What's the probability that you'll even read this post?

Well, if we look at all the billions of people on this planet [AJC: is it 6 billion or 8 billion now … damn, I lost count] …  the chances are minuscule.

If we take all the people who use the Internet daily … still microscopic.

If we take all the people who read Personal Finance blog … not much chance.

If we pick all people who read the self-prophesying headline to this post …. bloody great! You see, it WAS a trick question of sorts …

… all to lead me on to the subject of Probability … as in “it’s probable that your eyes will glaze over just about now, and you’ll click back to Pamela Anderson’s home page” … brought to my attention by a recent post from an excellent blog by All Financial Matters, appropriately titled Probability 101.

Even if you hated math [AJC: in other countries, known as: maths] and statistics, stick with me past this excerpt:

I’m in the process of reading Peter Bevelin’s awesome book, Seeking Wisdom – From Darwin to Munger (Not an Affiliate Link). I HIGHLY recommend this book for anyone interested in investing and behavioral finance. As boring as that sounds, this book is a page-turner. One of the sections of the book that I found most interesting was this illustration of probability on page 151:

A lottery has 100 tickets. Each ticket costs $10. The cash prize is $500. Is it worthwhile for Mary to buy a lottery ticket?

The expected value of this game is the probability of winning (1 in 100) multiplied with the prize ($500) less the probability of losing (99 our of 100) multiplied with the cost of playing ($10). For each outcome we take the probability and multiply the consequence (a reward or a cost) and then add the figures. This means that Mary’s expected value of buying a lottery ticket is a loss of about $5 (0.01 × $500 – 0.99 × $10).

The first comment that I would make is that whilst you need to understand the basics of a ‘good decision’ against a ‘bad decision’ in probability/statistical terms, simply running your eye over the key line “A lottery has 100 tickets. Each ticket costs $10. The cash prize is $500”  should do the trick:

If you bought all 100 tickets, at $10 each, you would spend $1,000. But you would only win the cash prize of $500 … are YOU smarter than a 3rd Grader?

But, as one of the comments on that post pointed, out not all decision that SEEM to be mathematical ARE simply mathematical:

Unfortunately, probability doesn’t always translate directly into real-life situations.

Let’s take your example of the lottery, except we’ll change things up a little.

Mary is 50 years old and approaching retirement. She’s been financially savvy for her entire life and has accumulated $1M in cash.

Donald Trump decides to hold a lottery for only Mary. One ticket costs $1M, and she has a 50% chance of winning $10M.
If you looked at just probability, her EV is -(0.5 x $1M) + (0.5 X $10M), or +$4.5M. Does that mean she should buy the ticket? Obviously, no.

I think what this comment is saying is that EVEN THOUGH you have a 50/50 chance of winning 10 times your money, you shouldn’t invest your entire life savings into it … because you have an equal chance of ending up flat broke!

The concept is good, but I take issue with the “obviously no” bit …

The numbers in this example are ridiculously skewed for most people, so I tried to give some ‘closer to home’ examples in my post centred on that popular game show, Deal or No Deal.

It all boils down to this:

When a decision is potentially Life Changing … the numbers count less … the possible result counts more.

In practice:

1. You should understand basic probability because it is so important in life,


2. You should first make the Life Decision then look at the odds …

Deal or No Deal?!


Too scared to buy? That's OK … just jump in, anyway!

With anything that has a big upside, there is usually the fear of the downside, but I say:

No pain, no gain!

Think back (or forward) to your first real-estate acquisition – it probably was (will be) your own home. 

Fear? Sure … in a ‘down market’ there are perhaps well-founded fears that prices could go even lower.

Does this mean that you shouldn’t buy a house? That’s up to you.

But, here’s what I think:

First, you should always seek out and listen to expert advice … that is advice that comes from:

(a) Somebody who understands the game – that would be a Realtor, and

(b) Somebody who has made a lot of money in real-estate – that would be me 😉

Follow what your Realtor says, but don’t be paralysed with fear …

If you find THE house that you like AND you can afford the payments, go ahead and BUY.

Just be sure to lock in a loooong (say, 35 year) mortgage at current rates (still a very low 6%).

Time – and low current interest rates (which is why you MUST lock in for as long as you can) – will ‘cure’ any mistakes that you do make … after all, mistakes can happen despite following all of the good advice that others will give you.

But, real-estate is (perhaps, surprisingly, to new investors) very forgiving if you have a long-term view …

And, I am a firm believer that owning your own home is the START of your path to wealth.

Even so, it’s OK to feel at least a little FEAR and TREPIDATION when you submit that offer …

… so that you will feel at least a little better, let me tell you about the real-estate transaction that scared me the most:

About 5 years ago, I decided to move offices. Even though I had already made some smaller real-estate investments, I had always rented my office space.

My accountant suggested that for this move, I should BUY my own office building!

Now, my business was just beginning to make  (still very, very little) money after years and years of losses, so you can understand my first words to my accountant: “Say what, Fool?” 😉

On top of that, the building that we had targeted was selling at auction … and, there were a ton of people at the on-site auction, all looking very intimidating and all looking like they wanted to – and, could afford to – buy … holy sh*t … scary stuff!

Now, I don’t recommend that anybody (bar an expert) buy at auction – just too many unknowns to deal with – but, I somehow ended up with this piece of real-estate for more than $1.25 million …

… and, it still needed another $500,000 in renovations and office fit-out before I could use it!


We bought the building with 25% down and we leased all of the renovations and fit-out.

I sweated every payment for the next couple of years, until the cash-flow in the business caught up with (and, thankfully, eventually overtook) the mortgage and lease payments.

Just a few short years later, I sold that business, then the building … I made a cool million dollars on the sale of the building alone; that’s $1 million that I would NOT have had if I hadn’t made the leap to buy it.

In parallel, I kept building my real-estate portfolio, using the ‘spare cash’ that my other businesses produced … most of which I still own (the real-estate, not the businesses … I usually don’t advocate buy-to-sell for real-estate … the office building was an exception).

But, that office building was still my scariest – yet, one of my best – Real Estate transactions, to date.

So, if you are thinking of buying some real-estate (be it your own home, own office, or a rental) and can afford the payments, I say:

Go ahead and jump right in … after the inital shock, the water’s fine 🙂

Retirement sucks!

I officially ‘retired’ in April … which is nice for one reason and one reason only (actually, two … second one below): I get to brag for the rest of my life that “I retired before 50 … nyaa…nyaa!”

Now, if that sounds a little vapid, it is … but, I have vapid, dumb, vain, stubborn, and a lot of other great characteristics in me.

But, what keeps me real are equally stupid things like: I didn’t meet my goal of my first million by 30 (I missed by 10 years, or so).

And, even if I did retire by 30, I can tell you unequivocably that retirement sucks … because life sucks!

To prove my point, here’s how I spent just one of my first days in ‘retirement’:

– My wife has been sick with bronchitis this week … in fact, she waited 15 years, until the very first day of my retirement, to get this sick;

– I found out that somebody just scammed one of my overseas businesses for circa $20k … in fact, they waited 15 years, until the very first day of my retirement, to scam me for this much;

– One of my longest-serving employees was terminated from the business that I just left … in fact, they waited 15 years, until the very first day of my retirement, to get rid of this guy;

– Some guy in a Lexus just did his best to kill me; a tennis ‘pro’ actually went out of his way to be rude to me; need I go on?

… and, all of that in one day!

 I guess retirement starts next week 🙂

The point: ‘life’ – for all its good and bad – goes on … and, for those of you just waiting for that perfect moment when [insert favorite when here: when I get $1 million; when I retire; when I get married/divorced/pregnant; when my life will be just perfect] …

… you need to heed my words: I have just had the brutal awakening so that you don’t have to.

Life doesn’t start or stop when something happens … life is … because life is always happening.

I think that this little paragraph from (from “Five Great Moments of Personal Finance”  in an article by Business columnist Scott Burns of the Dallas Morning News) summarizes it quite nicely:

Our easy problems involve money. They may be terrifying, but there is always a solution. Our big problems are the ones that can’t be solved with money. They are the ones that make us cry in the night and pray for relief. The marriage that doesn’t work. The illness that can’t be cured. The child who is afflicted. The friend who won’t be helped. If you are an adult and still think money problems are real problems, you have led a charmed life. Be grateful.

Despite appearances, I was actually quite well-prepared for this week … you see I really didn’t expect my life to become perfect when I retired / made $7 million / whenever …

… my life, for all of its ups and downs was (and is) already perfect.

Then, why did I aim for so much money, so soon?

Simply to give me the freedom and credibility to do what I am doing now, and what the coming months and years will unveil … and, it all begins with writing this little blog.

But, don’t wait to see how my life pans out before living yours … just 3.5 minutes a day is all the contribution to your life that I need to make – the other 1435.5 minutes are all yours!

What is the best way for a newcomer to get started in investing in stocks?

I just got back from Omaha, where I attended the Annual General Meeting for Berkshire Hathaway – Warren Buffett’s company – so, it’s timely that I remind you there are only a TWO sensible ways to INVEST in stocks – BOTH recommended by Warren Buffet  – plus one Speculative way:

1. Buy and Hold low cost, diverse Index Funds (check out Vanguard’s web-site, and others) – this is a long-term, low risk (if your holding periods are 30 years) strategy that can help you fund a normal retirement.

2. Invest in a FEW stocks in companies that are:

(a) undervalued,

 (b) have a large margin of safety,

(c) that you love, and

(d) are prepared to HOLD …

… until the rest of the market decides that they love them, too, at which point you cash out and go back to (a).

Anything else is SPECULATING – lots of people have made a ton in trading stocks and options (e.g. George Soros, but he was smart enough to know to quit gambling when you are ahead) – or UNDERACHIEVING such as following the herd and/or buying high-cost Mutual Funds.

You may be one of the few that can succeed in either of these alternative methods … but, please don’t offend the World’s Greatest Investor by calling it INVESTING …

We believe that according the name ‘investors’ to [people or] institutions that trade actively is like calling someone who repeatedly engages in one-night stands a ‘romantic.’ [Warren Buffett]

So, there are only two methods that Warren Buffet would recommend (and one that he clearly would not) – one for the wise and the other for the even wiser – which one would you choose?


Casting Call


Well, the ‘news’ of my 7 Millionaires … In Training! ‘experiment’ is finally out … check out my friend, Bill’s post on Money Hacks, then click here to find out more …

Meet The Frugals and The Moguls

There are two groups of people in this world:

1. The Frugals – those who live their lives frugally, scrimping & saving their way to the Magic $1,000,000,


2. The Moguls – those who think saving is for pussies and are busy scheming their way past $10,000,000.

What’s wrong with the Frugals:

i) $1,000,000 (or even $2 Mill. or maybe even $3 Mill.) will not be enough for MOST people, you simply can’t SAVE your way to Wealth

ii) Being Debt Free – the Holy Grail of the Frugal World – is a false target that actually serves to keep you poor

And, we all know what’s wrong with the Moguls:

i) Wealth isn’t measured by some arbitrary lump sum – be it, $1 Mill., $5Mill. or even $10 Mill. (OK, I admit, $100 Mill. sounds tempting but, and here’s the point: ONLY because I don’t already have it!)

ii) There’s no such thing as a ‘Get Rich Scheme’ otherwise we’d ALL be doing it ALREADY – you know, word gets around 😉

Now, here is the Shocking Truth – OK, Boring Homily –  you NEED to be a Frugal in order to STAY a Mogul …

The Frugal and Mogul are the same: one is the caterpillar, the other is the butterfly!

If you don’t develop the good ‘frugal’ habits on the way UP, you will quickly lose your money and slide all the way DOWN.

So, here’s what you need to do:

1. Get in the habit of spending 10% – 20% less than your earn NOW

2. Eliminate all NEW Consumer Debt and pay off any high-interest existing debt

3. Buy your own house and position yourself according to the 20% Rule

4. Start a business (online, offline, full-time, part-time, trading, flipping) – take SOME risk

5. Invest at least 50% of the excess cash that your business activities spin off into PASSIVE Investments

6. Do not drastically increase your lifestyle until the income from Passive Investments (indexed for inflation) ‘catches’ up to your required standard of living

7. When it does, retire!

Frugal / Mogul … two sides of the same gold coin … which ‘one’ are you?

The Great Debt Repayment Fallacy … don't fall for it!

Everybody knows about ‘good debt’ and ‘bad debt’, right? And, we all know – and have committed to memory – Personal Finance Prime Directive # 1:

Eliminate All Bad Debt Now … Before Doing Anything Else!!!

This may be the current Personal Finance mantra, but, if you happen to subscribe to the same view, then read on because this post could be the most important piece of wealth-building advice that you will ever read!

But, first …

That simple and clear ‘PF Directive’ was the assumed premise behind a recent (and very good, I might add) post on The Simple Dollar that I want to delve into a little more deeply than usual because it brings out a critical wealth-building point that may not be obvious to all. In that post Trent said:

A reader wrote in recently:

I have kind of a weird situation with our 2 credit cards, and wanted to see what you thought. We have one card (Citi) with a total balance of $4,800. $3,800 of this is a balance transfer that is at 2.99% until paid off. The remaining $1,000 is at 13.49%. Of course, all principal payments are applied to the lower rate debt first. Our other card (Chase) has a balance of $5,700, and is at 0% until September 08, when it goes to 8.99%. Which card do you think is best to “attack” first?

After reading this email, I thought it would be a good time to take a more general look at comparing the debts you owe as well as how to construct a healthy debt repayment plan.

Trent then proceeded to outline a very good and pragmatic approach to dealing with these, and any other, debts … a plan that involved: 

A few sheets of paper and a pen; the latest statement for every single debt; making the first list; ordering all of the debts by their current interest rate; looking for ways to reduce the rates, focusing most strongly on the highest current one; when you’ve reduced rates, making a new list reflecting the changes; dealing debts that are set to adjust in the future; directing all of your extra payments towards the top debt on the list; when a debt vanishes, crossing it off and feeling good about it; updating the list when you acquire a new debt; and, updating the list when one of your debts adjusts to a new rate

Before I weigh in on this, let me ask you a Very Important Question:

Do you really just want to be debt free or do you want to be rich?

I know that sounds self-evident, but stick with me … if you just want to be in the top 5% of the US population and retire on $1,000,000 in, say, 15 years then by all means, do the Dave Ramsey, Suze Orman, and/or Oprah ‘debt diets’:

That is, save and be debt free (including your own home) … whoohee! … by the time you ‘retire’ [read: work part-time in Costco handing out free food-samples until you’re 75], you’ll be living on the equivalent of $15,000 today  and hoping to hell that the government can still afford to pay you social security!

It’s OK if you slavishly follow this thinking: it’s the Conventional Wisdom …

It’s just that if you want … nay, need … to be rich(er) and retire soon(er) then you’re going to need unconventionally large amounts of money in an unconventionally rapid timespan, and that’s going to take some Unconventional Wisdom!

You see, I believe that being debt free and being rich are [almost] mutually-exclusive!

This is a pretty controversial view, I should think … but, I will even go so far as to say that it is [almost] impossible to become rich without using debt: debt to fund your business (working capital finance and/or leases on equipment and/or leases on vehicles, etc.); debt to fund your real-estate investments (fixed interest mortgages and/or interest-only funding); debt to fund your stock purchases (margin lending); etc.

Hold on, all the Personal Finance writers/bloggers out there say:

We can put all of the above examples in the ‘good debt’ category and we already agree that they are OK …


But, then they always add:

… but, ‘bad debt’ is ‘consumer debt’ (credit cards, student loans, car loans, etc.) and we all know that our Number One Personal Finance Objective is to wipe Bad Debt out, right? After all, it’s not called ‘Bad’ for nothing! Right??!!

Well, not necessarily … sure you shouldn’t get yourself INTO any of this Bad Debt … but, once you have some (you naughty, failed human being, you), you need to mix it with your Good Debt and revisit Trent’s Plan with ALL of your debts in hand … both ‘Good’ and ‘Bad’.

Look at it this way, once you find yourself with a mix of both Good (appreciating and/or income-producing assets) and Bad (depreciating, consumer goods) Debts, the only things that matter are:

1. Paying off the Dollar Value of the Bad Debt as quickly as possible, and

[AJC: Here is the key … its in the “AND]

2. Paying off the highest after-tax interest rate loan off first.

So here was my advice to the person who asked the question on Trent’s post:

Interestingly, in the reader’s case (if I read correctly) his ‘consolidated’ card is at a Combined Effective Rate of only 5.2% … because he can’t attack the 13% portion until he pays off the 2.99% portion I would do the following:

1. Pay off the other card first, then

2. Buy an investment using the money that he would have paid the 5.2% debt off with …

… after all 5.2% is a very low rate of interest!

To clarify: I would not pay either card when interest rates are under the standard variable mortgage rate … I would be financing new real-estate, or paying down the mortgage on my existing (IF I’m not breaking the 20% Rule). The plan I outlined above starts when the 0% period ends … until then, pay off NEITHER card IF you have a more productive use for the money!

What does this mean for the rest of us?

i) Don’t get INTO Bad/Consumer Debt … save and pay cash for any ‘stuff’ (cars, vacations, furniture, ipods, computers, etc.) that you want.

ii) Once you do get INTO Bad/Consumer Debt … don’t be in such a hurry to get out of it; compare the cost of your Student Loans; Ultra-Low-Honeymood-Rate credit-cards; Super-Low-Suck-You-Into-Buying-More-Car-Than-You-Can-Afford Interest Rate car loans; etc. against the after-tax cost of the mortgage that you have on your house and/or investment properties (or the interest rate on your Margin Loans for your Stocks; or your Working Capital Finance for your Business; etc.).

iii) Work out a repayment plan as though you were going to pay INTO that Bad/Consumer Debt … instead, pay an equivalent amount off against your highest after-tax interest rate loan across your entire Good/Bad Debt portfolio.

iv) Reevaluate at the earlier of Quarterly (i.e. every 3 months) OR when one of the interest rates on ANY of your loans changes OR [yay!] when you have paid one of your loans off.

v) If you don’t want to (or can’t) get out of a higher-interest loan early using (iii) then compare the cost of the lowest-interest loans that you have (regardless of whether they are Good/Bad) against the current FIXED interest rates for new loan on a new investment … if LESS, buy new instead of pay off old.

Remember: The Object of Personal Finance is to end up with MORE money … the object isn’t to SAVE money, PAY off debt, BUY a house, START a business … they are all just all steps along the way.

If you want to get Rich(er) Soon(er) never, ever confuse A Means To An End with The End

… now, let the flames begin!



Casting Call

Last days for ‘pre-applications’ to become one of my 7 Millionaires … In Training! Click here to find out more …



Put your money into CD's? Not exactly what we meant!

Casting Call


Last days for ‘pre-applications’ to become one of my 7 millionaires … In Training! Click here to find out more …


Here’s another in my Money-Video-On-Sundays Series …

This clip from the popular comedy, The Office, is sad but true … how many students are also ‘investing’ their money into CD’s the way that this guy does, rather than saving and paying down debt?



PS Take a look at the latest Money Hacks Carnival here ….

The 6% Realtor Solution

Casting Call


Last days for ‘pre-applications’ to become one of my 7 millionaires … In Training! Click here to find out more …


To get a Realtor or not to get a Realtor, that is the 6% question …

Joshua asked a question about a recent post:

I’m planning on buying a condo soon  … fixing it up a bit and renting it out … but how would someone “educate themselves daily on the market”? I keep an eye on the 30 FMR and am impressed with rates right now but I’m wondering if there’s more to this education.

If you’ve been following this blog, you’ll probably also be thinking that now might be a great time to be buying some real-estate: a house, a rental house/condo, duplex/triplex/quadraplex, retail/commercial, office or industrial … the choices abound!

No matter what you are thinking of buying, once you have done some of your own homework and narrowed down (a) the type of real-estate you want, (b) the price range that you are interested in, and (c) the area/s that you are looking at …

… then find a Realtor who will send you ‘comps’ (i.e. comparable sales) on similar sales in the area from the Multiple Listing Service (MLS).

Also, ask the Realtor for information that will help you find how the market has changed over the past couple of years … do the same with rental ‘comps’.

Also, physically look at a number of similar properties in the area/s that you are interested in before choosing one.

 Of course, you can get some (most) of this information from public (many free) databases … just Google ‘MLS’ for listings of properties of the type that you are interested in, and sites like rent.com for rental rates on apartments and houses. Sites like realtytrac and loopnet are great for commercial.

But, there are some big advantages of using a Realtor:

1. Qualification – these guys are trained (more so than a ‘standard’ real-estate agent … the ‘Realtor’ designation actually means something!) and if they have worked in the market for a while, they will know what you are looking for before you do.

2. The MLS listings that they can get you are far more detailed than the publicly available ones.

3. If they own and invest in the same types of properties in the same areas that you are interested in, they can be a great resource (AJC: this should be the first question that you ask … only deal with an Investor/Realtor who already invests in the same type of real-estate that you want to be investing in, and in the same or similar area/s).

4. They will represent you in the purchase and the other guy (i.e. the one selling the property) pays their fee – they typically split commissions with the selling agent.

So, the seller’s 6% commission pays you for a ‘free’ buyer’s agent … just choose the right one … OK?

The most dangerous idea in retirement planning that I have ever read!

Casting Call


Double Dose of 7million7years! Please check out my FIRST EVER Guest Post … it’s at BripBlap, a blog that should be on your DAILY READING list: http://www.bripblap.com/2008/guest-post-education-a-curse-or-a-cushion/

In a few weeks, I was planning an ‘expose’ of a book that I read , but just came across a related post by an innovative thinker who calls himself Gryffindor (presumably, named after one of the Hogwarts Houses in Harry Potter) so I can’t resist but to weigh in now …

And, I’m going in boots and all!

First, here is what Gryffindor had to say – which I actually like because it is innovative and a little controversial:

So if an investor has 2 million at the age of 55, what does the conventional wisdom say? He could invest it and with a safe withdrawal rate of 4% count on $80,000 a year. 2 million of savings – with that all you get is a 80k a year. No wonder most people are depressed about retirement.

Now what if the investor takes a million of his nest egg and buys [a] business? She gets $200k of cash flow a year that is growing at 3% to match inflation. She can also reinvest the additional earnings from the other $1 million. She also gets some additional tax benefits of owning the business and can have some productive part-time hobby / business and not just spend her time on the golf course. It sounds all good to me.

And, here is part of my response that I posted on his blog post:

This is such an important topic that I am going to post a response on my blog [which you are now reading!] … I would really like to set up some debate on this because it is a very useful – but, potentially highly dangerous – retirement strategy that really needs to be well thought through before anybody implements.

Rightly or wrongly, some people just see me as a guy who ‘got lucky lucky in business’ (AJC: most of my $7m7y Net Worth actually came from investments … my leter/additional Net Worth came from selling some businesses), so it might seem natural when I say that Gyffindor actually appears to be onto something that is one of the central ideas in a recent book called Get Rich, Stay Rich, Pass It On.

The principle is that rich people keep their money for generations ONLY if they split their assets roughly one-third in a business, one-third in paper (stocks, bonds, mutual funds, etc.) and one-third in real-estate (incl. their own home):

Then, you might be surprised when I say that this is “the most dangerous idea in retirement planning that I have read”!?

What the book is recommending, that I find so damn dangerous for retirees, is this:

The authors of Get Rich, Stay Rich, Pass It On suggest that you need to invest, and keep invested forever,  25% – 35% of your Total Household Assets into ‘continually innovative enterprise/s’:

What we mean here by a continually innovative enterprise is one that either offers a product or service that breaks new ground or changes a traditional product or service so much that it becomes virtually new.

Now, that is something that you do before you retire so that you can retire rich … you take risks, you innovate, then you sit back and reap the profits (or sell) …

… it is not something that you get into in order to preserve wealth, which is exactly what the authors suggest:

At the lowest level of personal involvement, you might invest in a limited partnership, private equity plan, or venture capital program in which the actual management of the enterprise – possibly even the choice of the enterprise to invest in – is beyond your reach and outside your control.

Put simply: this recommendation is crazy

… in my opinion, it unfortunately totally discredits an otherwise fine book written by authors who are respected consultants who assess the wealth habits of America’s mega-rich for the financial planing industry.

to me it seems that they are confusing the Making Money 201 wealth-building practices that rely partially on risk-taking strategies that may include a business – or, at least look a lot like a business (e.g. rehabbing/flipping real-estate; trading stocks/options etc.) …

… with the Making Money 301 wealth-preserving (i.e. retirement) practices that move you away from risk towards passive income!

So, is there a place for owning a business in a wealth-preservation strategy?


I think that I speak with some authority on this: I have owned, operated, and successfully sold a number of businesses across a number of countries, many of which I owned at the same time!

I was an active owner in some and am still a passive owner in others …

Now that I am retired before 50, I am giving one part of a business away to my partner, converting another part into a ‘licence annuity’ that I will keep, and I am also keeping one other operating business as a semi-passive entity.

This last one is interesting, as it appears to support the thesis in Gryffindor’s post and the book that I mentioned:

This business is still in another country … it’s a finance company that turns over $40,000,000 per year with a only staff of 4 and nets me a cool $250k per year with about an hour’s work a month from me … I control it (through various legal entities) 100%!

Even so, here is the fundamental truth:

There’s no such thing as a PASSIVE business – as long as you own a business, you:

1. Will lose sleep every so often until it is sold or closes down, and

2. You will NEVER be truly retired.

As long as you can accept this level of semi-retirement worry and activity (which may actually HELP to keep you young!) then the Gyffindor Strategy could work for you, BUT:

i) I could accept owning in retirement: Big Name Franchises; Self-storage facilities; Mobile-home parks; Car-Washes; Your own well-established business that you are now ‘winding back on’. 

ii) I would be a lot more concerned about: auto-repair and other skill-based businesses OR ‘vanity businesses’ – you know, the types that celebrities like to own (e.g. restaurants, bars, etc.).

iii) You would need to set out to have the business/es that you select run without you from the very beginning.

If you like the idea of owning a business in ‘retirement’, here’s a hint:

This strategy could hold a lot more attraction for you if you can also own the real-estate that the business operates from!


A. It assures the rental stream,

B. It assures at least some capital growth,

C. It hedges your bets against business failure (particularly if you plow excess cash generated by the business into the mortgage),

D. It provides a partial exit stream i.e. sell or give the business to management or a buyer under the condition of a long-favorable lease with upward-only ratchet clauses (rents increase at least with inflation).

A final thought:

I mentioned that I will continue to own at least one business now that I am fully retired:

– I founded this business and have owned it since 1991 … it has successfully run without my direct involvement for more than 5 years.

– I tried to sell it anyway, but it was only worth 3 times annual Net Profit before Tax … for that I will keep it for three years and take my chances!

– If I do happen to find a buyer who will pay me 5 or 6 times annual Net Profit before Tax, I will sell it.

– I do not count this business’s income towards my retirement portfolio’s ‘safe withdrawal rate’ because anything can happen with a business at any time … rather, I use the profit to build my portfolio’s total value, and spend the passive income from that.

If I do eventually sell it, THEN I will increase my portfolio’s withdrawal rate because I will have converted the business into a passive investment (cash, stocks, or real-estate).

Phew! This is one of my longest posts … so, now it’s your turn to comment!

Who is the Devil's Advocate's "devil's advocate"?

Have you noticed whenever you have an idea that goes against the mainstream (as most of my good ideas seem to) that people always pop up to rain on your [idea] parade?

They often justify their negativity under the guise of that old cop out: “oh, I’m just playing the Devil’s Advocate” … meaning that you get to listen to their endless diatribe. If you’re unlucky, they just may succeed in having you ‘come to your senses’ [a.k.a. miss yet another opportunity]. 

My response usually is: “In that case, I’m the Devil’s Advocate’s Devil’s Advocate! ;)”

… which means, this time I get to explain why their [contra]-ideas are dumb, and they get to sit there and listen!

I particularly like to play Devil’s Advocate’s Devil’s Advocate with the typical Personal Finance mantras as published in so many PF books and blogs – and, we have already covered a few, with a whole lot more to come – because so many of them are so self-limiting.

I go the idea for this post from a PF blog that I like, Bargaineering, who has a whole section called Devil’s Advocate … I have reprinted a section from his latest roundup, and have included the links in case you want to review the actual articles [AJC: I haven’t had time to review them all, yet]:

I have a few good ideas in store for future articles but I wanted to do a little roundup, in part for myself to see all the topics we’ve covered, so that you could join in the rock throwing against mainstream ideas.

  1. Don’t Invest in the Stock Market
  2. Cancel Unused Credit Cards
  3. It’s Okay To Ignore Your Problems
  4. Ignore Personal Finance Experts
  5. Don’t Have Kids
  6. Buy More House Than You Need
  7. Don’t Move From Job To Job
  8. Get A Store-Branded Credit Card
  9. You Don’t Need College to Succeed
  10. Four Reasons You Should Get A PayDay Loan
  11. Don’t Get Married
  12. Buy That Home Warranty
  13. Adjustable Rate Mortgages Are Awesome!
  14. Pay Cash for Everything
  15. Don’t Budget to the Penny
  16. Invest In Your Company
  17. Say No To Credit Card 0% Balance Transfer Arbitrage
  18. Why Roth IRAs Are Bad
  19. Lease A Car, Don’t Buy It
  20. Don’t Just Buy Index Funds
  21. Don’t Optimize Payroll Deductions
  22. Rent Forever, Don’t Buy A Home

My view?

Great ideas – in fact, I made a fortune by FOLLOWING ideas # 4, 6, 13, 15, 16, 18, 20, 21. ;)

Here’s how I look at it:

Follow conventional thinking and you’ll get conventional results.

Follow Unconventional Wisdom, and you just MIGHT get rich, too (but, don’t be stupid about it, because you will probably remain poor) … but, you need to throw in some ’special sauce’ as well [AJC: that’s what this blog is for].

Nothing wrong with following good advice … nothing wrong with ignoring it, either … I’ve made money both ways – just be sure you know WHY you are following/ignoring it!

Here are the Top 4 Personal Finance Myth’s that I will be doing my very best to destroy over the coming weeks:

1. ‘Bad Debt’ is to be avoided at all costs!

2. Your house is NOT an asset or Your house IS an asset!

3. Max. your 401.k and other Retirement Accounts

4. You can [and, must!] save your way to wealth

5. The Magic Number is $1 Million

… a whole plethora of ideas for us to explore!

But, first a word of caution:

If your target is just an amount like $1 Million to $2 Million in 15 – 30 years, then you do NOT need to read any further – this blog is NOT for you and you will get far more benefit for your time invested by reading here, here, and here, or probably ANY of the places listed here instead.

However, if you are going to join me on this exploration of Anarchic Personal Finance Ideas – and be the Devil’s Advocate’s Devil’s Advocate – then let me know which DUMB 😉 ideas that worked for you, so far …