage and compounding. You’ve seen the numbers. You know it could work. But have you taken your first steps?

I know the steps you have to take sound daunting at first but they aren’t that difficult at all. Things we’ve never tried before tend to seem huge and perhaps impossible but it’s only because they are unfamiliar. So try this … go ahead and go through the 2nd and 3rd step–start building capital and making low ball offers on property. Remember, during these steps, you aren’t committed to buying just yet. Putting away money is easy and it’s a great idea no matter what you do in the end. And making low ball offers … well that’s just chatting with someone. The thing is, once you’ve starting talking to property owners and realtors, you’ll realize it’s actually pretty easy. Then when someone does accept your offer, you have only one more step to take.

Just starting the process by putting money aside and making offers will do so much to boost your confidence. By the time you are ready to jump into step four–which is just an inspection and crunching numbers to find out if the property will get you the return you want–you’ll be feeling pretty good because of your successes with the previous steps.

And don’t worry if you go through Step 4 and don’t end up with a property. Just go back and repeat Steps 2 through 4 and do it over and over and over again—don’t stop. Each time you do this, you’ll have learned a lot just by going through the process. Pretty soon, the process will not seem daunting at all. It will be exciting and motivating! So go out there now and knock yourself out!!

Crunching Numbers

Okay, so we’ve gone over the first 3 big steps you need to take towards creating your fortune. I did want to reset the order a bit so if you are just starting, start with writing out your goals. These will keep you energized and motivated. Step #2 will be building and acquiring your beginning capital; Step #3, start making low ball offers on ‘dirt bag’ properties and get one legally tied down.

So now we come to Big Step No. 4 …

Let’s say that after you’ve made about 2 dozen very low offers, you get one back that is accepted. So now what do you do? Well, there are three things …

1. Conduct a very thorough inspection

2. Do your calculations as to the cost of the fix up or face lift.

3. Calculate your overall investment and potential profit to see if it will give you the return that you need.

Let’s say there’s a small house that was listed at $187,500. You offered $144,000 but received a counter offer of $160,000 which you are happy to conditionally accept. (Hey … they were motivated sellers since the house had been on the market for over a year.) After inspection you’ve been able to determine that $16,000 plus your hard labor over about 6 months will complete the face lift and the bank has agreed to finance it with 20% down ($32,000). You check for comparable properties in the vicinity that are in really good shape (go to Zillow.com to do this) and estimate you can sell it for, say, a net of $204,000 dollars.

Now you crunch the numbers to see if going through with this deal meets your “rate of return” goal.

$204k less your purchase price of $160k and less the money you put in to fix it would give you a profit of $28,000 dollars. Here’s where the magic of leverage comes in—you used $32k as a down payment and the $16k to improve it for an out of pocket investment of $48k. Even though you improved the property value by 27.5%, the return on your money, the money you used to invest in this, would actually be 58.3%. And if you borrowed the $16k your return on your money would be even higher.

So does a 58.3% rate of return in 6 months or so give you enough compounding? Go check a compounding table and see what would happen to that 58.3% in a few years if you keep doing this! Are you getting excited? If so, read my book “The Next Step to Waking up the Financial Genius Inside You” to really get you on track. In fact, I will give the first 10 motivated readers the book for free! I’ll even pay the shipping. Just write to me at freebook@reincome.com with your shipping address so I can help get you moving towards creating your fortune.

The Power of Leverage and Compounding

So now that we’ve gone over the first 3 big steps to building your fortune, it’s time to get to the very important Big Step No. 4. But before I lay that out, I thought we ought to talk about the power behind what you are about to do, the power of leverage and compounding.

My first introduction to leverage and compounding was as a stockbroker in the 70’s. I wanted in the worst way to make a fortune and do it quickly. I knew that there were seemingly ordinary people making millions of dollars in a matter of a few short years. What I didn’t understand was how that was possible. My thinking was stuck in the mindset of trading my hours for dollars and with only 168 hours in a week even with a decent hourly rate of $25 it would take 20 years to hit a million and that’s with the ridiculous assumption that I would not spend a dime or pay taxes!

Then I was introduced to leverage and compounding by Larry Rosenberg, a new brokerage client of mine and soon to be mentor. At that point I was becoming quite adept at bond trading and was shocked early on when I figured out I could make 100% return in a matter of weeks. I could buy $100,000 worth of bonds with only $5,000 or my own money, borrowing the rest from the brokerage firm. That’s using leverage. So if the bond price moved up just 5% the bonds would be worth $105,000 turning my 5k to 10k! Eureka! I had just discovered a money machine! But the bad news is that I could just as easily lose all my money if the bonds dropped 5%.

Larry Rosenberg introduced me to a safer, more consistent and more controllable asset: improved real estate. With this you could make a 100% return in 6 months to a year and do it with consistency and very little risk. But what Larry made me see that got me super motivated was what a 100% return per year will do to even a very small amount of money. $1,000 dollars at 100% compounded return will grow to the incredible sum of more than a third of a billion dollars in just 35 years! Although a consistent 100% may be hard to sustain, I did it for a while and reached my first million net worth in 47 months with only a couple thousand dollars to start.

This may all just sound like numbers now but in the next few weeks I will go into more detail with specific examples of improved real estate deals you can make so you can put these powerful concepts to work.

Writing Down Your Goals

Since we’ve just started a new year I must say something about renewing and re-dedicating ourselves to our life goals. And there is one super strong and time proven aid I would strongly suggest you use to increase your odds of hitting your goals. It’s something I talk about in my book “How to Ignite Your Passion for Living” but I have another source to show you just how powerful it can be.

For Christmas my son David gave me a book called “The Power of Habit” by Charles Duhigg and WOW what a great book. Duhigg relies on scientific studies to dissect what it takes to form a new habit or dump a habit that you don’t like. In future blogs I want to talk more about “The Power of Habit” but for now I want to address one simple but profound Scottish study that is Duhigg addresses.

In this study a psychologist recruited 60 patients that just had hip or knee replacement surgery. Having personally experienced double hip replacement in the same surgery I know just how painful this kind of surgery can be. Most people don’t want to even move afterward, let alone start walking even though their rehabilitation requires it. This psychologist gave each patient a booklet after their surgeries that detailed their rehab schedule, and in the back were 13 additional pages –one for each week–with blank spaces and instructions:

“My goals for this week are ________________? Write down exactly what you are going to do. For example, if you are going to go for a walk this week, write down where and when you are going to walk.”

Patients were asked to fill in each of those pages with specific plans. After their rehabilitation period the psychologist compared the recovery results of those that filled out the pages and those that did not. Duhigg notes that “It seems absurd to think that giving people a few pieces of blank paper might make a difference in how quickly they recover from surgery.” But it did. Those patients that wrote down their goals recovered much faster than those who didn’t write down a thing.

The great lesson and a lesson that I’ve preached to myself and others for years is we greatly improve our chance of success many times over if we simply write our goals down!  Financial goals, physical goals, family and social goals … it works on all of them. I would also add that you shouldn’t forget to put down the date by which you want to accomplish those goals.

You can read more about goal setting and how written goals can help you in my book  “How to Ignite Your Passion for Living” which is on sale right now on my website.

Step Two to Making Your Fortune: Making Property Offers

Last week I gave you the first step you need to take towards making your fortune. I hope you’ve started that first step or at least put in place a savings plan you can get started with in the New Year!

Now onto your next step …

Step 2. Go out and make offers on dozens of potential bargain properties.

Remember last week how I told you that timing is so very important? Well, this is what I mean–right now we are at a 50 year low when it comes to mortgage interest rates and as everyone knows home prices have dropped by 30% to 50%. At the same time rental vacancies have dropped which has pushed rental rates up. All that adds up to perfect timing and great opportunities.

This step is key to taking advantage of that “Partners Capital” concept that I hope you are seriously considering as part of your first step. The key to getting good partners to join you is to have a property “tied up” before you pitch the deal to them. Why? Because it’s so much easier to ask someone “Would you join me and take on a 50% (or 75%) interest in this property I found?” if you are giving specifics on the property as well. If you can start a pitch by saying “I’ve found a great 4 unit apartment building” or “I’ve have a beautiful little rental house under contract” as well as being able to tell them you can buy the property for 30% under it’s real value or that it’s all rented up and will show a fat positive cash flow from day one, it will be hard for them not to consider joining in your little venture.

Now back to making offers. How do you find those great deals?

Finding the great deals is largely a numbers games.  What I mean by that is if you make dozens and dozens of low ball offers you will eventually have some of them accepted. What I have done in most cases is to make those offers before I even take time to visit the property. This gives you the opportunity to write up the offer but make it “subject to” or conditional on your full inspection of the property and on the condition of the approval of your partner, even when you don’t have a partner yet. By using the “subject to” clause you are not obligating yourself and by using the internet and several brokers or agents it’s possible to make hundreds of offers without a huge expenditure of your time.

So get going on Step 2. Remember, you won’t be obligated to buy a property just because you’re making an offer but you do have to get out there and start looking and eventually there will be a property that you’ll want to jump on. It’s easier than you might think.

Make it your New Year’s resolution … take those first steps. Make this your year of success!

 

First Step to Making Your Fortune

Last week I promised that I would show you an almost fool proof path to your own financial fortune.  I said that I would lay out a step by step formula that you could follow, so that’s what I am going to do now.

First a few comments about timing as it is very important that you understand how your timing can impact your success. In Malcolm Gladwell’s book Outliers he talks about research done on young hockey players and how the timing of their birth dates made all the difference as to who went on to play at a professional level. This might sound a bit odd but if you read the book you’ll see why their birth dates were so important to their success. The timing issue is about being at the right place at the right time but it’s not just about luck. Right now the timing for someone who wants to make a fortune in the USA is near perfect but it won’t matter one bit if you don’t take advantage of it.

So let’s talk about step number 1, that first step you need to take on your way to building a fortune.

Step 1: Work on accumulating some beginning capital.

Okay, you may rightfully be thinking “Easier said than done!” But it’s not about easy; it’s about what is possible. Just about anyone can do this and there is more than one way to get the job done.

The slow but sure way is to consistently set aside at least 10% of your income. 20% is even better if you can do it. That’s the way I started and yes it took years before I had enough capital to begin to get started on amassing my fortune. However, if you want to jump start you growth of capital there is a way to dramatically speed up the process. It’s called “Partners Capital”.

In my book How to Wake Up the Financial Genius Inside You I tell the story of a guy that now has over a half a billion dollars of income producing property and he did it quickly because he did it primarily with “Partners Capital”. When he was in college he came across my book, followed the formulas I had outlined in it but also added the “Partners Capital” thing to the mix. With this combination he passed my success level by a huge margin, which of course makes me very proud.

If you choose to go the “partner” path there is a way to do it that can bring in not just one or two partners but multiple partners to join you. This is really is part of step number two which we will get to next week. But as part of your first step, I suggest you read my updated book now called  The Next Step to Waking up the Financial Genius Inside You. I very much want you to succeed so I am giving the first 50 people who email me a free copy of the book. Just cover the $5 cost of shipping to show you are serious about amassing your fortune and I’ll get the book right out to you. Email me at freebook@reincome.com  to get started.

The Path to Your Own Fortune

Recently I wrote about a young man in Australia whose father bought my Financial  (How to Wake Up the Financial Genius Inside You) years ago and now this 28 year old Australian is very excited to put the step by step financial formula that I outlined in the book to work for him and create his own fortune.  Of course I was very flattered and even more pleased to help someone since I had so many great people help me.  Plus, I am a huge believer in the concept of “Paying it Forward” or in other words—giving back!
Most of my blogs in the past have been about non-financial things and more about gaining and keeping a great “Passion For Living” but, in today’s slowly recovering  economy with many people out of work I think I just must address the very important subject of money.  We all need it and most people want more of it and since I’ve got a bunch of it and have huge experience and success in making tons of money, I really want to help!  And right now is the perfect time to go to work.
If you follow my financial formula you can create your own job and pay yourself very well—and yes you can do it from home.  That’s right … you can make a fortune starting with virtually nothing and do it primarily from your kitchen table and like I said, right now the timing couldn’t be better!
My first million dollars (in net worth) was made by the time I was 31 years old.  It took a little less than 4 years and the 2nd million took half that time and the 5th million took even less time.  No, I didn’t rob a bank and I didn’t come from a family with lots of money.  How did I do it?  I did it by using other people’s money (OPM) that is, bank money and partner money and I was pretty darn lucky because the window of opportunity was wide open just like it is for you right now!
On next week’s blog I will give some very specific things that you need to do if you want to forge ahead toward making your own fortune, large or small.  But first, do this for me … decide and be determined to make your fortune. Don’t question it or worry about how you’ll do it. Just get that idea well-planted in your mind then next week, I’ll give you the first steps you’ll need to put you on the path towards your dream.
If you are at the stage of your life where you’re very comfortable and not looking to make more money then you might want to pass this post and the ones to follow on to someone you know and want to help in the financial part of their lives. I’m sure they’ll love you forever for doing that.

Compounding Generosity

If you’ve read either of my books, How to wake up the-Financial Genius Inside You  or How to Ignite Your Passion for Living, you know how big I am on the concept of compounding. Compounding your investments has to do with keeping the income you make off your investment in the game so that you make new income off the previously created income allowing your revenue to grow exponentially. This concept can actually be applied to many things. If you saw the movie, Pay it Forward, you saw a good deed and the gratitude that came from it compounded. Instead of the one good act being the only good act and the thanks only being returned once, the idea was passed onto multiple people who passed the generosity onto several people each and soon the world was “paying it forward”.

This is the concept behind viral and word of mouth marketing. Tell someone or a group of people and encourage them to share their enthusiasm for your product or service and hopefully the news will continue to spread and grow your market.  We’ve all seen this happen with viral videos. A few people see it, pass it onto a group of friend who pass it onto a group of friends and next thing you know a million people have seen it!

When you give of yourself this season–be it money, time, knowledge or just a kind word–ask yourself if there is any way to compound the gesture. If you give money, it will compound if you give it to a charity that helps poor communities build commerce which will increase the community’s wealth and ability to financially sustain it. If you teach a young person a new skill, like how to invest (see the wonderful email I received and shared in the post last week), encourage them to share what they learned and ask those they teach to share it as well. Then your time with this one person will end up helping maybe dozens or hundreds of people or more.

Of course, if all you can do is give a few more people encouragement and a kind word, the good intentions and good cheer will usually get spread simply because you made someone feel better and that feeling tends to make others want to do the same. Generosity is self-perpetuating. And that, in a nutshell, is true compounding!

 

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