Truly Smart Money

One of the smartest people in the entire world said this about money: “The most powerful principle I ever discovered was compound interest”.  Who said that? Can you believe it was none other than Albert Einstein?

I had forgotten that wonderful quote until the other day when I came across a booklet titled “Being Smart with your Money” written by my very dear friend and my money mentor of years ago, Paul J. Meyer.  Paul was a man who truly went from rags to riches.  As a young man, he was making a few bucks by picking fruit in California, but by using his brain and wisely using his little bit of money with leverage and compounding, he eventually amassed close to a half a billion-dollar fortune.  He was considered the pioneer of the self-improvement industry and also made tens of millions in real estate. I must give him credit for much of my own fortune.

My other mentor was Larry Rosenberg from Denver, Colorado. Both Paul and Larry basically gave me the same advice when it came to making millions with Einstein’s powerful discovery figuring into the equation as well, big time!  I was taught that, to begin with, a person who wants great wealth needs to pay himself first.  That is, no matter how much or how little money you make, set 5%, 10% or more aside and then (and this is critically important!) never, never, never spend it!  This money is not for buying nice things, it is for investing!

When you’ve built up enough from those savings, go out and invest it wisely.  Most of the time that wise investment is going to be in good ol’ real estate.  The big-time, huge key to this investment, however, is to keep at it, reinvesting the money you make on the first deal in another deal and then another deal after that and so on and so on. That is what compounding is all about.

Paul says this about what a $1,000 investment can grow into: “If that $1,000 were in an investment that brought 10% interest per year, in 73 years, I would have over a million dollars from my original $1,000 investment!  If you put another $1,000 dollars into the pot each year, it would take only 47 years to hit the million-dollar mark.” Keep in mind, that’s compounding at only 10%. As my previous blogs have demonstrated, you can do much better than that. I, and many others, have compounded money at 25%, 50%, and even 100% which turns $1,000 into many multi-millions.

Paul Meyer also gives this excellent advice in his “Being Smart with your Money” booklet: “Only when you develop confidence in a principle will you exert the effort required to change your behavior and put this principle into practice.” That means, you won’t be able to put these ideas to work for you until you take the time to look carefully at them and come to understand just how well you can do with this plan. That understanding should motivate you into acting on these principles. Paul has these great bits of super money advice to get you going as well:  “Set goals, live within your means, get on a budget and stay there, pay yourself first, put your money to work …” and, I would add, use lots of leverage and reinvest for that wonderful compounding effect.

Although Paul’s booklet is no longer in print, I do have a number of copies that I would be so happy to share. Simply write me here with your mailing address and I will send it to you. Paul’s wise words are too good to keep to myself! (Free offer for booklet is limited and will be given to those that respond first while supplies last)

Build Your Wealth with the Help of Inflation

If you’ve been reading the last couple posts, you may be asking, can I get more specifics on this 15% rate of return morphing into a huge 60% return? Well, let’s go over some specific examples.

First of all, let’s have a quick review of what I call natural inflation vs forced inflation. Natural inflation is what our general economy goes through over time. It lifts the price of everything especially assets that are in limited supply, like land and houses. Because of this natural inflation many people, if not most, find that owning their own home has increased their net worth by a huge amount without much effort on their part. The average price of an existing home in America increased in value by $56,200 dollars from 2012 to February 2016 or from a price of $154,600 to $210,800 on average. So, without much effort on the part of the home owner, homes increased in value by 36% over those 4 years or 8% per year compounded. Not a bad investment with so little effort made.

Now let’s take an example to demonstrate what so called ‘forced inflation’ can do even if you don’t count on natural inflation. Let’s say you bought that $154,600 house back in 2012, or even last week for that matter, and put 20 % down or $30,920 and then spent another $7,730 or 5% to fix it up. If you found a house that needed a good bit of fixing up plus you did the kind of improvements that really lifted the curb appeal and the overall value, you most likely would have lifted the value by 15% percent which would raise its market price to $177,900.

If you sell it at that price, you would pull $23,300 out of it plus your personal investment of $38,630 (for down payment and fix ups) as well. That 23,300 is 60% of your personal investment. Where else can you get that kind of return? And remember, if you keep up that kind of investment and return over 20 years you could turn less than $40k into a whopping $459 million! I’m pretty sure that’s well worth your efforts.

If you feel uncertain about what improvements will really increase your investment return, take a look around and see what houses in the area are bringing in top dollar and figure out what they have that the slow and low selling houses don’t Also, pick the brains of those people that are good at seeing what brings in high prices. Do your research to find where your efforts will be most heavily rewarded.

You should also research the home prices in your area before you buy. You can go online and search your city or state and see what the average or median price is for existing homes. Many sites will even tell you what the natural inflation has been in the past. If you get the right deal, that natural inflation might well add on another 8% to the 15% you added to the value of your investment. And let me tell you, those kinds of returns over the years will blow your mind even more!

 

SUPER MONEY MIRACLE

Ever wonder why many smart, hard working people end up making only $40,000, $50,000 or $60,000 a year while others who don’t seem to be any smarter or work any harder, make millions and even billions?  Years ago when I was advertising my first book, How to Wake Up the Financial Genius Inside You, I used as a tag line, “Millionaires are not 100 times smarter than you, they just know the wealth formula.” So, if you are making $50,000 dollars a year, that very rich person, who is no smarter and is not working any harder than you, could be making $5 million.

On last week’s blog, I just touched on the basics of this formula. So if you read it, you may remember that I told you if you go out and buy a property that needs fixing up with a 20% down payment, putting another 5% into the fix up, you could improve the value of that property by 15%. That 15% would equal a 60% return on your actual invested dollars. But just how does that happen?

The million-dollar miracle part of that simple example, which I and others have done may times over, is a matter of leverage. You see, you leveraged your 25% (your 20% down plus that 5% to fix the place up) which allowed you to borrow 75% of the money so you could acquire the property. But your return is on the total value of the house. In other words the 15% increase in value of the property would equal a 60% return on your down plus fix up cost. Then by doing basically the same thing again on another property, you would be doing what is known as ‘compounding your return’.

Now here is the shocking and exciting part of this thing called compounding. Are you sitting down? If you keep getting a leveraged return of 60% on your investments, you can start with just $4,000 and build that into $48 million dollars in just 20 years! Now that’s what I believe is a super money miracle.

It really is that simple. Mind you, I didn’t say easy, I said “simple”. You really have to work your buns off to first find the deals and then fix them up to a point that increases their value. I’ve made a 60% return on many, many properties. I have also received thousands of letters, emails and phone calls from people who have told me that by following what I have been doing for years, they have seen, not just 60% returns, but even 100%, 200% and more.

However, you will no doubt find, as I did, that it usually is easier to get those fat returns on smaller properties.  As you move into larger and larger properties it does become more difficult but it is not impossible to get high returns on your dollar there either. I had one $2 million deal that made me more than a 100% return and even a new $27 million deal that returned more that 60% on my invested dollar.

I hope that this kind of huge potential will motivate you to keep working on deals, even the small ones you’ll have in the beginning. Remember those baby steps are necessary and very important. They show you what you can do. Those huge numbers I spoke of don’t happen overnight and that can be discouraging. Just focus on your success and build on it as you go and just like compounded money, your compounded efforts will also build into huge returns for you!

Control Your Wealth

Last week I ended my blog by talking about the huge importance of saving a minimum of 10% of your income as the first step to achieving total financial freedom and making that savings plan an absolute habit so you do it automatically every time.

But now what to do with that money? Where do you invest it for the best possible return with a reasonable low risk?

One rule that I’ve kept for life in investing is to never turn over total control of my money to someone else. As a stockbroker many years ago, I played in the market and usually lost money or just broke even. Part of the reason was that not only did I have no say or control over the company I bought into but I also had absolutely no control over the stock market and the direction it went.

But then I met a guy who became my wonderful and brilliant coach, Larry Rosenberg. He convinced me that improved rental real estate was the safest and most consistent way to build a fortune. Why? Because if you buy right and buy a property that needs improvement, you can reap huge returns and much of what happens with your investment is in your control.

First of all, you have the power of leverage you can apply when you have the right assets. In other words, if you fix up a property and raise its value by, say, 15% then that 15% improvement in value can turn your investment into a fat 60% on your money! That huge return is based on your choices. In this case, you would put a 20% down payment on it and keep fix up costs at about 5%. These are your decisions to make and therefore you have some control over how well you make out on the investment.

Even today, after 40 years of experience, I still say the best investment that allows you the most control, especially in today’s market with these very low interest rates, is real estate. I started with a small house on the wrong side of town and after I fixed if it didn’t sell right away I usually could rent it out so I had a tenant whose rent I was able to set so that it was paying off the mortgage, usually with a little left over for me. Then I moved on to larger and larger properties which I was able to work pretty much the same way and I still use this strategy today.

The other thing I do to keep control besides investing in the right property and making smart decisions to keep money flowing in, is to be careful with how I set up any partnerships. When I do deals and have a partner or two they always have their name on the deed showing the percentage interest they have in the property with everything spelled out clearly. If all investors insisted on doing it this way, it certainly would cut down dramatically on all the scams and Ponzi schemes. But it also means all the partners know what to expect and there are no out of control surprises later on.

So if you are smart and want to make those big bucks you’ll get out there, take and keep control of your investments, and keep focused on the great power of compounding and leveraging. Next week we’ll go into those subjects a bit more to keep you focused on your goal!

 

Make America and You Greater

I think most of us are getting pretty feed up and bored with politics lately.  I mean every time you turn around you see or hear more news about the race for the White House and, of course, the face you see most often is that of Donald Trump.  I don’t know about you but I’ve had enough of that big bully, loud-mouthed Trump to last a life-time.  This know-it-all thinks he’s the smartest man in the world but his campaign slogan is “Make America Great Again”. Every time I see that baseball cap with those words on it, I think, “Wow … when did America stop being great?”

I’ve traveled the world, visiting 84 different countries as well as living two years in the middle east and two years in England and I can say, without hesitation, that we have a great country and it’s constantly getting greater. I fear that might not hold true if Trump became president, however.

Ours truly is a land of great freedom and opportunity where you can start off being dirt poor and still become a millionaire. It happened in the 1930’s and in the 1970’s and it’s still happening today. So how does a person take advantage of our freedom’s and opportunities?

Continuing on last week’s post about the power of the brain and how we can program and teach our brain with enough repetition to act automatically without conscious thought, here’s the beginning key to achieving financial greatness in our great country. Step one is to start training your brain to calculate out at least 10% of every single dollar you earn and then you set it aside and never spend it and I mean NEVER. This is investment money, not spending money. So just keep doing that over and over again until it is such an automatic habit that you don’t even have to consciously think about it.

If you have followed me very long you know what comes next.  You take those savings after months or years and wisely invest them.  And that, my friends, is the beginning of a sure fire way to become wealthy in one of the greatest countries in the world, if not the greatest.

Next week I’ll lay out the best investments to make in today’s economy and the way to make those investments. You get started on the savings part and I’ll get you prepared for investing in the great USA.

 

Recognizing Reality

Did you get to read the post from last week when we started talking about common sense? Well while that was about using common sense when getting help and advice from the professionals that support your business, this week, let’s talk about common sense when deciding what financial deals to get in on. Here is just a little more from my old publication, The Financial Freedom Report.

One definition of common sense is “what is sound and prudent but often unsophisticated”. I’ve seen many very sophisticated business decisions that have lost millions of dollars. To avoid financial traps, you need a huge dose of common sense, especially when those all around you are playing sophisticated and getting wrapped up with what is hot or in vogue. Common sense will keep you from being trapped or pushed or bullied or shocked into doing a deal that you don’t want to do.

There are many high powered, complex formulas for success and financial independence, most of which are so mind boggling it would take a PhD to understand them. Many of these formulas were written by people who never actually made big money themselves but sat back and watched others do it. From a spectator’s position they think they know the answers and then they make things so complex and involved that the average person cannot understand them. Take it from me, making a lot of money in a short period of time can be done with a simple game plan. I said simple not easy, since it takes tons of work. You are probably already working very hard but maybe not with the right game plan.

When I studied the lives and fortunes of two dozen millionaires and multi-millionaires, I was looking for a common denominator, something they all did that accounted for their success. I finally noticed factors that were present in almost every fortune. I slowly eliminated those factors that didn’t show up in every case. What I ended up with was basic and somewhat obvious, although it escapes 96 percent of those who look for it.

There are four essential ingredients, and I put them into a formula I call “PSIC”, which simply translates into P=Plan, S=Save, I=Invest, C=Compound. And I will add now in order to compound at high rates you need to use leverage.  

An insistent, fast-talking, and even somewhat logical person many times can persuade somebody to do something he doesn’t really want to do. If somebody asked you if you would like to get in on this super-hot deal that will pay you a 250 percent return without any risk and without a lot of your effort, what does your common sense tell you? Common sense should tell you that if a deal were really that good, the guy trying to sell you the deal and or the promoters behind him would probably not have trouble getting the needed money as a loan from a bank.

The simple fact is, those kinds of returns don’t exist. Yes, it is possible for you to get 100 and 200 and even higher percent returns, but not without a lot of work on your part and certainly not without any risk.  Deals like that don’t come all packaged neat and simple, especially without risk and without great effort on your part. Believe me it won’t happen! If I had a deal with a return like that (and I have had those kind of deals) you’d better believe that I would be able to borrow a whole lot of money, which I have done many times, even if I had to pay 2 or 3 times the going rate of interest. Common sense is recognizing reality and then acting accordingly.

Supporting Roles in Your Success

Last week, I shared with you some great advice from an old publication of mine, The Financial Freedom Report. I quoted from an article published in the Summer of 1995 entitled “Ask Your Barber How to Cut Hair, Not How to Make Money” which was simply saying that people who aren’t a super success as making money are not the people you want to talk to. However, there are some people you will need on the sidelines, but like knowing who to go to for advice on money, know who to go for advice on the other things you’ll need along the way, and when to bring them in.

Generally speaking, I find from experience, attorneys are deal breakers, not deal makers. Knowing that, I usually structure the whole deal before I have an attorney get involved at all. Yes, I want him or her involved. When? Just before I sign the papers. I want the attorney to read the contract to a make sure that everything is legal.

Problems can arise when the attorney steps into a management role. When going to an attorney for legal advice, you should always be sure that you ask very precise questions and not let the attorney overstep his bounds. He will if you let him. He has to play the devil’s advocate, and that is good. The same applies to your CPA, your business managers, and your bankers.

A man by the name of Owen Feltham said, “The greatest results in life are usually attained by simple means and the exercise of ordinary qualities. These may for the most part be summed up in these two words “common sense.”

So what is the bottom line from these words written so long ago? Use common sense when choosing who to go to for advice as well as what advice you take from people, even if they are “professionals” because if the advice doesn’t have anything to do with their profession, your common sense meter should be telling you to set that advice aside and have a word or two with someone that really knows what they are talking about in those matters.

Next week, just a bit more from my old publication but this time we’ll talk about common sense deals and how to avoid getting taken by fast talkers and their so-called ‘advice’.

Surround Yourself with Makers

I happen to pick up an old copy of a publication that I produced for many years called The Financial Freedom Report. It was dated the Summer of 1995 and the article that caught my eye was “Ask Your Barber How to Cut Hair, Not How to Make Money”. I quickly reread what had written all those years ago about that statement and it’s something that needs to be repeated and practiced today. Here’s what I said.

It is amazing how many people seek or listen to financial advice from neighbors who are in approximately the same financial position as themselves. Others run to their bankers to ask if a particular deal is any good or not. What do bankers know about deals? Zip! Sure, a banker knows about loans and checking accounts, and they know a lot about accounting and borrowing and lending money because that is their business. Deals are not. Since people know that there is money in banks, they tend to think that the bankers know how to earn it. Remember they are just custodians; they are just janitors of money. It’s not their own money. It’s yours.

Barbers work on heads, but that doesn’t make them psychologists, because they only work on the outside of the head, so their psychological advice or advice on how to make money is not very credible. Avoid the trap of looking to the wrong outside sources by doing some of your own thinking.

The best way to learn how to make money is with somebody who has made a lot of it. What better place to go than to an entrepreneur who started from scratch and did it all themselves? I wouldn’t even want to go to David Rockefeller. Sure, he has several hundred million dollars and he is the chairman of the board of one of the largest banks in the world, but his grandfather, John D. Rockefeller was the one who made the big bucks.

Everybody needs advisers, but the advisers you need to surround yourself with should be deal makers, not breakers. Sure, you and only you should be the one making the final decisions, but I find that all of us can be influenced and helped by smart people whose opinions we hold in high regard.

Next week, I’ll reveal a bit more about the subject with more from this very same article. Although it was written over 2 decades ago, the ideas in it are still true today. The best ideas do stand up over time!

Accountable Goals for 2016

As pretty much everyone knows, this time of year is so super busy it can be the most stressful time of the year.  There is an automatic built in deadline for all of us and as you read this we’ve just past that automatic deadline that’s called Christmas. The 25th of December is a goal that the world has set for all of us. That date pushes all of us to get many tasks done and in a way that is a good thing.

So now as we finish this year of 2015, most of us start thinking what the next year will be like and what is it that we want to accomplish.  We start thinking about what goals we want to set for ourselves and, if we are wise, we put deadlines on our goals which pushes us to reach those goals within that self-imposed deadline.  If we tell other people what our goals are and the deadline dates, that is usually very helpful because those friends and relatives can help push us and keep us on track by asking how we are doing and if we are on track for completing our goals on time.

I couldn’t help but think of that late last night at a party, when I suddenly remembered that I hadn’t written this week’s blog and I had told my editor that I would have a draft to her by last night. Ouch.  So first thing this morning I got right on the task of writing this blog that you are now reading. Outside help can really keep us on track.

Additionally, last night someone asked me what my goals were for 2016. They knew I was big on goal setting and they also set goals for themselves and push their kids to do the same. My answer was that my biggest goal for the new year was to push myself for better and better health.  Now that I’m almost 72 years old I see, more and more, how important health is. I’m already in darn good shape and came so very close to a 10 mile a day goal I had set for myself in 2015 that included running, walking and playing tennis. But in 2016 I’m going to raise the bar to an even higher level and add some tough weight lifting goals since I know that extra muscle will increase my metabolism and of course make me look and feel better and stronger.

So my challenge to you is take time to think through what you want to accomplish in this coming year and be sure, as I’ve preached over and over again, to write down what those goals are and then be sure to put a time frame or a deadline on your goals. To help yourself along, tell friends and or relatives what those goals are and ask for their help. That combination is a sure fire way to make your goals a reality.

 

Money Can’t Buy Happiness—or Can it?

We’ve all heard the old saying “money can’t buy happiness”, but like many enduring myths, this one is proving not to be true.  Harvard business professor Michael Norton says that money can and does, in fact, buy happiness in many cases.  And quite frankly my personal experience has proved his point over and over again. But really, it’s what you spend the money on that determines if that money actually brings you happiness.

As we’ve just finished the giving of ‘thanks’ on Thanksgiving Day and as we approach Christmas time and the possible gifts we can pass on to others, it’s a good idea to really think through what possible gifts would bring the most lasting happiness and satisfaction. I don’t think giving just ‘stuff’ is the answer as I think professor Norton proves.

Many years ago, I figured this ‘money myth’ really was just that—a myth. I learned it during those years when my family traveled the world. We went everywhere in Europe and had some very interesting and thrilling drives in the family station wagon through the middle eastern countries of Turkey, Syria, Jordon, Lebanon and Egypt. Later in life I even did a ’round the world’ trip. I have often found myself thinking over the grand memories of these wonderful excursions and when I compared the money spent on travel with money spent on a big screen TV or a new fancy car, the experience of the travel won every time.

Discovering that money really can buy happiness was a huge wake up call for me and motivated me in my younger years to figure out the secrets of making millions so I could really lift my happiness level and keep it up there at a high level most of the time.

When it comes to bringing lasting happiness, Professor Norton’s studies show that experience trumps the acquisition of ‘stuff’ almost all the time. That includes all kinds travel and vacations as well as a trip to the beach, mountains or an amusement park with a ride on the roller coaster.

Think about your own life and experiences.  If you are like me, you get tons of pleasure for several days even before you go on your exotic trip simply by thinking about the great things you may encounter and experience. Then you get more happiness and fulfillment during the trip or vacation.  As an extra bonus after you return home, you often live and relive that trip over and over again, sometimes for many, many years after. Compare that with how you think about the ‘stuff’ you have.  The newness of things quickly wears out and doesn’t thrill you much after a short while.

So again, think about the gifts that you may give this Christmas and maybe throw in a plane ticket or two for you kids or grandkids to some place they’ve never been. And yes, keep on earning and investing wisely to build your estate, without guilt, and give others experience rather than just stuff.

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