Tag Archives: Starting Out

Flash of genius?

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I was watching the Greg Kinnear movie: Flash of Genius.

It’s the one where an academic engineer beats the giant auto makers in the ’40s to inventing the intermittent wiper that you see on your car.

In case you are thinking of starting a patent-based business … don’t.

To understand why, please watch the movie; you’ll see a man’s solitary struggle over 20 years to (luckily, successfully) enforce his patent rights against a giant corporation (in this case, Ford).

You’ll also get a bit of a wake-up call about the legal profession (they will aim to settle a case early, so that they get their 30% quickly).

But, what piqued my interest was the characterization of the man at the center of the story:

He (according to a screen play that probably had very little to do with reality) suddenly got the notion that fixed speed wipers were stupid, so he immediately – and, I mean that night (!) – set about solving the problem.

Now, I suddenly realized that man is me!

Case in point:

I created a little e-book some time ago for an online experiment that I was running for you guys; I actually gave the e-book away on this site but – for the purposes of the experiment – sold it for a few bucks a copy on a site that I set up for that purpose.

Well, I’d been selling a few copies along the way … but, the experiment served it’s purpose, and I almost forgot about the book.

But, it’s good! A simple, concise overview of everything that we talk about on this blog.

So, on Thursday night, I suddenly get the idea for a site called “little free book”; I thought: “why not give this little book away to everybody … heck, I don’t need the money”.

By Monday morning (that’s now), I have all of the pieces in place: book; graphics; web-site; twitter account; and, Facebook ‘fan ‘page‘.

I have two points that I would like to make:

1. It’s really easy to set yourself up on the Internet, especially if you have a blog: you have plenty of knowledge collected in your own blog (on whatever that subject may be) to create your own for-free and/or for-fee information products.

If I can get all of this up and running BY MYSELF over one weekend, surely you can do the same over a week or two? You may not make much money (or, you may make a lot!) but, you will gain a huge amount of experience with ‘new media’ and ‘social media’ … as well as business.

You might even make enough money to kick-start some other business and/or investment program.

2. What I don’t have is any clear strategy of what to do, other than give these books away to as many people as possible.

But, that’s OK … you read the book by  Ready, Fire, Aim by Michael Masterson didn’t you? If you haven’t, the message is clear: any ACTION is better than no action.

Now, that the site is out of my head and onto the virtual ‘paper’ of the Internet, I have PLENTY of time to cogitate on all the potential strategies and counter-strategies of what I might/should/won’t/shouldn’t do with the Little Free Book.

But, until I got SOMETHING going, I really didn’t have much to think about, did I?

Oh, if you don’t already have my e-book, I would love for you to download a copy for yourself, and even send this link: wwww.littlefreebook.com to your friends.

I would also LOVE for you to click ‘like’ on my new Facebook ‘fan page’ that I set up specially for this book: http://www.facebook.com/pages/Little-Free-Book/119974768055224 and, encourage your Facebook friends to do the same.

And, if you are a fellow blogger, you already know what to do …

But – and, this is a big BUT – only if you like the book … and, me 🙂

Why Vegemite is like personal finance …

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It occurs to me that, at the age of 49+, that I still like Vegemite, that quintessential Australian curiosity very loosely labeled as ‘food’.

If you don’t know what Vegemite is, let me give you a few brief ‘highlights’:

– Vegemite is a salty black spread that is best used VERY sparingly on toast or dry crackers;

– Aussie children are almost weaned on it … it’s the only way to learn how to like it!

– It’s predecessor is Marmite, an English product derived from animal fats;

– Vegemite, on the other hand, is made from the sludge left over from pouring beer out of its vats (really!)

– It used to be fed to pigs, because of its very high Vitamin B content, until an Australian Food Scientist discovered how to refine it slightly and feed it to children [kids = pigs?]

Even though I actually LIKE Vegemite, I can understand that to most people it is totally inedible:

I met a food scientist who was working on a project to create Vegemite cookies to help feed the less-fortunate in Africa (again, because of its super-high Vitamin B content); this came on the back of the very successful Milk Cookie project which helped to bring Calcium to places (like Africa) where the shipping and transport of dairy products would be just too difficult.

Unfortunately, they had to cancel the project … there was just no way to make the Vegemite cookies taste good!

Now, I can actually relate to how bad this stuff must taste to others (yet tastes so good to me … in moderation!) because I was traveling to Amsterdam and in the clothing store (that I stopped by to buy a hat and scarf for the bitterly cold winter weather) there was a jar of candy on the counter …

… actually, it was liquorish – so, I took one and almost spat it straight out … it was THAT horribly salty! Apparently, it’s a delicacy in Holland on par with Vegemite (and, as bad tasting to the uninitiated).

One man’s food it definitely another man’s poison.

But, to get an idea as to how popular Vegemite really is – despite the taste (!) – here are three anecdotes for you:

1. Kraft bought the rights to Vegemite at some point, and if you visit their offices in Northbrook, Illinois (as I have) you will see its logo displayed very prominently on the wall above the receptionist’s desk. Not bad for a product only sold in a country of 20 million people (and, stocked in the USA almost purely for visiting Aussies).

2. Vegemite is inherently kosher (apparently pig food isn’t as unkosher as pigs-as-food) , but when Kraft decided to cut costs and take it off the kosher list (meaning that religious Jews in Australia could no longer buy it … a very small minority, in a very sparsely populated country), there was such an outcry that Kraft had to certify Vegemite as kosher again.

3. When we came to America, we brought 6 huge jars with us (and, brought more back on every trip home); this is not just us: my wife accidentally met a girl who was also relocating to Chicago … they were both at the supermarket checkout with a few of these large jars and (naturally) got talking.

So, what?

Well, there is a personal finance message and it’s this: one size doesn’t necessarily fit all … what one person likes may not suit the other at all.

That’s why when Steve asked me why I recommend that you put aside 2 year’s living expenses in retirement (as opposed to zero dollars before retirement) in your ’emergency fund’, I can’t really disagree when he says:

Adrian, what you said makes sense in most cases I suppose, but ,each case /person will have different circumstances ,even after retirement.Some sort of funds set aside seems a wise move.You cannot fore see very situation that might arise,especially at an advanced age.

So, yes I agree that there is no magic in the 2 years’ number: put aside 1 year, 18 months, 2 years, or more …. I don’t really care!

And, does it really matter whether you meet the 20% Rule or make it, say, 15% or 25%?

Probably not …

BUT, the principles behind these rules – indeed, the whole methodology that I am slowly unfolding in these posts (in the random, shambly way that bloggers like to follow) – is One Size Fits All.

Why?

Because the principle is simple: Find out how much you need to make (and why and by when), then work out how hard you need to work (financially) and how much risk you need to take to get there, then go for it!

But, if you stray too far from the the guidelines that I provide, the chances are that you will not be investing enough to make any sort of meaningfully large Number by any reasonably soon Date.

Second guess the Been-There-Done-That Multi-Millionaire who has a passion for sharing his hard-won personal/financial experience at your peril 😉

–

The Zero Dollar Emergency Fund …

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If you own a boat that’s large, expensive, and is likely to take on water from time to time, you plan well ahead and put in a bilge pump.

But, if you have a dinghy and you’re paddling out on Lake Michigan, far away enough from shore to make swimming a poor second choice, then you carry a bucket … and, if the boat springs a leak (highly unlikely … it’s not a bad dinghy) or, water happens to come over the side from time to time …

… well, you start bailing water!

An Emergency Fund’s a little like that:

What you do depends on whether you expect the emergency [AJC: I know, it’s an oxymoron] or not. Of course, if you expect it – or, can reasonably foresee it (like problems with a beaten up old car), then it’s not an emergency at all … just something that you can’t budget an exact amount for.

But, you can provision for it; at least, as best you can.

But, true emergencies do arise – or, semi-expected events blow up bigger and/or sooner than you ‘expected’ – so what do you do?

Try and build up and emergency fund but not spend it even if a really great investing opportunity comes up [AJC: what’s the opportunity/cost of that?!]?

Or, why don’t you simply find a bucket of money that you can tap into IF an emergency arises … but, one that costs you zip (or, even makes you money) in the LIKELY event that an emergency does NOT arise.

Here are some examples of In-Case-Of-An-Emergency-Please-Break-The-Glass Funds:

1. A HELOC (home equity Line of Credit) that you put in place on your home ‘just in case’

Use an online mortgage calculator to make sure that you can borrow enough to cover your likely living costs + the repayments for as long as you think it will take you to get back on your feet and repay the loan. This is a pretty good, flexible option that only costs what you use.

The other advantage is that you should be able to raise a LOT more than you can save … and, it will be available as soon as you put the paperwork in place (a true emergency fund could take YEARS to save).

On the other hand – say, if you lose your job and the bank finds out – the HELOC may be revoked just when you need it the most … of course, if you’ve already drawn down the funds before the ‘pink slip’ is in your hands …. 😉

2. Your 401k

There are usually provisions that allow you to borrow or withdraw funds against your Retirement Account; again, this may allow for ‘protection’ against fairly large emergencies (say, a few months off work), but it may come at a hefty opportunity cost … particularly, if the fund rules don’t allow for the funds to go back in on a tax-preferred basis, if you’ve managed to recover quickly enough.

Also, the tax and/or penalty interest costs may be quite high.

3. Your Car

Maybe you can do a sale and lease-back on your car .. or, maybe you can sell your car for cash and either use some of the proceeds to ‘trade down’ (therefore, freeing up some cash) or even make an exception to the “don’t finance a depreciating asset rule” by financing a (cheaper) one, instead (thereby, freeing up a lot more cash).

Remember, you’re really borrowing some money to tide you over in an emergency … you don’t expect to get out of it squeaky clean.

4. Credit Cards

Yep … this is the time that a bunch of credit cards sitting in a drawer can be really useful … but, it’s very expensive (19%+ p.a.) so make sure you only take this route for really short-term emergencies that you KNOW you can trade your way out of really quickly (i.e. less than a year).

5. The Three F’s

And … don’t forget that getting on your hands and knees and grovelling to your Friends, Family, or other associated Fools is also an option!

Anybody have any other true ‘Emergency Fund’ source ideas?

This will teach you all you need to know about marketing your product or service …

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PAY CLOSE ATTENTION TO THE NARRATOR’S INSTRUCTIONS!

After you’ve seen the video, read on:

I said that if I found a video that was a real cracker, I would do one of my famous-in-my-own-lunchtime Videos on Sundays …

… well, I found this one on Youtube.

In fact, it’s the exact same video that I used to show students of our training division (before I gave it away to my ex-business-partner).

If you want to learn about WHY this works and HOW you can use these concepts in your own marketing, read Ramit Sethi’s spot-on post:

http://www.iwillteachyoutoberich.com/blog/why-personal-finance-experts-continue-writing-worthless-advice/

But, first be sure to let me know what you thought of this video!

Panning for gold …

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[BEGIN Message from our Sponsor]

Some minor changes to the 7million7years format:

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

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

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

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

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

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

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

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

[END Message from our Sponsor] 😛

To mini-retire or not to mini-retire?

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DrDollaz takes issue with whole ‘eat hamburger now so that you can eat steak later’ philosophy:

Problem with that philosophy is that years later – after being used to eating nothing but hamburger – most people have a hard time splurging on steak!

The whole fallacy of ‘saving so that you can enjoy retirement’ is BS – your life should be filled with mini-retirements.

But, Think Simple Now tried a mini-retirement and found that it wasn’t all it was cracked up to be:

When I first learned of the mini-retirement concept, I was immediately attracted to the idea. To me it represented freedom. I had all these romantic notions associated with it, and when I found a way to take three months off from work, I jumped at the first chance and ran with it.

While traveling is an eye-opening experience and a chance to see how others live in vastly different cultures. It is exhausting, on many levels. It quickly became clear to me that the romantic concept of traveling is flawed.

It turns out that TSN is more disillusioned with travel rather than mini-retirements, per se.

Fortunately, I agree with DrDollaz …

The $7million7years Way  is all about leading you to some future date where you have amassed the required amount of money to start living (your Life’s Purpose).

But, of course, if that’s all you take away then you’ve missed half the story:

Because I also say that money has only one purpose: to spend.

And, I have written many posts telling you to save now, but also to spend now!

Life is a journey …

… and, that includes the bits both before and after your reach your Number 😉

The Real Value of Money?

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Aside from the interesting New Zealand accent (only a hop, step and a jump away from my own Aussie accent) – and, the fact that the Porsche Cayenne costs NZ$260k (or a little over USD$189,000) making them ridiculously expensive in the Land Of The Long White Cloud – I think this video is misnamed.

So you forgo the car and invest the money (as you probably should, while you are trying to work towards your Number) and get back $1.8 million after 20 years … what do you do then?

Well, isn’t the Real Value of Money based for spending? Am I missing something here?!

What you spend it on is up to you: you could give it all away or you could go out and buy yourself a Porsche Cayenne.

And, if you’re going to buy a Porsche Cayenne then, why not buy it now (if you have reached your Number and/or can afford it within the 5% Spending Rule)? 😉

Still, the message is clear: don’t go out and waste your money on ‘stuff’ if you are still trying to work towards your Number!

The Murphy’s Law Fund

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Scott who – in my post proposing a Zero Dollar Emergency Fund – says:

I’ve given this topic a lot of thought and how do you feel about seeing a typical ‘emergency fund’ as more of a temporary ‘war chest’? In that, you are building up this cash savings reserve as fast as you can, while you scout for that next great investment opportunity (ie; stock in that excellent undervalued company that you researched, or that terrific foreclosure that you’ve scouted out in a great area that you want to purchase and turn into a rental property, or an excellent business idea or perhaps funding the expansion of your current business).

I figure that way, this money has a specific target(high returns that are more likely to get you to your number by your date) BUT, in the meantime, if Murphy pays you a visit while you’re building up this ‘war chest’, you have some liquidity(ie; emergency funding) to tackle that emergency. But, as soon as you have enough built up to take that next investment opportunity, take it with this money!

The short answer is that Scott has some cash lying around, and hasn’t yet figured out what to do with it. An ’emergency’ pops up, so the logical thing to do is to dip into that cash and use it to solve the problem.

I don’t have any issue with that: but it isn’t an Emergency Fund. It also isn’t a ‘war chest’. It’s just some spare cash lying around …

Of course, I’m overstating things for dramatic effect, here 😉

So, let’s take a look at the following graph to see what may be happening [AJC: I’ve adapted this graph from something to do with the ‘mating cycle of dogs’ that I found on Google image search, but I think it suits our non-canine purposes just fine!]:

Let’s pretend for a minute that this graph represents the amount of ‘spare cash’ that Scott has lying around (Y-Axis) at any point in time (X-Axis):

Scott starts building up his savings, has a little glitch as he realizes that he forgot to pay his car insurance premium by installments so he has to pay it all at once, then steadily builds up again until it reaches Scott’s ‘peak’  – his ideal Emergency Fund of $10,000.

Then Scott hits paydirt: an idea for a new online business, and he starts to spend that $10k on programming, domain name registration, hosting, Google Adwords and all the other stuff needed to get the ‘side business’ off and running. A couple of months and $9k later, Scott’s business is paying it’s own way [AJC: well done, Scott!].

Great, now Scott can start building that Emergency Fund again …

Do you see the problem?

The only time the Emergency Fund is adequate is between the time that Scott has managed to save up the full $10,000 and the time he starts spending the money on something else (in this case, his new business idea; it could easily have been a vacation, new car, girlfriend, or …?).

[Sigh] If only Life’s little ’emergencies’ knew how to fit into Scott’s calendar [double sigh]

I guess it’s up to me to propose a better solution …

Next time 😉

The case FOR credit cards …

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I think, by now, we all agree:

Credit Cards = BAD

I mean, that’s pretty much Personal Finance Kindergarten, right?

Why pay 19%+ interest for something that just goes down in value (like that 3D TV)?

But, why do I pay all my bills – both work and personal – by credit card.

I’m sure the answer’s pretty obvious to all and sundry: it’s for the points, man!

Yes, even millionaires like to get free stuff …

…. and, Sugardaddy outlines on NetworthIQ exactly how he does it:

1) Assuming that you pay your bills on time, most of the time, put all routine expenses on your credit card…utilities, groceries, etc.

2) Set up an automatic bill payment plan from your checking account for the card online.

Result:

1) you get a 30-day free loan.
2) you get free credit card points that are worth real money.
3) you increase your credit score.
4) you consolidate all your bills in one payment
5) You will never have a late fee and the APR will never concern you.
6) You will always watch your checking account balance like a hawk as failure to have enough in the account IS NOT AN OPTION.

I have done this for 10 years and it works like a charm…I get all my video games for “free” from Best Buy, and beat the banks at their own game.

Life does not get any better than that.

But, there’s always a catch in Life, Sugardaddy 😉

The one, here, is that the credit card companies HOPE that you forget to pay your bill on time, then you get to pay interest from the date of purchase.

[AJC: actually, they’ve already made their $$$$ from the Merchant Fee – believe me, I understand this side of the business VERY well – but, that 19% they get from you is just sweeeetttttt]

So, I add a few more steps to this otherwise inspired plan:

7 ) See 6)
8 ) See 6)
9 ) See 6)
10) See 6)

Point made?

Great, because I, too, have been doing this for years.

My assistant puts all ‘work’ expenses through my personal credit card (needless to say I have a LARGE credit limit), and my wife does the same with our home expenses.

Both ensure payment in full each and EVERY month.

Having done that, later this year I’m traveling ’round the world first class [AJC: I’m told that First Class on the new A380 entitles me to my own/private room on the ‘plane!] … fully ‘paid’ by points.

Sweet 🙂

Monetizing your passion …

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If you want a business but don’t know where to start, think about monetizing your passion.

By that I mean, find out what it is that you like to do in this world (golf? personal finance? knitting?) and parlay that into a business.

Here’s somebody who turned a passion (and talent) for jewellery made from twisting little silver-plated wires into a $600k+ p.a. online business that teaches others how to do the same!

That’s why I recommend that you start today …

… whether you have any idea what/how to start your business or not, start by writing a blog.

It can tell others how to do whatever it is that you do (if you are already an expert), chronicle your own journey to ‘expertness’ (great way to get started, even if you don’t know much about your passion at all), or it can simply be a collection / review of others who are experts.

Down the track, you’ll have enough randomized blog entries to create some of your own information products … all neatly reviewed, scrubbed, and honed with the volunteer assistance of your readership.

What do you think I’ve been doing with this blog all of this time? 😉

Seriously, if you think this is hard, check out this story of a 9 y.o. who decided to (successfully, I believe) help pay for his own heart operation by writing/selling an e-book:

http://steve-olson.com/9-year-old-helps-pay-for-own-heart-surgery-by-publishing-estory/

Inspirational, true story even without the business/money lesson that I had to wrap around it!