How much income do you need to be Rich?

In his bestseller, The Number (2006), Lee Eisenberg relates the story of a man who outlined for him what somebody else told him [AJC: already, this sounds like an Urban Myth] about what it takes to be rich:

This is really interesting, because it matches what I was told when I began my Journey (to $7 million in 7 years) by a well-known finance guru; at the time, he said [AJC: paraphrasing; my memory’s not THAT good!]:

In order to live a ‘rich’ lifestyle (i.e. you can drive the cars you want, live where you want, travel whenever and wherever you want) you need an income of at least $250,000 per year.

Now, that was back in 1998 … so, when I bumped into him a year or two ago, I reminded him of what he told me then, and asked him what he thought the ‘number’ was now: he said “$500,000” [AJC: that’s per year].

In fact, that $250k (times the 20 multiple that he also told me that I needed) was the exact basis for my $5 million Number, because I didn’t know how to calculate it any better (then) … and, along with discovering my Life’s Purpose, started the journey that totally changed my life.

Seeing this table, excerpted from Lee Eisenberg’s book [AJC: which, he admits ripping from somebody else … apparently, that’s how these ‘rules’ get written!] only reinforces that … so, just decide whether you want to be “comfortable” (or, “comfortable+”), “kind of rich”, or plain ol’ “rich” and  your Number is virtually set!

Which brings me back to the question of whether CEO’s are rich, in the first place?

[AJC: we already know the Fortune 500 CEO’s are, but what about the ‘ordinary’ CEO’s of all of those small-to-medium-size businesses out there?]

Really, it’s only the CEO’s of those businesses (and, their highly-deserving legal advisors) who can even claim to be “comfortable+”.

Most senior management in these businesses can only claim to be ‘comfortable”, at best …

… so, the real reason why most CEO’s aren’t rich is that they simply don’t earn enough!

My question to you is:

If you know your Life’s Purpose, and if you know your Number (particularly if it’s a Large Number / Soon Date) why are you wasting your time:

– kissing up to your boss,

– back stabbing your work mates, and

– running ragged for your company’s customers?

… just to have the slightest-possible-chance of getting to the ONE job in the WHOLE company that ONLY makes you “comfortable+” AT BEST?

Seems silly to me …

When I crunched those odds (way back in 1990), I very quickly made a rush for the Exit Door at my high-flying corporate job 🙂

Something from nothing …

In The Art of the Start, Guy Kawasaki (founder of, one of the earliest ‘business angels’) talks about bootstrapping your startup i.e. starting it on a shoe-string …

… he then proceeded to start his own Web 2.0 startup (perhaps only mildly successful, although he did manage to sell it for an undisclosed amount in 2009), called Truemors for only $12,000 (you can read about it, in this excellent post)!

Now, Guy could afford to spend millions, yet he chose to bootstrap, because it made good, commercial sense NOT to spend more.

For most startups, bootstrapping is a necessity, yet how little you spend up front may not have any detrimental effect as far as the success of your business goes, as the video above clearly demonstrates.

BTW: to prove that point, Hot or Not was (reportedly) acquired for $20 mill. not long after this video was shot.

My point: don’t let lack of money be your excuse for not starting your own business!

The timeless secret to making money in real-estate!

OK, so if the ‘secret’ to making money hasn’t changed in 50 years …

[AJC: if you didn’t read yesterday’s post, it’s simple: buy a rental property with about 25% down; renovate; trade up and start again; repeat until rich!]

… why are there so few people doing it?

It could be market fever: “the market’s too [insert excuse of choice: hot, cold, near, far, etc.]”; but, I suspect it’s the age old reason: you simply don’t know HOW.

Ok, so let me make it simple: save up a reasonable deposit (15% to 25% works for me), and do the most cost-effective renovation (also called remodeling or rehabbing, depending on what country you live in) possible.

The question is, what are the best ‘bang for buck’ renovations to do?

Well, here is a national summary of typical renovation/remodeling projects (including their average cost and how much resale value that they add to the project):

Despite this, I would not go about replacing all of the wooden front doors in my condos with steel doors! In fact, I would still look at:

1. Repaint / recarpet,

2. New blinds, door handles, light fittings (all of these can be quite cheap, as long as they work/look OK),

3. Kitchen remodel (you may be able to resurface the existing cabinets)

4. Bathroom remodel (you may be able to resurface the existing tiles, baths, and vanities)

5. Also, if it’s a house (not a condo), then you should paint the exterior and fix up the garden

6. Again, if it’s a house, perhaps the MOST ‘bang for buck’ rehab that you can do is to add another bedroom (especially to change a two-bedroom house into a three-bedroom house).

If you think it’s expensive, think again … just be very wary of your budget!

Here’s how it panned out for us:

We purchased one condo a street or two away from the beach:

– We bought for about $220k,

– Spent $15k on a rehab (paint/carpet, kitchen/bathroom remodel, door knobs and light fittings),

– Rented it out (we didn’t need to sell it).

It’s now worth $450k to $550k a mere 6 or 7 years later.

We then repeated with a block of 4 condos:

– Bought all 4 for $1.25 million,

– Rehabbed for $200k ($50k each condo), including the fees necessary to retitle from apartments (rental) to condos (rental or individual sale)

– It’s now worth $1.8 million to $2.25 million, a mere 6 years later.

For the four condo’s, we spent $50k in renovations (each condo: $200k total)), which bought us: paint inside/outside, new kitchen bathroom carpet, light fittings, security entrance for the building AND conversion of the front of the building into a private courtyard for one of the apartments, and conversion of the rear laundry into an ensuite bathroom for another condo in the block!

If you think the work is hard and/or time-consuming, we didn’t do the rehab on either project and didn’t even see the second project until 5 years after it was finished! We believe in outsourcing everything 🙂

How successful are they?

You’ve  heard the pitches, seen the ads, and even read the books …

… but, how successful are those ‘best-selling’ real-estate authors, anyway?

John T Reed is the guru-basher – rightly or wrongly, he reads, judges, and publishes his views on his web-site. Click on this link to read what he has to say about some of those real-estate gurus, then come back here.

You see, I want to point you to the very first ‘guru’ that he mentions: it’s William Nickerson. William Nickerson was unique in that he really was successful, and interesting for two reasons:

1. He actually wrote a best-selling book on real-estate that is the genuine article, and

2. He wrote (or commissioned) perhaps the very first real newspaper ‘advertorial’ (see the image, above).

According to John T Reed, an accomplished and genuine real-estate investor in his own right, William Nickerson:

… told the truth – but he did that back in 1959. His book, which is excellent, says to save money, put 25% down on rental property, renovate it, and exchange up to a bigger one and repeat the process.

Simple, but effective!

BTW: I now remember that Rich Dad, Poor Dad was NOT the first personal finance book that I ever read. It was, in fact, an old book that I found in my Dad’s book shelf. It was called something like: How I Made $1 Million In Real-Estate and was written by a Hungarian ballet dancer who either moved or defected to the USA and somehow found a lucrative ‘hobby’ in real-estate.

His system was very similar: buy one rental property, rehab, and trade up for a duplex. Repeat and trade up to a quadraplex. And, keep going!

I can’t believe that I forgot about this book, as it was the one that really fired my imagination, after which I promptly did NOTHING towards investing in real-estate for at least the next 10 years 🙁

The one question that you should ask, before you ask your question!

Now, that’s a circular headline: The one question that you should ask, before you ask your question!

It’s because Consumerism Commentary has shared his experiences in customer service:

The prevailing wisdom when dealing with customer service representatives is to just keep repeating “let me speak to your supervisor” until you eventually get what you want. Every time I read this, though, I get defensive and annoyed. I can’t forget that year I spent answering the phones for Bank of America … I learned a couple of very important lessons as a CSR that are in direct conflict with the “let me speak to your supervisor” rule.

His rules are good … and, basically involve trying to make the customer service representative on the other end of the phone line your “friend” which (he says) usually results in not only getting his issue/s resolved but also getting “fees reversed, special deals made, you name it.”

Now, I can’t argue with that!

Well, I could, since I employed well over a hundred staff in call-centers across three countries … but, I won’t 🙂

But, I will say that there is one question that you should ask as early on as you can politely work it into the conversation with ANYBODY that you hope to ‘get something out of’ e.g

– The customer service representative at the store or on the phone where you hope to have a problem resolved

– The person at the bank who you are sitting in front of to negotiate a new loan

– The customer sitting across the desk from you (or on the other side of the telephone line) when you are trying to make a sale

– The sales rep at the dealership where you are trying to negotiate a “super, great deal” on that new fridge, car, house, etc.

– and, so on …

… particularly, when you know (or, as soon as you are told) that you are ‘pushing the envelope’ with your request.

This one question that I am about to share with you will save you hours and hours of going around in circles trying to ‘close’ whatever deal you are working on (in your favor, of course!), before you have to finally resort to asking to “speak to your supervisor” … and, have to start all over again!

What’s the question?

Simple: “Do you have the authority to [insert: request of choice]?”

A word of warning: you don’t ever want to question somebody’s status, so be subtle and choose the right moment and way to ask this?

For example, in a sales situation, a really neat way to ask this same question without the running the risk of being thrown out of Mr-Lower-Middle-Manager-Who’s-Job-It-Is-To-Keep-People-Like-You-Away-From-The-Real-Decision-Maker’s office, is to politely and innocently enquire:

“Who do you usually like to talk to before you make decisions like this one?”

That’s who you want to speak to right off the bat … not Mr Peabody 😉

People came to him for financial advice!

This video commercial from the New York Lottery shows Louis Eisenberg, the then biggest ever lottery winner with $5 million.

The trouble is he is now broke and living on social security in a trailer park …

… until then, people actually asked him for financial advice:

All of a sudden, people were asking, ‘Lou, what about this?’ ‘What about that?’

All because he – temporarily – won $5 million!

Why aren’t CEO’s rich?

Why aren’t CEO’s rich?

Now, that’s an example of an attention-getting headline 😉

You see, CEO’s are rich!

At least, some of them: for example, Fortune Magazine lists the 10 most highly paid executives in the USA, listing salaries ranging from a low (!) of $48 million to a high of $71.4 million per year!

[AJC: This was published in 2005, so I am sure that it has dropped by $10 or $20 million each, per year; poor babies!]

Even when you ‘sink’ to the top US companies – in 2009, 200 such companies were surveyed for the Wall Street Journal, each with greater than $4 billion in annual revenue – CEO salaries are still a respectible $7.5 million per year (made up of: Base Pay $1,030,000 + Annual Incentives $1,523,701 + Long-Term Incentives $5,007,556).

This is in 2009, during the Global Financial Crisis; hard times, hard times ….

Clearly, you would have to define ‘rich’ very differently to most to say that these guys (and gals) are not rich!

But, we’re talking about the absolute top echelon in the field here; the top few hundred US companies (out of the 24 million+ businesses in the USA) … the same could be said of the top performers in any field: sports, medicine, entertainment, gambling, etc., etc.

We’re not at all concerned about them …

So, let’s look instead at the CEO’s of more ‘typical’ companies, as reported by who surveyed 1,800 companies with 500 or fewer employees across 50 industries to find that these CEO’s (including Partners and Owners salaries) only earned [AJC: a debatable term]  $290,000 (including: Base Salary $233,600 + Cash Bonuses $67,300) plus whatever fringe benefits they could eke out of the system.

Interestingly – according to a blog devoted solely to the salaries of doctors [AJC: now, that’s specialization] – in 2009, the average pay for a ‘hospitalist’ (apparently, the hot new term for Internists and hospital physicians) was $226k per year.

Now, is $226k per year rich?

Before I sold my businesses I took a salary of $250k – but, my cars were provided by the company, and my house was already paid off yet there was never very much left over at the end of the month …

… nothing left over to provide an emergency fund or to provide for retirement. So, I guess I was rich, as long as I could keep drawing the salary.

Except, that I already had $7 million in net assets, ‘just in case’ I got sick or my business went under. I wonder how many of these other ceo’s do?

So, I guess a ceo’s salary is ‘rich’ … but risky 😉

You get one shot …

Who was it that said: “you get one shot at making a first impression!”?

This is no truer than in marketing:

– You research your market,

– You target your audience,

– You create a great campaign,

– And, then you send this e-mail campaign out:

We Love Your Blog!!!

[AJC: So far, I’m hooked!]

I’m writing to inform you that [websitename] has been featured on Guide to Online MBA’s Top Personal Finance Blogs list found here: We’ve gone through and hand-picked a list of our favorite personal finance blogs and outlined the unique reasons why we like them.


How’s that for a credibility-killer; naturally I shot back an e-mail of my own:

Dear [spammersname],

“I’m writing to inform you that [websitename] has been featured …”

LOL … and, thanks!

The website owner kindly – and, quickly – wrote back … and, it was all a mail-merge error, etc., etc.

Too late, the marketing campaign is already shot … don’t let this be you 🙁

Footnote: If you check out the “hand-picked” and “unique reasons” why they apparently like my blog, they say my blog “discusses financial strategies for earning $1 Million a year” x 7 years = $7Million7Years (!) … a research genius at work! 😛

This is what happens when you don’t pay your bills!

I’m moving house (well, when i say moving house, our stuff was delivered on the same day that hot water, heating, and cooling came on … and, the first time we took a shower the kitchen flooded. Oh, and we have no gas cooktop, as they won’t have any of those beautiful, Italian thingy’s even in the country for another 6 weeks!), so this video – naturally – caught my eye.

Financial moral: don’t set yourself up financially, to have to live in a trailer park … but, if you do: always pay your rent on time 😉

You gotta have a hobby …

I don’t collect bees!

My hobby is personal finance: talking about it, writing about it, reading about it, thinking about it …

… strangely enough, making money is actually not my hobby [AJC: although, I far prefer it to the alternative ;)] although making money gives me the credibility to do the talking/writing.

Anyhow, one of my latest readings is a series of e-mails that is a section-by-section delivery of what Malcolm Hughes also sells as an eBook.

Presumably, when reading these e-mails, you will get SO EXCITED that you won’t be able to wait for the next FREE e-mail, so you will fork out your money for the eBook – ‘Millionaire Stealth Secrets’ Handbook.

Surprisingly, I found that I can wait 😉

For a ‘Millionaire Handbook’, there’s actually NO advice on making/keeping money that I can see, unless you count e-mail upon boring e-mail of goal setting / visualization / dreaming mumbo-jumbo as ‘millionaire advice’.

In fact, the first piece of sensible advice that I can see is the following passage from the 28th e-mail in the series (!):

Listen to this…   Every single hugely successful person in the history of mankind has failed at least once. In many ways, they had to in order to succeed. Richard Branson [billionaire founder/owner of Virgin Records/Airlines/Credit Cards/etc./etc./etc.] was almost put out of business by the Royal Mail strikes of 1971. His mail order record business relied on the post to make money. Instead of ruining him, it made him stronger and he began opening his record shops. He was also nearly liquidised by Coutts Bank for being £300,000 in overdraft!

But whatever had happened, there would still be a Richard Branson. In fact, if Coutts Bank HAD liquidised him, he might have been even richer by now! You see, what CAN happen to a person when he/she fails is that he/she realises at least 3 things that he/she would not have realised had he/she not failed.

1.      Money is actually easily replaceable

2.      There is nothing to fear about failure

3.      Failure is SOMETIMES necessary and ALWAYS fruitful

Fear of failure is one of the key hold-backs that stops people from stepping out of their comfort-zone, so this is good – and true – advice.

Unfortunately, IMHO the rest is BS 🙂