Increasing Income

My company has announced no raises for 2009 and no bonus. I have to make an extra alimony payment to my ex-wife out of a non-existent bonus and I usually use it to pay down on debts. Like many people I either need to increase my income or cut expenses. My expenses are pretty barebone right now, so there is little to cut

What do I do now? Invest in more real estate? Take a part time job? Find another source of income?

Is the real estate market at a bottom yet? Probably not in the hot markets of the past few years if you look at this graph. The market neither increased rapidly nor dropped in the Buffalo area (it's up 4% in the past 12 months). Underwriting for investment loans has become very strict the past year. If I could get a real estate loan, I would re-finance one of the properties I own that has a variable rate loan. I just cannot see any purchases of real estate at the moment. Besides, cash flow from my properties is revenue neutral and I wouldn't expect that a heavily financed purchase would produce a positive cash flow.

I mentioned here and here about my experiences with multi-level marketing through Amway/Quixtar (I read this weekend that they are now dropping the Quixtar brand and reverting to Amway). I don't really consider Amway an option due to the high people skill requirements for success.

I "tried" the Internet with this blog. But my 25 months of blogging has earned me a cumulative $2.46! Of course, I do not have a good sense of how to make money on the net. One of the aspects that I really grasped with Amway was the "franchise" concept (see point #2 here). Distributors like Dexter Yager had created an excellent "system" for success.

As I mentioned a couple of posts ago, I have been looking into SiteBuildIt. It seems to me that the creator of the site has done a pretty good job of building a good system that can be followed by most people. The system looks pretty comprehensive. If you are (like me) uncertain what type of Internet business to create, there is a Brainstorm section which provides lots of data. You can use the data to determine supply Vs demand for any particular keyword (i.e. business idea). His C-T-P-M model makes a lot of sense (and points out why this blog doesn't make much money!).

I am applying for a Census job and have thought about taking a second job. The problem with second jobs is that they have little flexibility. Since my boys have not been willing to get their driving licenses, I still need to do a lot of chauffeuring.I thought about becoming a Real Estate Agent and took an on-line CCI - but, as I suspected, the competencies needed are much like Amway and I scored in the lowest 20%.

So, over the next few weeks I will explore a web site in more detail and may pursue that for the time being.

Lawsuit against Amway Distributers

I met Randy Haugen several times and listened to him speak. I was shocked to see P&G win a $19.5M award against him for a silly rumor about P&G being a Satanic cult. I'm not sure how P&G was ever harmed by this rumor and this award appears to be excessive, like most jury awards these days.

Also, sad to see that Randy is an ex distributor. He was quite an excellent teacher and leader. Most of us have made more serious mistakes than forwarding an email or voicemail message. I wish him well in whatever he does in the future.

Failing to Succeed

Here's an inspiring article from Forbes on Looking Failure in the Face. I always admire people that have been at the very bottom and fought their way back to success. We usually remember people for their success and overlook the role failure played in them reaching success.

"The idea that a single "F" will keep you out of college and ruin your life
is something they use to scare students into doing their homework. The reality
is that we all have a string of "F"s on our records, whether we acknowledge them
or not, and those failures, just like our successes, add up to form our lives
and who we are."

I was terrified of failing in school, but my career, both at my job and in my side businesses has been a string of one failure after another. I've had many hundreds of experiments fail during my career. My successes have been few and far between, yet I am still employed after 29 years of failing. Why is this? Well, I've had enough successes to save or make $10's of millions of dollars for my company.

In my side businesses I've had a mix of success and failures as well. My first venture into real estate was a disaster and I had to take an embarrassing step backwards to recover. I told hundreds of people I would get rich in Amway, but in the end I only had moderate success.

Never the less, I survived and am working on another real estate business. Will I succeed this time? I don't know. But I do know I will survive no matter what happens and keep trying until I reach my goals. One aspect of my personality that I find I have in common with other successful people is perseverance and a willingness to work hard.

What will the focus of your life be - your failures or your goals?

Three Pillars of Business Success

I had purchased Don DeRosa's Building Wealth real estate course. As I commented in another post, I have not been too impressed with his courses (though his personal help has been great). Sometimes you read something many times and then suddenly you have an "aha!" moment when it makes sense. I had one of those recently after re-reading his course that puts into perspective some of my past business failures and makes me optimistic about my present course of action.

In Don's course he talks repeatedly about 3 factors that are the key to success in business:

1. Organization
2. Exposure
3. Capital

Most people that get into business have neither a plan nor goals, they run their enterprise chaotically, don't keep good records and just go from their gut. Then there are people who fail to do enough marketing to keep their pipeline filled with new clients. Sometimes they start with lots of marketing, get a few clients and forget to continue marketing and have to continually restart their business. And finally, the major cause of business failure has to be under-capitalization. Few people realize how much start up money it actually takes to get a business profitable.

Let me review my past businesses in light of this.

• I was involved in Networking Marketing for over 12 years in an Amway Business. Although the initial investment to get involved was minuscule, I realized after a couple of months that this business required real capital to build to a successful level. Although it was still relatively inexpensive, I had to invest thousands of dollars per year for advertising tools, training seminars and tools, gasoline and entertainment expenses. There was an initial negative cash flow after which I started to break even as I gained some success reaching the Direct Distributor level. I also had written goals and a plan. However, the weak link for me was exposure. To make the business grows requires you to really expose the Business Sales plan to about 2o new people a month. And this requires lost of one-on-one talking to strangers to market your business. For me, I dislike talking to people so much that I could not attain the 20 exposures per month. And in a business like Network Marketing, your down line duplicates your effort. So, I got 2 out of 3 aspects of this business right and reached some success, but the real riches were beyond what I was unwilling to do to get out of my comfort zone. By the way, of all the people that quit the Amway business in my group - none were willing to do any of these 3 things.
• My first real estate venture was in West Virginia. I did not do my due diligence when starting to buy properties, had no plan, no exit strategy and no idea how to handle the business. I purchased 12 properties in a 6 month period and was overwhelmed as to what to do. I ran out of cash and could not rehab them, they sat vacant and were an overwhelming cash flow drain. I didn't know how to market the properties. In essence, I failed in all three aspects Don talks about. And I ended up losing close to $100k. An expensive seminar!
• My current real estate venture seems headed on the right track for the moment. I have set goals and made a business plan. We are on track to attain the capital we need ($210k so far), we have been continuing to market using direct mail and are consistently getting leads. We have about 5 houses in our pipeline and seem on track to reach our goal. We will have to fight the tendency to reduce marketing once we have some houses in our possession, but I think we will be able to continue and expand out marketing. I have also created an Operating Manual (not public) which outlines every aspect of our business, so that we stay organized. We have bought QuickBooks and my wife is taking a training course to help us keep our finances organized. So I feel good about this venture. Of course, two weeks does not prove anything, Quarterly and annual reviews of our performance Vs goals will be needed to stay on track

Maybe after some failures I have learned something.

My Financial Resume

I read a post about posting a financial resume at the Carnival of Personal Finance from Canadian Financial Stuff and thought it would be worthwhile (though embarrassing) to do something similar. I am not proud of some of the financial decisions I have made in my life, but they are what they are. Hopefully, I am getting wiser (certainly older). Having a perspective on what you have done can certainly be the beginning of doing a better job in the future. So in no particular order are the big decisions I have made that put me where I am financially.

• Getting BS & MS in Chemical Engineering. I chose this field simply because I had read that Chemical Engineering graduates were the highest paid BS position out of college. My family had no money at all and I was motivated to make money from an early age. So, I didn't chose a profession I "loved", like so many people are advised to do today. I have no regrets about this decision. It has paid off very well from a salary standpoint. I've been employed by the same company for 28 years and earn a very good six-figure income. Sometimes I've hated my job and sometimes loved it. The cost of the MS degree was free plus I had a living stipend, so my out of pocket investment for my education was less than $10K for the both degrees (I received grants and paid the rest through a work-study co-op plan - my parents paid nothing). In sum, a very good investment.
• My first marriage - a very bad personal and financial decision. Sometimes love isn't the best reason to marry. And divorce is expensive, not only the legal fees (~$30K), but the loss in net worth (one-half goes away).
• Getting involved in the Amway business. I spent about 12 years in that business and had some success (getting to Direct Distributor level, winning a Cruise trip). All of the profits were re-invested in tools and training, so I never made much money. However, the books, tapes and seminars really were the best financial education I have ever received and worth every penny. I also, had many opportunities to consult with millionaires and listened to millionaires who had succeeded outside the Amway business as well. Finally, I had the chance to hear President Reagan speak which was priceless. Even though I didn't get rich, I think that this experience was one of the best financial decisions of my life.
• Not having a "six-months" living expense fund has been a bad decision. Working in a pretty secure field, I have been very lazy about accumulating this fund. Basically living paycheck to paycheck all of my life. I finally have some cash sitting in my account now, but this has been a very stupid failure on my part. Unfortunately, earlier in my life, even if I had a rainy-day fund, I probably would have spent it. My current wife is much more disciplined than my ex and so I think I am better off now in this regard.
• Cars - I've bought 2 new cars early in my life, but learned quickly that it was much cheaper to buy used cars (I've owned about ten used cars - see my post on buying used cars). Except for a Mazda RX-7, I've kept all my cars until they had over 200,000 miles. Two cars have been very expensive - the RX-7 and a '98 Dodge Intrepid - not because of repair cost as much as that they had catastrophic fuel system failures while travelling far from home. The Dodge failed 3 times while over 500 miles away and the cost to rent a car, hotels and travel back and forth to the dealer was 3 times the repair cost. My best car was a Honda Prelude which I drove over 225,000 miles personally and only made one non-routine repair to (water pump). On the car front, I have done pretty well. I spend about one-half as much on my two cars per year as most people spend on their one new car.
• Adopting 4 children from Russia was one my dumbest decisions but my ex was insistent on a larger family and I was too passive to fight her. The adoption cost over $45K and the legal fees afterwards cost another $50k, plus it ultimately ended my first marriage. Read how dumb I was here.
• Buying property on emotion. I have purchased 17 houses now. The first 15 were bought with my ex and all but one was based on an emotional decision. Our first house was a lakeside cottage which we overpaid for (but it's so "cute" she said and wanting to please her, I went along) and when we wanted to sell couldn't cover the mortgage. We tried to sell it on a land contract, but the bank found out and exercised the "Due on sale" clause and forced us to co-sign a new note with the buyers, who didn't pay of course. Our second house did make us a small profit after we rehabbed it. Then I found a cheap house in a nice neighborhood. It was the first motivated seller purchase and after rehab made a lot of money. But then, my ex decided to start "saving" houses in our area (like she wanted to "save" the Russian children later. So we bought 11 houses within a 6 month period - kind of like Casey Serin. I got caught up in the prospect of getting rich by rehabbing these. But I planned poorly, the properties couldn't be rented out and we had no cash to rehab. We lost money on all 11 - close to $100k. Since my first marriage ended I have bought two really good properties from motivated sellers and now feel pretty good about my real estate investments. But it has been an expensive lesson.
• Not funding my 401k uniformly throughout my career has been another stupid decision. not only was I not always funding it, I often raided the account to buy bad real estate, paying the taxes plus 10% penalty. Stupid, stupid, stupid. I'm sure I could be on the verge of retirement now had I been sane about this.But, then again, I would have lost half during my divorce, so maybe not.
• Not buying luxuries on credit. I have been very good about this my whole life, so at least here I don't have to hide my face. In fact, I have not really spent a lot on luxuries or eating out. I enjoy cooking and don't watch much TV at all. I find my entertainment in my life rather than watching someone else.

If I were grading myself, I would give myself a "C". About average. Some decisions have been good others bad. There's plenty of room for improvement. The next few years are critical as time is running out. Even though my career has been stable, times are changing. There's no time like the present to change your life and that is what I am doing.

Becoming a Millionaire

I've just finished reading an interesting post by StevePavlina on 5wealth lessons from a 20% Millionaire. The article was thought provoking and meshed with a lot of my thoughts on becoming a millionaire. The only disagreement that I have is that Steve doesn't mention a time frame in his article. In truth it is not that hard to become a millionaire by savings alone. Even though I started late, just by funding my 401k at 6% until I am 65 will make me more than a millionaire from that one source alone. Someone with self-discipline who starts saving in a 401k or Roth IRA should exceed the millionaire status a couple of times over before they are ready to retire. Just put the money into an index fund, forget it's there and the power of compounding will make you rich.

But if you want to become a millionaire in a short time frame most of what Steve says is right on the money (pun intended).

"If you take this goal seriously, you’ll realize you must make a
massive commitment to have a real chance of getting there. "

I wrote about commitment here. Even savings takes a long term commitment, but it is generally painless once you set it up. But achieving your goal in a short time frame takes a level of commitment that forces you to prioritize your life, give up many short term pleasures, lose some sleep and work much harder than your co-workers and neighbors and give up TV. I've lost 15 lbs. since I started working my real estate venture last month.

"People who say they want to become a millionaire but are
unwilling to back it up with hard work are only fooling themselves. It’s
not going to happen by itself. If hard work is a dirty word to
you, don’t bother."

Steve also writes about the mental attitude shift it takes. He talks about carrying more money in his wallet so that he feels richer. I wrote about prosperity consciousness here and here and here. In one of the posts I derided the "coupon clipper" mentality which I think is what Steve is really talking about.

In his last point Steve warns against listening to naysayers:

"A financial troll is a close cousin to the forum troll, except that
financial trolls strive to sabotage your financial pursuits. These trolls
can be internal or external. They’re the people who make comments
like, “Wealthy people are so greedy. They only care about themselves and
will take advantage of anyone to make money.” Financial trolls
are also the internal voices that say, “If you make too much money,
people will judge you harshly for it. They’ll assume that’s all you
care about.”"

One gentleman wrote a scathing comment about my coupon clipper statement to me in which he stated:

"It seems that you and a good majority of the world measure success by monetary value. Those that die with the most toys win. "

I simply laughed at his comment. In my years in Amway I heard every imaginable negative comment about making money and becoming wealthy. In fact, from this standpoint, I think that Network Marketing is the toughest businesses mentally to endure due to one on one attacks from financial trolls. If you talk to 100 people about network marketing 99 will try to justify their unwillingness to work by dissing your dreams or wealthy people in general. This is called "transference" in psychological terms and you just have to see it for what it really is - not an attack on you but a measure of that persons poverty consciousness, lack of confidence and poor self-image.

I've set a goal to acquire $1,000,000 in net worth in Real Estate alone within 5 years. This is in addition to my 401k or other streams of revenue that I might generate (like a blog).

Our War Weary Oprah Society

Reading the news during the past 24 hours you no doubt encountered the phrase "war weary". We are told how we are tired of the war and just want to bring the troops home. Now I could understand this sentiment in 1971 when we had lost 50,000 troops in Vietnam and there seemed to be no strategy to win. But today this notion is idiotic:

• we have no draft and the all-volunteer army is in good morale - less than 1% of our population is affected
• we have not been forced to pay more in taxes (we actually pay less)
• there are no "Rosie the riveter" ads
• we are not on gas or food rations - in fact we are enjoying the most prosperous period in our history - the stock market just hit another record high

So why are we "war weary"? One reason is just too much negative news from our obsessively anti-war press. But I think the issue is even larger. We have become the "Oprah Society". What I mean by that is a culture where feelings and caring and political correctness rule the day. Men can no longer be men but must act like women - sensitive, caring, emotional and ultimately wimpy. I think we are war weary because we are just a soft society that has no stomach to win in a war in which our enemies have sworn to obliterate our society. Our new motto should be "better to wear a Burka than die".

Now, don't get me wrong. I treat my wife very well, I cook dinner often, clean the house and try to listen to her when she needs to share her feelings. But I don't need or want to act like a woman. I am the leader in my house and ultimately make the final decision on the most important issues (yes, I always discuss everything with my wife and give her input great value as she is very smart and wise). In my first marriage this wasn't true. I bought into the Oprah way of thinking and my ex-wife was the "alpha male" in our house. This worked out terribly for our marriage and my children.

When I was involved with Amway I encountered the Oprah men out there in droves. Oprah men never made it in Amway. What I found interesting was that men want to follow real leaders. And most often this meant real men. (Yes women can succeed in Network Marketing- I saw many that did and I am not disparaging them.)

One thing I learned in Amway was how real men act. That is, they act like adults. Oprah men act like children in my mind. We, as a society, are dis-empowered and blame others for our failures. No one want to take responsibility for their failures.

As I grow older I am able to focus more clearly on how important it is for me to be an adult and a leader in my home - to my wife and my children. It is important for me in my real estate business and job to act with full responsibility for all my decisions and actions.

I am not "war weary" at all. I think the War against Fascist Islamist's is just beginning and will be here a long time. I expect my two sons will serve in the military. Unfortunately, I don't think that there are many adults in Congress. Although President Bush has made many mistakes, he is a lone adult politician in many ways and I support his goals and respect his leadership a great deal. Will our "war weary" Oprah society win a war against the aggressors? At this point, I don't know. Those with the give up at all cost mentality seem to rule the moment. Time will tell.

The Illusion of Knowledge

"The greatest obstacle to discovery is not ignorance, it is the illusion of knowledge"
Daniel Boorstin, 1984 Librarian of Congress

I am a naturally skeptical person (probably why I am an engineer) and I tend to analyse everything to death before I make a decision. But unlike many people I try to analyse things impartially and do not depend on opinions of the uneducated to form my ideas. Nearly everyone has opinions that are mis-informed about everything whether it is health, sex, marriage, money, business, network marketing, real estate and especially science (its really sad to me how poorly educated we are about science in the US since many of the political decisions of the day are being made based on poor scientific knowldege).

Global Warming is my personal scientific pet peeve. We have less than 100 years of fairly good scientific data on temperatures, yet we try to extrapolate that data over the life of the planet and think we can predict some disaster. Understanding normal variation is not something people seem able to grasp. Every weather event is treated like a unique event. This only demonstrates to me a foolish lack of perspective!

Getting good data is also of paramont importance when evaluating a new business as well. Now when you are investing $1,000,000 into a business you probably will do some due diligence. However, for businesses like Network Marketing with low entry costs, nearly no one does due diligence. So I found that people asked their "expert" friends about the business and they got information on how prices are too high or the market is saturated or whatever. When I got involved in the Amway business I did not ask one unsuccessful person what they thought of it. I investigated the pricing structure, the quality of the products, the payouts, the franchise "system", and interviewed people that had made the business work.

Likewise, in the real estate business, I've investigated lots of different systems, bought several and evaluated how they work. I only like to talk to successful people about what works. I like real knowledge, not theoretical knowledge about what might work.

Know that doesn't mean I won't listen to people that have failed at something. Certainly they can provide valuable insights. However, most people really didn't fail because they really didn't try. So 99.9% of their opinions are worthless.

Meanwhile thousands of people listen to Barbara Streisand rant about global warming while flying around in her private jet ruining the atmosphere.

Success will not attack you

I heard the title of this post often at Amway meetings I attended back in the 80's. I don't suppose I knew what it meant back then but now I can assign some meanings to it based on years of experience in both Network Marketing and real estate investing.

• Afraid that being successful will change you

I remember when it occurred to me that I might become very wealthy in Amway. It actually scared me to death! I wondered how I could be responsible for handling millions of dollars and dealing with hundreds of thousands of distributors. I thought that I could not change into the type of person I observed as successful in that business. Now I don't know what the heck I was thinking. We grow as we accumulate wealth and the changes are gradual. Success wasn't going to suddenly attack me in the middle of the night and change me into someone I am not. In fact, the changes happen first, then the success follows. Looking back now, I realized how much I personally grew during my years in Amway.

Now some people do fall into lots of money, so I suppose it attacks them and they can't handle it. This is probably due to our subconscious belief that we are not worthy of the money since we didn't earn it. If so, then you can turn that success attack around by changing your thinking. Change your thinking to prosperity consciousness.

• Success takes commitment

I think that the most apropos meaning of this phrase is that you are probably not going to become successful without a real commitment on your part. I've blogged elsewhere that I was 99% committed to being successful in Amway. That didn't cut it. I think real success takes going the entire way. Holding back just a little part of ourselves sabotages our efforts. In my first real estate venture I never really committed at all to success. After the first year I was just going through the motions and didn't have a plan to succeed nor was I committed to doing everything I could to make the properties profitable. In my current real estate venture I feel 100% committed and have been working like it.

• Success mean taking responsibility for your failures

When I was in Amway I was able to observe hundred of people in my down line directly. I could see their words and (in)actions. What I mostly saw was people that failed to take responsibility for anything that happened. Blame, excuses, laziness, lack of commitment and failure mentality all permeated everything they said and did. I don't have any ill feelings towards Amway or anyone involved for my failure to become rich. I lay the blame entirely on myself. People don't fail in that business because its saturated or the products are too expensive. They fail because they fail to take responsibility to succeed. Likewise, for my first real estate venture. I could blame the WV economy, but in reality, I could have made it work despite the economy. Buffalo's economy is just as bad as the one I encountered in WV, but I believe I can be successful here because of the same reason.

Success will probably not attack you. You have to attack your goals and dreams as if everything depended on your success.

Quixtar /Amway Prices and Poverty Thinking

I've read a couple of posts recently about how the price of the products sold in the Quixtar/ Amway business are "too high" by JLP at AllFinancialMatters and the GettingGreen. I think both of these bloggers are demonstrating a poverty consciousness of sorts.

Prices in and of themselves are neither too high nor too low. Now I don't think that you should pay an excessive price for a product just to prove you have a prosperity consciousness. On the other hand I think that people that routinely buy exclusively based on lowest price without considering value are demonstrating a poverty consciousness.

I investigated the value of the Quixtar/ Amway products quite extensively when I was involved with that business (I don't think that their pricing philosophy has changed but can't vouch for it now.) What I found was that the products really performed far in excess of comparable products. Many companies make good quality products and people buy them. Some would say that a Mercedes or BMW is too expensive but these companies sell a lot of cars due to the value they provide.

GettingGreen seems to think that he can buy good stuff from Walmart. This is absurd. As my Chinese wife lies to point out to me China ships their crap to Walmart and keeps the good stuff for their own citizens. She gets so disgusted by their poor quality and high prices compared to what she was able to buy in China. Do you really feel that treating yourself to the cheapest crap on the planet feeds into a prosperity consciousness? (By the way - I don't hate Walmart, I think it's an excellent business - they just sell the cheapest crap made.)

When we don't charge a fair price for the products we sell and think we have to sell everything on the cheap, we are buying into the notion that the world is experiencing the same lack that we are. This comes from the common emotional conflicts people have about money - that somehow we are taking something away from the buyer. That the world is a zero-sum game and we are cheating the buyer out of their money.

But if the buyer is getting a good value for their money, we are doing them a favor. We think that we should judge what is best for the buyer by convincing them they don't need something of greater value if they can save a few dollars. This is a very presumptive and condescending attitude towards others.

The world is an abundant place. There is a surplus of food, money and resources. Affirming lack only re-enforces poverty thinking and dis empowers people.

Is Quixtar / Amway a good or bad business?

I read a post linked from Carnival of Personal Finance today by a bloger called Getting Green about the Amway/ Quixtar Network Marketing business. It seems that this blogger has either some grudge about the Quixtar business or they are just closed minded. For someone who claims to be writing "for people who want to be millionaires" he is way off base.

I've blogged about my experience in Amway before. I spent over a decade involved with it before they changed their name to Quixtar. Getting Greens big objection to Quixtar is that is "hard work"! Well - duh!!!! (He also thinks the products are expensive - but I'll get to that.)

This blogger must be a very young person who has no clue about success. (Maybe today with the Internet you don't need hard work to succeed - I don't know about that yet.) But any business takes hard work in order to achieve real success. You are fooling yourself if you think you will get rich easily.

As far as business models go, the Amway model has a number of key components that really can help you succeed. The downside is that the cost of entry to this business is so low that people think it will be easy. Among the excellent attributes I saw:

1. Access to millionaires - I always had the opportunity to listen to and meet and personally talk on the phone to people that were extremely rich. If you want to be rich - you have got to associate with wealthy people. Broke people think like broke people.
2. A good "franchise" system (see E-Myth Revisited). One of the criticism's of Quixtar is that people make money on tapes. Well, the tapes are part of the success system that leaders in that business have put together. When you purchase a Franchise, what do you you think you are buying - hamburgers? Heck no, you are buying the system. What does that franchise system cost? From $10,000's to $1,000,000's. The Quixtar franchise system is a bargain.
3. Good quality products. The Green blogger complains about the cost of the products. When I started that business I too was sceptical about the prices. What I found out was that the products are very high quality and very good value for what they did. Now when you start a business you can have a low cost pricing structure like Walmart (My Chinese wife claims the Chinese ship all their "crap" to Walmart - the quality of goods in China is much higher :)). Certainly Walmart makes a lot of money, but so do stores that cater to high-end customers like Neiman-Marcus. When you are in sales is it easier to justify good quality or have to explain poor quality? I always found it very easy to justify the higher quality products to people - much easier than handling complaints.

When I was involved with that business, I probably had about 500 people pass through my organization. Probably 90% of the people did nothing but buy some products - no work at all. Like any business it is a numbers game. It is also a people business (my great failing). Success requires hard work, good people skills, perseverance and adherence to the system. Is it saturated? Hardly - the potential opportunity is worldwide and they have fractions of a percent of market share. In fact, I have never been contacted about it by anyone in my 54 years ( I sought it out).

Disclaimer: I am not now affiliated with Amway or Quixtar or know of anyone who is. I have not been involved with that business since 1995.

Courage to become rich

I was reading an article titled The Courage to Live Consciously by Steve Pavlina and was reminded (again) of the root reason for my current financial state -living too much in my fears.

How would I live if I had no fear at all? Have you ever asked yourself that question? When I was involved with Amway I often asked myself this, but had long forgotten about the question or my answer. Recalling back to the days I used to travel long distances to show the Amway business plan to prospects, I often would be driving home late at night listening to self-improvement tapes and sometimes would catch a glimpse of this awesome lifestyle that I could lead should I succeed - great friends, financial security, wonderful family and spiritually connected. But by the next day, trying to do my job with only 4 hours sleep, I slipped back into negative thoughts about why I would not succeed (fatigue can kill dreams).

Now I'm not totally a wuss. In some areas of my life I have a lot of courage. I relish heights and have no fear of dropping off the side of a mountain, I've had 20' boa constrictors crawl over my back. I love speaking in front of large crowds (I've given speeches before 10,000 people) and I have never had a fear of investing money. I don't really have a fear of failure, but I do have a fear of success. And I have had a very real fear of being rejected by other people in one-on-one situations.

"Life shrinks or expands in proportion to one's courage".

Anais Nin

The word courage is derived from the Latin "cor" which means heart. Steve Pavlina seems to think that courage is more about mental decisions. However, for battlefield decisions the Marine that falls on a grenade is not making an intellectual decision, but a very real emotional one. He (Steve) thinks that our decisions are not "fight or flight" based because the real danger to most of us is mostly in our mind - not life or death decisions our ancestors (or today's soldiers) faced.

Steve lists lots of practical advice to overcoming your fears (making list of possible negative aspects of you decision, breaking them down and setting goals to overcome them, becoming more educated, etc.). Maybe this helps some people, but I have tried this logic with only limited success.

So how do I gain the courage to be rich? My only good analogy is when I am at the top of a very steep ski slope and can't see the trail past the edge of my skis. I simply push forward over the edge and trust in my ability, God and my instincts that I will make it down the slope. I am totally immersed in the moment, not worrying about falling, breaking a leg or anything negative.

I think that business success will take a similar route. When I was in Amway I was 99% committed to my success. I invested heavily in tools, seminars, travel. I would drive anywhere to show the plan to people, but I withheld myself in one critical area out of my comfort zone - I wouldn't drop off that cliff when I was in the presence of a stranger. I have a colleague I work with who I admire greatly for that quality. For him everyone is a friend whether a CEO or the girl at the drive-through window. In seconds this man establishes rapport with strangers, a trait I envy.

So is becoming rich just about courage? To a large degree it is and a very emotional decision. It is about putting yourself on the line, about immersing yourself 100% into what you are going to achieve and blowing up the bridges that would allow you to retreat. That retreat has for me been too easy ( I make a six figure income at a job). But my job will never allow me to get rich.

“Successful people expect the best, and they generally get it, because
expectations have a way of attracting to us their material equivalent,”

Tom Butler-Bowdon

When I started in real estate the first time 20 years ago, I didn't have a plan, wasn't organized and invested based on poor information. But I also failed to commit myself 100% to making it work, so I retreated to my job and let it bail me out. This time I am better organized, have good market data, have a planned exit strategy, know what I want to buy and am not letting emotion drive my purchase or selling decisions. But I still have the opportunity to give up - I've got 4 teenagers to care for with associated activities, a wife who wants my time and still have that 8 hours every day to exchange with my employer. I don't have time to do this ( I could reason).

I'm 53 and I have no hope of retiring before my late sixties based on my financial position. I had not planned to be in this position, but that's because I never did stick with a plan to do it. So its going to take relentless persistence to succeed. And ultimately, the courage to push myself over the edge.

Using scarcity consciousness for gain

I've been posting about prosperity Vs scarcity consciousness and here and here. Today a blog post popped up on my GoogleReader which seemed to prove the point by Derek Pierce.

He talks about using a "take-away" technique during negotiations. If the person he is trying to negotiate with starts to waffle he "takes back" something he had previously given. Here's his explanation"

"The takeaway method works like gangbusters. But, you may ask why?
Well, it's proven that we all are motivated by scarcity. In other words, if
there is a product or service that is freely available, then the desire for that
product or service is not that great. However, if there is a limit or some
deadline to that product or service, then it will increase your desire to have
the product or service. That's why you see so many deadlines with
promotions."

When I was involved with Amway, this is one of the common techniques also taught. If a prospect wasn't sure that they wanted to join your business, you simply told them you were not sure if you could work with them, that your business was very successful and your time was limited you tried to give them something to lose.

In some respects, its sad that you can take advantage of people's scarcity consciousness with such ease, but my experience in Amway convinced me that it is far easier to work with their existing mentality than to change it. Sometimes I spent hours with people trying to convince them that they could have more money, make their dreams come true, help their family and nothing would register. But the fear of loss motivated them time and time again.

One of the wage roll employees that I work with is forever complaining about his situation in life - he honestly believes that he is no better off (he makes $25/hr) than his father who was also a factory worker. I think this is quite an irrational perspective. Just consider the following:

• health care has advanced tremendously. Survival rates from heart attacks and cancer have increased dramatically. This employee recently had a heart attack. Perhaps in 1965 he might not have survived
• automobiles today last longer, run more efficiently, require less maintenance and are safer than ever
• electronics are prolific and cheap - you can buy an HDTV and receive hundreds of channels (and the cost will be a lower portion of your paycheck than it was in 1965). Cell phones, DVD players, ipods and computers didn't even exist back then
• we spend a lower percentage of our income today on essentials like food and clothing than we did then leaving more disposable income for eating out (consider the proliferation of restaurants

Now I don't think I can ever convince this fellow employee that he is living a prosperous life. So are people hopeless? No, I think that most people have hope, but few have belief and even fewer believe that they can have real prosperity.

Is a Scarcity Consciousness Holy?

A retired gentlemen that clips coupons made a strongly worded criticism of a post I made the other day:

"It seems that you and a good majority of the world measure success by monetary value. Those that die with the most toys win"

He thought it more important to "help others" by serving food rather than working to generate wealth. Is he right? Are only poor people who "help others" assured of a blessing in the afterlife?

There have been several ministers that I have heard speak in the past 20 years or so who would disagree with that idea. - such as Norman Vincent Peale (The Power of Positive Thinking) and Robert Schuler (Move Ahead with Possibility Thinking). Another excellent book I have read that disputes that idea is Paul Zane Pilzers God Wants You to be Rich.

There are many Christians who point to the Biblical admonition

"It is easier for a camel to go through the eye of a needle, than for a rich man to enter into the Kingdom of God"

and think it is holier to live a life without money. Few pay attention to the parable of the talents.
The most insightful part of this parable is the most severe condemnation that Jesus gives to the servant that did nothing with his talents:

"And throw that worthless servant outside, into the darkness, where there will be weeping and gnashing of teeth."

Jesus also says something about those that create more money with what they are given

"For everyone who has will be given more, and he will have an abundance."

This passage tells me two things

1. God's given you something and you better do something with what he gave you
2. If you do something he will bless you with abundance
   

when I was involved with Amway in Network Marketing business I showed the business plan to hundred's of people. Many had been blessed with much in the way of gifts that would have made them very successful in Network Marketing. But, for one reason or another they declined the opportunity or started with great enthusiasm only to quit after a few days or weeks. I believe they were gripped by a scarcity mentality that didn't allow them to believe they could get rich.

Now my critic may have thought I was attacking him for clipping coupons. I was not, as I shop for good deals and don't believe there is anything wrong with being a good steward of your money. The point of my post was that people driven by scarcity mentality tend to focus on what they don't' have which leads to jealousy. Now, don't get me wrong - I am no saint (I'm sure I've broken every one of the Ten Commandments). Just as being too focused on getting money at the expense of others can lead to sin, so can being focused on scarcity.

We are all given different abilities to produce something in this world. Someone with disabilities certainly may think that they have fewer opportunities to others but there are countless examples of those who have overcome every form of disability to do something astounding in the world.

While most people think that the world is a zero-sum game, this is an illusion. As Pilzer correctly writes - "any increase in wealth of an individual, always results in an even greater increase in wealth for society".

God created the world with abundance, more than any of us can comprehend. God created each of us with abundant talents and has given us abundant opportunities to use those talents. Most of us have declined the opportunity (I plead guilty!), and we are left with a coupon clipping mentality. Now if you are putting the savings from your coupon clipping to good use for investments or business opportunities or charities, I'm sure you are using your money wisely.

I don't believe that those pursuing a life of poverty through scarcity consciousness have the corner on holiness, nor do I believe that those who pursue money just for the purpose of having more things are in the right either.

What I do believe is that God created a world that the more successful I am, the more wealth there is for everybody. By working and creating and sharing we make a better place for all.


My perspective is that God was the Creator and he created us in his image - so we were made to create. That is our role.

How to get rich

One question that many people ponder over throughout their lives is the question of how to get rich or least financially independent. The vast majority of us have been schooled in the time-honored wisdom that the best route is to go to a good college and get a good job. Then we spend our lives exploring the stock market or real estate or network marketing or a business or buying lottery tickets or suing someone if all else fails, without really understanding the basic concepts that will realize our dreams.

I'm going to give you the secret (I sound like a salesman here, but I'm not selling anything) and it is so simple, welll....duh!

There are two immutable's in getting rich:

1. Leverage
2. compounding (also known as interest or the time value of money)

If you understand these two concepts and use them positively, I can guarantee that you will be rich. Now most people spend their lives either not using these or using them in reverse. For example:

• they work at a job (trade their hours for fixed dollars) and spend all that they make
• they incur bad debt (reverse compounding)
• they use leverage with extremely high risk/reward ratios (for example, lottery tickets)

Many of us have read stories of poor ministers or spinsters that die and have millions of dollars in their estate - these people lived on meager incomes but used compounding( the time value of money) in their favor to accumulate wealth. In WV I lived across the street from a 92 year old spinster who had several million dollars in AT&T stock. She had purchased some small amounts from her employer when she was working a summer job in high school and 70 years later - voila!

I want to distinguish between bad debt and good debt. My Chinese wife believes that all debt is bad, but I think it is correct to say that investment debt that has a reasonable risk/reward ratio is acceptable (think of your home). Debt incurred to buy that HDTV is bad debt (but damn do I want one :( Guess I'll have to achieve some financial goals first!)

So what is leverage? Basically it is when you use a tool to allow you to be more financially productive. There are many tools that you can use:

• starting a business and hiring employees to get more work done (good risk/reward)
• franchising your business (good risk/reward)
• using the Internet to leverage your efforts (good risk/reward)
• buying real estate with small down payment (good risk/reward)
• investing in commodity futures (poor risk/reward)
• using margin accounts to buy stocks (poor risk/reward)
• investing in a college education (may be a poor risk if you choose the wrong major!)

What about ways to use the time value of money or compounding to your advantage:

• saving 10-15% of your income -especially in a IRA or 401k (excellent risk/reward)
• investing in stocks (could be good or poor risk depending on your diversification)
• owning a completely paid for piece of real estate (good risk/reward)

I'm not so sure that college is the best use of investment dollars. With a typical education costing $40k/yr, the $160k invested at 9% for 35 years will yield $3,266,000.

So what should you do? Here's my list:

• put some money into an emergency fund
• pay off all bad debt - use a snowball formula
• accumulate 3 to 6 months of expenses into very liquid savings
• invest 15% of your earnings into a Roth IRA or 401k (especially if its is matched)
• buy a house from a motivated seller - don't make an emotional purchase
• start a business (our tax laws provide magnificent deductions for businesses not employees)
• systematize your business (see E-Myth Revisted) so it doesn't run you
• invest in real estate

And stop buying lottery tickets! That's my perspective.

Goal Setting

I've been thinking a lot about goals for my real estate business recently. I've read that most people never set goals of any kind and fewer than 5 % of people actually write down their goals. I guess I have been one of the few that do this but not sure why I haven't achieved all my goals.

At the corporation where I work we have been forced to set goals (and document the results at year end) for many years. We use the S.M.A.R.T methodology.

SMART stand for:
# Specific
# Measureable
# Attainable
# Realistic
# Tangible

When I was involved in the Amway business, the successful people constantly discussed goal setting and writing goals down. They would even supply specific formulas to attain each type of goal. For example to make X$ you had to:

* Sponsor XX people
* Show the business plan to XXX people
* Contact XXXX people
* Meet XXXXX people

I would write down these extensive plans about how to achieve my goals. I could easily make call, show the plan and sponsor my fair share of people. But I could not meet people and never generated enough momentum to keep new people coming in faster than others dropped out. For me, meeting XXXXX people was an unrealistic goal because I did not believe that I could achieve it.

So after attending a real estate seminar I am again writing down some goals

For 2007 our goal is to purchase 4 single family homes with at least $20K profit potential and sell at least 2 of the properties I own.

To break that down into details:

1. Find sources of funding of at least $500K
* develop relationship with a loan broker
* get a source of hard money financing
* develop some sources of private money funding
2. Create a source of motivated sellers
* work with Realtors to find old listings, desperate sellers
* direct mail 50 letters per week to people filed in lis pendens (pre-foreclosures)
* direct mail 100 postcards to absentee owners per week
* put up bandit signs
* set up website (www.JinnaProperties.com)
* business cards
* install phone line
3. Make 3 purchase offers per month
* call all contacts from advertising
* look at 10 properties per month (use Realtors if not enough from ads)

I'm still in the process of reading The E-Myth Revisited and I decided that I needed some other goals. Gerber has us ask "How must my "business-as-a-product" work in order for it to successfully attract not only customers but also employees who want to work there?"

1. Create a business mission
2. Create systems to automate all of the above so that the business does not run me

I was reading a blog by StevePavlina today and read this statement

"I remember the moment when my financial situation began to turn around for the better. I can trace everything back to a specific shift in my mindset that happened in late 1998. Up until that point, my focus was largely on ego-driven goals, and no matter how hard I worked, my financial situation kept getting worse. Eventually I was so fed up that I abandoned that mindset and replaced it with a new one. I said to myself, “Living just for myself is getting me nowhere. I’m going to concentrate on making a contribution instead. If I go broke, then at least I’ll go broke doing something worthwhile.” "

I can remember when I was in Amway and the people that made it to the highest levels of success were on a mission. They were not in it just for the money anymore but seemed to have a higher purpose that allowed them to overcome their fears and move outside their comfort zone. I remember I had that sense for the first 3 months I was in the Amway business, but somehow started having a fear of success, fear of failure and no longer could see the people I was talking with as successful. In fact, I inwardly was very cynical of most people I talked with despite their braggadicio attitude. So it became more and more difficult for me to talk to anyone about the busines.

So part of my overriding concern for my real estate business is that I just not focus on the specific monetary goals, but develop a mission statement. I think, just like in Amway, I need to be able to convince the sellers that I am not just there to take advantage of them but have a greater purpose to help them solve their problems.

Not Luck at All

In the book Tales of Power by Don Juan he says "The basic difference between an ordinary man and a warrior is that a warrior takes everything as a challenge while an ordinary man takes everything as a blessing or a curse".

Ramit tackles this issue in a post on the Shrug Effect. His point is similar to Don Juan in that the average person is quick to dismiss the success of high profile people to the breaks they had in their life rather than be responsible for their own breaks. Spiritual people tend to count their blessings, secular people just look at their bad luck, but neither group tends to see everything as a challenge.

Now I can't dismiss the possibility of luck. Certainly it was bad luck to be on one of the planes hijacked on 9/11. But I'll wager that vast the majority of our life is governed by decisions we make from minute to minute. I've talked previously about luck and was hoping for some better luck in my new real estate ventures.

I think the cumulative effect of decisions we make from an early age often determine part of our personality, what kind of relationships we develop in life, our career choice and financial success. When I was in high school I would occasionally go to a school dance. But I wouldn't dance. It was too far outside my comfort zone to ask a girl to dance. There were other young boys that were less attractive than me, had worse personalities but didn't have the fear to take a chance. They learned from trial and error what the girls liked - often developing humor as a way to attract a girl.

Looking back to my college years I can see clearly that the people that succeed financially were not necessarily the ones with the best grades. It was often the ones who had the largest network of contacts. Was this my bad luck not to make hundreds of friends or a decision not to get outside my comfort zone and make friends. It was easy to study my engineering books and get good grades. That certainly got me a good job offer, but in my company it takes lots of people skills to climb to the highest levels.

The same certainly was true for my experience in Network Marketing with Amway. The people skills that I had failed to develop all my life through my fear of people stopped me from making it. And I still wasn't willing to get outside my comfort zone - even for the millions of dollars of potential income. As I mentioned in my post on SMART goals, I never believed and wouldn't try.

I've been busy creating a business plan and goals based on The E-Myth Revisited and feel much more confident that I will succeed - not because I'll have better luck, but because I have made the decision to treat each challenge as an opportunity to get better.

From A Separate Reality
"You should know now that a man of knowledge lives by acting, not by thinking about acting, nor by thinking about what he will think when he has finished acting. A man of knowledge choses a path with heart and follows it"

The Entrepreunerial Mindset

I've been re-reading "The E-Myth Revisited" this week. The premise of the book is that in order to have a successful business you need to have a balance of 3 business skills - The Entrepreneur, The Manager & The Technician. Most people that start a small business are skilled in only one of these three (often the technician) and consequently their business fails.

Most of what Gerber says rings pretty true to me. However, for me, I probably have more of an entrepreneurial mindset than the other two. In my work I am involved in R&D and have lots of vision about future product concepts. Most of my career I have been way ahead of where management wants to be. I have many patents but no real world applications. I don't lack the other two skills completely as I have strong technician skills (getting the job done). I'm weakest at management of the task. I tried a management position for a couple of years and just hated it.

The outside business interests that I have tried have been completely unrelated to my engineering job and as such I have not been caught up in the technician dominant problem that Gerber thinks is the most common problem. In both real estate and network marketing I have had lots of vision and many creative ideas. I thought of multitudes of ways to change the network marketing business but when it came to execution, I just didn't do the work as I discussed previously. When I had purchased over 10 buildings in the 1980's I just could not manage the many problems the properties had and just got too bogged down to get anything done.

Gerber talks a lot about creating a system. In my mind that was one of the strengths of the Amway business (at least in Dexter Yeagers groups). There are lots of people with their own systems trying to teach Network Marketing. The same is true in real estate. Every time I go to a REI club meeting a new guru has a new way to market or purchase or sell. And of course each one wants $800 to buy the complete details of their course.

So the idea that has been fomenting in my mind is can I use a wiki to create a real estate guide that doesn't cost the average person thousands of dollars.

virtual business from Amazon

Point, Click, Sell This is a pretty cutting edge idea. You could start your own Network Marketing Company and have Amazon do all the inventory, shipping, billing, etc, and use their computers to boot. It boggles my mind to think of the possibilities.

Via Instapundit

What's luck got to do with it?

"you make your own luck"

"the harder I work, the luckier I get"

"except for bad luck, I wouldn't have any luck at all"

After posting about Casey Serin, I spent most of the night thinking about the role of luck in my life and whether I should believe in it at all. All of the successful people I have met have outwardly stated that they believe their success is due to hard work, persistence, good organization, etc. Few seem to think that they were just lucky. On the other hand, nearly every poor person I have known (between having rental property for 10 years and trying to recruit people into Amway for an equivalent length of time, I met literally hundreds and hundreds) blames his or her lack of success on bad luck.

My wife is from mainland China and it seems that the Chinese have a strong belief in luck. She seems to think she always has bad luck. She grew up during the cultural revolution was very poor and remembers not having much food to eat, standing in line long hours to get an egg or some meat. (Even today in the US she goes to great lengths to make sure she doesn't leave the slightest trace of raw egg in a mixing bowl.) Her first husband abandoned her when their daughter was born and she was left alone in the Northwest province of China a thousand miles from her family. So she sent her baby home to her mom and lived alone, studying long hours to get an accounting certificate. She finally got her certificate and found a job on Hainan Island in the South China sea. But the bank was corrupt and went out of business. So she found a new job in a large city only a 10 hour trip away from her parents. She somehow managed to buy a house, marry a budding entrepreneur and pay off the house completely in few years. But the entrepreneur cheated on her and left her, taking his share of the business (worth a lot of money) without giving her anything. Still, through her frugality she had saved enough to buy a house for her parents and pay for it in cash. So she owns two homes in China completely paid for worth nearly 2 million yuan - a hefty sum for an average person in China.

A few years ago she decided she wanted to emigrate to America and found a man to marry (me!). But it was her bad luck to find someone who wasn't rich. After all, all the other Chinese women she know had married rich Americans! So has my wife had "bad luck" all her life as she claims? On the one hand she represents some one who sets goals (although she doesn't write them down) and diligently works towards them and inevitably achieves them. But she seems to focus on all the bad breaks she thinks she has gotten.

What about me? My outward demeanor is always optimistic. I was always telling the people I sponsored in Amway one of the first two quotes above. I have constantly tried to sell my wives that with a just a little more time we are going to be successful at _____ (fill in the blank- real estate, Amway, commodity futures, stocks, etc.). Initially in all my ventures I believed I really would be successful. But as they flopped I most often blamed (internally) my bad luck. Even today I feel that I have the worst sense of timing. I moved all my 401k savings into stocks in late 1999, I bought real estate in the 1980's just before the market crashed. E-gad - I am getting into real estate now again after it has peaked!

During my time in Amway I read hundred's of books, listened to thousands of tapes and heard hundred's of successful business people speak (both from inside and outside of Amway). They all espoused a thinking process similar to Steve Pavlina. Basically, our thoughts are like magnets and we can literally "Think and Grow Rich". Steve Pavlina has an experiment he is running to try to attract $1million. Can success be this easy? It is both inspiring and frustrating to read about how easy it is for others to make a lot of money such as this college student. I also know very personally my sister-in-law's success has a lot to do with extreme hard work. Her business InOutSouce.com is one of the fastest growing firms in Philadelphia and she is well on her way to riches. But she thinks luck has nothing to do with her success.

I remember when I first saw the Amway marketing plan. I was absolutely convinced that I would be a millionaire in 2 years. I felt certain that anyone would have to be an idiot to turn down the idea. The first two months I sponsored every one I talked with. I believe that they bought into my belief. One night I had an awful realization that I was going to be responsible for hundreds of people when I became successful, I would have to deal with so much money, etc. and I literally became scared. Doubt started to creep into my thought pattern and I started to have trouble sponsoring. That doubt has stayed with me in every venture since that time.

So is it luck or hard work that generates success? Or is it a combination? Or is it just my mental thought pattern that attracts or repulses wealth? I just do not know the answer and am really not sure that successful people know what made them successful. Just like when the news media interviews someone over 100 years old and asks their secret to long life. It's all anecdotal evidence and means nothing. More women and whiskey or more vegetables? Who knows really?

So I am jumping into real estate again. Just hoping really that this time I will figure it out. What's luck got to do with it? (apologies to Tina Turner) I hope nothing at all, really.