Tag Archives: wealth

The perfect side business?

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My good blogging friend, Kevin, mounts a good case for – naturally – taking on blogging as a side business.

Because I don’t monetize my blog at all, nor do I expend any effort on promoting it or driving traffic to it, I can’t really comment.

But, I can say that for my audience it’s probably not the right type of business for you.

Well, let’s backtrack a little; as I once said: “you can’t save your way to wealth“!

So, the only reason for starting a side business is so that you can build up an investing war-chest to use elsewhere.

[AJC: another perfectly valid reason might be so that you can grow it to one day replace your day job. Another reason might be to gain experience in business. All valid reasons, but not directly in the context of getting you to $7m7y]

If you do that, then you’re essentially beefing up your Pay It Twice strategy, so I have little more to add here.

But, if you do want to reach $7m7y (or some other large number / soon date), then I do have the perfect side-business for you:

If you are a programmer, go find a friend with some online marketing experience (here’s where a blogger can come in real handy!) … if you’re a fellow blogger, go find a great programmer who also likes to burn the midnight oil.

Then go and build your own startup!

If you come up with a cool idea aimed at small businesses or the self-employed, then you can build up a neat revenue stream and end up with something quite salable.

Just like the guy/s at Freckle (an online time accounting tool) who took their site from $1k/mth revenue to $20k/mth in just two years.

Firstly: SaaS (Software as a service, which just means tools that run online without needing to download software) companies typically operate on high gross margins (70% – 90%) and ‘in the cloud’ (which means that they don’t need to run or maintain their own hardware or operating systems) using ‘open source’ software (which usually means they’re free).

This means the owners make good income, with few (if any) fixed overheads, be it full-time or part-time.

Secondly: Unlike blogs, eBay businesses and many other types of online/offline ‘side businesses’, these types of internet businesses can scale; that means the sky’s the limit as to how much income they can generate.

Thirdly: They can be financed (by angel investors and, later, venture capitalists) for expansion.

Lastly: They can be sold … for a lot!

Just ask the guys who are financing Airbnb (started by just three regular guys) or Groupon what they think those businesses are worth 😉

[AJC: actually, these are not examples of SaaS businesses, but they also generate revenue, so there’s nothing wrong with going down that path, either, but you really need to be lucky to find the right ‘slam dunk’ niche]

Now, you may not be as successful as any of these guys …

… but, I submit to you, that you are just as likely to be successful in a true / salable online business as you are in any other kind of part-time business (including blogging) and that it takes just as much work.

So, why wouldn’t you try the one that has a chance of getting you to your – shall we say, audacious – financial goal?

My circle, my prison.

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1998 capped a long period in my life when I was imprisoned by a circle.

I suspect this is the same for most. What separates me from the others – and, I suspect you, too – is that I broke out.

The ‘circle’ was my life and the things that I was trying to deal with:

– Keeping myself sane in an increasingly mad world

– Keeping my family safe, fed, and healthy

– Trying to earn a decent living to pay the bills and keep a roof over our heads.

This type of existence is inherently inwardly focused … we focus on ourselves, our immediate family, our friends, and our work colleagues (probably in that order) and little else.

The reason why it’s a prison – well, a financial reason (there are others beyond this scope of a humble personal finance blog) – is that our ‘investments’ are similarly inwardly focused; aside from what little we manage to save in our bank accounts and 401k’s, our so-called investments center around the things that make our inner-circle lives a little better.

We invest in our health (as much as we can – or feel motivated to do), our education (often because our parents tell us that “it’s an investment in our future”), our home (because that’s what our parents did) and, of course, our cars & possessions (because that’s what our friends and colleagues do), and so on.

Why do we invest?

So that when our income stops we can try and continue living within our circle and simply maintain what we have?

But, when I broke out of that circle my life began to change!

My First Big Realization was that my life wasn’t about my money … so why was I spending so much of my life – that precious, finite resource – attempting to earn money?

When, in 1998, I found my Life’s Purpose, which included what was in the circle (family, health, and so on) but also a lot more than I had ever felt desirable or even possible, I was forced to look outside the circle … way out.

Interestingly, and logically, I also realized that the investments that I had been making for my circle-bound future would no longer be adequate for a far less bounded life.

Not only did my thinking have to move beyond the circle, but so did my finances. And, if my finances wouldn’t be adequate for the life that I really wanted to lead, then neither would my investments!

So, in 1998, my investment strategy also shifted … and, shifted dramatically.

[AJC: if you want to understand a little more about this process, then check out this free site:  http://site.shareyournumber.com/]

No longer would I try and upgrade my home and my car.

No longer would I try and upgrade my lifestyle in an attempt to keep up with the Jones’ (and, I had plenty of those to try and keep up with!) …

… I would simply begin to apply every spare penny to investing outside of the circle: in true investments that I could not eat, live in, drive, or share over a beer.

Now that those investments have born fruit, finally freeing me up to live my Life’s Purpose, I realize that living outside of the circle has actually also helped me live within.

The difference is that my inner circle is no longer my prison but my sanctuary.

The sooner that you identify what is in your circle and what – if anything – outside of the circle truly drives you, the sooner you will be motivated to seriously start making money and investing.

Then this blog will suddenly become very interesting to you 😉

The meaning of success …

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If you’re a new reader, you’ll pretty quickly find out that I only write when I think that I have something useful to say …

So, the best thing to do is scan this post and if it’s interesting, subscribe by e-mail / RSS and I’ll pop a quick e-mail into your in-box if the urge to write does strike.

Today, I am inspired by a post written by moneycrush about success:

“Big goals take time, which means it can be especially hard to stick to them when they require both time and sacrifice.”

Here, moneycrush equates success with “reaching your goals”. giving an example of getting your house paid off.

So, this got me thinking about the nature of success:

On the surface, I am successful.

Certainly my friends and family talk to me – and, of me – in those terms.

Now, they don’t necessarily know my net worth (after all, that’s why I write here under a nom de plume), but they do know that I sold three businesses in three countries … so, they can connect the dots.

They don’t realize that, by their measure of success = money, I was already ‘successful’ well before  before I sold my businesses, and well before those businesses even made any serious money.

Because I was quietly doing what I advise my readers to do: take your income and use it to buy income-producing assets instead of spending it. What my family and friends don’t realize is that’s how I made I made $7 million in 7 years, starting with $30k in debt.

In any event, I still don’t consider myself successful.

That doesn’t mean that I’m one of those guys who chases ever bigger and bigger financial wins …

It just means that I measure success differently:

To me, success is when I am living my Life’s Purpose. And, money is just one of the enablers.

In 1998, I discovered my Life’s Purpose; it was simply to “always be traveling mentally, physically, and spiritually”.

Now, that means nothing to you … so, let me translate that into some practical incarnations of that Purpose:

– Travel … a lot. This takes time and money.

And, comfortably. For me, this means about $50k a year of business class travel. I’m about to experiment with a roll-up mattress on the business class ‘lie flat’ seats; if that doesn’t work, I’ll need to ‘upgrade’ to first class because lack of sleep on the long-haul flights from/to Australia kills me.

– Personal Finance & Public speaking … twin passions of mine. I hope to be able to combine these, one day. The money I might earn is irrelevant.

I rarely get to indulge in public speaking these days; the hidden cost of no longer being attached to the corporate world. But, I discovered this passion about 30 years ago, yet have spoken publicly less and less as time has gone on. This blog, as well as being a passion in its own right, is one step towards resurrecting myself as a public speaker. My book (out soon!) is the second.

– Venture Capital … this goes with the ‘traveling mentally’ bit.

I must admit I was worried. Stories about VC’s investing in 10 businesses in order to (hope) that one may succeed scared me, with typical (VC-like) bricks and mortar investments requiring upwards of $250k each. Fortunately, the internet came along and I’m happily working on my little angel investing fund, which allocates $25k+ per investment. If 10 fail, well, it shouldn’t hurt much more than my pride. Fortunately, success rates are closer to 30%, so I’m told (hope!). In either case, but don’t tell my partners this, I’m only in it for the stimulation and … fun!

– the touchy/feely spiritual stuff. I’m not exactly the next great guru, but this doesn’t cost any money – or much time – and feels … well … nice.

So, for me success is more about what I do than what I have.

But, I am just starting to live my Life’s Purpose: I’m beginning to travel more; but, I am just starting my venture capital activities and my book isn’t out yet (hence, the speaking offers haven’t exactly flooded in) … so, I am working on my ‘success’ but am clearly not there, yet.

Now, I suggest that you find out what REALLY matters to you and go about becoming ‘successful’ too 🙂

Applying the Formula for Wealth – Part II

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The first part of the $7million7year Formula For Wealth is pretty simple, therefore so is its application:

Where (W)ealth is a function of (C)apital and (T)ime

It’s pretty useful for teaching your children to save part of their allowance; other than that, you need more help than I can give you if you still don’t know that you should be investing at least some of your money (i.e. capital) 😉

But, what about a more difficult questions? Like deciding whether or not you should pay off your mortgage early?

Dave Ramsey would suggest that you pay off your mortgage NOW and INVEST (presumably, once those funds are no longer required in order to pay off your mortgage) LATER.

According to the base formula, you are still putting your money into an asset (hence, creating Capital), and allowing that to sit for a long time, which has to be a good thing, right?

Of course it’s better than spending the money – perhaps literally eating your capital (fine dining, anyone?) …

… but, is it optimal from a wealth-building perspective? For that, you need to turn to the third part of the formula – the X-Factor:

The two sub-sections of this part of the equation simply suggest that (Re)ward is offset by (Ri)sk; you have to rely on other studies (or common sense) to realize that Risk and Reward are related: as you increase Reward, so – to a greater/lesser degree, depending where you are on the Risk/Reward curve – so do you increase Risk.

In other words, Risk is a dampener for Reward – otherwise, we’d be traveling to work by jumping out of planes and playing the options market, as a matter of course!

But, the same cannot be said for (L)everage and (D)rag …

Leverage is the ‘big secret’ of building wealth: increase leverage and you MULTIPLY your wealth.

Using other people’s money is one way to increase leverage … but, by paying off your home mortgage, you are DECREASING leverage!

According to the formula, that’s bad 😉

Interestingly, Peer to Peer lending also fails the leverage test.

You see, peer to peer lending, mortgage ‘wraps’, and other products where you are financing other people, reduces your Capital and increases their Leverage … the polar opposite of what you should be doing!

So, why do banks lend money, potentially reducing their leverage?

Simple!

They’re not lending their money; they are borrowing money as well. They are leveraged to the full extent allowed by their law and their board of directors.

Which brings us back to risk:

As the banks proved before the financial crisis, applying too much leverage can be bad for your financial health.

What about risk and your home mortgage?

The argument often cited for paying down your home mortgage is one of decreasing risk. Yet, if you intend to live in the house for some extended period of time how is your risk increased / decreased by paying down debt?

How have you applied leverage to improve your wealth?

 

Applying the Formula for Wealth – Part I

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There’s no point in having a formula – no matter how simple it may seem – if you don’t know how to APPLY it.

So it is with the $7million7year Formula For Wealth:

The beautiful thing about a formula like this – and, why I am so excited every time I get to share it with you – is that you don’t need to know anything about personal finance in order to answer the typical personal finance questions that arise … the formula makes the answers obvious.

Let’s take a really simple example, you earn money … so, you’re entitled to spend it right?

Well, what you do with your money is your own concern. But, if part of your plans include building wealth, what should you do?

Maslow’s Hierarchy puts physiological needs (food, water, warmth, etc.) right at the bottom, so you had better take care of all of the basic household expenses first. Then comes safety and security so you also had better take care of those brakes!

But, then come the ‘soft’ areas that cover the gamut of love and self-esteem, all the way to self-actualization and self-sufficiency. Which means that you have to take care of your future physiological needs etc. – but, that probably accounts for your basic spending and your 401k contributions.

Then you have to decide the tough issues: do you have more fun now (spend more now) or hold some back – better yet, invest – so that you can also have some fun later?

That’s a personal choice, but one that finding your Life’s Purpose will make much easier.

Which brings us back to the point where you’ve made the decision to build some wealth (e.g. your Number). And, that’s were the Formula For Wealth comes in really handy:

The formula for wealth merely says that (W)ealth is a function of (C)apital and (T)ime.

So, you need to start building capital – the earlier the better to also increase time – which means you shouldn’t spend that excess cash on going out and having (too much) fun, nor should you buy depreciating assets such as cars, furniture, and accessories (other than to satisfy the Maslow-needs for basic transport, protection and comfort).

And, the formula makes it pretty clear that the more your capital increases over time, the better. So, simply sticking your cash under the mattress probably won’t cut the mustard … you’ll need to start thinking about investments that grow your capital over (sufficient) time e.g. CD’s, bonds, stocks, or real-estate.

Nothing earth-shattering, so far. So, next time, let’s use the second part of the formula to answer one of the most commonly-debated questions in personal finance: should you pay off the mortgage on your home loan early, or just let it ride?

Dividends: real cashflow or fake cashflow?

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If you’ve noticed, I made a couple of adjustments to this blog:

The first is that I have reduced my posting schedule to (generally) twice a week; I’m trying for a Mon./Thur. posting schedule, but – if you enjoy reading this blog (near-future multi-millionaires need only apply!) – your best bet is to sign up for the RSS/e-mail feed on my home page because I’m fickle … if I get the urge, I’ll post daily, or simply shift days to suit my increasingly challenged schedule 🙂

The second is that I’m posting more business-related posts (e.g. my Anatomy Of A Startup occasional series) … I am funding a series of startups with the ultimate aim of a Y-Combinator style of early stage entrepreneurship mentoring / funding program and what I am sharing in this series is real ‘special sauce’ stuff … like everything that I do, it’s usually simple but works!

Back to the first change: if I write less frequently, I’m hoping to challenge myself and my readers even more. To whit, my last post (inspired by Canadian Couch Potato’s brilliant post on the same subject) inspired a one week long comment-debate … one of the best that I have seen on this blog.

The main thrust was the debate around income v capital growth.

Jeff stated the ‘for’ argument best when he said:

The reasons why people desire rental income from real estate are the same reasons why people desire dividends from stocks…you get a cash flow without having to sell the asset at an inopportune time.

But, there’s a key difference between so-called ‘Income Real-Estate’ and its stock market equivalent – Dividend Stocks: Income RE produces REAL cashflow, Dividend Stocks produce FAKE cashflow!

To illustrate, let’s take a look, first, at income-producing real-estate:

Tenants pay rent; you pay costs; what’s left (if any) is real, spendable, excess income/cashflow that generally increases with inflation. Bad RE doesn’t produce an income. Period.

Now, let’s take a look at so-called Dividend Stocks (i.e. Company stocks that you buy specifically because they produce a nice, steady dividend stream):

Dividend-paying company sells stuff; they pay their suppliers and other costs; Good company produces profits / Bad company produces losses.

In either case, the Board meets and says “we gotta pay some dividends”.

The CFO says “But, we got bills to pay!”; CTO says “I got R&D to do!”; COO says “I got warehouses to build!”; CEO just wants to keep his job (he is hired/fired by the Board, remember) and says nothing …

The Board says: “Too bad. If we don’t look after our shareholders they’ll crucify us … even worse, they’ll vote us off our nice cushy board positions and we’ll even have to buy our own lunches!”

“Let the CEO deal with poor cashflow and working capital, insufficient warehouses space, outmoded products and technology, lack of marketing, and so on … heck, we’ll even borrow money from our provisioning funds or the open market, if we have to. No matter what, those Dividends must be paid … after all, we are a Dividend Stock!”

So, they say “no” to the CFO, COO, CTO, CMO … and, every other shmo’

Do you want your board fussing over distributing cash that it may or may not be able to spare? Or, would you rather that your Board focussed on building a GREAT company, with GREAT long-term growth and profitability prospects?

In order to answer that question, there’s one more feature of dividend stocks that we still need to examine; Kevin @ Invest It Wisely says:

The pro-dividend guys do have a compelling case that dividends grow more smoothly than the ups/downs of the markets.

To which I say, “so what?”

As we have already seen, the apparent  ‘smoothness’ of the dividend stream can be illusory.

And, what are you going to do with any dividends that you have received pre-retirement?

I presume that you are going to reinvest them so that you, too, can get to $7 Million in 7 Years (or, at least to your own relatively large Number by your own relatively soon Date).

In other words, you’ll just take that relatively nice, smooth dividend stream and throw it right back into the choppy market [AJC: Next, you’ll be telling me that you’re Dollar Cost Averaging … somebody, grab me a Tylenol, please!].

If you’re going to be fully invested in the stock market, for a number of years, then why don’t you at least buy some stocks in great companies that are going to grow, grow, grow … profits?!

If they happen to pay dividends, well great [AJC: you’re going to give it straight back to them, anyway, aren’t you?], and if they don’t, well who cares?

I mean, would you rather own “this dividend stock [that] has delivered an annualized total return of 3.10% to its loyal shareholders”? Or, would you rather own this never-ever-paid-a-dividend stock that has delivered an annualized total return of 20+% to its loyal shareholders for over 40 years?!

However, there is one special case (i.e what if you are already retired?) that I want to examine next time …

The 0% ‘safe’ withdrawal rate …

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What % of your retirement ‘nest egg’ can you safely withdraw each year, to make sure that you money lasts as long as you do?

Many would say that this is a question best answered by highly educated practitioners of the highly specialized field of Retirement Economics, who will give you an answer – or, more likely, a range of answers – accurate to many decimal places.

But, I can give you a single answer …

… one that is accurate to at least 17 decimal places, yet I am not an economist of any kind.

You see, Retirement Economics is an oxymoron.

Why?

First, let me give you an excellent example of what retirement economics is …

In his blog dedicated to pensions, retirement plans, and economics, Wade Pfau provides the following chart:

It superimposes two charts:

– one shows descending survival rates for men, women and couples who retire at age 65.

For example, if you retire at 65, there’s only a roughly 18% chance that at least one of you will live past the age of 95. Reduce that to 90, and there’s a 40% chance that one of you will survive.

– The other is an increasing probability that your money will run out before you do the larger the % you withdraw from your retirement portfolio.

For example, if you only withdraw 3% from your portfolio (if invested in the exact 40%/60% mix of stocks and bonds assumed by Wade) then there’s almost 0% chance that you’ll run out of money by the time you reach 95 (and a small chance thereafter).

But, there’s a 30% chance that you’ll run out of money by age 95 if you increase that ‘safe’ withdrawal rate to just 5%.

You’re supposed to use these ‘retirement economics’ to make decisions like:

“Well it’s very likely that either my wife or I will live to 95 and we don’t want our money to run out, so we’ll invest all of our savings in a 40% stocks / 60% bonds portfolio, and we’ll only withdraw 3% of it each year just to be sure that our money won’t run out.”

That seems like sound economical judgement for the average person …

… BUT, you are not average!

For better or worse, you are … well … you.

Besides the obvious [AJC: who says you want to wait until you’re 65 to retire?!], when YOU are 95 (albeit in the 10th percentile), how happy will you be if your money has either either already run out or there’s a reasonable chance that you will soon be out of money, hence out of care?

I would argue that only a 100% chance of your money outliving you is acceptable.

Even then, only with a LARGE buffer, so you never need to worry about even the possibility of your money running out!

In my opinion:

Only a 0.00000000000000000% withdrawal rate is acceptable.

Now, 0% does not mean withdrawal nothing, but it does mean having a sustainable, self-regenerating supply of income; this is not as hard to achieve as you might think.

For example, you can create an ongoing stream of income from:

1. Inflation protected annuities (albeit expensive)

2. TIPS (albeit a low return)

3. 100% owned real-estate (albeit, needs management)

4. Dividend stocks (my least preferred as they are sometimes a sub-par investment that tends to rise-fall with the markets).

Remember, when you retire, you want not only ZERO chance that your money runs out, but you don’t even want to get anywhere near to zero by a wide margin.

Don’t you?

Mr Krabs is alive and well!

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Eugene (Mr) Krabs is the Mr Scrooge of the modern age. Scrooge McDuck was there for a while, but the duck got bumped by the crab. Sorry, duck!

All of these misers got rich, not by being misers (I’m sure it helped … a little!) but, by having a business; Mr Krabs has a hamburger joint. Nice cashflow business that – perfect for providing the funds to invest in all sorts of stuff.

And, I bet he owns the building …

Mr Krabs has one other advantage over his predecessors: he reads personal finance blogs!

I know this, because “Eugene Krabs” left his 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!

The formula itself needs a little tweaking, but ‘sensational’ nonetheless, for example it’s probably better written as:

Wealth = Capital x Risk x Time

Here’s how to make it work for you; if you are an:

– Ordinary person: do nothing … your wealth will not grow. In fact, it will decline in real terms, as inflation takes its toll. You can offset this, to a greater or lesser extent by cutting costs (including interest costs and living expenses). Whole legions of people swear by this approach.

– Reasonable person: limit your risk, and offset your limited capital by applying Time … lots of it (provided you are happy to work for 40+ years, don’t get sick or lose your job, etc., etc.), and pay yourself first to increase your capital by roughly 10% each year.

– Extraordinary person: you also make a 10% improvement, because that’s reasonable, achievable, sensible … but, you don’t make a 10% improvement in just one area, you do it – as Eugene Krabs suggests – across all three!

Look at what happens if you apply one unit of Capital, one unit of Risk, and one unit of Time: you gain one unit of Wealth.

But, what happens if you increase your:

1. Capital by 10% – let’s say by starting a business on the side and applying at least 50% of it’s net income to your investment capital?

2. Risk by 10% – let’s say by moving from investing in Mutual Funds to individual stocks (if you buy/hold one, you buy/hold the other)?

3. Time by 10% – let’s say you allow yourself 10% more time to get there?

Nobody would be too scared by making a 10% improvement in one are; so, what’s so hard about making it in three areas at the same time? If you do, you end up with 1.1 units of each of: Capital, Risk, and Time: 1.1 x 1.1 x 1.1 = 1.33 …

… your wealth doesn’t increase by just 10%, it increases by 33%.

Of course, you want to REDUCE time, not increase it, so play with a simple annual compound growth rate calculator and see what happens if you:

i) Double your Capital (increase your savings; reinvest 100% of your side business earnings; grow your side-business even more)

ii) Double your Risk (buy/sell your stocks; buy/rehab real-estate; start a ‘real’ business)

iii) Halve your Time

2 x 2 x 0.5 = 2 … how’s a 100% increase in your wealth suit you?

BTW: for the mathematicians out there, this simplistic formula is nonsense; for example, as your wealth increases over time, any ‘spare’ wealth (i.e. that you don’t spend) increases your Capital (thus compounding either/both until your Capital converges to your Wealth … but, never quite meets it), whereas Time is linear (as long as we don’t approach the Speed of Light), and Risk is certainly neither linear nor compounded.

But, that’s not important right now … 😉

Why climb Mt Everest?

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Thanks to all of those who entered my SECOND $700 in 7 Days Giveaway; you still have a couple of hours to sneak in and submit your entry for what looks like a better than 1 in 30 chance to win the first prize of $350 in cash … that’s like $10 just for filling in a 2 second form!

If you refer friends, you will be in the running to win the second ($150), third ($50), and fourth prizes of ($50) CASH as well … right now, I’ll be struggling to give all of those prizes away, so that’s a pretty good hint. But, since you’re late to the party, you’ll have to find the entry form yourself. HINT: xxxx 😉
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I wasn’t spanked by my readers nearly as much as I expected for sharing my happiness with my mansion purchase (actually, two mansions: one in US and one in Aus), then again the purpose wasn’t to brag but to counter the idea that spending is bad.

In fact, spending is only bad out of context … $7 million in 7 years kind of context … when not spending would be even more absurd.

Anyhow, Josh did pull me up:

What’s the point? Maybe I’m missing something. Maybe it’s because my assets are in the 7-figure range and not the 8-figure range. But why spend $X Million on a home?

I live debt-free in a home that cost $300K. I could have bought a $2M+ home, but it seems so impersonal, pretentious, and secluded. I want people to come over and feel comfortable drinking beer with their feet up on the coffee table, or to let their kiddos run around carefree after coming inside on a rainy day. Even now, some people feel uncomfortable in my house because it is “so nice” for the area in which we live.

Well, why do people climb Mt Everest? What’s the point?

Because (a) it’s there, and (b) they can!

So, I have a very simple rule on spending that has kept me in good stead – through poorer and richer:

I spend money when it doesn’t make sense NOT to!

I became rich because I wanted to travel spiritually (that’s free); mentally (that costs me in time and ‘venture’ capital); and physically (that much traveling costs me a LOT of time/money: hey, I retired at 49 so I WANT to travel Business Class and stay in at least 3/4/5-star hotels).

So I set out to make my $7 million in 7 years to allow me to begin the life that I wanted to live (without needing to work) and was fortunate enough to succeed …

… and, one of the side benefits of that financial success is that I have plenty of cash for cars and houses, and vacations and bling. And, for charitable gifts and deeds 🙂

I write this blog because I wish the same for all of you …

AJC.

PS a big house doesn’t need to be pretentious; ours is homely and welcoming and people love it because they get to hang with us, play tennis, watch movies, and swim 🙂

Beating the ‘more’ bug!

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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 ;)