The Myth Of Saving Your Way To Retirement …

Quite a while ago, I published a post that took a look at the supposed ‘power’ of saving …

… if you didn’t read it then, now would be a good time to ask yourself if you really care that weekly contributions of $34 could potentially grow to over $76,000 in 20 years, as proudly proclaimed by Fidelity?

One reader, Concojones, thinks that I have underestimated the ‘power of savings’:

Let’s not dismiss too quickly the good old save-your-way-to-retirement advice. Saving $15k/year for 40 years yields an expected $2.5M in today’s dollars (for what it’s worth: $10+M in retirement dollars), assuming your investments go up 5-6% per year after inflation.

Let’s not dismiss it too quickly, indeed. Retiring with $10 million in your pocket (albeit, ‘only’ worth $2.5 million in today’s purchasing power) is none too shabby.

The only problem that I can see – actually, the only FOUR problems that I can see are:

1. You have to be happy (well, ‘happy’ is a relative term) to work for 40 years,

2. You have to save $15k per year – easy at the end of 40 years, very hard at the beginning … and, even harder in the middle when you might be earning ‘only’ $50k (before tax) and have to put away 15% to 30% of your salary “with four hungry children and a crop in the field” [AJC: if you’re old enough to remember that Kenny Rogers song]

3. You have to average 8% to 10% return on your type of investment – but it has to be one that lets you add $15k annual increments for 40 years (which ties you to ‘standard’ products like, CD’s, bonds, stocks, and mutual funds).

4. You MUST be disciplined enough to stick to this simple strategy for the entire 40 years WITHOUT WAVERING in up/down markets: the Dalbar Study [ ] says a firm NO to being able to achieve anything like this rate of return.

So, great on a spreadsheet, but I wouldn’t want to bet my life on it 😉

Straight from the horses mouth …

I thought that we had successfully debunked the power of intention, when we showed that our readers – some of who may have tried to manifest money over the past year, but most of whom would have not – greatly outperformed a group of people who most assuredly did try and manifest significant amounts of money.

But, Napoleon Hill is the ‘godfather’ of intention, so go who am I to argue? 🙂

Is there any Power in Intention?

We have been examining every possible way to make $7 Million in 7 Years [or, insert: Your Number by Your Date], so why not look at the ‘power’ of Intention a là The Secret?

That’s why we undertook our own highly scientific study that seems to show that manifesting millions actually produces a far worse result than our control group of readers:

– Steve Pavlina’s volunteer team ‘manifested’ an average of $3,500 each over 12 months, but

– The $7million7year control group produced an average of $18,500 each over 12 months.

Our control group did more than 5 times better than the manifesters!

Of course, it wasn’t really a “highly scientific study” (then again, neither was Steve Pavlina’s), so it’s no surprise that we have for and against views; for example, Kate is clearly in the ‘for’ camp:

I am a firm believer in intentions, and I like this one. Intentions guide the thought process and help me look for opportunities.

Whether there is, or isn’t, any Power in The Secret, I can’t help wondering, Kate, if it’s the intent or the doing (in this case: ” look[ing] for opportunities”) that produces the outcome for you?

So, in defining our Life’s Purpose, are we hoping that the outcome will manifest, or are we guiding our thought processes, or are we simply wasting our time?

In truth, I have no idea!

I remember an Indian guru who once said that if you think back over your life to all of the times that you planned for something, you will find many examples of each of the following:

– You planned and it worked out pretty much as planned

– You planned but it didn’t work out very much as planned

– You didn’t plan but things worked out just fine, anyway

– You didn’t plan but (not surprisingly) things didn’t turn out very well

You get my point …

…. so, why bother to PLAN our Life’s Purpose, our Number and Date, and our Growth Engine?

Again, I have no idea, but it worked out just fine for me, so it may work out just fine for you, too 🙂

And, if it’s the ‘intent’ (in planning our Life’s Purpose etc.) that produces the outcome, then all power to The Secret and its followers.

Although, I can’t help wondering:

Why wouldn’t I intend to make $7 Billion rather than a measly $7 million … and, why wait 7 years? 😉

Dress to suit your audience …

I’m sure that Miley thinks she looks great … and, I’m DEFINITELY sure that her audience does, otherwise why would they come to her concerts in droves? It sure ain’t for the singing 😉

But, as cool as she may (or may not) be … she had better not be dressed like that when she’s going for:

– a job interview

– a bank loan (well, in her case this might be OK)

– a sales presentation

– etc.

In other words, it’s not important how you look, but that you fit in with how your audience EXPECTS you to look.

When we have a Life’s Purpose that transcends ‘today’, you can make these kinds of short-term trade-off’s – you know, the “but my friends are all …” kind – because you KNOW that you have a long-term pay-off (your Number/Date, allowing you to live your Life’s Purpose, which probably includes your dream lifestyle) that your friends are simply unlikely to ever achieve!

Let me give you an example of dressing (or presenting yourself) for your audience:

When I first started in business, I had three modes of dress:

– Smart casual for my clients, who were all tradesmen: I wanted to dress nicely (to present a good image) but not ‘stuffy’

– Suits for my corporate clients: my other business was much more corporate; whenever I had a client meeting, I would dust off my ‘power suits’ and ties (nowadays, you can dress more casual, but ONLY if your client does, also).

– Suits WITH gold watches/cuff-links/jewellery: for my meetings with the bank … I always want to leave my banker with the impression that I don’t NEED the money 😉

Now, this doesn’t mean that you can’t dress like Johnny Rotten after hours!

If that’s your ‘thing’ go right ahead … I mean, you gotta live, right?

BUT, make sure that your fashion accessories of the bodily kind can be TOTALLY hidden from view, come Monday!

Body piercings are fine; tongue/eyebrow/lip/ear piercings are not.

Small earings are fine; multiple piercings and ear ‘plates’ (the ones that enlarge the holes on your ears) are not.

Hidden tatoos are fine; visible ones are not.


Because the majority of people who you NEED to help you become successful (bankers, clients, partners) are nowhere near as broad-minded as you think!

Now, before you accuse me, my staff broke all the ‘rules’ … but, I was able to look beyond the physical (even if I had to endure a raised customer eyebrow or two), but don’t limit your market to me and the two other CEO’s out there who are as broad-minded as I am.

Let me give you another example:

A close friend of mine is CEO of a small public company. Interesting.

What his clients don’t know is that he has wall to wall tattoos on his body. Amazing.

BUT, he has to keep his shirt buttoned up (including his neck) and his sleeves all the way down to hide them … I guarantee that he regrets his tattoo decision for this reason.

So, that’s the sad truth about freedom of self-expression today; maybe it will change in a few years, maybe it won’t. Just don’t take the risk, if you want to reach your Large Number by Your Soon Date … it’s probably not worth it.

BTW: Nowadays, I don’t dress to impress anybody …

… on the other hand, I’ve already reached my Number. Have you?

A question I’m not sure I should answer …

Sometimes, I’m posed a question that I’m not sure that I should answer.

Case in point: Drew asked a question about my 7 Million Dollar Journey :

What were the terms of your first $1.25 million building purchase in 2001? You mentioned you had been in debt and had been losing money in your business until sometime in 2000 when you began to turn a profit. You had to have had a lot of profits quickly to put together the down payment for the building and be approved for a loan in such a short time period after years of money losing operations.

A straight-forward question, but the answer isn’t straight-forward … there’s a question of ethics and also a question of giving my readers potentially dangerous strategies.

After much uhmm’ing and aah’ing, I’ve decided that honesty is the best policy and to throw it to my readers to decide on the issues of ethics and danger:

As I mentioned, I had only recently become profitable, yet I managed to:

1. Stump up the 25% deposit on a $1.25 million commercial real-estate purchase,

2. Make the mortgage payments,

3. Make the additional lease payments on the $400k rehab and fit-out required.

Quite a tall order, so here’s how I managed it:

First, I made sure that I was profitable enough to:

i) Make the mortgage payments as and when due,

ii) Keep up with the lease payments,

iii) Pay back the deposit

Did you catch that?

Number (iii), I said: “Pay back the deposit”

You see, I actually borrowed 100%+ (i.e. the deposit, the mortgage set up fees, and the closing costs), but here is where the question of ethics and danger come into it …

… I borrowed the deposit and the closing costs from my customers!

And, here’s where ‘ethics’ come into the picture – my customers didn’t know!

You see, one of the easiest, best, but most dangerous ways to raise money, is to raise it from your customers.


It’s actually quite simple: most businesses have large inventories (the goods that you hold in stock), accounts payable (money that you owe your suppliers) and accounts receivable (money that your customers owe you).

Any and all of these have value.

For example, it’s quite a normal/accepted practice to borrow against the value of your inventory; unfortunately, your bank may not want to take the risk, and your finance broker may only give you a little money at a high interest cost because of the perceived risk (after all, do they really know how to sell the inventory if you default?).

It’s also quite normal to leverage the value in your receivables by approaching a specialist finance company to ‘factor’ those debts: that means that instead of waiting 4 to 6 weeks for your customers to pay, the finance company may advance you up to 80% of the value of those debts (i.e. your total receivables). This is, in fact, one of the businesses that I still own.

But, there is a third method that requires no bank or finance company to get involved: it’s simply to pay your suppliers slower than your customers pay you!

My business, being a services business had no stock (so no inventory finance opportunity), and factoring can have the stigma of a weak business so I didn’t want to go that route with my ‘Fortune 500’ corporate clients.

But, I did have a very tight contract that saw my largest clients paying my invoices in just 7 days (really!), yet I was only obligated to pay my suppliers in 30 to 60 days. Further, my turnover was huge (compared to my fees) because of the nature of my business.

This meant, effectively, that I had a line of finance equal to 3 to 7 weeks of my sales/turnover!

That was more than enough to raise the deposit for the building.

OK, back to my initial reticence to share this with you:

1. In most businesses, the turnover isn’t large enough, and the negotiated spread between accounts payable/receivable large enough to raise very much cash,

2. I think it’s ethical to use these funds for your business (unless you have lead your customers to believe that these funds are to be, somehow, quarantined and/or held in trust), borderline to use them for the building that houses the business (for example is the building going to be bought in the name of the business, or in a separate entity as I would normally recommend?), and unethical to use them for personal use / purchases outside the business … but, ethics is in the eye of the beholder, so YOU tell me what you think?!

3. I think it’s dangerous because your business MUST have the necessary solvency (not just profitability) to not only keep up with the payments (both mortgage and lease) as well as to ‘buy back’ the deposit over a relatively short period of time (in my case, 12 to 18 months).

So, now you are armed with a powerful – and dangerous – business financing tool. Use it wisely … and, sparingly!

How much home should I buy?

A reader who works with RE, Whittier Homes, says:

I’m in the camp that you don’t leave too much equity tied up in the walls of a house. That being said there is a risk factor or a comfort zone that every investor has to know. The bottom line is you don’t want to get over leverage and get caught on the short end of a declining market.

Home equity is simply what your home is valued at (today) less what you still owe on it (today).

This leads me to think that I’ve never said … and, nobody’s ever asked: How much equity should I have in my own home?

Well, there’s a reason:

I have NOTHING to say about how much equity – as a % of your house value – and, EVERYTHING to say about how much equity – as a % of your Net Worth – you should have tied up in your own home.

In other words, your equity is a function of:

– How much your house costs to buy

– How much it increases in value over time

– How much deposit you have available now

– How much you choose to put in / take out of the value of your house over time

I have no advice as to how much you should spend on your house in the first place, that’s your business not mine 🙂

But, I do have some guidelines that pretty much help to answer the “how much home should I buy?” question (other than for your first home), albeit obliquely:

1. The 20% Rule ensures that you are always investing at least 75% of your entire Net Worth (after allowing for another 5% to be spent on ‘stuff’),

2. The 25% Income Rule ensures that if you do decide to borrow money to buy a home, that you do not overcommit your cashflow,

3. The Cash Cascade makes sure that if you do have a mortgage, that you don’t pay it off too quickly if better investing opportunities abound.

Put these ‘rules’ into practice and you won’t go too far wrong, when it comes to your own home …

10 Paths To Wealth?

Ken Fisher is a well-known money manager – I know, because I’ve had to endure phone call after phone call when I stupidly signed up for one of his ‘free’ reports!

However, watching this video (and, maybe even buying his book) seems like a fairly non-threatening way to learn some of his wisdom.

Personally, I think you need to mix’n’match some of these methods to have a bats-chance-in-hades of making your Large Number / Soon Date.

On the other hand, I’m all for marrying into wealth, but who’d have me? 🙂