Beating the ‘more’ bug!

Do you have the ‘more’ bug?

I certainly do, and I think that most of us do … in fact, I’m so sure of it, because I see hundreds of blogs and books solely aimed at eradicating the disease with drastic remedies such as self-flagellating frugality and anorexic debt diets.

Kind of reminds me of how we used to treat ourselves with blood-letting, hole-in-head-drilling, and leeching – actually, all still legitimate remedies in a tiny minority of real-world cases – because we didn’t know any better.

In those days, a ‘real’ doctor, prescribing a drug that they had discovered would have been seen as a heretic or master of the ‘black arts’ (Louis Pasteur, anybody?).

But, I’m getting ahead of myself … first, here’s how Scott (a doctor, plenty of disposable income, so he’s a prime candidate) describes the symptoms:

I think a big dragon that we all face is that human nature of wanting more. We all seem to do it to some degree or another. We’ll live in a 150k-200k house(which was probably an amazing home to our grandparents standards) and while there, we imagine that million dollar pad. Once we get that, we need a 5 million dollar one, etc..etc..and our number continues to climb with the chronic discontent and needing more.

As Scott says, it’s not such much a ‘bug’ as a human condition: to always want more.

To get a little metaphysical: if you were the Ultimate Higher Power and you wanted to design an environment with endless conflict (all the way up from a personal level to a global level), you would fill it with little creatures that you ‘program’ to always want ‘more’. And, you would give them the tools (opposable thumbs, a modicum of intelligence, and inventiveness) to ensure that they create an endless stream of upscaled ‘stuff’ to constantly fuel that desire.

What Eternal fun! 😉

Assuming that the ‘more’ bug is curable … or at least manageable … how do you deal with this seemingly insatiable desire for ‘more’?

Well, if it really is a disease or condition, then I’m not sure how easy it is to switch off the ‘more’ switch; maybe a 12 Step Program for Wants (might be a great online/offline business here for any psychologists who have a side interest in personal finance)?

But, if it is real – and, manageable – then another strategy might be to build in gradual spending/lifestyle increases into your budget. Allow the ‘disease’, but control it …

For example, I drive a BMW M3 Convertible (in Australia, this is a USD$200k car, due to low volumes, importation costs, and exorbitant luxury vehicle taxes) but I really WANT a Ferrari ($500k++).

So, I have given myself a target:

Develop and/or cash out (for a certain amount over purchase price) on my development sites and I ‘reward’ myself with the Ferrari (not as simple as that: I will also need a day-to-day car, so figure a $150k Audi S6 or Maserati Quattroporte, in addition to the Ferrari … repeat every 5 to 8 years). I think that some of the Sudden Money strategies that I posted about recently are ideal for managing this.

Another way to deal with this was suggested by Robert Kiyosaki: he said that he, too, wanted a Ferrari. His wife said that he could only buy one if he generated the income to cover it. So, he bought a self-storage business and used the income to fund the payments on the car … I’m OK with this: even though he’s funding the car, rather than paying cash, the capital is in an income-producing asset – one that really should increase in value over time.

And, it’s not a ‘real’ business, in that it won’t need a lot of ‘hands on’ management … of course, it’s not a real passive investment either. Other candidates could be automated / no staff car-washes; ‘coin’ laundries (the new kind that use cards instead of cash); and, some of the absentee-owner franchises.

[AJC: Just be warned, you probably can’t tax-deduct much – if any – of the vehicle payments. Contrary to what the financial spruikers and shysters will tell you, the IRS is not stupid: why do you need a Ferrari to help the self-storage business / car-wash / coin-laundry produce an income?!]

But, now that Scott mentions it, I do have a hankering for an island ;)

Happiness = $75,000 a year!

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Finally, there is a study that equates money to happiness!

The Wall Street Journal reports a study by “the Princeton economist Angus Deaton and famed psychologist Daniel Kahneman”, which states:

As people earn more money, their day-to-day happiness rises. Until you hit $75,000. After that, it is just more stuff, with no gain in happiness.

Let’s assume you want to retire in 20 years on the equivalent of $75k p.a. – after adjusting for inflation (roughly double your required income every 20 years) and applying the Rule of 20 (equates to a 5% p.a. drawdown on your money), this means:

Your Optimal Happiness Number = $3,000,000

None of my readers are chasing less – otherwise, why would you be reading a blog called How To Make $7 Million In 7 Years (?) – but, the point of the study has been taken by the press and the pf blogging community to mean that it’s pointless to chase more than $3 million … seemingly making my uniquely positioned blog redundant by half 🙁

Well, it’s quite interesting because there’s a second part to the study that the media and most other bloggers are conveniently ignoring:

That doesn’t mean wealthy and ultrawealthy are equally happy. More money does boost people’s life assessment, all the way up the income ladder. People who earned $160,000 a year, for instance, reported more overall satisfaction than people earning $120,000, and so on.

“Giving people more income beyond 75K is not going to do much for their daily mood … but it is going to make them feel they have a better life,” Mr. Deaton told the Associated Press.

I don’t know about you, but I like to be happy ($75k p.a. happy) and have a better life ($250k p.a. better life)!

How about you?

The difference between a business and a job …

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You already know that I won the business lottery!

[Let’s face it, some guys have all the luck: It took me just 7 years to build a $7 million real-estate, business, and investment portfolio from worse than scratch (I was $30k in debt when I started). Then, I managed to sell my businesses (in the USA, Australia and New Zealand) just before the market crashed. On the other hand, I’m only 5 ft 4 inches tall and balding … so, things have a way of balancing themselves out.]

So, now I get lots of people who are clearly excited when they tell me that they are “also in business” … except that they aren’t!

Mostly, they’re just working 60 to 80 hours a week – on little to no pay – for the toughest boss of all: themselves.

Worse … their spouses!

Let me give you a couple of real-life examples that should help to explain:

Peter Hastings, who already owns the antiques store right next door, opens a sandwich shop at 2264 North Lincoln Avenue. A quaint sandwich shop that he decorates with many of the items from his antique store. The shop thrives and provides Peter with a nice income for the next 20 years, when he sells it. Peter, with his two little businesses, has carved out a nice niche for himself. He was careful with his money, both before and after ‘retirement’, so – after 20+ years of hard but fulfilling work – he can finally afford to take it a little easier.

Bryant Keil buys a sandwich shop; it’s uniquely (and, quaintly) decorated, it’s in a nice location, had one owner who is selling in order to wind down a little after ‘working’ the business for 20 years. Bryant buys the little shop and develops a franchise model around it. Within 10 years, Bryant has “over 200 stores, in Illinois, Indiana, Michigan, Minnesota, Ohio, Texas, Maryland, Virginia, Pennsylvania, New Jersey, Washington, D.C., Kentucky, and Wisconsin.” Bryant is now a billionaire.

So, if you own a little sandwich shop – or, the online equivalent (here’s how you spell it: B-L-O-G) – don’t bother me with the details … it’s nice that you’re keeping yourself busy, but I’ll get bored listening to your story.

But, if you’re working on the next Potbelly Sandwich Works – or, the online equivalent (F-A-C-E-B-O-O-K) – drop me a line and don’t spare the gory details … I’m listening to every single word you say!

A fund manager’s view …

This is a little different to all of those “this is what a millionaire thinks” posts, because Evan is in a support role (“my role is more brain storming and putting together documents and calculations….then I prepare materials for the planners’ second meeting and beyond”) at a financial planning office that specializes in sucking the blood out of – I mean assisting – high net-worth clients:

My role is more brain storming and putting together documents and calculations. So basically I see almost every balance sheet that may have significant net worth which goes through my office

Since I’m a sample of one, when it comes to high net-worth clients, it might be interesting to see what Evan sees:

The House is almost always Paid off

Prepaying your mortgage is always a hot topic on Personal Finance Blogs.  Everyone once in a while one of the big players in the field will put a post and it will garner tons of comments.  The comments are usually heated and go both ways about how the move is stupid and then invariably someone will say, its a great move.  Regardless of how you feel, most of the high net worth clients’ balance sheet that I see will have either a paid off house, or one with a very low debt to equity ratio.

They Almost Always Own a Business

Almost every high net worth client’s balance sheet has a business on it.  The types of businesses range from the mundane, lawyer who owns their practice, to beyond what I could have imagined as a viable business.

They Almost Always have Investment/Financial Advisors

Almost every single high net worth client/prospect is not hands on when it comes to their own investments.  Some are more active than others when it comes to asset allocation, but for the most part unless they are in the money business (fund managers, hedge fund execs, etc.) they just don’t deal with it.

Since Evan is coming from a position of observation of his sample size of many, I will observe from my position of a sample size of one:

– I found it valuable to have a business; indeed, it’s the ultimate driver of my financial success; even before selling the business I could use the spare cashflows (after attending to the business’ own growth needs) to fund a substantial real-estate and investment portfolio.

– I own a house, and almost always have … now that I am wealthy, I carry no debt on these houses, but started reducing my debt almost in proportion to the increase in my wealth. It’s not a strategy, just a happenstance. But, I will not hesitate to use some (perhaps, up to 50%) of that equity, if required to fund an investment.

– I certainly use an investment advisor – in fact, multiple; but (here is where my experience diverges from Evan’s observations) Evan says: “Almost every single high net worth client/prospect is not hands on when it comes to their own investments.”, yet the opposite is true for me. Could this be observation bias for either Evan (he does work for a financial planning/advisory firm, right?) and/or for me?

I would never hand the keys over to my Future Fortune [AJC: How do you make $1,000,000? Give an ‘investment advisor’ $10 million … and, wait!] to somebody who has not already made their’s … if so, why do they need me?

Thanks for sharing, Evan!

The key to untold wealth!

If you’ve been following this blog for a while, you may have the sneaking suspicion that I’m also a bit of a ‘mad scientist’.

For example, I told you that, like Albert Einstein, I’ve been working on a ‘unified theory’ [AJC: I’m rather proud of this post, so go ahead and pull it out of the 7m7y archives by clicking on this link: The Big Papa lives in the 11th Dimension!].

Unlike Albert Einstein, though, I am (a little more) kempt; (very slightly) less absent-minded;  (a lot) less than genius (even a little more ‘less’ each year); and, have no Germanic accent, although my parents spoke the language fluently (but, never allowed me to learn it … it was their ‘secret language’).

On the positive side, unlike Albert Einstein who reportedly went to his grave with his secret, I have found the Unified Theory of Finance!

After literally years of searching – and, this blog has been a way for me to publicly articulate my thoughts, and get the feedback that I needed along the way [AJC: so, I will need to remember to thank all of my readers – that’s you! – at my Nobel Prize for Finance acceptance speech] – I finally made this Great Discovery (?!) on the weekend.

In fact, the breakthrough came in two parts:

The Search

Because I am (still) enamored with Sponge Bob, I was attracted to “Eugene Krabs“, who left his version of the secret formula for wealth in a seemingly innocuous comment on Free Money Finance’s blog:

I’ve boiled what I’ve read myself down to the following equation:

Wealth = Capital + Risk + Time

(To be clear, capital is the money you have right now to make more money with.)

Technically, any one of those factors can do it for you. For example, if you have a massive amount of capital, or if you take massive amounts of risk and beat the odds, or if you have a lot of time to build your wealth, then you can still become wealthy at the expense of the other two factors.

However, there are downsides to all of these individual factors.

Sensational stuff!

Unfortunately, I can’t thank “Mr Krabs” because he didn’t include any links with his moniker. On the other hand, you may quickly spot a few issues:

1. Clearly Wealth isn’t an additive of capital, risk, and time, it’s really a complex function. But, that can be solved by rewriting the equation as W = C * R * T or, even better yet, as:

W = Fn {C,R,T} i.e. Wealth is a (perhaps, complex) function of Capital, Risk, and Time.

But, understanding the math is not the point – I’m sure that Mr Krabs’ formula is meant as conceptual, not mathematically rigorous – it’s understanding that you need to balance Capital, Risk, and Time, if you want to become wealthy, that’s important … at least, according to a fictional cartoon character who saves every penny that he can get his claws on 😉

2. The more important point is that this version of the formula forgets Return; and, if we substitute Return (e.g. the 9% or 0.09 return that you supposedly get if you stick your money in the stock market for long enough), you actually have something very similar to the basic formula for compounding (which, at least according to Einstein, is the ‘most powerful force in the universe’:

3. Even if I somehow modified Mr Krabs’ simple version (and/or the more complex – but, correct – mathematical representation of compounding) to include both Risk and Return (a.k.a. Reward), the formula IMHO still wouldn’t explain why Warren Buffett is sensationally rich investing in exactly the same stocks that we invest in, yet we manage to lose money (in the short term, in absolute value, and even in the long term, certainly after inflation is taken into account)!?!

Until I can explain that, there is no formula 🙁

The Breakthrough

Still my gut told me that Mr Krabs [AJC: I love using his pen name … I’ll see how many more times I can fit it into this really very serious post!] was on the right track, because his representation did provide the missing simplification that I needed.

But, I kept hitting brick wall after brick wall …

… until last Sunday.

Last Sunday, I took my son and a few friends to play in their weekly teenage tennis competition [AJC: we all got free ‘slurpies’ from a 7-11 Convenience store on the way back home from tennis because it was 7-11 Day: November 7, 2010. Go figure!].

Instead of watching the game, I sat in the car with all my notes – pages and pages of complex math, simple math, all trying to fit Risk, Return, Capital, Time, and so on into a simple, conceptual ‘formula’ … all the while, trying to use it to explain the difference between you, me, and Warren Buffett.

As I said, until I could do that, I had nothing!

It was driving me crazy! So, I did the only sensible thing: I laid back the car seat and dozed off … but, when I woke up half an hour later, I had it:

“Is that all?”, you say [yawn]

Hell, yes!

Really understand this, and you have the key to untold wealth … in any field of endeavor.

I’ll explain the X-Factor (it can be explained!) in an upcoming post …


PS Remember: this ‘formula’ is conceptual and is more correctly (but, still grossly) simplified as:

W = Fn {C,X,T} i.e. Wealth is a (definitely, very) complex function of Capital, The ‘X-Factor’, and Time.

The False War On Debt …

There’s a war raging out there: it’s being fought by authors and bloggers everywhere.

But, is it the right war? Is it a just war? Or, are we just throwing ourselves, by the millions, into a hail of fire: exploding spending, rampant inflation, the death of social security?

Sure, as we sit in the relative safety of our trenches (at least, that’s what we tell ourselves, until a random mortar shell of job loss or unexpected expenses chooses to lob our way) this is not OUR future … it’s somebody else’s, or it’s too far away, or it just can’t happen …

The sad truth is that legions have jumped the wall before us and have been brutally cut down for lack of an adequate nest-egg; it’s sad to see them go over the dreaded wall of retirement (be it their time, or forced on them early) without an adequate safety net … when they do, it’s as though their grim fate had already been sealed.

Broke – or ‘just’ financially crippled – and unable (for financial reasons) to live life as they had hoped, they are a sad, sad lot.

You see, the war that they fought wasn’t – isn’t – a just war. It’s not even a war … well, it shouldn’t even be more than a skirmish.

It’s the War Against Debt!

When it comes to that war, I’m strictly a pacifist; isn’t it better to simply avoid BAD debt?

Of course, that doesn’t mean that we can’t … shouldn’t … defend ourselves.

Far from it: if we find that BAD debt has snuck through our defences, let’s keep an eye on it. And, if we find that it’s also EXPENSIVE debt, then let’s whip out the Big Guns and wipe it out. Quickly, surgically …

… but, let’s not commit Debt Genocide.

You see, unlike the well-intentioned, but largely Debt-McArthyist “ALL Debt Is Bad, So Let’s Wipe It Out” rabble out there, let’s first ask The Missing Question:

What will you do after your debt is paid off?

“Well, start investing of course!”

But, does that REALLY happen? Who better to ask than Money Reasons:

This past February 2010, I became totally debt free, but now what!

I thought that there would be a period where I would break even for a while, and then start to plow about $1,000 extra each month into investments!  So now that it’s seven months later and how much extra did I save or invest?  Not a single cent!

Hang on, the whole purpose of suiting up for battle – for going to war against debt – was so that you could start investing, right? What’s up with that, Money Reasons:

Well it’s been a matter of bad luck with equipment breaking down and needing replaced and spending too much for our past vacation to Hilton Head Island!

But it’s also been a subtle form of LifeStyle Inflation!  Thinking back now, I realize that when wants would arise, I would just go ahead and buy it.  Yeah, I thought about it a bit, but I knew that I had the cash.  Then when your car and lawn mower broke down, I had the cash too…

Money Reasons should have started investing well before all of his debt was paid off … he should have started investing as soon as his expensive debt was paid off and left his cheap debt on a regimen of minimum payments.

The problem with this war is that it’s an unjust war; as TraineeInvestor said: “Debt is a tool. Paying it off is simply choosing not to use the tool.”

Yes, becoming debt free is simply a tactic

If you have to go and fight a war, don’t fight a war against debt …

… go and fight a war for investment 😉

All you need to know from a guy who does know …

After three years, you may be sick of listening to me – besides, by now, you should be $2 million or $3 million into your own $7 million 7 year journey, so what can I teach you? – so, here is some really important advice from Darwin Deason, a self-made billionaire entrepreneur:

Forbes Magazine: You have $100,000–where do you put it?

Darwin Deason: It depends on age and goals–but if I was young, I’d put all of it in a company that a) I could directly influence or control, and b) that I loved.


If you have your own financial advice, or feel that summarizing somebody else’s ‘personal finance system’ into “just one page” would be fun – and useful – then I have 5 x $100 Apple Gift cards to give away!

Just check out this post to join the action:

But, hurry … the giveaway finishes on Thursday November 11th (the last day for submissions) and the entries are already starting to come in!

Winners announced Monday, November 15.

I want you to start an online business …

… heck, you can blog, write eBooks, create a course and sell it. Anything!

If you are interested in starting your own online biz, though, I want you to visit Erica’s site … she’s been there done that when it comes to online businesses. She sold just one of her online businesses for $1.1 million and now travels the lecture circuit talking about what she learned about life and business.

But, don’t believe the hype: you can’t “make millions” with the latest online hooey; Erica REALLY pumps her online ‘presence’ – by blogging, writing, speaking, and creating online products left, right and center – yet here are her income figures:

Ignoring one or two big sales; it’s not enough to change the world is it? Now, with Erica’s commitment and energy, she will keep building this ‘business’.

But, this is NOT how Erica made her first million, either.

Here’s what you should know: in the world of online biz, there’s a slow-path and a fast-path … a ‘real’ online business and an online ‘job’. Which one do I want you to try?

Perhaps surprisingly, I want you ALL to try the online ‘job’!


– It’s great experience: it will teach you about marketing, online businesses, writing … and, so on

– It’s also a great source of additional income that you can use to build your investment ‘war chest’ and/or your ‘real’ business startup capital

It will also help you decide if business is for you …

Then, if business is really for you, start a ‘real’ business either online or offline: one with a brand, with customers, with trailing income … one that somebody will want to buy!

Just like Erica:

By the end of 2003, my fledgling web hosting company, Simpli Hosting, was making more than my consulting gigs. The problem was, I was spending 40+ hours a week doing web development, and maybe 5-10 hours a week on hosting. I figured I had nothing to lose. I met with all my consulting clients and arranged transitions. I would be a full-time web hosting company owner in 6 months.

[lots of problems]

Things turned around. Just four months later, on September 7, 2007, I sold my company for $1.1 million to a competitor.

See the path that Erica took?

She started a business part-time … kept her full-time job (well contracts) … eventually took the plunge and went full-time into her business (this is the really hard step!) … battled all the usual BS that business owners have to put up with … and, eventually sold the business to somebody who didn’t want to go through all of that BS again to grow their own business.

That was (part of) my path to $7 million in 7 years, too. Maybe it should be yours?

Enough is enough!

Early Retirement Extreme wants to slay the ‘enough’ dragon; while, for many, ‘enough’ refers to their income and/or spending, in ERE’s case it refers to his investment net worth:

In terms of the invested assets dragon, I have several. I want to have a $500k net-worth. Once I hit that, I want $750k; then I want $1M. It’s been like that all along. It might just be my biggest source of stress— not being able to rapidly save money, which, rationally, I’m not going to spend anyway. It’s pretty stupid, I know.

And, before you think that “when I’m rich, then I’ll have enough” remember that when people who you and I think are rich (i.e. with net assets in the $5 million to $25 million range) are asked how much they will need before they consider themselves rich, they tend to say: “about double”.

That is, they tend to think that they need about twice their current net worth in order to feel comfortably rich!?

The solution is to prepare your definition of ‘rich’ … in advance!

… and, that should be to have enough money to live your Life’s Purpose. We call that number your Number.

When you get there, STOP because that is – for you – truly ENOUGH.

On the other hand, my ‘dragon’ isn’t income, investment assets, spending, etc., it’s my entrepreneurial gene … I see opportunity in everything and want to invest in it.

Right now, I’m working on my real-estate development projects, partnering with a young entrepreneur in his first bricks-and-mortar venture, and have any number of browser windows open with new technologies that I want to pursue.


While it’s all fun, and mentally challenging, and fits totally within my Life’s Purpose, it all still takes money … so, in some ways, it’s no different to any of the other forms of ‘enough dragons’ out there.

So, how do I deal with my ‘enough dragon’?

Well, I built enough ‘fat’ into my Number to allow both the free time and the free cashflow to play with these new ventures: about 10 @ $50k a pop. Unfortunately, just one of my non-property business ventures is already in $100k territory, so I need to tweak by reducing the number of other ventures that I back.

And, as I’ve already said, this is easier said than done 😉

Pay off debt or invest?

I’m publishing a whole series of posts targeting Debt … it has very little to do with conventional financial wisdom on this critical subject. Here is the second post (I have another one coming up, soon) …


Gen-X Finance is polling his readers as to whether they would prefer to pay down debt or save:

If you have both debt and a need to save money, how do you prioritize? Some people will pay off debt at all costs before saving a penny. Others will be fine getting by with minimum payments while dumping as much money into savings or investments as possible. While others try to do a little bit of both. That’s why the poll today asks how you view this subject.

You should go ahead and answer the poll.

Now, this is such an important decision – perhaps one of the MOST important mindset changes that you need to make if you want to follow in my $7 million in 7years footsteps – that, for my new readers, I will point you again to my trademark Cash Cascade™ system (don’t worry, it’s simple and free) that replaces the Debt Snowball, the Debt Avalanche and most of the other other debt repayment systems that you may have previously tried.

Here’s why it works:

People make the mistake of thinking that there is GOOD DEBT (typically, investment debt) and BAD DEBT (typically, consumer debt) … but, this is only true BEFORE YOU TAKE ON THE DEBT.

Once you are in debt, then there is only CHEAP DEBT and EXPENSIVE DEBT. Put simply, pay down your expensive debt, until only the single digit ones (on an after tax basis) are left, THEN start investing.

This goes against the ‘pay down all debt’ theories, but works both logically and practically. Try it … and, let me know how it’s working for you?