A couple of reader e-mails …

I like receiving questions / comments, etc. via e-mail, even if it’s not always flattering, like this one from ‘hardtop’:

Been reading your website for a while and your posts. What you share is nothing new.  Just the same recycled material that all the “guru” financial “experts” share with their flock. None it it will make you rich, nevermind 7in7. Becoming rich is more about being in the right place at the right time (luck) with the right product and enough capital. One could follow yours and similar advice for years and never get rich. Keep up the good work.  :)

Of course, since ‘hardtop’ has been reading my website for a while and my posts, he should know – as my regular readers already know – that I hold totally opposing views to many gurus such as Suze Orman, Dave Ramsey, and Ric Edelman.

But, I do admit with great shame that I have ‘recycled’ material from Robert Kiyosaki, Michael Masterson, and Phil Town

Of course, it was very specific information, with the source, hopefully, credited

And, while I do agree that it helps to be “in the right place at the right time (luck) with the right product and enough capital”, I had to create the ‘right’ products for the businesses that helped to propel me to $7 million in 7 years,  as well as creating a market for them – without ANY outside capital – and, I had to commit to moving countries … and, putting EVERYTHING that I had on the line to get there!

[AJC: Insert favorite inspirational quote about making your own luck, here]

Oh, and before then, instead of spending my meager profits, I invested them in real-estate.

I guess we can put my success down to luck, after all

Panning for gold …

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Some minor changes to the 7million7years format:

Previously, I had been trying to post to a Monday/Wed/Thur schedule PLUS a video on Sunday. Unless I really find a video that knocks my socks off, I’m going to drop my Sunday video (for now) and shift my posting schedule to Mon/Wed/Fri each week.

I should also point out some key differences between this free blog and my paid membership site (7m7y.com): my blog (i.e. the site you are on right now) is much more ‘chatty’ and random than my membership site; my blog simply reflects my thoughts, feelings, and experiences gleaned from my own journey from $30k in debt to $7 million the bank in 7 years.

My journey – hence, what I share on this blog – is absolutely authentic and I believe that there is real gold to be gleaned simply by reading this blog 3 times a week.

IMHO, it’s the best 6 minutes that you’ll spend each week, besides your love life

I liken reading this blog regularly to wading in a shallow stream and panning for gold: stand there long enough and you get what you need and, hopefully, enjoy yourself in the process. But, don’t expect instant results …

On the other hand, my NEW membership site (The $7 Million 7 Year Wealth System) is a complete course on wealth; if you’re a regular reader of this blog you’ll immediately recognize the main modules (Finding Your Number, Making Money 101, Making Money 201, and Making Money 301) but it’s covered to a depth that this blog simply doesn’t – and, can’t – go.

And, I’m building it to be a true step-by-step course to fulfiling YOUR financial destiny.

BUT, I don’t advertise on this blog, so the only way you’ll hear more about the course, is by subscribing to my free MONTHLY newsletter – using the form in the right-hand side-bar [see right ====>].

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Speaking of Billionaires …

Where I fear to tread, Bargaineering boldly ventures; proudly proclaiming The Billionaire Secret: Avoid Ordinary Income, Acquire Capital Gains.

I won’t presume to tell you anything about being a bil-yun-air until I are one, but that doesn’t stop others from trying; Bargaineering says:

The key to building wealth is to build or buy an asset that can appreciate in value and/or generates passive income. The key to building or buying an asset that can do that is to convert your labor into capital (money). This is why saving for retirement, saving for a home, and saving in general is such an important piece of your personal finance plan. This is the billionaire secret because this idea is well understood by people who are wealthy. They see that capital gains taxes are much lower than ordinary income, that’s why Warren Buffet pays lower tax rates than his secretary. Capital gains are taxed at 15% for 2010 while the 15% tax bracket is the second lowest federal tax bracket (for those earning up to $34,000). It’s a no brainer, you want to transition, as quickly as possible, from ordinary income to long term capital gains and dividend income.

Have you ever seen those magic shows where the magician pulls some random guy out of the audience and gets him to try and copy what the magician is doing?

Presto!

The magician accomplishes some amazing feat and the other guy (gal?) ends up looking like a shmuck …

Well, that’s kind’a like what’s happening here – in fact, with most PF authors who write ‘get rich’ stuff. They are working by what they THINK they see other (real millionaires and billionaires) doing.

And, they see Warren Buffett playing with capital and saving on taxes and … presto!

“Convert your labor into capital (money)” and “capital gains taxes are much lower than ordinary income”, so “it’s a no brainer, you want to transition, as quickly as possible, from ordinary income to long term capital gains and dividend income”.

So, it’s a no brainer that you do all this (because the Billionaires DO do all of this, I think) and you’ll be standing there in 5 to 10 years as a poor shmuck.

Why?

You’ve missed the point entirely: how the trick is done, because it’s done behind the scenes … Bargaineering can’t really see it and neither can you.

Not because these billionaires are hiding anything (well, they probably are hiding at least a little) – unlike the magician who can’t afford to tell, not even once – but, because they have much more important things to do than write books and blogs.

So, from a multimillionaire’s perspective rather than a billionaire’s, let me share what I think is going on:

1. While you are trading hours for $$$ you lose

This is why I chose NOT to become a highly paid consultant, way back when I was a world expert (speaking tours and all) in my little niche. Don’t trade a limited commodity (time) for an unlimited one (money); you only have 40 to 60 hours a week to trade, no matter how much per hour you think you can pull, yet money is just bits of paper that Uncle Sam prints by the trillions.

Fortunately this one is simple: start a business; start investing … make your little bit of time and money work as hard as possible, until the money – on its own – starts to make more money for you. I think you can extrapolate?

2. Capital is better than income

But, it’s not for the tax-advantages … I don’t do anything BECAUSE of the tax advantages (for one, Uncle Sam loves to change those rules at the drop of a policy change); I simply take ‘em when they come.

But capital is a tool for creating income; it’s a little like that time/money thing. The best you can do is create your perpetual money machine: use your income to buy a little capital (real-estate is nice) which generates more income (from rents, after mortgage and other costs) which you pump back into buying more ‘capital’; repeat until rich!

Finally, Bargaineering says:

While the 2% you can get at a high interest savings account isn’t going to set you for retirement, that income represents your money working for you. The problem with this approach, at least for the long term, is that interest income is considered ordinary income. It’s taxed at the higher rate, which makes it a bad idea.

Do I really need to explain why the problem here is the 2%, not the taxation rate?

None of this get rich(er) quick(er) stuff works, if you don’t get your annual compound growth rate to infinity and beyond … well, at least to 15%+++

What it takes to be a Billionaire ….

I feel so privileged to be in the blogging company of a billionaire …

Guerrilla Billionaire [AJC: who, presumably is so humble that he doesn't even pay $12 at GoDaddy for a real domain name, prefering to use: the free one provided by Typepad ... so humble, it brings tears to my eyes] offers a course on How to Become A Billionaire.

Thankfully, he also provided a link to an article written by a guy who interviewed a REAL Chinese billionaire 5 or 6 times:

It seems that this Chinese Billionaire’s ‘secrets’ are along the lines of being humble (he started as a peasant boy), being nice to everybody (you never know when the next peasant will become your competitor, financier, or business partner), being scrupulously honest (apparently, there’s a way to be unscrupulously honest that, so far, I am blissfully unaware of), and to leave plenty of meat on the bone for others.

Of these, perhaps the last is the only ‘real’ secret that I can see in all of this (5 interviews and no secret business or money management techniques?!) … or, at least the only one (other than being honest) that I can relate to:

In my latest property development deal, I am sharing 25% of the project profit (plus a $200k fee) to my partner who is essentially doing nothing other than project management … he’s not putting a penny into these deals (I’m paying him $200k + 25% on each): I’m funding 100%.

I could hire an experienced building project manager for less than the $200k fee alone, yet I am potentially giving away millions to this guy.

Why?

Well, part’s the ‘honesty/ethics’ bit: he did find me one of the pieces of land that I aquired and pointed me towards the real multi-story condo development potential of the other (I had a much less lucrative project in mind); not to mention, he helped me with the rehab of my house.

But, that’s not quite the full story: while I don’t normally like partners – in fact, have never had one before – this is a whole new thing for me … I know nothing – nada – about property development, having always been a buy-and-hold guy. Again, I could have bought in the expertise, but that may not be the same as having somebody that I can (hopefully) trust who now has skin in the game.

We shall see if this strategy works; and – given how much I have already learned (property development is EASY) – whether I will go it alone on any future projects.

But, there’s a LOT to be said for not looking at how many beans are on the other guy’s plate: if you’re hungry, and you’re also eating beans, who cares?

Oh, as to the billionaire course, I won’t be taking it – even though I probably need an instructor for Making Money 401.

Fortunately for you, you already have a bona fide multimillionaire to guide you through MM101, 201 and 301 …

… even if I’m not very humble – at least as far as this blog, using my semi-anonymous AJC identity, goes, 

The much maligned Robert Kiyosaki

Robert Kiyosaki is famous (or infamous, depending on your viewpoint) for his break-out book: Rich Dad, Poor Dad.

Whichever way you happen to lean on this subject (and, please feel free to share!), I think that he deserves to be congratulated for thrusting personal finance back into the spotlight, and he equally deserves to be admired for his ability to parlay that first success into a personal finance publishing empire that includes 10 to 20 books, a few games, and so on.

In fact, RDPD is one of the very first books on personal finance that I ever read, and is certainly the book that inspired me to look into the field very deeply.

It’s unfortunate, then, that Robert Kiyosaki has managed to build up both a cult following and a cult anti-following (?!), neither of which I ascribe to.

Jake says, somewhat, tongue in cheek:

Ahh, so you will now renounce your belief that Kiyosaki is not a quack?

Abandon the dark side…

Actually, Jake, I’ve never commented on RK’s quackiness of lack thereof

All I’ve said is:

1.  His book – at the time – inspired me to look into the field of personal finance a LOT further.

2. I like RK’s definition of liability v asset (albeit, not technically correct, he says an ‘asset puts money in your pocket, and a liability takes money out’. Neat!).

3. I think that RK became rich because of his book, and was worth ‘only’ circa $1.5 mill. (give or take $500k) before.

I base this last assessment purely on a statement he made in RDPD (or one of his later books, perhaps Cashflow Quadrant? … I’m working from memory, here, as I have filed his book away somewhere) that he ‘retired’ to write that first book (or was it to create his board game?) on passive income of $100k p.a., driven primarily by real-estate.

That’s pretty much it!

But, and this is important, realizing that a lot of these personal finance gurus – whether well-meaning and genuine in their belief or out-and-out scammers, scoundrels, and liars – actually made their real wealth, if at all, AFTER (or because) they wrote their books …

… I firmly resolved that I would study the field of personal finance, apply what I learned, and (hopefully!) become rich in the process, THEN write about it from the standpoint of a REAL self-made, multi-millionaire entrepreneur and investor.

This blog is the result

5 Secrets Of Self-Made Millionaires

I’m a voracious reader of anything that purports to teach you how to be rich … when I needed to learn, I read everything hoping to find ‘the answer’ … and, after I made it, I continued reading (but, I must admit that I am more discerning now) mostly out of curiosity (to see what others are saying).

In both cases, I was almost invariably disappointed … hence this blog.

But, I was pleasantly surprised to read an article with a [groan] headline: 5 Secrets of Self-Made Millionaires …

… it’s actually not that bad. Not rocket-science, but not anywhere near as bad as most similar articles and books are.

Here are the 5 ‘secrets’ and my take on each:

1. Set your sights on where you’re going

T. Harv Eker, author of Secrets of the Millionaire Mind [another groan] says:

The biggest obstacle to wealth is fear. People are afraid to think big, but if you think small, you’ll only achieve small things.

Wanting to be wealthy is a crucial first step.

I obviously agree; if you don’t understand why, you must be a new reader [Hint: It's to do with discovering your Life's Purpose and Your Number / Date]

2. Educate yourself

You’re reading this blog post … and, I wrote it, didn’t I? ‘Nuff said

3. Passion pays off

See 1. above … ZZZZZzzzzzzzzzz

4. Grow your money

Well, d’uh!

But, Loral Langemeier, author of The Millionaire Maker, adds something sensible:

The fastest way to get out of that pattern [the never-ending cycle of living paycheck to paycheck] is to make extra money for the specific purpose of reinvesting in yourself.

[AJC: I would delete the last two words, which are hokum; it doesn't cost much to "reinvest in yourself" except time ... for example, this blog is FREE].

I like this part [AJC: I bolded the part that I like the best ... I like it, because I did it, too; that's how I raised the capital to expand to the USA i.e. from profits left in the business]:

A little moonlighting cash really can grow into a million. Twenty-five years ago, Rick Sikorski dreamed of owning a personal training business. “I rented a tiny studio where I charged $15 an hour,” he says. When money started trickling in, he squirreled it away instead of spending it, putting it all back into the business. Rick’s 400-square-foot studio is now Fitness Together, a franchise based in Highlands Ranch, Colorado, with more than 360 locations worldwide. And he’s worth over $40 million.

I also like:

If you want to get rich, you need to pay yourself first, by putting money where it will work hard for you—whether that’s in your retirement fund, a side business or investments like real estate.

5. No guts, no glory

If there’s any one secret in all of this, it’s this one:

Iif you are a timid mouse (like me), you either have to learn to roar (like I had to) or learn to live with a Small Number / Never Date.

Getting the Life’s Purpose ‘religion’ is one way to put the fire in your belly … it worked for me.

Oh, and they leave the best secret to last (at least the author feels it’s the best), which is funny because this would then be Secret # 6:

The Biggest Secret? Stop spending.

I agree with everything AFTER the ‘?’ above

If you don’t have the money to invest, don’t spend … it’s simple!

But, I don’t agree with this:

Every millionaire we spoke to has one thing in common: Not a single one spends needlessly. Real estate investor Dave Lindahl drives a Ford Explorer and says his middle-class neighbors would be shocked to learn how much he’s worth. Fitness mogul Rick Sikorski can’t fathom why anyone would buy bottled water. Steve Maxwell, the finance teacher, looked at a $1.5 million home but decided to buy one for half the price because “a house with double the cost wouldn’t give me double the enjoyment.”

Don’t believe that Millionaire Next Door cr*p; some multi-millionaires are frugal – even some Billionaires (most notably Warren Buffett) – but, don’t be fooled into believing that’s the majority of multi-millionaires:

I have a friend who works for a 35 year old Russian immigrant who is now a hugely successful hedge fund manager (yes, he’s survived the GFC as far as I know. I’ll check when I’m on Safari in South Africa with my friend later on this year); my friend overheard him explaining to his daughter that he was going to take the family jet to a business meeting, so she would need to fly on a commercial airliner with her mother to get home from their vacation.

This is what he said to his daughter: “You know that there will be people you don’t know on that plane” … at 8 years old, she had never flown other than by private jet!

Another friend works in MLM and had breakfast with that company’s # 1 distributor – a nice, young lady. She receives a $600,000 check every month. She just bought a mountain in Colorado and a special tractor, so that she could grade her own private ski run.

I hope she puts a lot aside for a rainy day; gives overly generously (money and time) to charity and those in need; and, joyfully spends the rest!

I have a simple rule: spend freely, when it doesn’t make sense not to.

Think about that, and let me know what you think it means …

Would you donate your last penny?

They say that the will to give – to donate – generously is governed by a gene. 

For those readers in – or approaching – MM301 (i.e. you’ve made your millions, now you are struggling with what to do with it), I want to test that gene to its fullest, by asking you a question:

Would you donate your last penny?

I can honestly say that I would not …

Which brings me to a related topic: it seems that many people who come into money take a chunk of it to donate. Perhaps to have the wing of a school named after them, or to do some other ‘good works’.

Whether the sum is $1,000,000 or $100,000 or $10,000, when donating what you consider to be a large sum, think about what you are really donating; you are not merely donating $1,000,000 (or $100,000 or $10,000), you are donating the future value of $1,000,000:

Let’s say that you plan on living for another 40 years, and you can invest your money at 5% above inflation, then the real value of your donation is not $1,000,000 but more than $6.7 million!

[AJC: if inflation runs at 4%, and you can get an average return of 9% over 40 years your $1 million will grow to almost $29 million, but inflation takes away a huge chunk of it!]

When thinking about donating that $1 million [AJC: The Cartwood Family Wing does sound tempting], I’m not really thinking too much about that $6.7 million [AJC: or, $28.8 million ... ounch!], I’m actually asking myself:

Would I donate my last $1 million?

You already know the answer to that

But, why?

If all goes belly-up in my financial life, I really may have just given away my last $1 million … in other words: if I lose $6 million, I am now broke (since I already gave away the 7th million of my 7m7y).

That’s why I would never donate a lump sum … instead, I would invest that $1 million for the benefit of charity. Further, I would not even pledge the capital or the income stream in advance, I would simply make the requisite donations annually and anonymously.

It may not get my name ‘in lights’ [boo hoo]; it may not help the charity with capital acquisitions; and, it may not be the most tax-effective method of donation (compared to, say, charitable trusts and the like), but it will help both the charity and me, long-term:

1. The chances are that I can invest $1 million far better than the people running the charity can [AJC: after all, I've made 7m7y]

2. It’s likely that the charity – or, some other equally worthy casue - can use $6.7 million more than they can use $1 million, albeit spread over 40 years; but, I admit that I’m just making a wild guess that the world will need philanthropy for at least the next 40 years.

3. If all goes belly up, and I end up becoming the one in urgent need of ‘charity’, I can ‘donate’ my last million (at least the income thereof) to myself and my family.

4. When I die, if I feel so inclined, I can finally donate either the asset or the income stream (or both) to the charity as I will no longer require it as insurance for myself. On the other hand, I may choose to pass it on to my family and let them decide.

I guess nobody will be talking about “AJ Cartwood, the great AustraloAmerican investor, raconteur, and philanthropist” … at least, not during my lifetime

What would you do with $5 million … or $50 million?!

Even if you are NOT a poker fan, scroll forward to exactly the 5 minute mark (once the video has had a chance to buffer) to hear Kara Scott ask some poker young – and, old – guns what they would do with $5 million (or, $50 million) …

… you might be surprised how little it seems to mean.

But, if I asked you the same question, you would [AJC: I hope by now] instantly answer:

That’s easy, I would [insert: Your Life's Purpose]!

But, if you want to understand why these guys are seemingly so relaxed/flippant about $5 million (or, even $50 million for a couple of them) you first need to realize that the question actually means: “what would you do with another $5 million?”

So, it shouldn’t surprise you that my answer would equally be:

Nothing special …

… it would simply make me a little more comfortable that I could live my Life’s Purpose, since I’ll just buy another $5 million of [insert Perpetual Money Machine of choice: 100% paid for by cash real-estate; annuities; TIPS; bonds; etc.; etc.] and live off 75% of the net proceeds.

The Formula For Wealth!

Oops, I made a couple of mistakes, and one of the millionaire ‘success factors’ that I believe in is to admit your mistakes, make restitution as best you can, and then move on.

My first mistake was taking a hot chilli from one of the tradesmen working on my house; I told him it was fine, but a minute or so later (when I was already in my car on the way home) it really hit and I was suffering for another 10 or 20 minutes. I decided that appropriate Restitution for this one was simply the embarrasment of ‘coming clean’, so I had to go back and tell him I’m not a real man, after all

My second mistake was making a promise to the 7million7years who applied (and, were accepted) for my new 70 Millionaires … In Training! program that resulted in me (a) reducing the number of Foundation Members to 40 (was meant to be all 70) and (b) charging them $1 a year (it was meant to be totally free for life). We agreed that appropriate restitution was to donate $5 to a worthy charity for each Foundation Member ($5 x $40); I decided to do it for all 70 charter members (Foundation Members, plus full paying Premium Members) hence the receipt, above.

You gotta admit your mistakes and keep your promises …

__________________________________

The 7million7year approach is not to measure wealth by the amount of money that we have, or some arbitrary sum that we might wish to have, or even some really complicated ‘secret formula’, but to measure wealth by this simple formula:

Where RequiredAnnualIncome = f { LifePurpose }

[AJC: which simply means that your Required Annual Income is some Function of Your Life's Purpose i.e. they are -or, at least, should be - totally related!]

You are wealthy, in 7million7year terms, when:

“Wealth Factor” Wealth < 1

Or, you can just go by Ill Liquidity’s formula:

Let E be earn and S be spending. If E E QED. The latter part of the statement is redundant. What about “if you can finance it you can own it?”

I finance therefore I can?

Casting Call: 70 Future Millionaires Wanted!

So far, this blog has covered - in a random way - perhaps 10% – 20% of what I have to offer, and over the next 2 years you can expect that to double again … so, if you can wait 4 or 5 years (and, can unscramble the order that I deliver this content in) you will know at least half of what I have to offer.

IF you can wait …

But, now I am offering another way to learn what you need to learn – quickly and in a totally ordered/guided way – AT NO COST TO YOU … NOT NOW … NEVER … EVER … really

Why?

It’s another way for me to share my ideas … and, more fuel for my next book [AJC: my first one is finished and is being hawked to publishers and agents as we speak]

So, what’s this all about?

If you have been around – reading this blog – for the past two years, you will already know about my Other Site, which was host to a unique online experiment where a real multi-millionare (that would be me) offered to mentor just 7 people to make their own fortune.

Scott, Ryan, Josh, Debbie (who volunteered to leave the program to help me write a book about their experiences with this experiment), Jeff (who replaced Debbie), Diane, Mark and Lee (a retired Police Chaplan!) all participated and you can read about their experiences on that site.

If you are a regular reader of this blog, and meet a couple of very small criteria, ALL of this content is – and, will always remain - free to you!

But, I am offering you even more .. also for free / for ever …

You see, I am opening up this site to just 70 more Millionaires … in Training! and, will be offering memberships to qualified applicants for a small monthly fee … but, not for you – as a reader of this blog, I feel morally obligated (seriously!) to keep my promise that I would NEVER ask you to pay a dime for my online services.

This won’t stop me from advertising the hell out of this re-launched site elsewhere, looking for paying customers … but, NOT HERE.

[AJC: This is about as good an offer as you will ever receive in this life, so maybe you should take advantage of it]

Foundation Membership (this is exclusive for the first 70 QUALIFYING $7million7years readers) is just like the Premium Mmbership that others will need to pay for – but, you get it for LIFE and for FREE.

Joining will enable you to find:

EXACTLY how much money YOU need in order to be rich [hint: this will be different for everybody]

WHEN you need to stop working full-time and WHAT you will be doing with your new-found freedom

WHAT steps you need to take in order to amass the fortune that you need

HOW to find your passion and turn that into cash

Most importantly, you will find THE ONE THING – more than any other – that helped me move from $30k in debt to $7 million in the bank in just 7 years … and, how it is virtually guaranteed to work for you.

This is no scam or Get Rich Quick system that tells you how to invest in real-estate, stocks, online businesses, or any other method that made the author rich [or, was it just selling you the information that made the author rich?!] …

… no, this is a NEW and UNIQUE Guided Learning Experience that will show you how to get as rich as you need to be, doing whatever it is that you are most passionate about.

Haven’t found your passion?

Don’t worry, that’s one of the first things that we will cover

If you want to become one of the 70 Millionaires … In Training! click here now, before 70 others jump in ahead of you!

Still reading?

There’s nothing more to know!

Just click the button … I’m offering you – just 70 of you – the Keys To Willy Wonka’s Chocolate Factory, perhaps you shouldn’t look a gift horse in the mouth?

Good Luck!

Adrian.