Applying the 20% Rule – Part II ( Your Possessions)

Posted on April 12, 2008 by Adrian

In my precursor post called Applying the 20% Rule – Part I ( Your House), I defined the 20% Rule and the 5% Rule as follows:

You should have no more than 20% of your Net Worth ‘invested’ in your house at any one time; you should also have no more than 5% of your Net Worth invested in other non-income-producing possessions (e.g. car/s, furniture, ‘stuff’). Why?

This ‘forces’ you to keep the bulk of your Net Worth in investments i.e. real assets (stuff that puts money into your pocket … not stuff that drains your finances)!

As a reminder, I represented this as a simple formula:

20% (max.) for your house + 5% (max.) for all the other stuff that you own = 75% (min.) of your Net Worth always in Investments

I also pointed out in that article how the Current Market Value of Your House will usually go up over time (current market conditions aside) but, the Current Market Value of Your Possessions will usually go down over time (collectibles aside!).

Whereas houses generally appreciate … possessions generally depreciate!

Now, as much as I hate to point this out (because the ‘frugal blogging community’ will probably fry me!) you can actually use this interesting financial anomaly to buy more stuff …

… and, according to the $7million7year ‘philosophy’ the process of making money and getting rich should sometimes mean ‘delayed gratification’ but should never have to mean ‘no gratification’!

That means, that when starting out you may have to buy what you need and maybe even buy a house and generally screw yourself up financially (that’s where the ‘frugal blogging community’ comes in handy, because they will show you how to minimize – perhaps eliminate this risk – even better than my basic Making Money 101 Principles can help you).

If you do, by following my Making Money 101 steps and reading (and following) as many of these posts as possible, you will get yourself on the right track and find that:

1. Your House fits the 20% Rule,

2. Your Meager Possessions fit the 5% Rule,

3. And, you are sensibly Investing the rest!

What now … well, pat yourself on the back and wait … until:

i) You have saved up enough cash to buy whatever it is that you are salivating over – repeat after me: we will never borrow money to by depreciating ‘stuff’ again – and,

ii) You have revalued your stuff (eBay and Craig’s List are two excellent sources of ‘current market valuations’ for all sorts of ‘stuff’) and found that they have lost so much value since you bought them that they now total less than 5% of your Current Net Worth, and

iii) The (hopefully, now increased) equity in your House still fits into the 20% Rule – and, you have applied everything in Applying The 20% Rule – Part I (Your House) if it doesn’t, and

iv) If you do buy the ‘New Stuff’, the total Current Market Value of your Possessions still fits into 5% of your current (hopefully, by now increased) Net Worth.

…. if you can check all of the above ‘boxes’ … go ahead and buy it, guilt free – you deserve it!

Now, the astute investors out there will have realized that if you increase your Investment Net Worth (i.e. the minimum of 75% of your Notional Net Worth that you keep in income-producing INVESTMENTS) – as you should, by an average of 8% compound a year or better – you will be able to increase the other 25% that is in your home equity and possessions to match!

In other words, you will (if you so choose) be able to match an increase in lifestyle arising from a better financial position …. life doesn’t get any better than that, does it?

Applying the 20% Rule – Part I ( Your House)

Posted on April 11, 2008 by Adrian

Since my early post How Much To Spend On A House is still one of the most visited posts on this site, I thought that I should write a little follow-up piece that gives some examples on how to apply this important ‘rule’.

First a recap:

This ‘forces’ you to keep the bulk of your Net Worth in investments i.e. real assets (stuff that puts money into your pocket … not stuff that drains your finances)!

Warning: most people think of their house as an asset, but by this definition, it most definitely is not … let this be a warning to all those ‘house rich … asset poor’ people out there who think they can retire just from their house.

For those mathematically minded, as a formula, this can easily be represented as:

20% (max.) for your house + 5% (max.) for all the other stuff that you own = 75% (min.) of your Net Worth always in Investments! Simple, huh?

Also, for those who have been tracking my posts, the difference between your Notional Net Worth and your Investment Net Worth will be the Current Market Value of Your House + the Current Market Value of Your Possessions; if you’ve been following my advice this should be no more than 25% of your Notional Net Worth.

Now, you may have noticed something interesting:

The Current Market Value of Your House will usually go up over time (current market conditions aside!)

The Current Market Value of Your Possessions will usually go down over time (collectibles aside!).

Houses generally appreciate … possessions generally depreciate.

This sets up some interesting situations that we should discuss … by no means an exhaustive list:

1. Aspiring Home Owner – The chances are that you have debt (particularly if you were recently a student), little income, some possessions, virtually no savings or investments. You will probably never be able to buy a house at all – or, if you can it may never be bigger than a cardboard box – if you follow the 20% Rule …

… My advice is to buy the house anyway IF you can afford a decent down payment (ideally 20+%) and can afford the monthly payments (lock in the interest rates for the max. period that your bank will allow, ideally 30+ years).

A lot of financial mumbo-jumbo has been written in the press, books, and blogosphere about this … ignore what you may have read: for most people, it’s the only way you will ever get financially free.

2. Already A Home Owner – Revalue your home (be conservative … don’t wear ‘rose-colored glasses’ … check what other houses around you have actually sold for … don’t rely on any realtor’s advice – they may ‘talk’ up the price to convince you to sell – we don’t want to do that, yet!). Do this every 3 – 5 years (yearly is better).

If the conservative value of your house puts the equity in your home (Your Equity = What the Home is Conservatively Worth – Today’s Payout Figure On Your Home Loan) at greater than 20% of your Current Net Worth (you will need to redo this calculation at the same time as you revalue your house), then it is time to extract that ‘excess equity’.

What to do with this excess equity? Invest it of course! For example, you could buy a long-term, buy-and-hold, income-producing (get the picture!) rental property … or you could buy stocks … or you could take some risk and buy / start a business … or it’s up to you!

But, if you locked in your home mortgage at a cheap interest rate, you probably don’t want to refinance it, so be sure to ask a professional about suitable options for you (second mortgage; use your home’s equity to ‘guarantee’ the loan on another, etc.) … just be sure that you can afford the loans on both your house and your investment/s … make sure you have a cash [AJC: better yet, a Line of Credit] buffer against emergencies (loss of job, loss of tenant, etc.).

3. Right-Sizing Home Owner – Again, revalue your home … but, of course you can down-grade (let’s say that you are retiring or the kids have moved out) – but just because you have freed up some equity and can easily fit into the 20% Rule doesn’t mean that you can slack off on your Investments.

ADD the freed up amount of equity to your Investment Plan … it will help you retire earlier and/or better!

Remember, your Investments should be a minimum of 75% of your Net Worth … you can and should invest more wherever and whenever possible!

Again, if your original house is rent-able, and you have locked in a cheap interest rate (like I told you), you may want to keep it as an investment … consider doing so!

Now, buying houses isn’t always about making the right investment choice; there will be times in your life when you have to consider changing houses whether it fits within the 20% Rule or not (one obvious example was our First Home Purchase) …

… most likely, this will be at major life changes (marriage, divorce, babies). So be it!

Remember our Prime Directive: Our Money is there to support Our Life … Our Life isn’t there to support our Money (that would be just plain sick)!

Just make sure to revalue every year at first, then every 3 – 5 years min. and try not to get off-track, but if you do, simply realize if you are off-track financially and that you just have to get on-track at the first opportunity …

AJC.

PS You may want to bookmark this post (using the convenient links below) and review at every major ‘house change’ decision!

10 steps to whatever it is that you want … how to weigh up the cost of a lifestyle decision

Posted on April 10, 2008 by Adrian

In Devolving the Myth of Income – Part I we discussed the case of Docsd (or just ‘Doc’) who said:

I have been awaiting approval on … an older historic horse farm on several acres … my goal has always been to live as far below my means as possible while accumulating wealth.

This generated some debate, which eventually boiled down to the following well known saying:

Never invest in anything that eats or needs repairing.

Attributed to Billy Rose, the famous Broadway producer and investor.

But, you can’t always just distill your life down to the pursuit and saving of money – there is a word for being too frugal: it’s called being a miser! Sometimes, you have to make a lifestyle decision …

For example, buying a house to live in may not be the best financial decision in the strictest sense (but, still a sensible financial decision for most people) yet we often buy them for the emotional values: sense of ownership, stability, a house is a home, my wife will divorce me if we don’t 🙂 and so on.

Put simply: there are many acquisitions that we want to make in life that are lifestyle acquisitions not investment acquisitions.

And, the real financial question associated with them is: I really want it but can I afford it?

Unfortunately, there are no hard and fast rules on these things … so I came up with a fairly simple financial decision-making check-list that you can use:

1. Are you saving at least 10% of your GROSS income? If not, do not buy.

2. Are you putting aside enough to meet your future obligations (e.g. college fund, donations, family medical expenses)? If not, do not buy.

3. Have you paid down all of your consumer / bad debt? If not, do not buy.

4. Do you have all of the right insurances in place and have you saved and put aside a 3 – 6 month buffer against emergencies? If not, do not buy.

5. Have you bought your first home? If not, do not buy.

6. Have you paid down your mortgage sufficiently (and/or has the equity risen sufficiently) to ensure that you meet the 20% Rule (i.e. no more than 20% of your current Net Worth as equity in your own home)? If not, do not buy.

7. Are you Investing at least 75% of your Net Worth? If not, do not buy.

8. Have you saved enough money so that you can pay cash for the item without changing your answer to any of the above and still meet all of your current commitments? If not, do not buy.

9. Can you afford to pay all of the associated expenses (insurance, repairs & maintenance, running costs) on the item without changing your answer on any of the above and still meet all of your current commitments? If not, do not buy.

10. If you have made it all the way to this Step without triggering a ‘do not buy’ …. what are you waiting for?!

… you’re a hard-working adult, if you really want it, go ahead and buy it … you deserve it!!

There you have it … 10 Steps to Whatever It Is That You Want, simply designed to ensure that you can buy the things that you want as long as you put things of lesser long-term intrinsic value (maybe of a higher emotional value) behind activities that:

Keep you out of the poor house, and keep you heading towards your ultimate financial goal. There is a short-cut if neither of these goals are important to you: Buy now and hang the expense!

But, I don’t recommend it 😉

Celebrating Spending Week!

Posted on April 9, 2008 by Adrian

For the remainder of this week I want to do something that I believe has never been done in the history of Personal Finance: encourage spending!

Why would I do a ‘heathen’ thing like that:

1. Well spending is good for the economy … it’s how we got things going after WW2 … go ahead be a Patriot!

2. Money has NO PURPOSE until you spend it

3. Money SPENT NOW is worth more than MONEY SPENT later (due to a little thing called Inflation)

4. Learning when/how to spend is AS IMPORTANT as learning how to save … after all, you WILL spend b/w 50% and 90% of your weekly paycheck!

5. If you don’t SPEND when you CAN and SHOULD, society has a word for you: Miser and we don’t want to confuse being SENSIBLE with being STUPID, do we?

But, there is a why and a wherefore that I will be exploring for the rest of this week … enjoy!

And, don’t forget to let me know what you think … we want to be on the cutting-edge of Personal Finance thinking, not the BLEEDING EDGE … your feedback will help us determine where we stand.

AJC.

Fire your boss before he fires you … the 50% solution!

Posted on April 8, 2008 by Adrian

There is a cycle of life in the workplace … it begins when you get your first job, and hopefully it ends when you retire.

At least, it used to, when people worked their way up from the shop floor to the executive penthouse by working hard and staying with the same company.

By saving as they could, and relying on a good company pension plan (indexed at a reasonably high percentage of their ‘ending salary’) these loyal, hard-working folk could look forward to a reasonably relaxed retirement at the age of 65.

Not so any more …

A U.S. Department of Labor – Bureau of Labor Statistics news release published in August 2006 examined the number of jobs that people born in the years 1957 to 1964 held from age 18 to age 40.

According to this report, these younger baby boomers held an average of 10.5 jobs from ages 18 to 40 (In this report, a job is defined as an uninterrupted period of work with a particular employer).

Sometimes, this is because of new/better employment opportunities – or simply due to a change in life circumstance – but, all too often, it is due to being laid off.

This brings me to a recent post on Get Rich Slowly that asked “What To Do If You’re Laid Off?” … I’ll let you read the post and the comments, but I can’t help thinking that you need to put in place a ‘backup’ plan (something a little more meaty than the usual “save up a 3 month savings buffer“).

And, I think that the whole process should begin as soon as you get your first job …

… so, I was pleased to see this really cool post on The Simple Dollar, for all you college kids or school drop-outs out there [AJC: this is an equal opportunity ‘get rich(er) quick(er)’ site!].

The article was called About To Enter The Workplace For The First Time? Try The 50% Solution which really boils down to:

– We all know that Paying Yourself First 10% – 20% of your gross salary is a really cool thing, so

– Starting your very first job by Paying Yourself First 50% of your gross salary must be a really, really, really cool thing?

Read the post for more details, but TSD is absolutely right … why?

A. If you’re used to living on NOTHING, then living on 50% of SOMETHING has gotta be a snap 😉

B. If 10% of your gross salary compounded for, say, 40 years can give you $730,000 then 50% compounded for the same 40 years should give you $3,700,000 [AJC: It won’t be WORTH $3.7 mill. but that’s another story!].

But, as some of that post’s commenters pointed out, it can be very hard to start saving 50% of your starting salary, even if you lived on nothing before, because now you need to buy: food, shelter, transport, and so on.

But, the principle of setting your target much higher (TSD suggests 60/40 … spend 60% save 40%) when you start out and trying to maintain your momentum holds water.

Here is what I think that everybody who is still working for a living should do, regardless of source and amount of income, or their age:

1. Use this post, and the others that I have referred to, as a wake-up call that your job is NOT secure … therefore, your life is NOT secure until you take your future security into your OWN hands.

2. Once you realize that you are taking a financial risk every day at work, it becomes much easier to think about ways to break free. Start by putting as much behind you as quickly as possible, in case the ‘worst’ happens:

i). Commit to an maintain a Pay Yourself First mentality that may be as little as 10% of your current salary or as much as 50% – anything less is not enough … anything more and you are a miser 😉

ii). For any future increase in salary – commit to saving 50% of the increase and putting it to work in your Investment Plan

iii). For any future ‘found money’ including bonuses, tax refund checks, overtime payment, spouse back to work, etc. – commit to saving 50% of the increase and putting it to work in your Investment Plan

iv). Start a part time business – or find another way to increase your income – commit to saving 50% of the increase and putting it to work in your Investment Plan.

Take these actions with the eventual aim of firing your boss before he fires you!

How your hobby can set you financially free!

Posted on April 7, 2008 by Adrian

The path to financial freedom usually comes from accelerating your investment plan – which usually starts by accelerating your INCOME.

Why?

Because, you usually can’t just save your way to your dream retirement.

There are many ways to increase your income (e.g. ask for a pay-rise, work longer hours, get a second job, send your spouse back to work, etc.) but the rewards are generally limited to the number of hours that you can put in … and simply working longer/harder can sap your emotional and physical energy.

There can be a better way!

For example, if you have a hobby – something that you willingly and happily spend time on anyway – why not look at ways to make some extra money from it?

Look at it this way: if you can earn at least some money from your hobby, rather than simply spending money on it, aren’t you already well ahead of the game?

Early Retirement Extreme writes on his blog about his hobby, which happens to be blogging!

It all started with the observation that all my expensive hobbies were a major drain on my finances …Let us consider personal finance blogging or maybe just personal finances in general. This is a valuable hobby (from the perspective of financial freedom). Even in its most passive form it does not cost much. In fact one may avoid a few mistakes.At slightly higher levels, one learns to do one’s own taxes and perhaps to invest for market returns without having to pay fund fees. (This is where I am).Getting slightly more active one can start a blog. Commit an hour a day to write a post and one can pick up an extra income within a month or two. This can be a very valuable hobby. Some bloggers have even replaced their day jobs e.g. Lazy Man and Money, Get Rich Slowly, The Simple Dollar.

Now, I’m not sure that blogging (except for the few … those who started early and treat it as a ‘serious business’) can earn all that much money for the average blogger, but I don’t advertise, so I can’t be certain.

But, the principle of earning money from your hobby is a wise one, indeed …

Here’s an example that I really like, courtesy of the Internet Marketing Center.

It’s about an ordinary guy who was able to turn his hobby of making wire-sculpture jewellery into a $600,000 a year online business!

Preston Reuther of Wire-Sculpture.com has overcome incredible odds to build and grow not just one profitable Internet business… but three of them!

Preston overcame his mental illness and went on to start his very own Internet business selling wire sculpture jewelry tools, growing it to an impressive $50,000 in on-line sales… per MONTH! (To save you from running for your calculator, that’s over $600,000 a year.)

I have a friend who has a similar hobby, she designs interesting jewellery that is very quick, easy, and relatively cheap to make. A bit like beading, but her designs are unique and quicker/easier to make.

She has turned her hobby into a very small business, selling jewellery that she makes to friends and even to one or two stores.

She also lists some on her own home page and on craft-oriented web-sites like etsy.com.

Now, I can’t let an opportunity like this go begging, so this is what I have suggested to her:

1. Buy a video camera and film herself making (and, explaining how to make) some of her designs. Package these videos as an ‘eCourse’ for download off her web-site for $49 each.

2. Buy wholesale lots of the tools and bits and pieces that she uses, to create a Jewellery Start Up Kit that she can package with her videos and sell the combined ‘advanced start-up package’ at $149 each from her web-site.

3. Create / photograph (and/or video) new designs and sell these (with the bits required to make them as kits on her web-site from $9.95 each to $29.95 each.

Now, she may do some, none, or all of these things … that’s the wonderful thing about hobby/businesses – you enjoy doing them anyway, so an improved financial outcome is a bonus!

For example, I’ve mentioned my 13 y.o. son’s hobby before: he has taken a liking to everything-eBay.

Now, he sells products on eBay, which he packages and ships himself (every day, there’s a parcel of two sitting on the front door-step for the mailman to collect and deliver) and makes a cool $30/week.

The moral: you don’t have to be big to benefit …

So, if you have a hobby, think about how you can use your creativity to move you closer to your financial dreams:

i) If you can EARN money from your hobby instead of just SPENDING it, you are twice as well off than you are today

ii) If you commit to saving at least 50% of the excess income that the hobby produces, then you can accelerate your Investment Plan

iii) If you are extremely lucky … and work very hard at it … the ‘hobby’ could eventually become a fully-fledged business, perhaps even allowing you to quit your day job.

Let me know how you plan on turning your hobby into cash?!

It's a musical life?

Posted on April 6, 2008 by Adrian

[AJC: Since I wrote this, I notice at least two other blogs posting the same video … oh well, I guess it’s worth another look]

Occasionally, I lapse into the philosophical rather than the purely practical.

For example, I wrote a post fairly recently about the importance of The Journey … money is the result, not the object … yada yada yada.

While true, this Allan Watts video, produced by the South Park Boys (Trey Parker and Matt Stone) says it SO much better … enjoy.

Please!

http://www.youtube.com/watch?v=ERbvKrH-GC4

AJC.

Why did Warren Buffett buy half a dozen MLM companies last year?

Posted on April 5, 2008 by Adrian

For a start, I believe that is not true and simply an urban myth … but, it was what caught my eye when I received an interesting e-mail the other day … who it’s from is the most interesting part, but more on that later.

The e-mail opened with:

Both Trump and Kiyosaki recommend Network Marketing in their latest book “Why we want you to be rich.

Two rich, successful people ‘pushing’ network marketing?! Let’s read on …

Trump and Kiyosaki BOTH say that if they had to do it all over again, they would build their fortunes in THIS industry.

There were rumors travelling the blogosphere that Robert Kiyosaki’s first book “Rich Dad, Poor Dad” only hit the best-seller lists because legions of Amway members were buying it (I’m sure some did, but I’m also sure that the book hit – and stayed on – the best-seller lists simply because it was very popular with the masses).

But, the biggest reason why these guys seem to be pushing MLM is the same reason as Warren Buffett could consider owning one: there is more money in OWNING an MLM than there is in being a member of one.

Over 90% of the money in this industry is made by the COMPANY’S OWNERS and Trump, Buffet, and Kiyosaki know this! (Buffet alone reportedly bought 7 network marketing companies in the last year!)

Let’s look at why this might be so …

In the traditional world, a company manufacturing goods for sale to an end-consumer has to go through ‘many hands’ to make the process work.

This distribution chain (manufacturers -> manufacturer’s agents -> wholesalers -> distributors -> retailers -> consumers) multiplies the manufacturing cost of the product by 6 to 8 times!

If a manufacturer can instead have a highly-motivated, commission-only sales force taking their products directly to consumers in their local area (and, who also buy and use the products themselves at relatively small discounts), these manufacturers can keep a large piece of that distribution pie for themselves. Tempting huh?

But, there must be SOMETHING in this for all the people who pay money, buy product and give up their time to join all of these MLM’s that seem to be springing up everywhere …

The dream, perpetuated by the MLM industry itself, is to earn a perpetual stream of income from your own downline that is, the people (usually friends, relatives, co-workers, casual acquaintances) that you recruit to also join the MLM ‘under’ you.

I guess that explains why MLM is so damn big!

The MLM industry currently consists of well over 2,000 companies in the United States, with sales of more than $28 billion annually. According to the Direct Selling Association (DSA), approximately 13 million Americans participate in this industry.

Exactly how lucrative can this be? Well let me share a personal story …

My father had a little clothing store in an Italian neighborhood, but he eventually decided to sell it. A young man (he happened to have been in my wife’s year at the same school, but that’s a coincidence) bought the store to ‘trendy up’ the shop downstairs.

At the same time, he opened up a little business upstairs; we didn’t realize it at the time, but he was the first local distributor for a well-known MLM.

Over time he spent more and more time ‘upstairs’ and less and less time in the store ‘downstairs’ eventually closing the clothing store altogether. He is still in the MLM business, although he spends very little time on it and still earns millions of dollars every year on it.

A friend of mine (who received $4.5 million from the sale of his own business two years ago) recently joined his ‘downline’ and is busy building his own MLM stream of income … he must feel that there is enough potential in this to justify putting all of that “ask me how” signage all over his brand new BMW!

Sadly, that is not the case for everybody, as the e-mail went on to mention:

Here are Facts about Network Marketing:
-Less than 1 out of 1000 people in this industry will ever
make 6-figures.
-90% of all business WILL fail within their first 5 years
(Entrepreneur Magazine)
-Over 30, Million (yes million) Americans have either
attempted Network Marketing or are currently involved in the
industry.
-Yet 90% make less than $10 a week.WHY! WHAT ARE THEY THINKING? Why does everyone think this is an
industry of easy-riches when the reality is that most are failing
dismally?

Pretty strong stuff … so which disgruntled person sent me this apparently anti-MLM message?

A Multi-Level Marketing Company!?

I guess they are trying to get a jump on the competition by saying between-the-lines:

“The rest of the industry may be in the you-know-what … but, we’re different … we have a support team … a unique model …”. Whatever. At least they brought some interesting information to our attention, if true.

I have already mentioned MLM in passing as one possibility in my Making Money 201 strategies, so what do I really think of MLM?

Going into MLM to ‘strike it rich’ is the same as going into any other business (and, make no mistake, to succeed in MLM you MUST treat it as a business) … you pays your money and you takes your chances.

Only put up as much time/money as you can afford to lose … and, do your homework (what is the commission structure; who’s in it; what are the products like).

And, just remember that if you DO get lucky, the company had better be around for ever if you want your business to fund your retirement … how likely is that?

On the other hand, going into MLM because you like – and, would use for yourself anyway – the products, and you are going in with the more realistic expectation of perhaps making a little extra income on the side, this might be a better way for you to get started (if you do happen to hit it big … more power to you!).

In which case, I would recommend spending no more than 50% of the profits that you make (i.e. commissions after paying for product samples, convention travel, motivational products … believe me you will be offered – and will buy – plenty!).

Invest the other 50% into your long term Investment Plan … even if you do strike MLM-gold, keep funding your passive investment strategy (e.g. buy-and-hold investment real-estate) and live off the income THAT produces.

That way, if the MLM stops, you don’t! This is no different to the advice that I would give to any business owner …

Most of the entrepreneurs are lured to this industry by dreams of riches and easy money. A better lifestyle, less work, more free time, nice cars, and lifestyle. Yet the VAST majority will fail.

This is true … most will fail … what you get out of an MLM will depend upon your expectations up front (easy riches, or supplement to your Investment Plan?) and the amount of effort you put it.

It’s not for me … but, it could be for you …

Why do personal finance bloggers blog … what's in it for me?

Posted on April 4, 2008 by Adrian

I must admit that whenever I read a personal finance book I ask myself the question: was this guy rich before he wrote this book or because he wrote this book?

Sadly, for many, writing the book is a way to wealth for the author … not a way to express wealth to the reader.

For personal finance blogging, I feel that it is different, simply because there isn’t enough money in it to justify the time … even for those who do accept advertising on their blogs.

So, why do personal finance bloggers blog?

For the answer to that question, I turned to a blogger who is clearly so successful that he can’t possibly be in it just ‘for the money’ – or the fame – Guy Kawasaki … he already had plenty of both!

If you don’t know Guy and his blog, I suggest that you open a new tab in your browser and get acquainted with him now.

In a recent post, Guy talks about a a three-part study from C-NET, appropriately called “The Influencer Study from CNET Networks: Challenging Perceptions.”

Guy says that the study “explored the structure of social networks, the motivations for giving advice, and methods of acquiring information.”

The part that interested me was this comment about influencers:

Influencers aren’t driven to share information for the sake of appearing knowledgeable or to demonstrate their expertise. They’re primarily motivated by a basic desire to help others. They develop a stronger sense of self-confidence when it’s well-received, further motivating them to help and advise others.

Now, I can relate to this …

I write this blog because I want to share what I learned the hard way … there was no clear roadmap for me to follow when I was struggling financially, so I want to create one for others to follow.

The many books – and blogs – that are out there dealing with the subject of money seem to mainly focus on how to save and get debt free, or how to retire on plus/minus 20% of your current salary …

… while important, none addressed my need to be totally financially free, at a (relatively) young age and with enough ‘play money’ to do the things that I needed to do.

And, none showed me how to do that quicker than ‘get rich slow’, but more safely than ‘get rich quick’.

I guess I had to write my own ‘manual’ on how to get rich – by trial (many) and error (many) as I went along … this blog is the result.

I hope that it works to make your path to wealth a little quicker and easier for you than it was for me!

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STOP PRESS: Investor Finds Bank-Owned Bargains Galore!

Posted on April 3, 2008 by Adrian

I am (temporarily) shelving today’s post because a very interesting e-mail arrived in my in-box last night.

It was an e-mail newsletter from a foreclosure and real-estate listing service that I use, called RealtyTrac.

This particular article caught my eye, because I love anything that shows that real money is made when you ignore conventional wisdom; the headline read:

Investor Finds Bank-Owned Bargains Galore

“I just bought two brand new homes as REO from the bank,” said a Tennessee-based investor [Kirk Leipzig] in December. “I am buying five more new homes next week from the bank. I am buying $750,000 homes for $450,000 … This is the time to buy, and to make a killing out there,” continued Leipzig, who’s been a RealtyTrac subscriber for about nine months. “But you need to totally understand your market and educate yourself daily on your market. Then go buy, buy, buy.”

What’s most surprising about Leipzig is that he is not buying and holding – as many experts recommend in a down market – but buying and flipping.Now this really goes against conventional wisdom i.e. “housing prices are low … they can only go down … nobody is buying … you will be stuck with real-estate” …Maybe all true … maybe not … who knows? But, this guy has an answer for all of that:

“All the properties I currently buy are for flipping only,” he said, acknowledging that he always has a backup plan because of the difficulty selling in the current market. “I always buy a property now to flip, but in the back of my mind I know I can lease-option it, or rent it if it does not sell as quickly as I would like.”

I have to admit that ‘flipping’ real-estate is not in my particular comfort zone – I have never flipped anything (unless you call ‘buying’ majority share in a business for $0 down and ‘flipping’ it 18 months later for $6 million … but, that’s another story) …

However, for those of you looking to take some risk in what I would call The Business of Flipping Homes” as a somewhat risky way to make money in the short term (i.e. with a possible very large reward if you can replicate what this guy is doing) in order to then INVEST the excess proceeds into your long-term INVESTING (i.e. buy and hold) strategy, this just may be worth considering?

Whether you try and replicate what this guy does, in your own market, or try something else entirely different in the real-estate field “you need to totally understand your market and educate yourself daily on your market” …

… then, don’t just sit on your thumbs along with the rest of the herd … do as this successful business person does: go buy, buy, buy!

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STOP PRESS: Investor Finds Bank-Owned Bargains Galore!

Investor Finds Bank-Owned Bargains Galore