Monthly Archives: March 2009

What's your exit strategy?

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My Dollar Plan asks: “What’s Your Exit Strategy?” giving the example of his father’s business:

My dad has been sick this week, and I’ve been spending a considerable amount of time with him at the hospital. Since he’s a successful small business owner for 30 years, we’ve spent some time discussing his plans for the future.

Since I’m in a very ‘anecdotal’ mood at the moment [AJC: Don’t worry, I’m sure it will wear off soon. Who could possibly be interested in my boring life? ;)], My Dollar Plan’s brief mention of his sick father reminds me of how I started in business:

I think that I’ve mentioned before about my father who started a little finance company in his 60’s after being unceremoniously ‘booted’ by his former partners, and for some unknown reason, we mutually decided that I should join him in that business as a 1/3 partner [whoohoo!].

A couple of years later, just as I realized that the business was in serious financial trouble, my father fell terminally ill. He was also unfortunate in that I wasn’t able to save the business, but I guess by bringing me in – had things not already been so screwed up (initially, well hidden from my view) – my father was creating the classic family business ‘exit plan’: bring in the children …

… bring one, bring all!

You see, my father’s Grand Plan, unbeknown to be when I joined, was to bring in both of my sisters as well … and, we had a wonderful 6 month period where he actually hired my younger sister and I would fire her the same day, then we would repeat the farce a week or two later, until he eventually gave up. Before you judge me too harshly, let me share two small snippets:

1. The business – as I found out all too late – could not afford me, let alone my sister, and

2. I would sit at my desk in the afternoon working at feverish pace trying to catch up on all the paperwork and phone calls (at the same time, naturally; who has time to ‘single task’ in their own business?!) having been ‘on the road’ all morning rushing from appointment to appointment; only to watch my sister working at snail’s pace on some basic task (I wish I could have taken a video of her very slowly and deliberately unstapling some papers sheet by sheet, by sheet, by …. [yawn] …. and, taking a minute’s rest between each sheet!), which drove me absolutely bonkers given the absolutely frenetic pace that I had to work at.

This also reminds me of the country’s richest families; the business empire was started by two brothers who opened a butcher’s shop together and parlayed that into a multi-billion steel and manufacturing conglomerate: realizing the family issues that would eventually be created upon succession (who would get/run what?), they deliberately broke up their huge conglomerate while they were still alive and in-charge and gave one division of the conglomerate to each child to own and run as their own.

Very clever exit plan: exit while still willing and able to handle the ensuing family ‘issues’ …

So, the point 0f all of this is that I am not a fan of family businesses; some run very well, but others don’t run at all.

Oh, and every business needs to have a ‘succession plan’ before you even go into it (i.e. before you either start it or buy it): work out how much you will need to sell it for, and by when, in order to achieve your Number/Date and go out and find that buyer as soon as you reach that predetermined profit/date target.

My balance sheet doesn't …

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financial-fence

There’s an old accounting joke:

Q: What do you call a balance sheet that doesn’t balance?

A: An expensive sheet of paper! 😛

I don’t know if that really is an old joke because I think that I just made it up (actually, I just modified a really old joke about boomerangs) … but, the point is that balance sheets always DO balance; they have to, so once your accountant fiddles the numbers to produce the desired result what do you do with it?

If you’re anything like me, you file it under “who cares?” …

When I ran my businesses, I really struggled with understanding the numbers – as represented by the Profit and Loss (or Income) Statement and the Balance Sheet. My accountant didn’t even bother to run cashflow statements or forecasts for me, and I would have had no idea what to do with them if he did!

Yet, that opened me up to ‘success [or failure] by luck’ rather than by design …

My friend, Andee over at onesherpa.com, being a former Big Business bean-counter-type, understands the problem all too well and has developed a much better way of looking at the numbers in your business – or your life – called The Financial Fence.

Here’s what Andee has to say about the dreaded balance sheet:

You may have seen a balance sheet that shows; Assets minus liabilities equals Equity … [but] here’s how we do balance sheets in the 21st Century.
Working Capital Plus Fixed Capital equals Debt plus Equity.

Think about buying your first home. Probably looked like this:

    Home (which equals Capital).
    Paid for by:
    Debt (borrowed from the banks),
    Plus
    Equity (contributed by you).

That’s how we do balance sheets because they make sense to the average person who has bought a home. It’s very easy for them to understand.

Think about your business for a minute:
You will have working capital (Inventory, accounts receivable, accounts payable, employee provisions etc.

You will have fixed capital (plant & equipment, motor vehicles etc).
And these will be paid for by:

    Debt (borrowed from a bank) and
    Equity (which is your wealth tied up in the business).

When you do balance sheets like this it becomes easier to understand what you’re accumulating and how you can use this to help you run your business.

This is a surprisingly simple yet powerful way to rethink your business/personal finances and I suggest that you learn everything that you can about it … to get you started, Andee has a great game, which I feel is a worthy rival to Robert Kiyosaki’s CashFlow series of games and which will really help you in your personal financial life.

15 seconds to say what took me three posts …

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Scroll to about the 3.5 minute mark and listen for 30 seconds: that’s all it takes Warren Buffett to tell you what I’ve been trying to tell you in post-after-post about the folly of buying so-called ‘dividend stocks’ …

… why is he so quick?

First of all, Warren Buffett has credibility; secondly, he has a knack for summarizing things very neatly.

Now, Warren didn’t teach me how to think about dividends – to me, it’s just such clear common sense I can’t even understand the “pro-dividend for dividend’s sake lobby” – but, it’s nice to see that “The World’s Greatest Investor” puts his shareholders’ money where his mouth is 🙂

#1 reason to be rich?

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moneyworries2If you ask people why they want to be rich, the most common answer will be “so that I don’t have to worry about money any more” …

Think about it, no more money worries!

So, let me pop that little bubble for you:

MICRO

I went to the supermarket on Friday and duly handed over my credit card to the attendant who swiped it for me … only to find the TRANSACTION DECLINED.

What!? I thought that I put those days well past me? I called my wife who said that we must have max’ed out that card (it has a $17k credit limit!) that month and the scheduled payment hadn’t been processed yet, but didn’t I have another?

Well, I did have a ‘business’ credit card on me, as well, but that wasn’t the point … it appears that even rich people have credit card issues from time to time.

Not to worry, I just whipped out the old debit card and trotted off to the ATM, to find …. INSUFFICIENT FUNDS.

Now, I was confused … how could our bank account be empty? To be sure, it’s only a daily money needs account (not The Big One with all the zeros) but didn’t I just pop $15k in it, ‘to be safe’?!

Turns out that the debit card that I’ve been using is attached to an old bank account that we now just use to manage one of our properties … and, I’d unknowingly been using the wrong debit card and draining it with my day-to-day cash needs …. oops.

So, there I was shopping without any cash or credit cards; I solved the problem by rifling through the parking change sitting in my car (fortunately, there was about $50 or $60 just sitting in my center console) and even managed to lend $2 to a another ‘rich’ friend whom I happened to bump into the street as she was rifling through her purse for some cash to buy a loaf of bread from the bakery that I had just stepped out of.

Seems like she can afford a $3 house and $1 mill. renovations, but was equally ‘cash poor’ (on that particular day) as me …

… oh, the irony!

MACRO

Some people go through their wallets, handbags, coin jars, and various bank accounts adding up the bits and pieces to see if they have enough in the ‘kitty’ to buy that nice [insert discretionary item of choice: clothing; car accessory; concert ticket; etc.; etc.].

If my experience is anything to go by, it doesn’t stop when you become ‘rich’ … you see we suffer from budgeting problems, too.

It seems that a combination of market shifts and various stock market and housing market collapses and we have (relatively speaking) overspent on our house; not to mention, we haven’t yet sold our old house, and we have a complete ‘rehab’ of the newbie about to begin …

… and, herein lies the problem:

We provided our architect with a brief to draw up plans for renovations to fit a $450k renovation budget, which he assured us was not only possible but eminently achievable given the modest (if you can call adding a room, updating a kitchen, and refitting 7 bathrooms ‘modest’), mainly cosmetic, renovations that we had in mind

Well, when the quantity surveyor came in with an estimate of $890,000 for the renovations to the house – – this not including the costs to rehab the pool, tennis court, and redo the gardens etc. – I found myself doing what everybody else does:

In a panic I went through my “wallets, handbags, coin jars” – by way of checking all of the statements on my various bank accounts – adding up the ‘bits and pieces’ to see if we have enough in the ‘kitty’ to handle the cost blow out … thankfully, we do [AJC: you know, sometimes a mill. or two just seems to ‘slip through the cracks’, but when you add it all up, it’s still there after all … phew!].

So, if you need to find a reason to be rich, it had better be a very, very good one, because money ‘issues’ NEVER go away …

Paying down debt … an instant Net Worth fix?

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I think we’ve covered this in brief before, but it’s a common – and, easy to make – mistake, so I thought that I should cover it again, here …

… Diane asks:

I’m withdrawing the funds in the IRA to pay [some of my] debt. So, is my Net Worth actually decreasing?

Unfortunately, that’s not the case; simply moving money between accounts (such as using some spare cash to pay down your home mortgage) doesn’t do anything to change your Net Worth, at least not on its own …

… it seems counter-intuitive, so try updating your NWiQ profile by, say, taking $10k from your retirement account and reducing one of your debts by the same amount … you’ll quickly see that your Net Worth does not change.

Here’s an example:

picture-5

Let’s assume that Diane currently has a Net Worth of $66k because she has some assets (including a $93k ‘retirement account’) totaling $259,500 but she has to pay debts (liabilities) of $193,000 (including a $33k credit card debt).

Now, let’s see what happens if she takes $10k out of her Retirement Account to help knock a hole in her expensive credit card debt (let’s also assume there are no taxes or other penalties involved):

picture-6

All that’s happened – from a purely Net Worth perspective – is that the Retirement Account has gone down $10k (to $83,000), but so has the credit card debt (from $33,000 down to ‘only’ $22,000). Do the math and it’s clear:

Diane’s Net Worth hasn’t changed … it’s still $66,000!

What will change is that Diane will earn less in her retirement account, but she will save more interest on her debts. I’m betting that paying the debt down (thus saving, what, 10% – 20% interest p.a.?) will put more money into her pocket than the 6% – 10% that she is ‘losing’ in long-term mutual fund returns (after fees and charges) …

… and, it’s what Diane does with THAT ‘found money’ that will dictate what happens to her future Net Worth 🙂

Building a better retirement account …

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If I say “retirement account” what do you say?

“401k”?

Or, is there a better way …

MoneyMonk thinks that there may be, but only once you’re a millionaire:

If you can achieve your investment goals, at the same time taking advantage of the legitimate tax-shelters available to you (e.g. 401k, self-directed IRA, etc.), then you would be a fool not to do so

Agree, 401k is the best way I can shelter tax

Once you are a millionaire, I see why a person like yourself Adrian have no need for it.

Essentially, Money Monk is saying two things:

1. You would be a fool not to have a 401k if you can achieve your investment goals, and

2. You probably don’t need one once you are a millionaire

I’ll turn this over to Scott, who addresses both of these issues very nicely:

I think that’s the big point that many people are somehow still missing. The point is that you did not BECOME a multimillionaire by putting money in your retirement accounts. You BECAME a multimillionaire by focusing on building successful businesses(which required you to put all your available cash into developing those business, not stacking it away in 401k’s, Roth IRA’s etc..), as well as buying stocks and real estate.

I think many folks keep forgetting that the purpose here is to learn how to make 7 million in 7 years, not 2 million in 40 years and then get taxed on it anyhow when you withdraw it at ‘government declared’ retirement age.

And, Scott is right: if I had put money away into my 401k instead of investing it back in the businesses and in real-estate (I invested in stocks, at that time, mainly with what little was in my 401k-equivalents, which were self-directed), I’m pretty sure the blog that I would be writing today would be Frugal Living Until You Are Just On Broke … and, I WOULD be advertising: I’d need the extra $4 a week 😛

But, pursuing tax-savings – as part of a Making Money 201 wealth building program – is a noble, worthy …. and MANDATORY … goal if you truly want to become rich(er) quick(er) … it’s just that the 401k is typically not the right vehicle to foster an ‘early retirement strategy’, and the other government-sponsored programs also have their limitations (how long your money is tied up; what you can invest in them; and, more importantly for the BIG Number / SOON Date brigade: how MUCH you can invest in each) …

…  so, by now, we know what NOT to do … but, what should we do to manage our tax expense (after all, if we pay less tax, we have more to invest)?

Well, let’s turn back to Scott who was your typical 35%+ tax bracket high-income earner:

As far as using retirement accounts to shelter tax,just to help the readers understand a little better, after my wife and I did our taxes at the beginning of the year, we realized that after all business deductions, real estate depreciation deductions and rental mortgage interest deductions, we only paid around 25% tax for the year on our income, which is substantial. This was about 10% LESS in taxes than we paid the previous year when we didn’t own such investments. Needless to say, that 10% savings over last year equals approximately the savings we would have made by putting money into a retirement account, but instead, we now have multiple business ownership and extra real estate. This was simply from our first year of dipping our foot into investing and being part of the 7 millionaires in training.

And this is only the beginning. I wonder how much less in tax we’ll pay next year by buying up appreciating assets and/or small business ventures?

No matter how much tax you pay next year, Scott, by investing in income-producing, appreciating assets – and, holding for the long-term in the right types of structures (trusts or companies) – I have absolutely no doubt that you will (a) pay less tax and, (b) return more than the average Doctor on the same salary who doesn’t …

… and, since you are one of the 7 Millionaires … In Training! I will show you exactly how to do it … and, anybody who wants to be a fly on the wall (better yet, participate in the open discussion) will be able to learn some valuable lessons, as well.

And, you can take that to the piggy-bank!

Debt Snowball, Debt Shmowball … as long as you're RICH!

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debtbazooka1Let’s face it, if your whole goal in life is to simply get rid of your debt you are probably reading the wrong blog ….

… but, I am working on the assumption that you feel that paying off debt will help you get rich(er) quick(er).

How?

Well, most people that I talk to say: “I will become debt free then I will have all that money spare to start investing … stress-free because I’ll have no debt to worry about”.

Stress free, until I point out that paying off debt early to start saving up to invest later is the long road to nowhere. You see, they will simply start investing too little, too late to make a dent in their true retirement needs … assuming that living on an ashram, eating rice-cakes three times a day isn’t their ideal future 🙂

When I point this out, they say: “Oh no, I’ll be accelerating my investment plans because I’ll be borrowing to buy an investment property … you see, I’ll have paid off all of that BAD DEBT (on my car, my TV, my house) and be ready to put all of those monthly payments into a big, fat GOOD DEBT loan on an investment property”.

Then they point me to all the methods that might be used to quickly and efficiently pay down all of this ‘bad debt’  – conveniently and cleverly collated in this blog post by my good blogging friend, Pinyo, over at Moolanomey – and:

BANG!

I’ve got ’em right where I want ’em …

You see, the concept of ‘good debt’ and ‘bad debt’ only applies when you are deciding whether to take on debt or not.

Let’s take the following two examples:

You want to buy a car on finance = BAD DEBT

You want to buy a ‘positive cashflow’ investment property by borrowing 80% of the purchase price from the bank = GOOD DEBT

Still with me? Good.

Now, here’s the twist: once you have acquired the debt, there is no more ‘good debt’ / ‘bad debt’ anymore … there’s only EXPENSIVE DEBT and CHEAP DEBT.

I don’t think that this is something that you’ve ever seen anywhere else (at least, I certainly haven’t!), so let’s take a simple example to explain:

You used to have a $25,000 student loan (at 2.5% fixed interest) and a $5,000 car loan (at 11.5%) … and, you cleverly and diligently worked at paying off the car loan at the rate of $150 a month (your minimum payment was $50 a month, so you paid it off pretty quick … good for you!), while maintaining your minimum payment of $25 a month on the student loan.

Now that the car is paid off, you are naturally planning to apply that whole $175 a month to the student loan and have it paid off in only a few years (yay!) … is this the right thing to do?

Well, let’s apply the cheap debt / expensive debt test to the alternatives available to us:

1. Pay down the student loan (save 2.5% interest), or

2. Spend the extra $150 a month on all the stuff we’ve been going without (an effective 0% earned or 100% ‘interest’ expense on the money spent, depending on how you want to look at it), or

3. Stick the money in a CD (earn 1.9% interest).

Clearly paying down the student loan is the best ‘bang for buck’ that we can get, here, and spending the money is the worst.

But, what if we add a fourth option:

4. Use that $150 a month to save up for a deposit, then apply for an 80% loan to buy an investment property (pay 6.5% interest).

Using my ‘cheap debt / expensive debt’ rule, you would immediately work on reducing your most expensive debt, which is the 6.5% mortgage loan … and, the best way to reduce it is by keeping $25k of it in the cheaper (2.5%) student loan.

However, the ‘Ramseyphiles’ would pay off the student loan (BAD DEBT), then save up the entire $175 ($150 + $25) for the deposit on the investment property (GOOD DEBT), and spend a lot more in interest for the privilege.

Now, do you see the sense in doing this?

Well, I can’t!

Why pay down a $25,000 loan at 2.5% just so that you can replace it with another $25,000 loan (plus ‘another loan’ for the remainder of the amount that you will need to buy the investment property) at, say 6.5% or 8.5% or whatever the interest rates will be a few years down the track.

Not, only do you pay more in interest, but you delay the purchase of the ‘cashflow positive’ property which means that you are putting less cash INTO your pocket and missing out on all of that extra appreciation on the property, not for the benefit of being debt free (because you will have a nice, fat mortgage on the property), but for the very minor advantage of only have one larger loan to pay rather than two smaller ones (student loan, plus $25k smaller mortgage).

If you don’t think the property is going to make you money, why buy one at all … and, if you do think it will make you money, why delay?

When thinking about finance, it’s much better to shift your focus from the means (paying off debt) to the ends (having enough passive income to fund your ideal life) …

If you’re interested in understanding more about how this works, read Pinyo’s post to get the basic Debt Snowball mechanics set in your head (he has a nice diagram), then read the Cash Cascade where I explain in video and words how to make this work – even better, in my most humble of opinions – for you 🙂

But, if your sole goal really is to become debt free, why not consider doing it the easy way as the cartoon above, suggests?

Why get your knickers in a knot over Robert Kiyosaki?

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Flexo over at Consumerism Commentary is getting his knickers in a knot over Robert Kiyosaki’s definition of “asset” and “liability”:

A house, like any other object that comes into your possession, is classified as an asset. An asset is something you own. A house has a value. Whether you assign the value as the price at which you purchased the house or the price at which you believe you can sell the house, that amount is how much your house is worth.

You can offset the value of the asset with the value of the mortgage, your liability. Your house, an asset, subtracted by your remaining mortgage, your liability, results in your wealth due to your house. That’s commonly called your “equity,” but that has a murky definition, too.

So why do so many people claim that your house is a liability if it’s clearly incorrect from a financial standpoint? Most of this stems from one personal finance “guru.” Robert Kiyosaki, a successful marketer of products, believes an asset is anything that provides cash to you, while a liability takes your cash away. These are not the traditional meaning of the words, but this establishes a framework for the ideas Kiyosaki tries to sell. Kioysaki believes you should strive to increase the assets that provide positive cash flow (Kiyosaki-assets) and reduce the assets that require negative cash flow (Kiyosaki-liabilities).

The concept is sound, but Kiyosaki’s use of the words “asset” and “liability” angers those of us who understand finance and prefer not to confuse the general public by redefining words.

First of all, let me put on the record that (a) I like the general thrust of Flexo’s blog, and (b) he is ‘technically’ correct in what he says here, BUT …

… Robert Kiyosaki is simply trying to make a critically important point (in his famous book Rich Dad, Poor Dad) that I covered in my earlier post on this subject:

Poor Dad vs. Rich Dad

My Poor Dad Says My Rich Dad Says
“My house is an asset.” “My house is a liability.”
Rich dad says, “If you stop working today, an asset puts money in your pocket and a liability takes money from your pocket. Too often people call liabilities assets. It’s important to know the difference between the two.

I guess that Kiyosaki could solve the problem by saying that “My Poor Dad says that my house is an Asset, but my Rich Dad says that the mortgage is a liability” … but, that doesn’t really present the view that you can have a fully paid off house and still live like a pauper (asset rich … cash poor).

Also, I could point you to the Merriam-Webster Online Dictionary definition of ‘Liability’ (“one that acts as a disadvantage” “drawback”) and state the obvious i.e. Kiyosaki is using the general definition, not the financial definition, but that’s not the point either …

… regardless of definitions, I feel that the ‘issue’ of taking a technical term and ‘bending’ its use in order to make a point that could mean the difference between your future financial success and failure is a relatively small one … as long as you understand that there is a technical definition of the term as well, just in case you do need to converse with professionals (who are all trained to talk in your lingo, if necessary, anyway) 🙂

So, can you live with two definitions – a technical one and a ‘functional’ one?

The lament of the trust fund baby …

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It seems that my Rich Dad. Rich Kid? post struck a bit of a chord with some of our readers; the post was essentially questioning whether your kids are rich – or should be – just because you are –  or, will soon become 😉 – rich yourself?

The universal agreement seemed to be that the best financial ‘gift’ that a wealthy parent can give their children is education … particularly education about money; something about teaching children to fish …. ?

That leads me to Diane who suggested that I write a follow-up post, saying:

I married a man who was the son of rich parents and rich grandparents. He didn’t have a lot of motivation, but I liked the fact he was not a workaholic. Divorced now, I do not know how his parents and grandparents’ trust funds have fared, both with the economy and with is father’s aging (a topic for another post, Adrian? How to help the aging parent who’s used to controlling the funds but perhaps has lost his cognitive ability and no one has recognized that decisions are impaired? But I digress…)

Let me deal with both Diane’s question and the whole ‘spoil the child?’ subject with two personal stories:

Firstly, Diane’s question about the aged dealing with finances is a real one that can only be solved with a willing ‘aged one’, some personal ethics, and an Enduring Power of Attorney:

My grandmother is 96 years young; she is in an old people’s home now – having just moved from her retirement village (i.e. over-55’s) due to an over-medication issue – her doctor’s fault. In short, she’s more capable than you or I.

She’s so capable, in fact, that in the last 2 years she personally engineered the sale of a substantial downtown property on behalf of herself and her partners, fetching a record price. She handled the realtors, the attorneys, and her partners herself. Period.

However, she also put in place a Power of Attorney (“just in case”) and has recently set up a trust fund to deal with the cash proceeds.

So, my experience is with somebody who is mentally capable of recognizing their own strengths – and weaknesses – and puts in place the appropriate strategies. She also recognized that my mother may not have the same capabilities so has set up a trust involving my mother and an attorney (not exactly how I would have set it up, but it’s not my call) to try and protect the assets for future generations.

So, my only counsel is that you have to put in place the safeguards, well in advance of the problem – with the elderly person’s consent … if they don’t want to play ball, well it’s their money  …

… which brings me to the second personal story:

I am one of three siblings, having a slightly older sister and another sister a few years younger; neither of whom exhibit any signs of financial intelligence (one has no money, no job, no prospects, and the other has no money, a part-time commission-based job, few prospects, and gave away her house to a con-man despite warnings … ’nuff said) … since I have at least some sense of financial responsibility and a desire for self-sufficiency, I can honestly say that I can’t relate.

It was explained to me once by a professional why my sisters and I are so different (and, why I am now wealthy and they are now ‘broke’ … awaiting the next regular dose of parental hand-out): you see, my sisters believe that they grew up in a rich household … that was the impression that my father gave my mother, sisters, friends, bankers … in fact everybody but my grandmother and me.

He would live beyond his means then go to my grandmother for handouts to maintain his comfortable-to-upper-middle-class lifestyle (and support his usually failing business ventures), but he would tell me our true financial situation: just over broke.

Since finances were never discussed openly in our house, I didn’t realize that I was the only one who knew the truth … so, I simply grew up in a ‘poorer’ household than my sisters, which meant that I automatically worked every weekend and every vacation and bought all of my own clothes, cars, and saved for my own discretionary spending. My sisters, of course, simply held their hands out, as and when needed.

Therefore, as the professional explained it to me, I simply grew up responsible and my sisters didn’t. As things turn out, this ‘education’ was a blessing for me …

So, here’s where the two stories intertwine:

Early in my career, I still felt that I had a financial ‘safety net’ – even though my parents were struggling, there was always grandma in the background if things really went awry … not to mention a nice large inheritance surely to come ‘one day’.

Until I realized that (a) the family assets would need to be spread over more and more people as they (eventually) moved from my grandmother to my mother, [perhaps] then to my sisters and me, and (b) my sisters (and, mother) had a huge capacity to consume … so who knows if there will actually be any assets left if my turn should happen to come? That’s the time when I made the key decision to become truly self-sufficient: independently wealthy (you read how this came about, already).

This is the point: if you rely on a safety net, chances are that you will need one, but it won’t be there when you need it.

But, if you choose not to rely on a safety net – instead, choosing the path of self-sufficiency – you will end up creating your own safety net …

… and, if the inheritence happens to come through, you have the perfect means to start your own charitable foundation 🙂

An unbelievable experiment in subliminal advertising …

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I’ll show this video [if clicking on the above embedded video doesn’t work, click this link instead] because (a) it is from the brilliant Derren Brown, the genius behind The System (that I ‘lifted’ for my own cruel experiment in spotting scams, a week or two ago) and (b) it shows that there is power behind the concept of advertising.

However, the problem is this: while ‘awareness advertising’ may indeed work (as I think this video, which I believe to be genuine, seems to prove) you need VERY DEEP POCKETS to make it work …. your message has to be in front of each person’s eyes multiple times, which takes money – a lot of it.

That’s why, for me, advertising is something best left to the McDonalds and Coca Cola’s of this world and the small guys, like you and I, are much better off with more direct forms of sales and marketing.

For example, I have used: e-mail newsletter campaigns (low cost and slightly effective),  referrals (free and fabulously effective), PR (which is totally free and reasonably effective), and educational courses (where I was actually paid to speak and that were completely effective) to deliver my message in a very cost-effective way … I am not aware of a single client who came to my businesses through any of the advertising campaigns that I allowed myself to be talked into (VERY rarely, I might add) over the years.

But, watch the video even if you are not in – or planning to be in – business … it’s a hoot 🙂