Are polar bears left-handed?

polar bear

Here’s some interesting ‘information’ that I picked up:

Apparently, all Polar Bears are left-handed.

Well, it seems that there are two types of people in this world: those who will now run off and propagate this ‘fact’ at trivia and pub nights, and those who will go and check their sources.

I’m in the latter … now, I’m not obsessive about it, so this information ‘seems’ right, but I’ll let a polarbearophile prove me right or wrong with these Polar Bear Myths:

A hunting bear will cover its black nose while lying in wait for a seal.

Canadian biologist Ian Stirling has spent several thousand hours watching polar bears hunt. He has never seen one hide its nose, nor have other scientists.

The great white bears are left-pawed.

Scientists observing the animals haven’t noticed a preference. In fact, polar bears seem to use their right and left paws equally.

Polar bears use tools, including blocks of ice to kill their prey.

Scientist Ian Stirling believes that this assertion can be traced to unsuccessful hunts. After failing to catch a seal, a frustrated and angry polar bear may kick the snow, slap the ground — or hurl chunks of ice.

A polar bear’s hollow hairs conduct ultraviolet light to its black skin, thus capturing energy.

This theory was tested—and disproved—by physicist Daniel Koon.

The polar bear has a symbiotic relationship with the arctic fox, sharing its food in exchange for the fox’s warning system.

Not only is the bear-fox relationship not symbiotic, the little foxes often annoy the bears. An arctic fox will sometimes tease a bear by darting in to nip at its heels and will sometimes try to drive a bear off its prey.

Orca whales prey on polar bears.

This has never been observed.

Polar bears live at both poles.

Polar bears, of course, live only in the circumpolar North. They never encounter penguins, which do not live in the same regions as polar bears.

[AJC: Polar bears = Arctic and Greenland; Penguins = Antarctic, Australia and New Zealand. Get it??!!]



Well, if this is how many myths polar bears can generate, imagine how many there are about our favorite subject: personal finance?!

Here are just some that I have tried to dispel on this site:

The myth that entrepreneurs are driven by greed

The myth that a high income equates to wealth

The myth that diversification is one of the most important personal finance tools around

The myth that retirement planning centers around replacing your income

… and, I have written many, many more (just type the word ‘myth’ into the search box at the top of this page).

What myths (personal finance or otherwise) have you recently had cause to question?


… another man’s poison!

To some people, it seems that I promote high-risk strategies. For example, long-time reader, Josh says:

I wondered over to your blog to see what’s new and after reading a few posts I realized why I don’t visit anymore, and it’s because your articles are drenched in pro-debt/leveraged strategies. This is something I don’t agree with and don’t practice. I do understand the mathematical ramifications of using debt to leverage yourself, it’s just something I plan to do without.

Firstly, what Josh is saying isn’t quite true …

… in fact, I don’t recommend debt to anybody. What I have said is that I don’t believe in the anti-debt lobby.

There’s nothing evil about debt per se, it’s if/how/when you apply it that counts.

For example, I have variously had:

a) a little debt: on my various buy/hold properties

b) a lot of debt: in my finance company (for a finance company, cash is like stock … you need as much of it on hand as possible)

c) no debt: all of my other businesses were ‘bootstrapped’ and self-funded

I should point out that Josh is a stock investor; he has made a small fortune (turned a couple of $k into one $m or so while still at college) buying pharmaceutical ‘penny stocks’ … I wonder how many people would consider that risky?

One man’s ‘sensible investment strategy’ is surely another man’s poison 😉

A new kind of slum dog millionaire …

KC points me to an article in Yahoo Finance:

A new AP-CNBC poll finds nearly one-third (31 percent) of U.S. residents believe they would need a minimum savings of $100,000 to $500,000 if retiring this year in order to be confident of living comfortably in retirement, and 22 percent believe the minimum is $1 million or more to retire comfortably.

I’ve just conducted my own survey and I’ve found:

– Nearly one-third (31 percent) of U.S. residents are totally deluded if they think that they can retire on $100,000 to $500,000 today.

– 22% are only slightly less blinded to the obvious to think that even $1 million will be enough to sustain them in retirement.

Let’s say that you can withdraw 4% of your portfolio ‘safely’ each year (a figure commonly promoted by the financial planning industry): then, you can give yourself a salary of:

– $4,000 per year if you retire today on $100,000

– $20,000 per year if you retire today on $500,000

– a whopping $40,000 per year if you retire on $1 million

Now, there’s be a whole bunch of people reading this who’ll say: “$40k a year, indexed for inflation … for life … without working. Now I can live with that!”

So, let’s see what it will take to get to $1 million in retirement savings; the same article says:

If you start with an initial $10,000 investment and your portfolio grows by 5 percent every year, here’s how much you need to save each month to reach your $1 million goal by age 70, according to’s calculator.

• 25-year-olds have to save $450 a month. That’s just $15 a day for the rest of your working years.

• 35-year-olds have to save $850 a month.

• 45-year-olds have to save $1,700 a month.

• 55-year-olds have to save $4,000 a month. (Of course, with an average inflation rate of 3 percent, that $1,000,000 nest egg will only be worth $642,000 in today’s dollars. So that means you’ll likely wind up having to save even more.)

Did you check out that last point? Even if you could save these amounts, your $1 million is whittled down by inflation by the time you get there, so $40k expected retirement salary is only worth (in today’s dollars):

– $30,000 p.a., if you’re 55 and have 10 years to retirement

– $20,000 p.a., if you’re 45 and have 20 years to retirement

– $10,000 p.a. if you’re 35 and have 30 years to retirement

… or, to put it another way – because of inflation (even at only 3%), if you want to retire at age 65 on the equivalent of today’s $40,000 salary, you need to:

– Quadruple the above suggested monthly savings rates if you’re 25

– Double the above suggested monthly savings rates if you’re 45

– Add 50% to the above suggested monthly savings rates if you’re 55

… Oh, and did I mention that these numbers are after tax?

And, just when you were kidding yourself that you really can save yourself to a decent retirement: current CD rates are 1% and inflation is still running close to 0.5%, meaning that even a 4% withdrawal rate – previously described as ‘safe’ according to the financial planning industry – is committing financial suicide.

On current returns, to safely pay yourself $40,000 p.a. (indexed for just 0.5% inflation) you would need to retire with a nest egg of not just $1,000,000 …

… but, $8,000,000.

Or, you could just keep reading this blog and find a whole new way to look at your financial future 😉

[AJC: Try and find consensus on inflation; it’s hard! One article that I saw in researching this post suggested that inflation is currently running at just 0.5%, another says 4%, as suggested by Steve in the comments below – Since nobody really knows what inflation will be over a long enough period, I always use 3% – 4% just because it makes forward planning easy: just double your estimate for how much money you need to retire with for every 20 years until retirement]

The problem with financial advice – Part I

Now, I’m just some semi-anonymous blogger, so what do I know, right?

So, sometimes it’s nice if I can point you to others who share my opinions on controversial financial matters [AJC: I write almost exclusively about controversial financial matters … why write something that’s already in 5,000 other blogs, therefore, has a 99.9999% chance of being wrong?!].

For example, my opinion on financial advisors is that they are a waste of money.

But, Dan Ariely, a behavioral economist and author of two best-sellers, including Predictably Irrational, agrees:

From a behavioral economics point of view, the field of financial advice is quite strange and not very useful. For the most part, professional financial services rely on clients’ answers to two questions:

  • How much of your current salary will you need in retirement?
  • What is your risk attitude on a seven-point scale?

From my perspective, these are remarkably useless questions — but we’ll get to that in a minute. First, let’s think about the financial advisor’s business model. An advisor will optimize your portfolio based on the answers to these two questions. For this service, the advisor typically will take one percent of assets under management – and he will get this every year!

I agree with Dan when he says:

Not to be offensive, but I think that a simple algorithm can do this, and probably with fewer errors. Moving money around from stocks to bonds or vice versa is just not something for which we should pay one percent of assets under management.

Now, this is targeted at funds managers (both retail and institutional) as well as those who charge fees and/or commissions to prepare similar financial advice.

Remember, funds tend to fall short of the market in performance over time, by about how much they charge in fees …

Lesson: if you really want to short-change your financial future by investing in funds and over-diversifying (two sure ways to die broke), do what Warren Buffett suggests and invest in super-low cost Index Funds:

A very low-cost index is going to beat a majority of the amateur-managed money or professionally-managed money.

In the next part of this special three part series, I will show you how most people short-change their retirement by 60%,


For new readers ….

Every so often I like to do a post for new readers, because this isn’t your ordinary personal finance blog.

How so?

Well, the first thing you’ll notice is that there’s no advertising. In fact, no obvious way of monetizing the blog at all …

That’s an important clue. It either means: (a) I have no readers to bother monetizing, (b) I have no idea how to monetize a blog, (c) or I don’t need to monetize.

Given the title, it should be obvious that (c) is the correct answer.

In fact, the lack of monetization is one way that I try and ‘prove’ the basic premise of this blog … and, therein lies its greatest differentiator:

I am one of the vey few self-made multimillionaires to write about finance … and, one of a tiny group that actually made their money before they started writing.

For example, in one of Robert Kiyosaki’s books he states that his passive income from real-estate was about $100k per year when he wrote Rich Dad, Poor Dad (or, produced his game “cashflow quadrant”, whichever came first: book or game).

To be fair, let’s just take that to mean ‘net income’ … assuming that his net-income was between 5% and 10% of his real-estate portfolio, that made him a millionaire once – perhaps twice. Certainly impressive, but hardly enough to retire on.

On the other hand, I started $30k in debt and made $7 million in 7 years.

In fact, the highest cash balance that I had in my bank account before I started to write this blog was $10 million. And, that was on top of the other assets that I owned.

This makes my perspective very different to most personal finance bloggers who are all about frugality, debt reduction, paying yourself first …

… all admirable, even necessary, but none will make you rich.

And, herein lies the unique nature of this blog: I believe that you need to become relatively rich in order to retire reasonably well (and, early) these days. I believe that you need to build up a nest-egg of $x million in y years, where x > 2 and y < 10.

I filter my readers by the title of this blog: How To Make $7 Million In 7 Years.

So, when new readers, like Emily tell me:

Some people really don’t care about riches. Our neighbor and handyman loves being able to work at his own pace and not deal with employees. He will occasionally have a nephew or brother help him with a job, but he has no desire to rack up a ton of money and looks forward to continuing his trade until he dies.

I say:


But, pushing aside obvious issues such as what does he do if he gets too sick to work (or, simply too sick OF work), my blog is aimed solely at those who DO want riches. ;)


A formula for investing in real-estate …

People are always looking for “magic formulas” to get rich. Even I’ve had a go at sharing mine

But, when it comes to real-estate, the formula is simple: buy/hold/reinvest.

That means:

1. Buy positive cashflow ‘20% down’ real-estate in an area that can appreciate

2. Hold on to it until it does appreciate

3. Refinance using the extra equity plus any accumulated rental profits to create your next deposit

4. Goto 1.

Here is a guy who has a very conservative (and, sensible I might add) real-estate investing strategy [AJC: for those who take the trouble to read the whole post, they will find the ‘magic formula’ they are looking for]:

I went from zero to more than one hundred units between 1977 and the early eighties by seeking tired rental property owners with free and clear buildings who were willing to finance the sales.

The early eighties was a financial climate not too unlike that today in there was really no mainstream lending occurring. It was the savings and loan crisis, Jimmy Carter and 18%+ FHA mortgages.

At the time I paid a bit more than the properties were “worth” in cash. But I operated with a buy and hold strategy so the properties became free and clear off the rents while providing me an above average income. We still own almost every property we purchased in the past 33 years.

In the early 2000’s every kid entering the business had Excel spreadsheets with estimated returns that would have them richer than Bill Gates in a decade. Every waiter, barber and auto mechanic you ran into was on their way to be the next Donald Trump or so it seemed.

Even buddies of mine called me a “dirt farmer” because I wasn’t taking advantage of easy lending and apparent ever expanding market, rather I stuck with the hard work of landlording. But the prices were unsustainable compared to rent. So I kept with what I knew worked and withdrew from buying. Between 2002 and 2010 I bought just three properties, two of which were commercial units for our own businesses. I’m still here and they all went belly up.

Usually you can’t go wrong if you are headed in the opposite direction of the majority. So that means today, with everyone shunning real estate it is probably a good time to buy, just as it was in 1982.

This year I reentered the market , but only on limited basis as there are some good deals, but for the most part the market still is in somewhat of a free fall.

My math in the beginning, which remains so today is: Assuming that you financed the whole purchase at 12% for 15 years, even if you paid cash, the property had to net $100 per month per unit after all expenses including at least $100/unit/month for maintenance. Did I get every deal? No, but why own if ownership will not help you reach a financial goal.

[AJC: 12% is very conservative; if you used 8% in the USA and 10% in Australia you would still have plenty of margin for error; remember, this guy was investing in an era with 18%+ interest rates]

It may not be ‘get rich quick’, but it is sensible 🙂

You don’t need to become a barber to become rich …

Darwin’s Money shares a story about his barber that shows how anybody can become rich; here’s a trimmed down version of Darwin’s assessment of how his barber became rich:

  • Real Estate Mogul – He owns multiple rental properties.  He started off small and kept rolling his profits into more and larger properties.
  • Business Savvy… and Patient – He knows the real estate market very well and he waits for deals to come around.  He’s patient.
  • Frugal – Just through some casual observations, it’s evident he’s a frugal guy.  He dresses modestly, he doesn’t take extravagant vacations, and he doesn’t drive a fancy car.  The combination of multiple streams of income and frugality make for a huge net worth in your later years.
  • Small Business Owner– Like all smart business owners, he gets other people to work for him and generate income and offset his costs.  Rather than just running a one man barbershop, he has a couple other barbers working there.

This looks likes an great observational report … I’m not certain that Darwin actually asked his barber how much money he has or how he made it?

I’ll do the reverse; I’ll tell you how I made my money … it’s much the same as the barber, but I think it’s the order that’s critical:

Business Savvy, Impatient, Small Business Owner – I started by becoming a small business owner, then trying to become business savvy. But, it was a slow path. When I finally hit rock bottom (business-wise) and found my Life’s Purpose, hence my Number, I suddenly became impatient. In fact, this was the turning point for me: as I accelerated my business growth, I accelerated my income, which is the first key to becoming rich.

Frugal – Now, this is where most high income earners go wrong: as their income increases, they become looser with their money. It should be quite the reverse: in dollar terms it’s OK to (in fact, you should) reward yourself by increasing your expenditure [slightly] in $ terms. But, and this is the secret, you should be decreasing your expenditure in % terms. While it’s fine and dandy to be frugal while you are still on a low and/or fixed income (i.e. job), it’s actually critical to become more frugal in relative terms as your income increases.

… and Patient Real-Estate Mogul – What to do with the rapidly increasing bank balance? Well, you could put it in mutual funds (but the fees are too high and/or the returns are too slow), stocks (but, they are not leveraged enough), or other businesses (but, you run the risk of spreading yourself too thin). For me, the best compromise between the leverage of a true business and a passive investment is – and remains – investment-grade real-estate. This is where being patient finally kicks in, because buy/hold real-estate is subject to the vagaries of the market. But, I had a primary source of growing income, so I didn’t need to touch my real-estate investment income until I finally began Life After Work.

So, my assessment is that Darwin is right, but the order is wrong.

Oh, I also think that you can substitute small business ownership for any high income potential (e.g. highly-paid professional; CxO-level employee; consultant; etc.) with the only catch being that you miss out on the potential capital gains that owning a business may offer – on the other hand, you may be able to negotiate yourself a nice golden parachute …

How well do you think this simple strategy could work for you?

If you were interviewing me …

If you were interviewing me …

… here is what you might ask:

At least, these are the questions (and my responses) just sent to me by a journalist who writes for a number of newspapers. This time, he has been contracted by a company that researches – and writes about – the wealthiest families in America.

I’ll let you know if/when/where the interview will be published, in the meantime, here goes:

[EDITthis is a link to the actual interview in Millionaire Corner; I recommend that you read it there, instead … it’s been slightly edited to make it read better. Donald, the freelance reporter, is the consummate professional and a hell of a nice guy, to boot!]

1)      A little personal background information. I understand Adrian J. Cartwood is a nom de plume?

Yes. I share intimate personal details about my financial background. If I used my real name, I’d just be bragging instead of sharing. Seriously, I started off by inheriting a family business that was failing, and I was $30k in debt. By slowly fixing the business (while starting another), living mainly off my wife’s part-time salary, and investing EVERY penny that we could spare into real-estate and stocks, our net worth grew to $7 million in just 7 years.

2)      What inspired you to start your blog? (what did you do pre-blog—what do you do now besides)

In 1998, when I was still in debt and my businesses were still struggling, I found what I like to call my Life’s Purpose … or “Life After Work”. Others call this retirement, but who wants to wait until they’re 65 to start living their passion? I decided that I really wanted to be traveling and working on things that I was passionate about in just 5 years instead of the usual 20 to 40 years.
So, I calculated my Number, that is how much I would need in the bank in order to stop working. That Number was a very scary $5 million. I missed my 5 year / $5 million target, but made $7 million in 7 years, instead.
Now, starting $30k behind the 8-ball, $5 million in 5 years seems like an impossible target, so I started reading every single personal finance book that I could get my hands on. What I quickly realized is that they are mostly written by people who became rich BECAUSE they wrote a book about how to get rich. Needless to say they were mostly full of rubbish.
So, I found one of my passions! It was, and remains, to be the first true multi-millionaire to write about personal finance, hence the blog.
In my spare time, I develop property and make angel investments, primarily in internet businesses. I am also putting the finishing touches on my first personal finance book.

3)      When did you launch your blog? How many visitors does your blog get?

I don’t do any advertising, marketing, or promotion for my blog at all. I’m not even sure how you found me! Yet, in the three years that I’ve been writing it, I’ve somehow built a dedicated audience in the thousands who seem to read my blog every day. I hope to never disappoint them.

4)      For whom is your blog intended?

This is an excellent question because I often get comments from new readers who say “well, my 401k is company matched, so it’s a great investment” but, I say “sure, but it won’t make you rich”. So, my blog is specifically targeted to people exactly like me: those who realize that their life isn’t merely about money … rather their money is simply there to support their life.
Now, for those readers who truly get this, suddenly they realize that that they, too, want to stop full-time work to pursue their passions – be it writing novels, traveling, researching great wines, writing their own blogs, volunteer, whatever. The kicker is, when they calculate their own Numbers – how much they need in passive investments to support them while they work part-time or quit paid work entirely – it’s inevitably something like $2 million in 6 years. If you run their starting position (say $100,000) through any simple online compound growth rate calculator, as I encourage my readers to do, they quickly see that they need to achieve a 65% compound growth on their investments. Given that their 401k can’t achieve more than 8% over 40 years, it’s clear that they need somebody to teach them how to become rich.
That narrows down my readership to those who have done the same kind of self-reflection that I did 7 years ago and realize that they actually NEED to become rich.

5)      What do most hope your readers get out of it?

I hope that my new readers realize that they should evaluate their lives and see if what they are currently doing is going to truly satisfy them. If so, don’t change anything. But, for those who need more out of life, I hope that they walk away with the tools to evaluate what they truly want to do with their lives, how much money they will need (and by when), and the real personal financial steps that they need to take to bridge the gap … quickly. It’s not about getting rich quick. But it is about getting richer, quicker.

6)      For those unfamiliar, what would be some representative posts?

I really like this one, because it encourage you to start thinking externally rather than internally, which is the first step to financial freedom:
And, this one because it shows that WHERE you invest your money is more important than HOW MUCH you put aside each week or month:
Finally, this one, because it introduces the 20% Rule that tells you how much you can spend on a house:

7)      Did you grow up in a financially literate household? Did your parents discuss money matters with you?

I grew up in a poor household. The rest of my family grew up in a rich one. The trouble was, it was the same house!
You see my father lived beyond his means, but I was the only other male in the family, so he only confided his true financial situation in me. Therefore I grew up paying for all of my own clothes, cars, and so on. The rest of my family still lives on handouts from richer relatives.
That knowledge only taught me financial responsibility, it didn’t teach me how to make money. That came from my $7 million 7 year journey. Naturally, I taught my own children about money from birth. My son is a natural entrepreneur. My daughter more social. But, both know how to save and how to spend responsibly.

8)      If not, were you self taught? Were there any books, for example that influenced you? Or financial pundits?

The books that greatly influenced me were Rich Dad, Poor Dad by Robert Kiyosaki and The E-Myth Revisited by Michael Gerber. The first is about money and the second about business.

9)      How did you get started in investing?

My very first investment was an apartment that I bought soon after college because a friend of mine was buying one in the same block. I knew nothing other than to copy him. I sold it a couple of years later to pay for a trip overseas. It’s safe to say that was not the start of my financial journey!
When my financial wake-up call arrived 7 years ago, I made my first real real-estate investment. Rich Dad, Poor dad was my motivation, but it was very short on ‘how’. So, like most people, I knew that I had to invest in real-estate but I had no idea HOW.
One day I was driving around my neighborhood and saw a ‘for sale’ sign on a condo in an older block of 12. There was an Auction just about to start! I figured that not many people would know about it, because the sign was by an out-of-town agent, so I figured it was likely to go for a good price, so I stopped to check it out.
My next problem was that I had literally no idea of how much to pay. But, I saw a young guy in a trademan’s outfit measuring doors and windows and so on. I guessed that he was planning to buy it for himself, fix it up and flip it. I decided to bid against him and pay $1 more. I figured that if he was looking to take a quick profit that he would be operating on a tight budget, and that I could then afford to pay just that little bit more to buy and hold.
And, that’s what happened.
I found myself as the winning bidder for a property that I had never been in before. I had to call my wife (who was NOT pleased) to rush over with my checkbook. We still own that condo today and it has been a start performer, although we went on from there over the next 5 years to buy our own block of condos, an office building and so on.

10)   What were some of the defining lessons you learned when you first started out?

 You can’t save your way to wealth. Running some simple numbers through that online calculator quickly showed me that my 401k would never be able to fund my retirement even if I waited until 65: investment returns from mutual funds are simply too low and fees are too high, not to mention inflation eats up half of everything every 20 years.
I realized that I would need to create my own perpetual money machine by taking as much of income as I could put aside and investing in assets that I could borrow against (so that I could buy more) but had enough income to cover the costs of owning those assets. Real-estate (and, to a lesser extent a small portfolio of hand-picked stocks) could fit the bill. I also learned that starting a business is the best way to increase income; more income means more investments; more investments means more real wealth.

11)   What are some of the most common mistakes investors make?

The most common and deadly mistake is confusing good debt and bad debt with cheap debt and expensive debt. Because so many people have trapped themselves into bad credit card debt, which they should pay off as quickly as possible because it’s just so expensive, they have been lead to believe by so many financial pundits that they should pay off all of their debt, including their mortgages. For most people, this is actually a mistake.
Instead they should pay off expensive debt (such as credit cards, and auto loans) as quickly as possible. But, as soon as they remaining loans are at a lower rate than the cost of an investment loan (such as you might get to buy an investment property), why pay it off just to take out a bigger, more expensive investment loan?
The second mistake is thinking that you house is an investment, it’s not. The chances are that you will never be able to sell that house, even when you retire, to  truly down-size. Retirees plan on selling their big houses but rarely move into a small, two bedroom condo. They realize that they either don’t want to move, or stay close to their children, or move into an expensive retirement community. That and the moving costs (plus, are you going to move old furniture into a nice, new codo?) mean that they pocket a lot less than they think. Suddenly, there’s a huge hole in their retirement plans.

12)   What is the most common question you are asked?

Mostly, people ask me how I became rich. On my blog, I tell them because it’s something that anybody can do.

13)   What are some key dos and don’ts you think investors should consider?

I think that you should find out what you’re passionate about e.g. real-estate, stocks, business and learn all you can about that subject then base your investment strategy primarily about that.
I don’t think that you should buy any “how I made $1 million by invest in …” books, instead you should find one author whom you feel speaks your language and learn all you can, then go ahead and try out what you have learned. But, first, you should make sure that the author actually made his/her money from the financial strategies that they speak to you about. You’ll find that most made their money either by writing their books or in the business of offering financial advice, rather than actually from investing.
I think that you should buy a house, but then you should not put more than 20% of your net worth into any subsequent or upsized houses.
I think you should not take on debt for consumer purchases, such as gifts, cars, or furniture but you should borrow reasonable amounts of money to invest (say, 20% down real-estate).
I think you should start a business, but you should not quit your job until you have proven the business model with at least some paying customers

14)   The most important question: How much do you miss the Deerfield Bakery?

I still have a home in Deerfield as well as my other home in Australia, so you might say that I am in the fortunate position of being able to have my cake and eat it [pun intended].

<- Now, if you want actually HEAR me interviewed, check out eventual millionaire ->

So, that’s a bit about me; now, why don’t you tell me a bit about you?

real rich, real simple, redux

This is a redux of a 2009 post, but it’s about time that I gave my newer readers a heads-up as to what we’re all about … if I had to point somebody to just one of my posts to get them started this would be the one; putting in all of the links nearly killed me 🙂


I get a lot of questions, comments, and e-mails in general from new readers, and this one – from Chad – is reasonably typical of what I might see:

I’m turning 27; just got a job making 50k/yr.; on the market for my 1st condo to live in (and hopefully rent out a room); have 1 student loan at < 3% fixed interest. My goal is $7 million in 13 years.

1. I have very little to no knowledge of finance/investing. Do you recommend any resources to get me up to speed so I can understand what you write about?

2. Where does my situation put me in terms of Making Money 101 and 201, i.e. where do I go from here?

I appreciate ANY direction you can give me as I do not want to be stuck behind a computer in a cube for the next 30-40 years.

While I love reading these sorts of e-mails (AJC: I really do!], I have a hard time responding because I can’t / don’t give direct personal advice … but,

I can suggest that Chad think about:

1. Exactly HOW important that $7 million in 13 years is to him, and

2. Assuming it’s VERY important (critical even), how he is going to get there.

You see, my advice might change according to his Number – more importantly to his Required Annual Compound Growth Rate:

a) If low – say, no more than 10% to 15% – then I would point Chad to the various ‘frugal’ blogs (my personal favorite is Get Rich Slowly) and ‘starter books’ like The Richest Man In Babylon, or the more modern equivalent: Automatic Millionaire by David Bach, or anything by Dave Ramsey or Suze Orman.

Each would probably suggest something along the lines of:

– Keep your job; times are tough!

– Save as much of your salary as you can (max your 401k’s, then your IRA’s)

– Pay down ALL debt, following a Debt Avalanche or Debt Snowball, whichever is your favorite

– Invest any ‘spare change’ (after all debts are paid off and the requisite ’emergency fund’ has been built up) into a low cost Index Fund

… and, wait until your government-directed – or, employer-forced if you are retrenched and become unhireable – ‘retirement’. This is where that fully paid off home and a lot of candles and canned food stockpiled will really pay off … you won’t be able to afford real food 😉

a) If high – say, more than 10% to 15% (and, I would venture that $7 million in just 13 years would well and truly put Chad in the 50+% required annual compound growth rate category!) – then I would instead point Chad to books like Rich Dad, Poor Dad and The E-Myth Revisited and then towards this blog and its 7 Millionaires … In Training! ‘sister blog’ and suggest that he starts working his way through the back issues (well, posts).

After reading/digesting properly, he should be able to come up with his own plan … something along the lines of:

– Keep your job, but get into active stock and/or real-estate investing – better yet, start a side-business; because times are really tough(!):

i) A mildly successful part-time business might provide additional income to help you weather the financial storm and supercharge your savings, investment, and debt repayment plans

ii) A more successful part-time business might provide a built-in ’emergency fund’, tiding you over should you lose your job and/or unexpected expenses crop up

iii) An even more successful part-time business that can be started and/or survive during a recession may prove to become wildly successful once the clouds of the recession begin to lift, maybe even carrying you directly to your Number [AJC: do not pass Go, but do collect $200 million 🙂 ]

Control your spending, and save as much of your salary as you can to build a war chest for starting / running your business

– Pay down ALL expensive debt, following the method laid out in the Cash Cascade, but keep your mortgage (lock in to current low rates) subject to the 20% Rule and the 25% Income Rule and seriously think about keeping your other cheap debt loans.

– Invest any ‘spare change’ from your job and business (after all expensive debts are paid off and the requisite ‘business startup fund’ has been built up) into quality ‘recession-priced’ stocks and/or true cashflow positive real-estate.

… and, wait until you have reached your Number (through sale of business and/or conservative valuation of your equity in your investment assets).

That’s it 🙂

Premature Retireration …

Don’t get me wrong, early retirement is great …

… not for everybody, mind you.

Many go back to ‘work’ because post-retirement life can become pretty boring, if you haven’t properly planned your time and your money.

I don’t include in ‘work’ anything where you are earning money because you want to, except where the commitment / stress / boredom rises to sustained uncomfortable levels and you feel that you can’t just walk away, in which case it’s probably ‘work’ just the same.

No, the real problem is that people don’t know when ‘retirement’ really begins:

They think it begins when they receive the huge card signed by 50 people they have hated for 40+ hours a week, or when the gold watch that they expected to receive turns into a Parker pen (in a nice box!), or when they get a nice speech from the boss who says: “Gee, we’ll really miss you, Bob” when your name’s John.

But, it really begins much, much later.

Ashton Fourie puts it best when he says:

This reminds me of a conversation I had with a friend after we sold our first business.

His comment then was, that having a pile of money, is not useful, because expenses continue to be a regular occurence. So we realized that one can only really “retire” when you have enough secure, passive income. Many people make the mistake to think you can retire on a pile of money.

Until you’ve figured out how to turn the pile of money into secure, long term passive income, you’re going to have to keep “working” – even if that “work” is the process of moving that money into income generating, secure, instruments.

This is really a very important observation and realization!

I remember being insanely jealous [AJC: slight exaggeration] of my friends who cashed out while I was still trying to earn a quid. Now, I am insanely jealous [AJC: this one is probably a huge exaggeration for dramatic effect] of those who still have a job or a business because they can spend pretty much whatever that want, knowing that next week the magic pot of honey will be refilled.

You see, it really is all about cashflow …

… when you have a pile of cash, you can only deplete it. Sooner of later it has to run out, no matter how much you started with, right?

Just ask [Insert big spending celebrity who’s financially crashed at least once in their lives: Elton John; MC Hammer; Willie Nelson; etc; etc] 😉

So, think about the early days of your retirement as a “transition phase” while you busily reassign your financial jackpot into income-producing investments then think about how much income those investments produce (after tax, various buffers for contingency, and reinvestment to keep up with inflation) and retire on that!