Category Archives: Starting Out

The Perpetual Money Machine begins to wind itself up!

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I’m about to find out if I can make money on-line … read the latest installment (just posted) here!

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Your Perpetual Money Machine begins to wind itself up (in the case of selecting RE as your ‘income capacitor’) simply when the property portfolio that we discussed on Wednesday becomes cashflow positive …

… this is a critical point in time, because now we can exponentially accelerate the size of our pool of capacitors!

Now, we can take our 15%++ (continually growing as our income stream continues to grow) and ADD the excess cash spun off by our profitable property portfolio (assuming that we selected real-estate, as our ‘income capacitor’ i.e. storage device for money) …

…. this ALL goes into: new properties!

Now, Scott is building a whole bank of financial ‘income capacitors’ …but, for what purpose?

Aah, until the point in time that the income from these ‘capacitors’ is enough to replace Scott’s income from his inventions and movie royalties!

If you have been following the process, this can happen surprisingly quickly (5 to 10 years) IF the income stream that Scott is seeding with is large enough to purchase large ($1 million+ each) commercial properties.

If residential (incl. larger multi-family) you can expect it to take a little longer, as these tend to start more cashflow-negative, or grow too slowly.

At this point in time – assuming that the income-replacement is sufficient to satisfy Scott ‘forever’ (if not, keep working/building a few more years) – we have our Perpetual Money Machine!

You see, the real-estate will continue to grow, even if you no longer continue to ‘seed it’ with more income … in fact, it will grow (on average) at least according to inflation, producing an income that also at least grows with inflation (even allowing for keeping 25% aside as a buffer against repairs/maintenance/vacancies/etc.).

Scott can spend that entire income with impunity, knowing that his capital is never at risk … just like cash in the bank, only better because the capital also grows (at least) with inflation …. provided that your outlook is long enough.

On the other hand, if Scott chose to put his money into Berkshire Hathaway stocks, instead of the real-estate portfolio that we discussed here, which have grown at 21% compound for the past 20+ years (although, not even Warren Buffett suggests that that rate of growth will continue), then Scott can simply sell down enough stock each year to fund the next year’s income.

Different tool, hopefully a similar result …

In either case, when Scott’s royalty income stops, his Perpetual Money Machine seamlessly and automatically takes over.

Nice for some 😉

PS The mechanical/electronic Perpetual Motion Machine is impossible in physics (although, quantum mechanics may provide a solution) … the one depicted in the image above was built in 1996 and resides in a vault in a Norwegian gallery: it once ran as long as 14-days in a row without stopping … hardly ‘perpetual’ but pretty, damn good!

Debt snowballs, avalanches, meltdowns …

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I’m about to find out if you can make money online!

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FREE eBOOK

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(well. free to readers …. come on over and see my new blog to see what all the fuss is about)!

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Now for today’s post …

There are three basic ways to deal with debt:

1. Sweep it under the carpet and hope it goes away … pretty much the middle-class American mantra

2. Peck and poke at it … barely keeping it under some sort of control

3. Systematically demolish it … the subject of this post

The methods for ‘demolishing’ debt basically all have to do with snow (Why? No idea!):

a) Snowballs – where you deal with the little guys first in order to ‘psych up’ with a few, quick wins

b) Avalanches – where you deal with the high interest debts first, so your debt repayment strategy builds up momentum

c) Meltdowns – where you try either of these methods (or some other way) and fail mid-stream

The Debt Avalanche, nicely described (and named!) here is mathematically the best way to deal with eliminating all debt. I also covered this method in a recent post.

As I said in that post, it stands to reason that if you tackle the high interest debts first, you lower your overall interest bill – hence debt. Therefore, you pay the lot off quicker …

… but, not much quicker as Dave Ramsey is quick to point out:

He says that the debt snowball isn’t terribly slower at paying off debt, but has a psychological advantage of allowing some quick ‘wins’ … by ordering your debts from smallest to largest and paying off the smaller ones first, you get to see the results that will hopefully sustain you as you start to tackle the larger debts (also, you are applying larger and larger amounts to each debt, as you have fewer and fewer ‘minimum payments’ to maintain as you go along … but, this is true with both methods).

Then you have the ‘Debt Meltdown’ aptly described by Diane, one of the Final 15 on my 7 Millionaires … In Training! ‘grand experiment’:

I’m in such a financial mess that I am working on 101 and not sure I’m going to survive that at times.  But I should.  I know I make a lot more money than many folks.  I shouldn’t be in this situation.  I could probably go back and show how it crept up because I was down to about 2k in debt, at 1.9% interest rate (sans the student loan), before I bought my house 2-1/2 years ago.  I’ve got 30k in debt now roughly and some months lately am not sure how I am going to meet all of the must-pay bills.

This is typically what happens when you start on any debt repayment schedule and something ‘comes up’ …

Diane should have stayed the course until all debts were paid off then bought her house, ensuring that her total mortgage wasn’t any more than the total monthly debt repayment schedule … if less, she should have applied the balance to her investment strategy (if she didn’t yet have an investment strategy, then she should have started that before considering the house).

All Diane can do now, is start a Controlled Meltdown …

… anyway, of all these methods, I actually like the Controlled Meltdown best  – and, for that to work you actually need to begin with the Debt Avalanche:

1. Order all of your debts from lowest interest rate to highest (regardless of size … if you have two debts at the same interest rate, tackle the smaller one first, just to please Mr Ramsey)

2. Decide how much each month you are going to apply to debt repayment (min. 10% – 15% of your net salary … after contributing to 401k … sorry no Starbucks, movies, or sushi for you!).

3. Pay the minimum on all of the debts except the one that you are tackling (always the highest interest rate loan that you have left). Put all of the rest of that month’s debt repayment into this ‘high interest debt’.

4. Repeat until …

[AJC: and, this is where a Millionaire … In Training! differs from the ordinary folk]

5. The interest rate on the remaining loans is lower than the return that you can get by investing your money elsewhere (buy some real-estate, leverage into some stocks, start a little business) … just remember not to accumulate any more debt and keep repaying the minimum on the ones that you do have.

6. Also, don’t forget to tie the investment time period to the loan: let’s say that you have a student loan at 2.9% that must be repaid in 2 years … make sure that you can sell (or refinance) your investment to pay it back: the student loan is acting as a proxy for your investment loan, so don’t get caught out.

This is the fastest method because you don’t need to pay off all of your debt right now!

The Controlled Meltdown (patents pending) recognizes that being 100% debt-free is not a useful financial goal; being 100% financially-free is … and, to achieve real financial freedom, you are going to need some well-directed debt to help you accelerate you Net Worth to the point that it indefinitely sustains you.

Your existing ultra-low interest rate loans are a great place to acquire that debt …

… because you already have them and just need to redirect that debt towards good rather than evil 😉

Jack somebody …

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My 13 year old son sent me this YouTube video from “Jack Somebody” …

… it’s Jack Canfield (Chicken Soup For The Soul author) talking about the 4 steps to getting rich (I’m not so sure about Step 2).

Step 1 is what we have been covering for a number of weeks on http://7m7y.com, my site devoted to making 7 Millionaires … In Training! (and, as many of you as want to follow along!) as rich as they need to be.

Chicken Soup for your Wealth, indeed 🙂

According to this, I'm financially dead!

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I came across this financial health check on an Australian government web-site, and I must admit that the test itself is sound  and you should try it NOW at this link before reading on …

dum di dum di dum [waiting music]

Finished already? It’s a quick one …

… did you see how it provided useful links to basic Making Money 101 reading material for any question where you may not have selected the ‘best’ answer? Nice, huh?

But, if you’re an avid follower of Personal Finance books and blogs, the answers may have seemed a little obvious … and, you may have even disagreed with a couple.

Let’s see:

As you know by now, my purpose for sharing this type of basic PF ‘wisdom’ on this site is to show you exactly why so-called conventional wisdom fails because it is almost always designed to deliver a conventional result … but, we aren’t satisfied with merely achieving conventional results, are we?!

So, here is the test – reproduced, with the most obvious answer bolded (I haven’t checked the test results to see if they agree … these just seem the most obvious answers to me) – but, I didn’t say it was the ‘right’ answer 🙂

I have added my comments underneath each question:

1    Do you save any of your money?
a) Yes. I try to put some aside for bills.
b) Yes. I keep a bit back from each pay because I am saving for something I want.
c) Of course I save, to pay for bills, to buy things I want, for a rainy day and for my retirement.
d) It would be nice to have enough left to save.

For me, the answer was None of The Above: since I have transitioned (almost) from Making Money 201 to Making Money 301, it is calculating the correct amount of ‘safe monthly withdrawal’ from my ‘nest egg’ that determines that I have enough for bills, to buy things, and for a ‘rainy day’, as I am already retired. Unfortunately, if you don’t do this calculation well (in my case, 7 years, but for most people 10 to 20 years) before your expected retirement, your nest egg simply won’t be enough to support your intended lifestyle.

2    Do you keep track of your money?
a) No, I have a life.
b) My bank statements help me do this.
c) I have a rough idea of where my money goes and where it comes from.
d) I have a budget plan.

I have a confession to make: I have NEVER kept track of my money. This is a fault but, contrary to conventional financial wisdom, actually not wealth threatening unless, one of the potential disasters (that  will point out in a future) post does occur. So, while conventional wisdom says to have a detailed budget plan that you should stick to, I have found that when I was ‘poor’ and when I was ‘rich’ a “rough idea of where my money goes and where it comes from” is sufficient.

3    How much do you pay towards your credit card accounts each month?
a) As much as I can.
b) I can’t always make the payments and sometimes use one credit card to pay off another.
c) The minimum amount.
d) I only borrow money for something I really need and when I am sure I can keep up the              payments.

The answer here, for me and for everybody, should be None of the Above: if you cannot pay your credit card balance off IN FULL each and every month, don’t use it. That was our policy through financial ‘thick and thin’ and it should work for you. As for borrowing to buy ‘stuff’ … don’t! I remember that we took ‘advantage’ of an interest-free purchase once …. it was a pain in the rear-end to keep up with the payments (they want you to, so that they can kick in the ‘fine print’ excessive interest payments) and we didn’t do it again … neither should you.

4    What would you do with a windfall?
a) Pay off my bills and put some money towards my loans.
b) Buy something I really need.
c) Save it.
d) Spend it.

The answer here is both All of the Above and None of the Above and deserves its own post; but, for now: Reserve whatever your accountant says that you need to pay any taxes on the windfall; then take 5% to 10% of what’s left and spend it like a crazy gorilla (go ahead … don’t be a miser); then if you owe money (on consumer loans), pay those down until there’s either no loan left or no windfall left (there are exceptions); then put aside 50% of the balance for investments; then pay cash for something that you really need (do you REALLY need that car? If so, go ahead and buy it!); then invest whatever is left. Notice that this only makes sense if you do it in this exact order 🙂

5    If you were in the market for a new car and loan what would you do?
a) Shop around for the best deal for both the car and the loan.
b) Take advice from a friend or family member.
c) Find a car I like and get the finance wherever I can.

None of the above: In ANY stage of my financial life I’d pay cash for less car than I want. Period.

6    Will you have enough money when you retire?
a) I am far too young to worry about this.
b) I have superannuation and I am pretty sure I’ll have enough when I retire.
c) I have made sure that I’ve got a plan and I know I’ll have enough when I retire.

Of course the answer is c) and we have the plan all laid out for you (the exact, same planning process that I followed) on http://7m7y.com … find it, read it, do it!

7    Would you be protected if your house burnt down?
a) I don’t know if I’m insured or not.
b) I am fully insured.
c) I have some insurance but I am not quite sure what is covered or the level of that cover.

Of course, your answer must be b), but, when you have enough money, why pay somebody else to carry the risk for you? So, while I was on my journey I carried a sh*t-load of insurance, including millions of dollars in life/trauma cover. Now, I carry a $20k deductible on my contents cover; full house/building insurance (a $1 mill. house fire would hurt at little); no personal life/trauma insurance – we do carry health insurance because with a young family we don’t know what will come up and it saves us carrying large chunks of cash … but, we could just as easily ‘self-insure’ this, too.

8    If you received a large bill for car repairs how would you pay for it?
a) Withdraw the money from my savings or take out a loan and work out the best way of paying it back.
b) With my credit card and pay it back sometime.
c) From a special account I keep for emergencies.

For me, the answer is always b) – plonk it on my credit card then pay the bill in full when it comes up … we always have enough cash on hand (not as an emergency fund) because it’s hard to be always fully-invested (in the current market, having cash on hand IS an investment!). My thinking for you, though, differs from the conventional answer that is bolded: I think the correct answer is a) and have already posted on this.

9    What would you do if you received a phone call offering you a chance to make big money with a new investment opportunity?
a) Take up the offer, no one becomes rich without taking risks.
b) Consider it carefully and seek qualified advice.
c) Ignore it. It is unlikely that anyone would make such a good offer unless there is a catch.

I think that most people would say b) but I think that the people who created this questionnaire agree with me that c) is the correct answer: by the time you see, read, hear, are told about, given a hot tip on, read in the tea-leaves, had a vision about ANY investment, it’s already too late for YOU to make money on it! Sorry, that’s just the way it works …

10    If you lost your partner are you sure your family would be OK financially?
a) My partner is too young for me to worry about this.
b) They will be OK as I have ensured that our finances are in order.

OR
c) I am reasonably sure they will be OK as I have some insurance.

For most people the answer is a combination of b) and c) … from the way the question is written, b) is the ‘obvious’ answer, though. The only correct answer is b), though, as insurance becomes less and less important as you build up your own financial reserves … until you reach that point, insurance is really PART of making sure that your ‘finances are in order’ anyway.

Did you find it as interesting as I did that in many cases the ‘correct’ answer wasn’t even one of the options provided?

If you also noticed this – while you were doing the ‘test’ for yourself, and before I pointed it out – then you have a real chance to be an ‘unconventional financial success’, too 🙂

Is this what a transition to Money 201 should look like?

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I received a message from Ethele, a fellow Networth IQ member.

I love this question because it is a chance for me to review all the basics of the 7million7year Philosophy – so new reader, or ‘old hand’, I encourage you to really study this post and all the links that I have included!

Ethele asks:

I was wondering if you can give me some feedback on my plans for moving from Money 101 to Money 201.  At worst, I figure I’ll learn I was silly to ask 🙂  I’m still in the early 101 stages, but want to build a good plan for moving to 201 so I am ready to take advantage of opportunities as they arise.

Our situation:  I only recently got out of debt and bought a house.  Due to the expensive area we live in where the bubble bursting hasn’t been felt very strongly, we spent $370,000 on our home.  We got a 0% down loan, and are paying PMI.  Our NetWorth is currently growing by $1.7K / month, mostly from my J.O.B. I am 25, married to a stay-at-home-parent, with two kids.  Seeking an additional income from my husband isn’t a sensible move right now (he’s anti-J.O.B., has low earning potential, and is not very ambitious), but I am hoping to get him involved in our Money 201 strategy when we get there (and after the kids start kindegarten).

My current plan for getting through 101 is:
1.  Build a small 2 month emergency cushion (by 2009) and invest 6% income into a 401(k) to get the employer match (6 months)
2.  Pre-pay on our mortgage until we have 20% equity in our home (about 4.5 years with current rates of extra income – but will probably be accelerated by raises and bonuses).
3.  Refinance our home, get rid of PMI, lower our payments.
4.  Grow our cushion so we have 6 months expenses (should take about 6 months or less) and can take risks.  Maybe have this additional cushion money do some light work, but nothing too risky.
5.  Start investing our extra income (I’m still fuzzy on how – index funds?  Risk just means we might stay in 101 a little longer – or less long, if we get lucky) and grow until we can invest in a Money 201 strategy – leaning towards rehab / flipping or a rental property, so probably 20% down plus a little more to invest somewhere besides real estate.  This will probably take another three years or so.

Is this what a transition to Money 201 should look like?

Firstly, I responded to Ethele to let her know that I can’t give direct/personal financial advice: (a) it’s not legal – I am not a licensed financial adviser, more importantly (b) how could I possibly have enough information from just one e-mail to know enough about Ethele’s capabilities, hopes, desires, and true financial status to make any reasonable recommendations?

But, I can make some general observations that may assist us all:

Making Money 101 is the basic stage of getting your personal financial house in order … it is the ‘meat and potatoes’ of almost all personal finance blogs that I have read, so why would I bother to even talk about it here?

I agree!

If your plan is to work your entire life; save only via your 401k and buy (then pay down) your own home aiming to retire on $1 – $2 Million when you are 65 then you need read no further.

However, I feel that my audience wants more … they have a ‘big dream’ … they want it now (well, soon’ish) … and it requires fuel – lots of it (money!) – and lots of free time, to boot!

If that’s you, Ethele, then we DO need to revisit Making Money 101 in this blog, because we need to explode some of the myths that will hold you back from your goal of being rich … even before we get to Making Money 201.

Myths like: building a cash emergency fund; paying down our mortgage; diversifying through Index Funds.

So, Ethele, if you are planning to Get Rich Slowly, this isn’t the blog for you … and your plan looks excellent!

However, if you are planning on getting rich(er) quick(er) then you are still on the right track, with a few somewhat controversial tweaks that you may want to consider:

1. Do the math on the 401k + employer match against what you can achieve elsewhere. I have no problem with any answer that you come up with.

2. By all means keep a couple of months of expenses in the bank, but can you find something better to do with 6 months worth of expenses than having it just sit in CD’s: Can you pay down consumer debt? Can you put down a deposit on an investment property? Can you finance renovations to increase rent on something you already own?

3. Can you find a better investment than a diversified Index Fund (by all means use this option over bonds / Mutual Funds, if that’s all that’s available to you inside your 401k)? Maybe Rule # 1 Investing by Pete Town will get you interested in the stock market, or you can consider some of the real-estate options mentioned in #2., above?

4. Does your house fit into the 20% Rule? This is not a measure of % equity that you hold in your own home, rather a measure to ensure that you are always investing at least 75% of your net Worth (as measured by Networth IQ), allowing 5% for other purchases (cars, furniture, etc.).

By doing this, you are indeed transitioning to Making Money 201 … are you sure you need to – and are mentally ready to – make that transition?

So, for all the Etheles out there, food for thought?

Age is NO obstacle!

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Applications for my 7 Millionaires … In Training! ‘grand experiment’ are now closed. I will be announcing the Final 30 Applicants this Thursday at 8pm CST on my Live Chat Show … if you want to follow along, I will also be announcing the next Millionaire Challenge! This will help me decide the Final 15 … now for today’s post:

It seems that blogging and personal finance is a ‘young man’s game’ …

… not so!

At least, not according to Lee, who was yesterday’s Featured Applicant for my new 7 Millionaires … In Training! ‘experiment’.

You can read Lee’s story on the 7m7y site, but I wanted to share the following with you:

Lee is a ‘tad’ older than me 🙂 and is an e-mailer, emoticon’er, and … a blogger. Go Lee!

Whether Lee joins our program from the front-lines or the side-lines, he will succeed because age is NO impediment.

Here are two related stories:

1. There’s an old ‘urban myth’ that says that a retired ‘colonel’ with no money and no prospects at the age of 70 left for a journey across the USA, living out of his car! All he had was an old family recipe for chicken that he wanted to ‘licence’ to restaurants. 1,000 restaurants and 2 years later, all he had was a trunk-full of “no, thanks!”.

Then restaurant number 1,001 said “yes!” … and, that’s how Colonel Sanders came to launch Kentucky Fried Chicken (now, KFC) …  or so the story goes!

His actual story is a little less ‘dramatic’, but I really feel epitomises the path that people like Lee need to (and, can) take:  ‘The Colonel’ actually started at the age of 40, cooking chicken dishes for people who stopped at his little gas-station in Kentucky. 

At the time (he wasn’t a ‘Colonel’ yet) he did not have a restaurant, so he served customers in his apartment at the gas station!

Eventually, his local popularity grew, and Sanders moved to a motel/restaurant that seated 142 people where he just worked as the cook. Over the next nine years, he perfected his method of cooking chicken. Furthermore, he pioneered the use of a pressure-fryer that allowed the chicken to be cooked much faster than by pan-frying.

He was given the honorary title “Kentucky Colonel” in 1935 by the Kentucky State Governor. Ever the ‘salesman’, Sanders started to call himself “Colonel”, even dressing in the stereotypical “Southern gentleman” outfit that we are now used to seeing; he was the consumate marketer!

After the construction of a major highway bypassing his town reduced the restaurant’s business, Sanders had to leave so he took to franchising Kentucky Fried Chicken restaurants, starting at age 65, using $105.00 from his first Social Security check to fund visits to potential franchisees.

To me, that’s the real story: a 65 year-old fry-cook funding a franchise from Social Security!

2. The second story is a little more personal … highlighting the moment when I can remember being most proud of my own father.

It was my 30th Birthday and my father was at my Surprise Party (I am so thick, I didn’t notice all the cars on the street, the late arrivals hiding behind the trees, or even the balloons when I walked in … boy, was I surprised!) happy as a Dad can be.

The next day he told me that it was on the day of my party that he had been fired from his job – what made it worse was that he had been ‘stabbed in the back’: it was a finance company that he helped start for a ‘friend’, who (once my father had done all the hard work to get the company up and running with a solid book of business) reneg’ed on their deal to pay my father a 33% profit share.

Just two weeks later, at the age of 60, my father had found an ‘angel’ for seed funding and a bank for the major funding and was off and running … a feat that I was (fortunately) able to repeat just a few, short years later (and, unfortunately that I HAD to repeat … but, that’s another story).

Lee, age is NEVER an obstacle …

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Meet the applicants!

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7 Millionaires ... In Training! 

Recently, I sent out a Casting Call for what I call my Grand Experiment … a real attempt to create 7 Millionaires in just 7 Years!

My desire is to ‘prove’ that my methods for real wealth are replicable – naturally, not by everybody, but by anybody with a dream, a desire, a will, and a way. If you supply the first three, I will help light the way …

I am surprised, not to mention a little humbled, by the fantastic response, just from my own readership base (supplemented by a few mentions in other blogs, even though I haven’t yet ‘announced’ this project to the blogger community or the wider-media).

Starting today, I am going to feature some of the best applicants … and, I will announce my short-list early next month at 7m7y.com

Now might be a great time to sign up for regular e-mail updates – that way, when something does happen, well you’ll be amongst the first to know! You can sign up by clicking here:

Subscribe to 7 Millionaires … In Training! by Email

Whether you choose to apply … whether you are selected to become one of my 7 Millionaires … In Training! or not … I hope that you will join in this Grand Experiment by reading and commenting (we want YOUR advice!) and by participating in the various activities that will be going on …

Now you have two free blogs to help you reach your full financial potential … Good Luck!

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The one question that you should always ask when it seems too good to be true

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I’m only 4 months into this blogging thing, but it has already broadened my horizons.

For example, here’s a blog that may not normally have made it to my ‘must read list’, but the guy is quite funny. I found him because he left a comment on one of my posts (it’s the one with the Mad Magazine, Alfred E Neuman avatar) … seems this is the way that blogs work.

[AJC: Leads me to wonder if the only people who read/comment on blogs are other bloggers?]

…. there is a [admittedly, small] finance point to this, so stick with me.

I saw this post on his blog: Why Don’t Psychics Win The Lottery? 

Here’s an “oh, so true” snippet from his post:

Being able to tell the future and predict events should give all Psychics the ability to become rich beyond their wildest dreams. So why aren’t they?

They should be able to win the lottery, predict stock market gains and losses, predict business trends, and win in Vegas–big time. With this knowledge, they should be able to run circles around experienced financial advisers.

This caught my eye, because about a month ago, my wife and I went to a charity event (my wife was one of the organizers, so I had to go … damn, hate those events), an event that just happened to have a semi-well-known ‘mind magician’ (a.k.a. a mentalist or psychic).

Apparently, he’d been on TV …

He was quite good and managed to guess a friend’s chosen number (it was 99) as well as a bunch of other, non-numeric stuff. Now, we all know that these types of shows are all staged and the people on the stage are all ‘stooges’, right?

Well, that’s what I assumed until … wouldn’t you know it, he called my wife up to the stage.

Now, my wife is nobody’s stooge and I have the bruises to prove it 🙂

Apparently, she does have a ‘thing’ for George Clooney … the psychic guessed that – but, I didn’t know it (time for that face-and-body-lift for me … pronto!). He also guessed her ‘number’ (it was  63).

Does that make him a psychic … perhaps. Are my wife and her friends ‘new believers’ … absolutely!

But, not me; I like to apply the ‘common sense’ test to these things … the questions that I ask are simple:

1. How many digits can this guy correctly ‘read’ in one night?

Looks like 4 digits per night at 100% accuracy, from what I saw.

2. How much did he get paid for this extraordinary feat?

Not sure, but it was a local charity event (it wasn’t Vegas), so I’m guessing a few hundred bucks.

3. What would I do if I were this guy?

Now isn’t this the Litmus Test question; the one that we should always ask when confronted with a seemingly ‘too good to be true’ situation?

If I were this guy, I guess I would go to Switzerland, and stand outside a bank for a few days … waiting for one of those mysterious looking men going into their equally mysterious looking bank to access their really, really mysterious ‘secret bank’ account using only their 10 digit access code, conveniently committed to memory.

If I could guess 4 digits per day at close to 100% accuracy, then I’m pretty sure that I could guess 10 digits, if I stood outside the bank for, say, a week and made at least 3 or 4 attempts … I might need a couple of different fake moustaches

I wouldn’t net a few hundred dollars in a night, I would net the $1 Bill. or $2 Bill. sitting in some chump’s secret bank account in a week.

So, our psychic … real or not?

Your answer probably dictates whether you have any chance of making some serious money in your life … because so much of financial success [AJC: see, I promised a ‘financial’ point] depends on being able to apply simple, perhaps ‘uncommon’ sense to sort out the ‘too good to be true’ from the ‘thank god it’s true’.

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Maybe Dale Carnegie was on to something?

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In his famous book, How to Win Friends and Influence People (first published in 1936), Dale Carnegie – the great public speaker, personal improvement trainer, and prolific author – showed that success very much hinges on your ability to ‘influence people’.

In fact, as I think back, my greatest successes have been with people who have liked and admired me … and my greatest challenges have been with those who haven’t.

You can invent the greatest mouse-trap in the world, but nobody will beat a path to your door if they smell a rat 😉

This is Dale Carnegie’s summary of his own book; apply some of these ideas and you will succeed in life.

Remember, no matter what you do other people are the key to your success:

Part One

Fundamental Techniques in Handling People

  1. Don't criticize, condemn or complain.
  2. Give honest and sincere appreciation.
  3. Arouse in the other person an eager want.

Part Two

Six ways to make people like you

  1. Become genuinely interested in other people.
  2. Smile.
  3. Remember that a person's name is to that person the sweetest and most important sound in any language.
  4. Be a good listener. Encourage others to talk about themselves.
  5. Talk in terms of the other person's interests.
  6. Make the other person feel important - and do it sincerely.

Part Three

Win people to your way of thinking

  1. The only way to get the best of an argument is to avoid it.
  2. Show respect for the other person's opinions. Never say, "You're wrong."
  3. If you are wrong, admit it quickly and emphatically.
  4. Begin in a friendly way.
  5. Get the other person saying "yes, yes" immediately.
  6. Let the other person do a great deal of the talking.
  7. Let the other person feel that the idea is his or hers.
  8. Try honestly to see things from the other person's point of view.
  9. Be sympathetic with the other person's ideas and desires.
  10. Appeal to the nobler motives.
  11. Dramatize your ideas.
  12. Throw down a challenge.

Part Four

Be a Leader: How to Change People Without Giving Offense or Arousing Resentment

A leader’s job often includes changing your people’s attitudes and behavior. Some suggestions to accomplish this:

  1. Begin with praise and honest appreciation.
  2. Call attention to people's mistakes indirectly.
  3. Talk about your own mistakes before criticizing the other person.
  4. Ask questions instead of giving direct orders.
  5. Let the other person save face.
  6. Praise the slightest improvement and praise every improvement. Be "hearty in your approbation and lavish in your praise."
  7. Give the other person a fine reputation to live up to.
  8. Use encouragement. Make the fault seem easy to correct.
  9. Make the other person happy about doing the thing you suggest.

Sound advice from one of the 'soundest advisors' of all time ... just wish I had paid attention sooner ... I would have been sitting on the beach, sipping pina-coladas 10 years earlier!

AJC.

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Brip Blap beat me to the punch … and, what an important punch it is!

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I came to Brip Blap’s blog because of a trackback somewhere else (I can’t remember exactly where now) but I was attracted to some of his ideas because he seems to ‘get it’.

Firstly, who or what is Brip Blap?

Brip Blap is a blogger who writes about personal finance … unlike most PF bloggers, who mostly talk about ways to save yourself to a fortune [hint: it can’t be done] he also talks about how to make money, perhaps through improving your career prospects …

I am at the other end of Brip Blap’s journey … having made it … and, I also have this desire to teach/write, that’s why I started this blog a month or so ago … as my way of ‘giving back’.

I have made a lot of money, using most of the ‘traditional’ ways (business, consulting, real-estate, investing, etc.) and I am loosely planning a book about the lessons that I have learned … this blog is a way to air some of those ideas and get feedback …

The particular idea that got me to look at Brip Brap’s blog (and, I have added him to my blogroll so that you can easily find him, and others that I like) was the one where he asked people to think about increasing their income  not (just) cutting costs …

The wrong way to think: “spend less than you earn.” If you have been reading about personal finance for any length of time, I’m sure you’ve come across this advice before. It is the wrong way to think, and it will not make you rich.The right way to think is this: earn more than you spend.

He hit that nail on the head!

There was a small book that I came across a few years ago written about this idea for business owners – I wish I could remember the name of that little book – but, Brip Blap beat me to the punch of writing about applying this simple-yet-powerful idea for EVERYBODY.

Let me summarize the concept for you:

You can’t cut your expenses and expect to get rich … you can only cut a maximum of 100% of any cost.

You can’t just save on your current income and expect to get rich … you can only save a maximum of 100% of what you earn.

But, you can increase your income even in just some small way to start … keep going, and you can earn 110%, 200%, 500%, even a virtually unlimited amount more than you currently earn …

… then, invest just a small proportion of that and you can easily be rich.

For 15 years, I saved diligently, I cut costs diligently, I delayed gratification diligently with a very poor outcome … I guess I was laying the groundwork and building some great lifetime financial habits … 

… but, it was only when I also started to concentrate on increasing my income that I made it to $7 million … and, that whole process only took 7 years!

If this strikes a chord with you, go read his post then come back here for ideas on how to apply that thinking and what to expect when you do …