It’s when things seem worst …

I’m not usually one for motivational stuff, but it seems to me that this is something worth remembering, IF you want to take the Large Number / Soon Date route to your Life’s Purpose:

It’s when things seem worst that you must not quit

… because things usually DO get worse before they get better!

It seems, an unfortunate FACT of life

Do you have any “it got worse … but, then it did get better” stories in your personal financial journey, so far? If so, this would be a GREAT place to share them!

Is a college degree worth it?

Well, the first thing thing that I will say is that you had better finish what you start …

… because, if you don’t complete your four year college-level degree, you will probably still end up with the average student debt of $20,000 but only earn $4,000 a year more for your troubles!

But, let’s take a closer look at what the US Census Bureau has to say about students who do complete their degrees against those who don’t:

OK, so for a $20k ‘investment’ (at least, if we assume the average debt left behind), the average college grad. can earn an extra $19k – $20k per year; sounds like a great deal?

It seems that we forgot to account for the extra four years of income that the high-school grad (but no college degree!) earned while you were off at the frat or sorority house!

So, let’s say that the college graduate starts (4 x $27k) + $20k behind the 8-ball … how long does it take him to catch up?

Well, if we assume that both achieve 4% yearly salary increases (starting from the same date that both are working, keeping in mind that the high-school-only grad. has already put four solid years of work in) and earns 8% on their investments (fueled by consistently saving 15% of their gross income), then we can see that it’s a ‘no brainer’:

- The College Grad would have saved $794,000 after 26 wonderfully exciting working years, and

- The High School Grad only saved $468,168 after 26 equally wonderfully exciting years working.

So, college is ‘worth’ $326k, in this admittedly highly-oversimplified example …. yippee!

But, readers of this blog aren’t thinking of spending the next 26 years working in the Quick E Mart, studiously saving 15% of their hard-earned income, just to earn 8% p.a. …

… no, they are preparing to be investors (say, real-estate and stocks) and/or entrepreneurs. Activities that high-school grads – and, even high-school drop-outs – can and certainly do in equal numbers to college grads!

You see, serious money making doesn’t discriminate on the basis of education … some of the world’s richest people have little to no formal schooling.

And, they aren’t wasting their ‘no college’ years earning $27k (and, salivating over their next 4% pay-rise) … no, they are busy reading this blog and starting their business/investment careers.

They have realized that serious wealth comes not from what you earn, but from the return that you earn on your money. So, with just the benefit of 4 years head start, they can turn a $20k per year earnings deficit into the same amount as a high-flying College Grad, by only increasing their annual return on that 15% savings from 8% to only 11.5%.

[AJC: If they can increase their return to serious real-estate investment territory of 20%, they will blow the college savings rate away by amassing nearly $3 mill. in 26 years, and if they achieve 'entrepreneurial' 50% p.a. returns, well they will join the ranks of the rich with more than $300 mill. to their name ... really!]

Of course, if you choose to go to college – as I did, and will encourage my children to do – there’s nothing that says that you can’t also be an equally good entrepreneur and/or investor, on the side … or full-time

Speak up!

Speak up, everybody … it’s important!

Take a look at the image (or scroll down to the very bottom of this page, to see the ‘live’ version) … it’s our ‘user cloud’ and reflects the quantity of recent comments by various users. It would be great to see your name on this list …

… in fact, while this blog receives its fair share of comments, it doesn’t – IMHO – receive its fair share of NEGATIVE comments.

C’mon guys, I write a controversial blog, one that flies in the face of conventional financial wisdom … don’t I?

If not, I may as well shut shop …

Now, don’t get me wrong, I love positive reinforcement-style comments – the ones that let me know that I’m on the right track, BUT …

… it’s the negative comments that drive change and we should all be challenged from time to time [AJC: now, let's not go overboard on the negative, shall we? ]

Later on in the week, I will introduce Dan, who challenges the notion that paying off your mortgage is the dumbest thing that you can do …

Answer this question ….

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… it just might tell you something important [AJC: I'll tell you what in an upcoming post ]

Not all is as it seems …

This video has nothing to do with money per se other than (maybe) helping you realize that IF you want to be successful, you have to be able to see things that others can’t and learn to differentiate between the real and the unreal.

If you want to find the ‘secret’ in the above video, then you really need to watch this version, then watch the first one again:

Maybe, it’s all the people giving you common wisdom financial advice who have everything backwards?

What’s behind Door Number 2?

There’s nothing wrong with being debt free …

… which seems like I am flipping, when I should be flopping, about debt. Until you realize that I can just as equally claim that there’s nothing wrong with being in debt, either.

You see, it depends.

In fact, what I contend is that the majority of my readers NEED to be in debt … but, that’s not the same as advocating debt for debt’s sake.

Confused?

Let me explain by introducing you to a new reader, Lee, who asks:

I’ve been reading about this 20% rule and it does make sense, but after what happened with real estate over the past 18 months do you still think this is a good approach? Right now, I have about 55% equity in my home. To get my home to only be 20% of my networth I would need to refinance it to 80% LTV. I have a pretty low rate (4.625%) and only have 9 years 8 months left on my mortgage. Would you still recommend someone in my situation refinancing?

After a lot of confusing to’ing and fro’ing [AJC: you can go pack to that post and read all of the comments ... in fact. I would encourage it, because this is one of my Top 3 most widely read posts], I asked Lee what I think are the critical questions:

1. Do you have a Date in mind, when you REALLY want (nay, NEED) to stop working so that you finally have time to live your Life’s Purpose?

2. Do you have a Number in mind, that represents how much you need in your nest egg (be that the bank, ‘passive’ investments, your house – although, you may need to think how you plan to access those funds to live from – etc.)?

If not, I suggest that’s your first task: think about your Number and Date. Already (or just) got them?! Good … now;

3. Will your current financial plans and strategies get you to your Number by your Date?

To which Lee responded:

As far as retiring by no later than 55, yes my current path will easily provide for that. If I choose to the pursue the passion I mentioned earlier, then that would impact the amount of money I would need in the short term, but would not affect my long term retirement goals.

If your current financial strategy is working for you – i.e. in that you are happy with your current work and financial arrangement, and believe that you can achieve your Number by your Date – why would you even think about changing anything, Lee?!

So, let me go back and clear up the confusion about debt for my other readers:

- If you can achieve your Number by your Date WITHOUT the use of debt then PLEASE do so,

- Otherwise, what choice do you have but the wise application of debt?

… I just happen to believe that for the vast majority of my readers, Door # 2 (‘wise application of debt’) is the one that holds their prize

Not a fan?

It’s fairly safe to say that Mike is NOT a fan:

I happened to stumble on this site doing some research on debt free. No wonder I’ve never heard of this site or even the radio show apparently associated with it. Anyone who thinks that living debt free is the wrong thing to do needs to have their head examined. That’s like saying Ohh we shouldnt live debt free we’re on the planet to make banks rich on our hard earned money. Nice mentality you got there. It just doesn’t hold any water. The question you should be asking yourself is would you rather live be constantly paying out your hard earned cash to banks making money off you not paying for your own assets or should you own your assets outright and control a greater portion of your hard earned cash? The choice IS obvious.

But, what of Mike’s aversion to paying the banks interest?

I look at banks a little differently to those like Mike who are averse to paying their interest, fees and charges …

… sure, I don’t like how they can mount up. And, I don’t like how the banks can make ‘super profits’ in good times and seem to get away with it. And, I don’t like those snooty tellers who look over their glasses at you, when you want to make a withdrawal, like they’re doing you some sort of favor by letting you have your money

But, I can put that aside, when I realize that here is a partner who is willing to put up some – or even most (if it’s a real-estate transaction) of the capital to fund my latest entrepreneurial or investment endeavor, yet they want virtually no say in how I manage that business / investment once they have put their money in … and, I even get virtually 100% control over all of the daily management decisions and even, pretty much make the ‘sell’ decision on my own.

And, all they want is a few % per year return on the money that they put in … no share of the speculative upside!

Where else can you find a partner like that?

So, Mike, I ask you: what’s your objective?

- To get rich(er) quick(er)?

- Or is it to avoid putting any of your money into somebody else’s pocket?

I don’t mind which path you choose, as long as it gets you to your financial objective i.e. Your Number by Your Date …

… if not, you will do well in life – not just your financial life – to stop obsessing about what the other guy might be getting out of the deal, and start obsessing about what you might be getting out of that same deal

I wonder what our readers think? Tell us about your good/bad experiences with bank funding …

My top posts!

These are my ‘best-selling posts’ … what does this say about me? More importantly, what does this say about you???!!!

1. How much interest do you earn on one million dollars?
2. Making Money 101
3. Why did Warren Buffett buy half a dozen MLM companies last year?
4. How much should you have saved by now?
5. The 4 absolutely vital questions to ask before buying ANY business …

BTW: I am not unhappy with any of these posts … but, I doubt that many of those who came to my blog via Top Post # 3. have stuck around

Some housekeeping ….

I ummed and aahed about it, but three sites is one too many to maintain. So,I finally DID decide to move the home of the Millionaires … In Training! ‘grand experiment’ to our Share Your Number community site – if you haven’t visited that site, yet (or, recently!) NOW would be a great time to bookmark this page and visit often!

Oh, and feel free to join the community at http://shareyournumber.org/ and you, too, can write your own featured posts and ask and answer member questions … what fun!

So, from now on, I hope to see you HERE and THERE

Adrian.

Finally Revealed! The MOST important Making Money 101 lesson of them all …

I was just rereading last week’s post where I said that I believed delayed gratification to be the most important Making Money 101 tool of them all.

And, as I said, I truly believed this to be the secret of my financial success …

… until this very morning!

Let me backtrack a little: we delayed gratification (MM101), built up our business income (MM201) and socked money away in passive investments (to prepare for MM301) and we finally made it.

We then started to really live our ‘new life’ as multi-millionaires: we acquired the houses, the cars, the paintings, the vacations, the technology …

[AJC: feel sorry for us, yet? ]

… but, today we did something just as important (since we are stripping and renovating entirely the new house, which is actually an old house, built in the 1940′s and last renovated some 20 years ago):

We sold some second hand light-fittings for almost $200!

No, you didn’t misread: the new multi-millionaires didn’t just say to the builders “it’s a soon-to-be $6 mill house, so throw the junk away … or, take what you want” … they sold some stuff for $200

Just in case you still don’t see the irony, here was the process:

1. We went to the house and decided what we wanted to sell: a few light fittings; some old built-in shelving (total hoped-for sales price circa $700)

2. We photographed everything that we wanted to sell

3. My wife and son listed each item on eBay (about 5 or 6 separate auctions)

4. My wife dealt with the two ‘winners’ (only two of the items actually sold first time around: both were light fittings)

5. I met the winners separately at the house and helped them remove the light fittings

6. I ‘upsold’ both: one with a heated-towel rail and extra light fitting for an additional $9, and the other for an additional $50 of lights

7. My wife and son are busy relisting the shelving and unsold lights as I am writing this … Round 2. Ding!

So, I spent a whole morning – plus all of the lead-up work – ‘earning’ exactly $140 …

… in some circles (millionaire circles, that is) that would be regarded as sick

But, that’s when it hit me: it was not delayed gratification that set the grounds for our later financial success …

… that’s a result, not a cause.

And, it wasn’t saving 15% – 50% of our income, or putting money into a 401k, and so on … they are all results, not causes.

It was the respect that we had and still have for money as a tool to help us live our Life’s Purpose that caused us to do all of these things …

… read that again, carefully: I didn’t say ‘love’ or ‘need’ or ‘desire’ or ‘greed’ … I said respect.

If we want the money to live our Life’s Purpose, we have to respect money as one of the tools (just one, not even the most important) to help us achieve that. Just as a hunting nomad would respect his hunting weapons, a farmer his plot of land, a charter pilot his aircraft, and so on: we respect the money that feeds us and fuels our needs.

This means that we don’t squander it needlessly, we save it when necessary, and we spend it when it doesn’t make sense not to … that’s Making Money 101, and it just hit me like a sledgehammer between the eyes: delayed gratification is the tool, but gaining a healthy respect for money is the lesson that we all need to learn.

I won’t forget this lesson … will you?