Be your own President by turning your retirement savings into your very own monthly 'social security' check

I read an interesting post on Free Money Finance – one of my favourite blogs in the ‘Making Money 101’ space – the other day; FMF said:

Here’s an interesting report on the value of Social Security :

The average monthly benefit for retirees is $1,045 in 2007. A 65-year old who wanted to buy a guaranteed income of that size – with payments that go up with the cost of living and continue for a widowed spouse — would need to pay an insurance company about $225,000.

Firstly, if you are rubbing your hands and thinking “I need to save $225k LESS” for my retirement now, you have rocks in your head!


Relying on a government hand out is always bad advice … as the population ages there will HAVE to be changes in Social Security – none of them good … for you!

My advice is simple: PLAN to go without, GRATEFULLY ACCEPT what you are given.

But, there is an even more interesting lesson to be learned here:

The government is prepared to pay you 2% of that ‘invisible’ $225,000 that they have effectively put aside for you, each year … and INCREASE it each year to keep up with the cost of living … nice.

 How would you like to be able to set up your own plan that works exactly the same way?

 There is a way!

It’s safe … it’s legal … and, it’s easy … and it’s all covered in this book by a highly respected professor.

Here’s what you do …

 You invest your lump sum at (or before) retirement in special inflation-proof government bonds called TIPS.

TIPS are as safe as Social Security because they are US Federal Government Treasury Bonds … the difference is that you put up your own money so, unlike Social Security, the government can NEVER get out of it’s obligation to:

a) Pay you back your Principal (the amount you put in) plus the value of inflation! And,

b) Pay you a 6-monthly dividend (call it your ‘social security check’) also adjusted for inflation each year.

This is not financial advice, as you will need to see your own financial adviser to determine:

1. If this strategy can work for you;

2. How much to expect in bond interest each year; and,

3. Whether you should substitute inflation-protected MUNI’s for the TIP’s that the author recommends … useful if you are investing outside of a tax-shelter (e.g. ROTH IRA).

Let me know what you think?

Making Money 301 – Staying Rich

Very few people will ‘become rich’ …

… a lot of those that do make it to this stage do so by virtue of ‘accident’ (inheritence, lottery, sudden fame, etc.) … without graduating through Money 101 and 201, many lose their money here … all of it and quickly.

During this stage, there is still an up to 80% failure rate!

Even for those who have lived through Money 201 and 301, the rules change (again). There are only a couple of books (Get Rich, Stay Rich, Pass It OnThe Millionaire Next Door, and Donald Trump’s books) and I didn’t find any of them to be terribly helpful.

This stage is all about moving more risky ACTIVE assets (businesses, trading portfolios, etc.) into PASSIVE portfolios (income producing real estate, selected value stocks, inflation-protected bonds, etc.) that generate enough passive income to support your dream retirement lifestyle.

The tools here are wealth preservation tools: value stocks, buy-and-hold commercial real estate, inflation-protected bonds (as well as maintaining the remaining Money 101 and 201 systems).

Now that you are Rich (really), your main task is to have fun (you’ve earned it!) but to also be at least 98% certain that your money will not run out before you do

Simple, isn’t it?

A very useful tool for serious real-estate investors …

I often get asked about what tools I use for analysing various investment: for example, businesses, stocks, or real-estate.

Today, let me tell you a little about a very useful on-line data service that I use (and, you may have at least already heard of) called RealtyTrac … if you are an aspiring real-estate investor, this is definitely one of the tools that you will want in your kit-bag.

RealtyTrac is an on-line database, primarily known for listing foreclosures, but it also offers so much more:

Real-estate of all types (from homes to huge commercial developments); Foreclosure listings across the country; For Sale By Owner (not as many as the MLS, but you will find quite a few); Bank-Owned; and, Pre-Foreclosure.

 The last two are the ones that you want to get into, because foreclosures can be difficult (often auctioned and you can’t be sure about title etc. before you buy) and because these last two are more like ‘normal’ purchases  …

… that is, you can plonk down some refundable earnest money and do your due diligence before you buy. The rest of the sale process is somewhat similar to any other real-estate sale, but at generally ‘distressed’ prices … at least, if you are patient, selective, etc, etc.

For example, right now, I have set RealtyTrac to look for commercial property – retail, office, industrial, apartments – in the $1 mill. – $3 mill. range.

I have asked it to show me real-estate within the geographic areas that I am currently interested in, and of those last two types (i.e. Bank-Owned; and, Pre-Foreclosure).

I have recently added For Sale by Owner, because in the commercial sector 99% of owners will still have an over-inflated view of the real value of their real-estate, but 1% may have an under-inflated view (they may not have really researched the market; they may have under-managed, hence under-rented their property, etc.) …

… But I also have some pretty specific financial criteria that whittles down the hundreds of properties that may be within my nominal range … I will be happy to share these in a later post if enough people want to read about it.

I think RealtyTrac costs about $35 a month, so you need to be serious about buying before you signe up … but you can start a free trial  if you just want to ‘kick the tires’.

Be warned: they take your credit card so be sure to call up and cancel before the trial period is over and they automatically start charging you!

Fire up your true passion … hot passion drives massive action … massive action drives incredible results

When talking about money, and how to make lots of it, I always start by asking you to imagine your DESTINATION.

Where is your life going? What will your life have been about when it’s done?

Most people fail not because their financial goals are too big, but because they are too small

… that’s not a misprint. Let me explain.

In 1998, I had a business that was losing $5,000 a month (after 5 years of operation … sometimes it’s a good thing not knowing when to quit!) … I was struggling to take home $30,000 a year (having given up a lucrative career paying a LOT more) … and, my wife had to work full-time to help support us.

My vision was too small …

But, in 1998 that all changed; I read a book that I highly recommend to anybody in business that showed me how to envision my life when it was DONE, and how to envision a business to support that life.

Overnight, my vision changed …

… it became big … very, very BIG.

And, that vision rang true to my subconscious and buried itself deep in my psyche … it’s still there today, constantly egging me on to my ‘new life’ … a life that has nothing to do with multi-million dollar homes and very fast cars (not that I don’t have them, and not that they aren’t VERY NICE to have) …

… but, a life that has more to do with how I USE that wealth to enrich the life of others, thereby enriching my own life in ways that I just couldn’t even imagine when I was Just Over Broke.

With that new life blueprint firmly entrenched in my little mind, almost immediately, I started taking bold (ok … scary) new steps with my business, my investments, and my life to move towards that new, big vision.

I became absolutely resolute and driven to that single-minded goal …

The result … $7million in 7 years … ethically and safely (really), and for me, in multiple streams of income all in areas that I was passionate about.

Why did this work for me? In truth, I don’t know and don’t care … it just worked!

Also, I am not a great believer in The Secret and other ‘visualize and ye shall receive’ New Age beliefs – if you could ‘dream yourself’ to $2 million, why not just imagine $2 billion and be done with it? Better yet, dream $20 billion and help Bill and Melinda Gates save the world …

If pressed, I will say that by going through this process, you find then fire up your true passion … hot passion drives massive action … massive action drives incredible results.


So, what’s your big life vision? Your whole future depends upon being crystal clear on this …

Calculating your Investment Net Worth

I found a site that I really like; it’s called Net Worth IQ and it’s a social network around calculating (& sharing if you feel so inclined) your net Worth.

 To be conservative in calculating your Net Worth, you should LEAVE OUT:

a) Any ‘equity’ in your house that you NEVER intend to release as investment (i.e. borrow against for purchasing, when the timing is right, income-producing-buy-and-hold-investment-real-estate).

b) Any supposed ‘equity’ that you have in your business.

Let’s call the result your INVESTMENT NET WORTH …

 It’s the only one that matters!


Well,there are only TWO reasons to even bother calculating your Net Worth:

1. To ensure that your ‘portfolio’ matches the Rules of the Rich (e.g. the 20% ‘rule’ on home equity that I talk about in a recent post), and

2. To check whether your INVESTMENT NET WORTH (which should be in passive income-producing investments by then) can FUND your ideal retirement with at least 99% chance that your money won’t run out before you do.

I must confess that for the purposes of the Net Worth IQ site … I broke those two rules, so I should lower my Net Worth by approx. $2.5M, and I may make that change later – I haven’t decided yet.

BUT, I have already done the calcs and am acutely aware that my INVESTMENT NET WORTH can EASILY fund my retirement starting next year (I’ll be 50 … now, that’s old, Man!).

If this makes sense to you … check out some Tips that I have already left on that site and this blog.

Now, what’s YOUR Investment Net Worth … more importantly, can it fund your IDEAL retirement?

Do you know how much you will retire on?

If you are like most Americans, the chances are that you have virtually no idea how much you will be able to retire on …

In fact, only 1 in 3 do. And, everybody else in the world is pretty clueless, too … at least according to this AXA survey:

Do you know how much you will retire on?

It gets worse, of those who do know (or think they know) how much they will retire on almost half don’t think it will be enough:

Retirement Shortfall

… and, I bet that 90% of the other half are simply settling for a LOT LESS than their dream retirement.

Don’t let that be you … start by working out your Number, and let’s go from there …

A sure fire plan to long-term wealth if you are a student or just starting young …

If you are a student, you have one of the greatest assets available to you … time!

It means that you can succeed with a ‘get rich slow’ program (whereas, most of the rest of us can’t … not enough ‘runway’ left).

Just how important is ‘time’? Just take a look at this example taken straight from the Investment Company Institute‘s web-site: 

The following graph shows three investors, each of whom invests $1,000 a year until age 65. However, one begins at age 25, investing a total of $40,000; one at age 35, investing a total of $30,000; and one at age 45, investing a total of $20,000. Each earns 7 percent per year and, for purposes of this illustration, the effects of taxes and inflation are ignored.

The Power of Compounding

Source: Investment Company Institute

So, if you are happy to ‘get richer than most people but slow’, here’s a super-quick 4-step program for you just because you have time on your side:

1. Get debt free … pay of those credit cards and student loans (if interest rates are super-low on these AND you like a bit of risk, keep the loan and buy and investment property instead) … look at the debt snowball for a neat debt-reduction strategy?

2. If you are hell-bent on investing in stocks stick your money in a low-cost Index Fund (it’s what Warren Buffet suggests) … if you prefer owning direct stocks, then read a book called Rule # 1 Investing by Phil Town.

3. Try and save for a deposit on a rental property (or your own home … but, it’s better to rent/own than own/own) – both real-estate and finance is cheap right now; buy and lock in for 30 years.

4. If you want to accelerate your results (i.e. ‘get rich quicker’), you need to focus on accelerating your income … start a part-time business (for you, Internet-based might be ideal!?). IF you make money, put at least 50% of it towards 1., 2. and 3.

If you do this early enough … then you just may be able to kick-back and enjoy the ride!

Making Money 201 – Going for Broke!

If Making Money 101 could be drastically over-simplified as ‘saving’; then Making Money 201 is equally over-simplified as being about building your income.

If you were serious about getting your financial house in order quickly, then you probably already did some income building to help you pay debt off quickly while you were working your way through Making Money 101.

Unless you’re a CEO of a Fortune 500 company, or a top professional doctor / dentist / attorney / accountant, then you will need to think about starting a business.

And, to accelerate your business or professional income you may also decide to get into the business of active investing (renovating/flipping real estate, trading stocks and options, etc.).

This is the stage that you get to take RISKS (that’s why you need a solid foundation and plenty of runway … you WILL fail at least once, twice, three times …) because that is the only way to get the big financial REWARDS.

This stage is hard work!

But, it is where you actually sow the seeds that will eventually make you rich …

There are plenty of books and a few blogs around, but most of them are specific to just ONE WAY of making money … the author’s way; some are good and some are lousy.

By the end of this stage you will be earning more than 90% of the US population and will be accelerating rapidly down the runway to financial health … but, spending will also increase dramatically and you will struggle to hang on UNLESS you ALWAYS remember your Making Money 101 lessons about saving!

Paradoxically, you will be the ‘richest’ that you will ever be in your life during this stage IF to you, being ‘rich’ means being able to spend lots of money

… the problem is that your ‘wealth’ is only based upon your income, therefore only lasts as long as your business or job does.

Also, many of the Making Money 101 rules now need to change, as do almost all of the tools ….

For example, dollar cost averaging and index funds are replaced with sensible investment and savings rules and strategies.

You are still far from ‘rich’ …

In fact, you are still Just Over Broke … but, starting to break free!

The greatest advice from the Oracle of Omaha

As the latest in my ‘videos on sundays’ series, I offer some advice from the man billed as the ‘greatest investor who ever lived’.

 In 7 minutes you will have ALL of Warren Buffet’s secrets 😉

… maybe not, but you WILL have some insights into his life (the first three minutes) followed by some of the best investing advice that I have seen.

Warning: some of these slides flash across your screen so fast that you will have trouble following them, so pay attention to the very last two slides if you are not an expert investor:


If you are a student of investing, have a long-term view and are willing to dedicate some time and effort, take note that Warren offers exactly the opposite advice for you …

Wide diversification is only required when investors do not understand what they are doing.
Warren Buffett

… he also points to this time in history as being possibly a great time to make your fortune:

We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.
Warren Buffett

I see a lot of doom and gloom … I bet that Warren Buffet is gearing up for something big …

What are you doing right now?