Hello! David J here again bringing you more of the steps on my journey toward financial independence.
Some important information I wanted to bring to your attention, as you begin to build credit for your business entity:
Some vendors will deal with startups having no credit history. Of those, some may extend credit right away.
Yet others will want you to pay up front for the first 90 days. Then, they'll report the entire 90 day period as on-time payments to the bureaus. So, it's entirely reasonable to go a whole calendar quarter buying from your vendor and paying up front, yet seeing no progress from them on your credit history. Then, of a sudden, you'll find you have a history with that vendor and they reported 90 days of on-time payments!
So, that was unexpected.
It's also the good news! Since you pay up front, your payments don't get a chance to be late! Rather an interesting plan, eh?
If you've been reading along as I publish my experiences, you may have noticed that I've been advocating opening two lines of credit a month and buying $60 or more from each vendor every month. If you follow these guidelines, your expenses will look like this:
Month 1
Vendor 1: $60
Vendor 2: $60
Month 1 Total: $120
Month 2
Vendor 1: $60
Vendor 2: $60
Vendor 3: $60
Vendor 4: $60
Month 2 Total: $240
Month 3
Vendor 1: $60
Vendor 2: $60
Vendor 3: $60
Vendor 4: $60
Vendor 5: $60
Vendor 6: $60
Month 3 Total: $360
Total, 1st Quarter: $720
Of course, that's a low estimate. By the time you pay taxes and shipping, your actual purchases will likely run closer to $75 each month, more or less, from each vendor. So, now the numbers look like this:
Month 1
Vendor 1: $75
Vendor 2: $75
Month 1 Total: $150
Month 2
Vendor 1: $75
Vendor 2: $75
Vendor 3: $75
Vendor 4: $75
Month 2 Total: $300
Month 3
Vendor 1: $75
Vendor 2: $75
Vendor 3: $75
Vendor 4: $75
Vendor 5: $75
Vendor 6: $75
Month 3 Total: $450
Total, 1st Quarter: $900
That's not inconsequential, but it's not too bad. It's as close to "no cash, no credit" as we can come given what we're trying to do. I mean, how do you establish credit for your business entity if the entity doesn't buy stuff and pay for it?
On the other hand, you're reading this blog for the cost of what you're already paying. If you're at home, you're already paying your power and internet bills. If you're reading this at the library on their computer, that's about as low cost as it gets.
I'm blogging to help you do what I'm doing. I'm not asking for a month's take-home pay like some "get rich" gurus might ask.
All I'm asking is to stop by here every so often and look for a new post. I try to post at least once a month, more when I have news that won't wait.
Let's layout the timeline, then:
From the time you start buying, figure two calendar quarters before you can start looking for startup lenders who will honor your entity's established credit. That's six months.
For me then, that means I have six months to study large multi-family properties and explore lenders and other options. So, I'm looking at June of 2011.
At last! A "stake in the ground"! A concrete target I can aim for. A wise person once said, you can't hit a target you don't have!
We'll talk again soon!
Take care - be well!
Much Success!
Monday, December 20, 2010
Thursday, November 18, 2010
Pay It Forward
Hello! David J here again bringing you more of the steps on my journey toward financial independence.
Just a quick update to the blog today. Really, sort of thinking "out loud".
One of the tasks for building credit for your business entity is to make some purchases from, for example, office supply stores and such. You need to buy about $60 worth of stuff from each vendor every month, and pay the net-30 bill on time to build a good credit history for your entity.
So, whaddaya gonna do with all that stuff?
Here's one idea I had. Since you're using your own money to capitalize these purchases, why not buy things that schools and churches need, donate the excess stuff - beyond the needs of your own business, and take a deduction for the donations?
Now, naturally, you'll need to consult your own tax accountant because I obviously am in no position to be giving advice. You'll need to consult with your own professionals and see whether and how much that would work in your favor.
Why donate what you bought with your own, hard-earned money?
Consider:
Our purpose here is to build a business that produces massive passive income.
I'm sure you've heard it said that much is expected from those to whom much is given.
So, by buying and giving now, before your plan comes to fruition, you're "paying it forward" and developing the habit and attitude of giving: an attitude of gratitude. When your business starts cranking out cash you'll be so in the mode of giving and sharing that you'll NEVER be called a rich, old penny-pincher, stingy or a miser.
I know - rather flies in the face of conventional wisdom, does it not?
If we want to be financially independent, we want to hold onto money, not give it away, right?
Well, yes and no.
We want to avoid unnecessary expenses, certainly. Providing for the less well-off and contributing toward the education of our children are certainly necessary, I'm sure many of you would agree.
Those were my thoughts while trying to decide how many cases of paper to buy from one vendor, how many pens, pencils and other supplies from another.
One extravagance I might like for myself, though: When I got married, I gave my best man a genuine Montblanc Meisterstuck, but didn't get one for myself. I like those big, heavy, brass pens - I have several bootleg versions (they accept the Parker refills, but not the Montblanc). They feel good to hold and to write with. I might do that to satisfy one month's purchase from a vendor who offers it, if I find one.
We'll talk again soon!
Take care - be well!
Much Success!
Just a quick update to the blog today. Really, sort of thinking "out loud".
One of the tasks for building credit for your business entity is to make some purchases from, for example, office supply stores and such. You need to buy about $60 worth of stuff from each vendor every month, and pay the net-30 bill on time to build a good credit history for your entity.
So, whaddaya gonna do with all that stuff?
Here's one idea I had. Since you're using your own money to capitalize these purchases, why not buy things that schools and churches need, donate the excess stuff - beyond the needs of your own business, and take a deduction for the donations?
Now, naturally, you'll need to consult your own tax accountant because I obviously am in no position to be giving advice. You'll need to consult with your own professionals and see whether and how much that would work in your favor.
Why donate what you bought with your own, hard-earned money?
Consider:
Our purpose here is to build a business that produces massive passive income.
I'm sure you've heard it said that much is expected from those to whom much is given.
So, by buying and giving now, before your plan comes to fruition, you're "paying it forward" and developing the habit and attitude of giving: an attitude of gratitude. When your business starts cranking out cash you'll be so in the mode of giving and sharing that you'll NEVER be called a rich, old penny-pincher, stingy or a miser.
I know - rather flies in the face of conventional wisdom, does it not?
If we want to be financially independent, we want to hold onto money, not give it away, right?
Well, yes and no.
We want to avoid unnecessary expenses, certainly. Providing for the less well-off and contributing toward the education of our children are certainly necessary, I'm sure many of you would agree.
Those were my thoughts while trying to decide how many cases of paper to buy from one vendor, how many pens, pencils and other supplies from another.
One extravagance I might like for myself, though: When I got married, I gave my best man a genuine Montblanc Meisterstuck, but didn't get one for myself. I like those big, heavy, brass pens - I have several bootleg versions (they accept the Parker refills, but not the Montblanc). They feel good to hold and to write with. I might do that to satisfy one month's purchase from a vendor who offers it, if I find one.
We'll talk again soon!
Take care - be well!
Much Success!
Saturday, October 23, 2010
LLC Update
Hello! David J here again bringing you more of the steps on my journey toward financial independence.
Well! It's been quite a while since last we met! A lot has been happening. Let's get caught up...
Probably the biggest news is that I'm back to work after a year and six weeks! While the original plan was not to take another J.O.B., the reality of my financial situation did not make that possible. The new job came along just as my money - the last of my life savings - was running out. October would have begun the bankruptcy and foreclosure phase of my life. Now, we can forestall that for the time being and keep building the LLC's credit!
On the LLC front...
Where this is at: we're ready to start building store/vendor credit and get our D&B profile put together. So, that's the next step. The LLC has everything it needs to be recognized as a valid entity: An EIN, a real address (though that address needs to change - part of the story I haven't told here just yet) a checking account and its own phone number (with Vonage). That makes it a "real", recognizable entity in the eyes of potential lenders and creditors.
As relates to the LLC's purpose...
Here's a real gem I picked up recently from a REIA leader:
Y'know how the Real Estate investment gurus always tell you to make offers and they claim it can be done without tying up gazillions of dollars in earnest money? Well, here's how you do it: this works for "commercial" real estate (which, for purposes of this discussion, we define as "large" multi-family residential, 12 units or more) and may work for some single family income property. The "secret" - if you want to call it that - is to make a distinction between an offer to purchase and a "Letter of Intent", or "LOI".
An Offer to Purchase such as you or your agent may submit to a seller for an given property requires an earnest money deposit and is a binding contract once it is accepted.
A "Letter of Intent", or "LOI" is just what the name implies: it's a letter to the seller indicating your intent to negotiate to purchase their property. It is NOT binding on either party, so no earnest money is proffered. The LOI is merely a vehicle used to open the lines of communication. For any given seller or property, the LOI might or might not lead to negotiations which yield an offer to purchase. The LOI may undergo revision as the negotiations, if any, proceed before the seller accepts one of the proposals contained in the LOI. The accepted proposal then gets written up as an offer to purchase, earnest money is put forth, and the seller accepts the offer at which point the offer typically becomes a purchase contract which is binding on both parties.
The fellow giving the presentation used examples of LOIs wherein he actually makes three proposals in each LOI.
The first proposal in the sample LOIs is usually 100% seller financing. He indicated that this is seldom accepted, but it has happened. The first proposal is usually structured to be the most lucrative to the seller, having the highest purchase price of the three proposals, and highlighting is used in the letter to make that stand out, such as using a larger, bolded font to indicate the total amount received by the seller through the end of the financing period.
The second proposal in the sample LOIs typically includes some kind of cash to the seller in addition to seller financing. He showed examples where the second option is presented less attractively with fewer details and no highlighting, since the most desirable scenario is the 100% seller financing proposal. The purchase price is lower than the first proposal to reflect the buyer's (your) additional overhead (finance charges on the money that will need to be borrowed to provide cash to the seller).
The third proposal in the sample LOIs was simply an "all cash" offer. No details provided or needed. The purchase price for this proposal is the lowest of the three.
That information there would normally "sell" for at least a couple of thousand dollars at a guru's seminar or in their books-and-tapes "course" they might sell from a table at the back of a hotel banquet room. You just got it here "for free". I paid $20 to attend that presentation, and I was a half-hour late because I forgot it was happening that evening.
Here's a tip you might pay to get from a marketing guru:
When sending your Letters of Intent, it's o.k. to print the letter off of the computer. In fact, you want to look as serious and professional as possible. Remember to sign the letter in your own hand, of course.
To get your letter opened, however, HAND-WRITE the addresses - the property owner's address and your own (return) address. Research shows you stand a much better chance of your letter being opened and read when the envelope is hand-written. Otherwise, you just look like more junk-mail.
So, in the "course" of this blog post, I figure I've not only helped enable you to make $millions, I've saved you $thousands in money you'd otherwise pay to gurus to attend their events or purchase their stuff, most of which is fluff intended to motivate you to buy even more stuff, most of which is fluff intended to motivate you to buy even more stuff, etc., etc.
Since the purpose of the LLC is to buy and hold income property, I thought it appropriate to include that here in my LLC update.
Tune in again soon. Now that I'm able to get the whole credit building project onto the fast-track, there will be more news more often.
We'll talk again soon!
Take care - be well!
Much Success!
Well! It's been quite a while since last we met! A lot has been happening. Let's get caught up...
Probably the biggest news is that I'm back to work after a year and six weeks! While the original plan was not to take another J.O.B., the reality of my financial situation did not make that possible. The new job came along just as my money - the last of my life savings - was running out. October would have begun the bankruptcy and foreclosure phase of my life. Now, we can forestall that for the time being and keep building the LLC's credit!
On the LLC front...
Where this is at: we're ready to start building store/vendor credit and get our D&B profile put together. So, that's the next step. The LLC has everything it needs to be recognized as a valid entity: An EIN, a real address (though that address needs to change - part of the story I haven't told here just yet) a checking account and its own phone number (with Vonage). That makes it a "real", recognizable entity in the eyes of potential lenders and creditors.
As relates to the LLC's purpose...
Here's a real gem I picked up recently from a REIA leader:
Y'know how the Real Estate investment gurus always tell you to make offers and they claim it can be done without tying up gazillions of dollars in earnest money? Well, here's how you do it: this works for "commercial" real estate (which, for purposes of this discussion, we define as "large" multi-family residential, 12 units or more) and may work for some single family income property. The "secret" - if you want to call it that - is to make a distinction between an offer to purchase and a "Letter of Intent", or "LOI".
An Offer to Purchase such as you or your agent may submit to a seller for an given property requires an earnest money deposit and is a binding contract once it is accepted.
A "Letter of Intent", or "LOI" is just what the name implies: it's a letter to the seller indicating your intent to negotiate to purchase their property. It is NOT binding on either party, so no earnest money is proffered. The LOI is merely a vehicle used to open the lines of communication. For any given seller or property, the LOI might or might not lead to negotiations which yield an offer to purchase. The LOI may undergo revision as the negotiations, if any, proceed before the seller accepts one of the proposals contained in the LOI. The accepted proposal then gets written up as an offer to purchase, earnest money is put forth, and the seller accepts the offer at which point the offer typically becomes a purchase contract which is binding on both parties.
The fellow giving the presentation used examples of LOIs wherein he actually makes three proposals in each LOI.
The first proposal in the sample LOIs is usually 100% seller financing. He indicated that this is seldom accepted, but it has happened. The first proposal is usually structured to be the most lucrative to the seller, having the highest purchase price of the three proposals, and highlighting is used in the letter to make that stand out, such as using a larger, bolded font to indicate the total amount received by the seller through the end of the financing period.
The second proposal in the sample LOIs typically includes some kind of cash to the seller in addition to seller financing. He showed examples where the second option is presented less attractively with fewer details and no highlighting, since the most desirable scenario is the 100% seller financing proposal. The purchase price is lower than the first proposal to reflect the buyer's (your) additional overhead (finance charges on the money that will need to be borrowed to provide cash to the seller).
The third proposal in the sample LOIs was simply an "all cash" offer. No details provided or needed. The purchase price for this proposal is the lowest of the three.
That information there would normally "sell" for at least a couple of thousand dollars at a guru's seminar or in their books-and-tapes "course" they might sell from a table at the back of a hotel banquet room. You just got it here "for free". I paid $20 to attend that presentation, and I was a half-hour late because I forgot it was happening that evening.
Here's a tip you might pay to get from a marketing guru:
When sending your Letters of Intent, it's o.k. to print the letter off of the computer. In fact, you want to look as serious and professional as possible. Remember to sign the letter in your own hand, of course.
To get your letter opened, however, HAND-WRITE the addresses - the property owner's address and your own (return) address. Research shows you stand a much better chance of your letter being opened and read when the envelope is hand-written. Otherwise, you just look like more junk-mail.
So, in the "course" of this blog post, I figure I've not only helped enable you to make $millions, I've saved you $thousands in money you'd otherwise pay to gurus to attend their events or purchase their stuff, most of which is fluff intended to motivate you to buy even more stuff, most of which is fluff intended to motivate you to buy even more stuff, etc., etc.
Since the purpose of the LLC is to buy and hold income property, I thought it appropriate to include that here in my LLC update.
Tune in again soon. Now that I'm able to get the whole credit building project onto the fast-track, there will be more news more often.
We'll talk again soon!
Take care - be well!
Much Success!
Tuesday, August 31, 2010
Passive Income
Hello! David J here again bringing you more of the steps on my journey toward financial independence.
A fellow named Chris Wise recently sent out something about passive income, and it really got me thinking.
See, in his article, Chris Wise feels very strongly that devoting one's resources to the acquisition of passive income is more important than the elimination of debt. He claims that focusing on debt elimination distacts one from making more money.
Now, understand: I don't disgree with that. As Chris says, if we generate enough income - preferably passive income - the debt situation will take care of itself.
The challenge I have with that is this:
An adopted mentor of mine, Robert G. Allen, describes what he calls his "Bathtub Theory of Economics". His theory expresses wealth accumulation in terms of cash inflow versus cash outflow. He uses the paradigm of water flowing into a tub and drains allowing the water to escape from the tub. If the water is escaping faster than it flows in, you have two choices: open more faucets or plug up some drains.
Coming from the IT world, I've seen a lot of situations where corporate management was content to mask issues rather than expend the resources to resolve them. Chris's one-sided suggestion seems to me to reflect a similar paradigm: create a sufficiently massive passive income that the demands of debt service are over-whelmed. That way, massive cash flow not only serves to grow the business (instant gratification) but eliminates debts at a rate faster than if cash flow was only a bit more than the demands of debt service.
My personal belief is that the best way to build LASTING wealth, is to clear up unhealthy debt first. That is, plug some of the drains in your "money tub" so the cash which does flow in doesn't flow out so quickly.
I have the perfect example of this in my life right now. As I write this, I've been out of work for a year and a month. I've been living off of my life savings to keep my bills current and protect what's left of my credit score as long as I can. There's been no - or very little - cash flowing in, while the rate of outflow has remained steady, or actually increased somewhat as I've been buying study materials to increase my knowledge and build my business. I'm coming down to the last two months worth of my life savings. I've been job seeking while I've been building my business, but as yet I've not acquired any new income. So, the money I had, and the little I had coming in - unemployment compensation - have been overcome by the demands of my bills and debt service.
Had I been able to "plug some drains", my money would have lasted much longer. Now the divorce settlement was a serious drain on my resources - it cost me better than half of my life savings. Had that challenge not arisen, I could continue for at least another year on course toward building my business. As it is, I must now make some choices between new sources of income that are, perhaps, potentially a great boon to my plans yet may also present some challenging options from which to choose.
Here's a comparison that may help clear up my point for you:
Suppose you're in a boat on a lake. The boat springs a leak. You have a pump that can keep up with the water coming in as long as no new leaks open up. Now, you could stay out on the lake if no new leaks pop open or someone gave you more pumps, or you could get back to the dock and pull the boat out of the water to fix the leak. What would YOUR choice be?
So, my advice is yes, acquire passive income - as much passive income as you can.
However, when it comes to my cash situation, my preference would be to "plug some drains" in my money tub so the money I do get stays with me longer and allows cash in "the tub" to build up more quickly than if the outflow rate was still the same as it was before I acquired the new income.
We all have money mistakes we'd like to put right, things we could have done better that we'd like to fix. My preference is to "clean house" financially when the opportunity presents itself. With my financial house in order, my pursuits of income will utlimately be more productive, in my opinion.
We'll talk again soon!
Take care - be well!
Much Success!
A fellow named Chris Wise recently sent out something about passive income, and it really got me thinking.
See, in his article, Chris Wise feels very strongly that devoting one's resources to the acquisition of passive income is more important than the elimination of debt. He claims that focusing on debt elimination distacts one from making more money.
Now, understand: I don't disgree with that. As Chris says, if we generate enough income - preferably passive income - the debt situation will take care of itself.
The challenge I have with that is this:
An adopted mentor of mine, Robert G. Allen, describes what he calls his "Bathtub Theory of Economics". His theory expresses wealth accumulation in terms of cash inflow versus cash outflow. He uses the paradigm of water flowing into a tub and drains allowing the water to escape from the tub. If the water is escaping faster than it flows in, you have two choices: open more faucets or plug up some drains.
Coming from the IT world, I've seen a lot of situations where corporate management was content to mask issues rather than expend the resources to resolve them. Chris's one-sided suggestion seems to me to reflect a similar paradigm: create a sufficiently massive passive income that the demands of debt service are over-whelmed. That way, massive cash flow not only serves to grow the business (instant gratification) but eliminates debts at a rate faster than if cash flow was only a bit more than the demands of debt service.
My personal belief is that the best way to build LASTING wealth, is to clear up unhealthy debt first. That is, plug some of the drains in your "money tub" so the cash which does flow in doesn't flow out so quickly.
I have the perfect example of this in my life right now. As I write this, I've been out of work for a year and a month. I've been living off of my life savings to keep my bills current and protect what's left of my credit score as long as I can. There's been no - or very little - cash flowing in, while the rate of outflow has remained steady, or actually increased somewhat as I've been buying study materials to increase my knowledge and build my business. I'm coming down to the last two months worth of my life savings. I've been job seeking while I've been building my business, but as yet I've not acquired any new income. So, the money I had, and the little I had coming in - unemployment compensation - have been overcome by the demands of my bills and debt service.
Had I been able to "plug some drains", my money would have lasted much longer. Now the divorce settlement was a serious drain on my resources - it cost me better than half of my life savings. Had that challenge not arisen, I could continue for at least another year on course toward building my business. As it is, I must now make some choices between new sources of income that are, perhaps, potentially a great boon to my plans yet may also present some challenging options from which to choose.
Here's a comparison that may help clear up my point for you:
Suppose you're in a boat on a lake. The boat springs a leak. You have a pump that can keep up with the water coming in as long as no new leaks open up. Now, you could stay out on the lake if no new leaks pop open or someone gave you more pumps, or you could get back to the dock and pull the boat out of the water to fix the leak. What would YOUR choice be?
So, my advice is yes, acquire passive income - as much passive income as you can.
However, when it comes to my cash situation, my preference would be to "plug some drains" in my money tub so the money I do get stays with me longer and allows cash in "the tub" to build up more quickly than if the outflow rate was still the same as it was before I acquired the new income.
We all have money mistakes we'd like to put right, things we could have done better that we'd like to fix. My preference is to "clean house" financially when the opportunity presents itself. With my financial house in order, my pursuits of income will utlimately be more productive, in my opinion.
We'll talk again soon!
Take care - be well!
Much Success!
Monday, August 23, 2010
SBA Community Express Loan - Update
Hello! David J here again bringing you more of the steps on my journey toward financial independence.
Found out something new: some types of businesses are ineligible under SBA Guidelines.
Unfortunately, my LLC is one of them. Because I'm looking at looking at buying income properties and holding them for cash flow, my LLC is not the type of business for which SBA programs can be useful.
* Heavy Sigh *
Well, I had to try, and maybe if you're thinking about a more traditional type of business, this SBA program can still be useful to you.
In the meantime, I just ordered a Vonage account for the LLC. It takes over a week to get that going. So, I won't know if I did it right until early in September, a good three months behind schedule.
I was planning to use the proceeds from the SBA loan to fund the remainder of the startup of the LLC, including the phone and the initial build up of vendor/store credit. I'll have to find another way to fund that.
Stay with me! It's been a bumpy ride, and it's going to get rougher before it gets better! So, grab something and hold on TIGHT!
We'll talk again soon!
Take care - be well!
Much Success!
Found out something new: some types of businesses are ineligible under SBA Guidelines.
Unfortunately, my LLC is one of them. Because I'm looking at looking at buying income properties and holding them for cash flow, my LLC is not the type of business for which SBA programs can be useful.
* Heavy Sigh *
Well, I had to try, and maybe if you're thinking about a more traditional type of business, this SBA program can still be useful to you.
In the meantime, I just ordered a Vonage account for the LLC. It takes over a week to get that going. So, I won't know if I did it right until early in September, a good three months behind schedule.
I was planning to use the proceeds from the SBA loan to fund the remainder of the startup of the LLC, including the phone and the initial build up of vendor/store credit. I'll have to find another way to fund that.
Stay with me! It's been a bumpy ride, and it's going to get rougher before it gets better! So, grab something and hold on TIGHT!
We'll talk again soon!
Take care - be well!
Much Success!
Tuesday, August 10, 2010
SBA Community Express Loan
Hello! David J here again bringing you more of the steps on my journey toward financial independence.
This post is a bit different from most of the others so far. I wanted to pass along some information that I hope can be useful to you, my readers, no matter what business you're pursuing.
Our thrust here has been to establish credit for your business entity. This information represents an oppportunity to actually obtain credit, albeit personally guaranteed by you, the business owner.
My Small Business Development Center (SBDC) rep. at at my local community college recently made me aware of the Community Express loan program from the Small Business Administration (SBA).
Here's the thumb-nail sketch: the Community Express loan program provides $5,000 to $25,000 in unsecured funds at prime+4% amortized over 10 years. The monthly payment is roughly $64 per $5000 borrowed at the current prime rate.
The loan is guaranteed personally by you, and is based on your credit and character, not on your income (startup businesses take note!).
There are some fees deducted from the loan proceeds before you get the money, but that's actually a good thing. By the time you get the money, the fees are already covered and the rest is for your business's use.
Once you are granted a loan, and make payments on-time for six months, you may be able to apply for more funds. This may help you capitalize a startup using only your own good credit rating without putting your personal assets up as collateral or at risk, and even if you have no liquid cash assets.
You should already have a business entity set up and have an EIN, but this might not be required. Check with your local SBDC rep.
Contact your local SBDC rep. for full details.
When you go on-line to apply, make sure you read the directions for filling out the on-line application. Look for the directions link - it's not entirely obvious. This will help you avoid mistakes as some of the questions do not ask exactly what they mean.
Now - don't let the personal guarantee aspect put you off. Even if you can only get the minimum $5000, the monthly payments on that for the first year only come to $768. So, set aside that much - roughly 20% - from the proceeds of the loan to make the first year's monthly payments, and use the rest to help build your business and its profit stream. Do it right, and you'll soon have money coming in to keep up the payments and continue to build your business's profit stream.
Hope this helps!
We'll talk again soon!
Take care - be well!
Much Success!
This post is a bit different from most of the others so far. I wanted to pass along some information that I hope can be useful to you, my readers, no matter what business you're pursuing.
Our thrust here has been to establish credit for your business entity. This information represents an oppportunity to actually obtain credit, albeit personally guaranteed by you, the business owner.
My Small Business Development Center (SBDC) rep. at at my local community college recently made me aware of the Community Express loan program from the Small Business Administration (SBA).
Here's the thumb-nail sketch: the Community Express loan program provides $5,000 to $25,000 in unsecured funds at prime+4% amortized over 10 years. The monthly payment is roughly $64 per $5000 borrowed at the current prime rate.
The loan is guaranteed personally by you, and is based on your credit and character, not on your income (startup businesses take note!).
There are some fees deducted from the loan proceeds before you get the money, but that's actually a good thing. By the time you get the money, the fees are already covered and the rest is for your business's use.
Once you are granted a loan, and make payments on-time for six months, you may be able to apply for more funds. This may help you capitalize a startup using only your own good credit rating without putting your personal assets up as collateral or at risk, and even if you have no liquid cash assets.
You should already have a business entity set up and have an EIN, but this might not be required. Check with your local SBDC rep.
Contact your local SBDC rep. for full details.
When you go on-line to apply, make sure you read the directions for filling out the on-line application. Look for the directions link - it's not entirely obvious. This will help you avoid mistakes as some of the questions do not ask exactly what they mean.
Now - don't let the personal guarantee aspect put you off. Even if you can only get the minimum $5000, the monthly payments on that for the first year only come to $768. So, set aside that much - roughly 20% - from the proceeds of the loan to make the first year's monthly payments, and use the rest to help build your business and its profit stream. Do it right, and you'll soon have money coming in to keep up the payments and continue to build your business's profit stream.
Hope this helps!
We'll talk again soon!
Take care - be well!
Much Success!
Monday, July 26, 2010
Progress Report July 26, 2010
Hello! David J here again bringing you more of the steps on my journey toward financial independence.
Well, it's been a while since last we met. Here's what's been happening this past month...
When last we met, we discussed the initial actions to complete and the order they need to happen.
First, we chose a state and set up our business entity.
Then, we applied for our EIN (Employer Identification Number. Some folks call it a "Tax Id").
Interesting bit of EIN info: the IRS form for that is the SS-4 form. The IRS replies with a document containing your EIN. That's the document you keep with your book of records to show your EIN and that it was officially issued by the IRS.
Where I ran into a delay was that my service provider - who helped me set up my entity - managed to scramble my e-mail address in their records. So, I was waiting for a document they couldn't get to me by e-mail, and they weren't sending it by snail mail, for some reason. So, that cost me almost the whole month of June.
The next step after that was registering the LLC in my home state. No big deal, but without the IRS document containing the EIN it, too, was delayed.
I now have the IRS Form in softcopy showing the EIN. This is saved in hard copy in the book of records for the LLC, also. Hard copies were sent to the state as part of registering the "foreign" entity doing business in my home state.
An important item: you may need to check with your local municipality to see if your entity will require a business license. According to my current location, my LLC does not require a business license given the business I intend to do with it, "General Real Estate Related Activities".
As we go forward attempting to build a credit history for the LLC, a key item is getting the LLC its own checking account.
Naturally, I thought this would be a simple situation, now that I have the EIN. I even went on-line to my chosen bank and filled out the information thinking, "O.k., type all this in, a few more clicks and I should be done."
Needless to say, it didn't work out that way. Oh, sure, I did all the on-line entries. Then, the last screen says, "You will receive ... in the mail in approximately two business days." Well, the packet from the bank arrived three days later. There was a whole checklist of items to be copied and included in the packet to be returned to the bank. Items such as the LLC's Articles of Organization and the Operating Agreement, among others.
So, I made all the copies, wrote out a check to cover the initial deposit, went to the Post Office and dispatched the return packet. That was on a Friday, two weeks ago. This past Friday, I noticed that my initial deposit check had cleared.
Now, I'll be watching the mail for the next package from the bank. I'm thinking it will include my initial checks and deposit slips and some form of "checkbook" including a ledger similar to a check register for a personal account. It may even look just like a personal checkbook. I won't know until it arrives.
Once I have the LLC's account number and routing number, I can go to Vonage and set up a company phone number.
My service provider for building business credit initially said that VoIP services weren't suitable for the purpose of obtaining commercial credit. The important item is to be listed with Directory Assistance where someone researching your entity can find it.
I'm now told that Vonage does provide Directory Assistance listing and so is suitable. This is good news because a "hard", land-line phone line would introduce additional complications.
If you've been following my saga since last August, you know that I'm coming up on a year of being out of the workforce. I'm now faced with a situation where it will very probably be necessary to rent this house out to avoid foreclosure. So, having the LLC physically tied to this location would complicate the situation even further. Just doing an address change for a fledgling entity is going to be complicated enough.
So, here are the steps which lie ahead in the days this week and the next two weeks or so:
We'll talk again soon!
Take care - be well!
Much Success!
Well, it's been a while since last we met. Here's what's been happening this past month...
When last we met, we discussed the initial actions to complete and the order they need to happen.
First, we chose a state and set up our business entity.
Then, we applied for our EIN (Employer Identification Number. Some folks call it a "Tax Id").
Interesting bit of EIN info: the IRS form for that is the SS-4 form. The IRS replies with a document containing your EIN. That's the document you keep with your book of records to show your EIN and that it was officially issued by the IRS.
Where I ran into a delay was that my service provider - who helped me set up my entity - managed to scramble my e-mail address in their records. So, I was waiting for a document they couldn't get to me by e-mail, and they weren't sending it by snail mail, for some reason. So, that cost me almost the whole month of June.
The next step after that was registering the LLC in my home state. No big deal, but without the IRS document containing the EIN it, too, was delayed.
I now have the IRS Form in softcopy showing the EIN. This is saved in hard copy in the book of records for the LLC, also. Hard copies were sent to the state as part of registering the "foreign" entity doing business in my home state.
An important item: you may need to check with your local municipality to see if your entity will require a business license. According to my current location, my LLC does not require a business license given the business I intend to do with it, "General Real Estate Related Activities".
As we go forward attempting to build a credit history for the LLC, a key item is getting the LLC its own checking account.
Naturally, I thought this would be a simple situation, now that I have the EIN. I even went on-line to my chosen bank and filled out the information thinking, "O.k., type all this in, a few more clicks and I should be done."
Needless to say, it didn't work out that way. Oh, sure, I did all the on-line entries. Then, the last screen says, "You will receive ... in the mail in approximately two business days." Well, the packet from the bank arrived three days later. There was a whole checklist of items to be copied and included in the packet to be returned to the bank. Items such as the LLC's Articles of Organization and the Operating Agreement, among others.
So, I made all the copies, wrote out a check to cover the initial deposit, went to the Post Office and dispatched the return packet. That was on a Friday, two weeks ago. This past Friday, I noticed that my initial deposit check had cleared.
Now, I'll be watching the mail for the next package from the bank. I'm thinking it will include my initial checks and deposit slips and some form of "checkbook" including a ledger similar to a check register for a personal account. It may even look just like a personal checkbook. I won't know until it arrives.
Once I have the LLC's account number and routing number, I can go to Vonage and set up a company phone number.
My service provider for building business credit initially said that VoIP services weren't suitable for the purpose of obtaining commercial credit. The important item is to be listed with Directory Assistance where someone researching your entity can find it.
I'm now told that Vonage does provide Directory Assistance listing and so is suitable. This is good news because a "hard", land-line phone line would introduce additional complications.
If you've been following my saga since last August, you know that I'm coming up on a year of being out of the workforce. I'm now faced with a situation where it will very probably be necessary to rent this house out to avoid foreclosure. So, having the LLC physically tied to this location would complicate the situation even further. Just doing an address change for a fledgling entity is going to be complicated enough.
So, here are the steps which lie ahead in the days this week and the next two weeks or so:
- Set up a company phone line with Vonage, including automated attendant and voice mail.
- Begin setting up store ("vendor") credit with those businesses who report to Equifax and Experian business credit.
- Acquire some small items such as office supplies from my credit sources to the tune of $60 or so a month, payable Net-30.
- Track the LLC's business credit rating with Equifax and Experian. Prepare to work with my service provider to establish a Dun and Bradstreet account for the LLC.
- Set up a new entity - or use the existing LLC - to hold this property so it does not show up as an asset in my name and to limit my exposure to liability related to the rental property.
- Sign on with a property manager to provide services to my eventual tenant.
- Check with the HOA (yeah, I know...) to see what additional steps are necessary to put a tenant in here instead of me.
- Contact my insurance agent and let his office know of the change.
We'll talk again soon!
Take care - be well!
Much Success!
Thursday, June 24, 2010
Sequence of Events
Hello! David J here again bringing you more of the steps on my journey toward financial independence.
Again, tasks have taken top priority, and now I have "news from the front" to share with you.
THIS IS IMPORTANT!
In working with the company helping me build business credit for my LLC, what is taking the most time is simply completing the establishment of the LLC as a recognizable entity: getting the Employer Identification Number, the EIN.
Your personal Social Security Number is your personal key to getting everything from a job to a bank account or a credit card.
Likewise, your entity's EIN is the key to getting everything from a bank account or a business credit card to vendor credit or cash credit, as well as registering your entity in your home state, applying for a business license if required where you live, and so on. You really need the EIN to get everything moving.
If you read the earlier post, The First Thing, you know that the approach I'm taking is to set up a business entity - an LLC - and build business credit for that entirely separate from my personal credit. The reason why is outlined in the earlier post.
The first two most important steps in your entity set up process are:
1. Establish Your Chosen Entity
2. Get an EIN for the Entity
Let's look at this more closely.
Establish Your Chosen Entity
There are free and low-cost sites where you can establish your entity.
LegalZoom.com is one such website. Select the "LLC (Limited Liability Co.)" link under "Business Formations" on the left-hand side of their home page.
The Company Corporation is another website. Follow their navigation hints on their home page.
Both LegalZoom.com and The Company Corporation are low-cost options. Note that I am not affiliated with either one and make no repesentations regarding them. Other sites exist also but were not included in my research preparing this post.
You will need to be aware of certain things which MUST be done to make sure that your entity is 100% compliant with the criteria used by the grantors of credit.
For example, your entity must have a REAL street address, not a Post Office Box or a mail drop box at a place like the UPS Store or similar. Further, the street address for your entity may not have multiple entities associated with it. The credit grantors will be checking to see that your entity looks like a credible business. So, it needs to have a real street address of its own.
Also, get with your tax and/or legal professional to discuss any advantages of an out-of-state entity. Certain states have laws which are especially friendly to business, most notably Delaware for public entities and Nevada for private entities. Your professional consultants can explain the advantages.
Be aware, however, that if, for example, you live in Illinois and organize an LLC in Nevada, you will need what's known as a "registered" agent in Nevada in order to have the required local presence in that state. You will, then, need to register your entity in your own home state. Again, your professional consultant can help fill in the blanks. Remember that I am not an accountant or an attorney and cannot give advice or counsel on such matters, I can only tell you what I know which may or may not be applicable to your specific situation. In the end, you and you alone are responsible for your own entity. The registered agent represents an additional expense, but is required.
Get an EIN for the Entity
This can be done directly on the IRS website. Select the link which says, "Apply for an Employer Identification Number (EIN) Online".
In my case, I went with the company helping me build business credit for my LLC. In the packet of papers they sent me for my LLC was the IRS Form SS-4 for applying for an EIN.
As of this writing, it's been about six weeks since I began this process. I submitted my SS-4 to my coach a little over two weeks ago. I'm waiting to get notification back from them that the SS-4 was filed and the IRS responded with an EIN for my LLC.
The EIN Is The Key!
As I was looking to begin setting up bank and store credit accounts for my LLC, I quickly discovered that without the EIN I was going no where. Having submitted my SS-4 to my coach, I am now waiting for their response containing the EIN so I can start taking the next steps.
Since I'm waiting for the EIN, I'm holding off on store credit and so holding off on certain purchases such as office equipment and supplies. I'll be using those purchases during the time when I'm building credit history for my LLC. Then, I can look at completing the steps toward getting ready to apply for larger lines of cash credit.
The process continues ...
We'll talk again soon!
Take care - be well!
Much Success!
Again, tasks have taken top priority, and now I have "news from the front" to share with you.
THIS IS IMPORTANT!
In working with the company helping me build business credit for my LLC, what is taking the most time is simply completing the establishment of the LLC as a recognizable entity: getting the Employer Identification Number, the EIN.
Your personal Social Security Number is your personal key to getting everything from a job to a bank account or a credit card.
Likewise, your entity's EIN is the key to getting everything from a bank account or a business credit card to vendor credit or cash credit, as well as registering your entity in your home state, applying for a business license if required where you live, and so on. You really need the EIN to get everything moving.
If you read the earlier post, The First Thing, you know that the approach I'm taking is to set up a business entity - an LLC - and build business credit for that entirely separate from my personal credit. The reason why is outlined in the earlier post.
The first two most important steps in your entity set up process are:
1. Establish Your Chosen Entity
2. Get an EIN for the Entity
Let's look at this more closely.
Establish Your Chosen Entity
There are free and low-cost sites where you can establish your entity.
LegalZoom.com is one such website. Select the "LLC (Limited Liability Co.)" link under "Business Formations" on the left-hand side of their home page.
The Company Corporation is another website. Follow their navigation hints on their home page.
Both LegalZoom.com and The Company Corporation are low-cost options. Note that I am not affiliated with either one and make no repesentations regarding them. Other sites exist also but were not included in my research preparing this post.
You will need to be aware of certain things which MUST be done to make sure that your entity is 100% compliant with the criteria used by the grantors of credit.
For example, your entity must have a REAL street address, not a Post Office Box or a mail drop box at a place like the UPS Store or similar. Further, the street address for your entity may not have multiple entities associated with it. The credit grantors will be checking to see that your entity looks like a credible business. So, it needs to have a real street address of its own.
Also, get with your tax and/or legal professional to discuss any advantages of an out-of-state entity. Certain states have laws which are especially friendly to business, most notably Delaware for public entities and Nevada for private entities. Your professional consultants can explain the advantages.
Be aware, however, that if, for example, you live in Illinois and organize an LLC in Nevada, you will need what's known as a "registered" agent in Nevada in order to have the required local presence in that state. You will, then, need to register your entity in your own home state. Again, your professional consultant can help fill in the blanks. Remember that I am not an accountant or an attorney and cannot give advice or counsel on such matters, I can only tell you what I know which may or may not be applicable to your specific situation. In the end, you and you alone are responsible for your own entity. The registered agent represents an additional expense, but is required.
Get an EIN for the Entity
This can be done directly on the IRS website. Select the link which says, "Apply for an Employer Identification Number (EIN) Online".
In my case, I went with the company helping me build business credit for my LLC. In the packet of papers they sent me for my LLC was the IRS Form SS-4 for applying for an EIN.
As of this writing, it's been about six weeks since I began this process. I submitted my SS-4 to my coach a little over two weeks ago. I'm waiting to get notification back from them that the SS-4 was filed and the IRS responded with an EIN for my LLC.
The EIN Is The Key!
As I was looking to begin setting up bank and store credit accounts for my LLC, I quickly discovered that without the EIN I was going no where. Having submitted my SS-4 to my coach, I am now waiting for their response containing the EIN so I can start taking the next steps.
Since I'm waiting for the EIN, I'm holding off on store credit and so holding off on certain purchases such as office equipment and supplies. I'll be using those purchases during the time when I'm building credit history for my LLC. Then, I can look at completing the steps toward getting ready to apply for larger lines of cash credit.
The process continues ...
We'll talk again soon!
Take care - be well!
Much Success!
Friday, May 28, 2010
Self Made People
Hello! David J here again bringing you more of the steps on my journey toward financial independence.
While doing a search on Yahoo! recently, one of the articles on the front page was about "Self-Made" millionaires.
Now, you may have noticed that so far in this blog, I've avoided using such words as "wealth", "riches", "millionaire", and so on. I'm not into hype at all since those words don't move me the way most marketing people wish they would. So, I avoid using such words here since I prefer to take a more practical approach to motivation. I know those words do move some people to take action. They just don't do much for me.
...but, I digress.
I was thinking about the phrase, "self made".
I wonder just how true that is: "self" made?
In previous posts, we've discussed building our team, every one from attorneys, accountants, and real estate agents, to title companies, banks and other lenders, inspectors, and so on.
So, if we find success dealing with real property, can we truthfully say we are "self made"?
It is perhaps more accurate to think about the old saying, "It's not what you know, it's WHO you know", though perhaps not in the sense of important, influential and/or affluent people.
In this case, it is perhaps more accurate to consider that the greatest contributors to our success will be the team we build around ourselves.
In our business endeavors, we need certain services that we are ourselves are not qualified to perform. This includes many services or functions which require special knowledge, certification or licensing.
To facilitate our own success, we need to meet and connect with the best professional people we can find.
Sometimes, that takes an effort not unlike interviewing prospective employees. Just as an employer looks for the most experienced and knowledgeable people, so we must "employ" the best professional and clerical people we can find to help us in our business pursuits.
In an earlier post about Delegating, we spoke about the importance of having people around us to "multiply" ourselves, people who can do what needs to be done while we personally attend to more productive business pursuits. In that way, we leverage their time rather than taking our own to get things done.
The quality of the team, in addition to our own ability to provide leadership and guidance to the team will be the most powerful determinant of the success we achieve.
So, in that sense, at least, we are "self made" as a team leader. We might enlist the services of a coach or a counselor to help us build and improve our leadership abilities. Yet even in that, we are still adding members to our team.
Our success is dependent upon us to make the key decisions that keep our team productive and profitable. The members of our team are the tools we use to build our success.
We are the key that unlocks our success.
We'll talk again soon!
Take care - be well!
Much Success!
While doing a search on Yahoo! recently, one of the articles on the front page was about "Self-Made" millionaires.
Now, you may have noticed that so far in this blog, I've avoided using such words as "wealth", "riches", "millionaire", and so on. I'm not into hype at all since those words don't move me the way most marketing people wish they would. So, I avoid using such words here since I prefer to take a more practical approach to motivation. I know those words do move some people to take action. They just don't do much for me.
...but, I digress.
I was thinking about the phrase, "self made".
I wonder just how true that is: "self" made?
In previous posts, we've discussed building our team, every one from attorneys, accountants, and real estate agents, to title companies, banks and other lenders, inspectors, and so on.
So, if we find success dealing with real property, can we truthfully say we are "self made"?
It is perhaps more accurate to think about the old saying, "It's not what you know, it's WHO you know", though perhaps not in the sense of important, influential and/or affluent people.
In this case, it is perhaps more accurate to consider that the greatest contributors to our success will be the team we build around ourselves.
In our business endeavors, we need certain services that we are ourselves are not qualified to perform. This includes many services or functions which require special knowledge, certification or licensing.
To facilitate our own success, we need to meet and connect with the best professional people we can find.
Sometimes, that takes an effort not unlike interviewing prospective employees. Just as an employer looks for the most experienced and knowledgeable people, so we must "employ" the best professional and clerical people we can find to help us in our business pursuits.
In an earlier post about Delegating, we spoke about the importance of having people around us to "multiply" ourselves, people who can do what needs to be done while we personally attend to more productive business pursuits. In that way, we leverage their time rather than taking our own to get things done.
The quality of the team, in addition to our own ability to provide leadership and guidance to the team will be the most powerful determinant of the success we achieve.
So, in that sense, at least, we are "self made" as a team leader. We might enlist the services of a coach or a counselor to help us build and improve our leadership abilities. Yet even in that, we are still adding members to our team.
Our success is dependent upon us to make the key decisions that keep our team productive and profitable. The members of our team are the tools we use to build our success.
We are the key that unlocks our success.
We'll talk again soon!
Take care - be well!
Much Success!
Tuesday, May 25, 2010
Crooked Furrows Vs. A Field Unplowed
Hello! David J here again bringing you more of the steps on my journey toward financial independence.
If you've been following this blog from the early posts, you've probably noticed that I'm getting a little better at it. The early posts ramble a bit and the focus often changes from the title subject to something related and back again, sometimes more than once in the same post.
That's really just a manifestation of one of my personal challenges. I'm a bit ADD, and as I'm writing, my focus tends to drift off onto tangents. Sometimes, I end writing multiple posts in one day, but actually publish very few of them.
One of my adopted mentors, Robert G. Allen, once said this about perfectionism and waiting until everything is just right: "I'd rather see a crooked furrow than a field unplowed".
That's from Robert Allen's "Wealth Training" cassettes, circa. the late 1980s, early 1990s.
Crooked furrows are a specialty with me. I think that drove my ex-wife nuts because I'm not hesitant to try something and have it not work. That's rather a good bit outside her paradigm.
As I'm going through this financial independence experience, I'm finding that I often end up proceeding on actions even though I would like to be better prepared to take those actions. Rather than feeling the confidence of preparedness, I end up falling back on the confidence of my own ability to pull things together, even if the actions taken earlier perhaps weren't done the best way to facilitate success later on.
In my former career - Information Technology - I was often called upon to find creative solutions to difficult situations, sometimes because earlier actions were taken that either could have been done better or perhaps should not have been taken at all.
In my pursuit of financial independence, there are indeed many decision points, and they arise every day, in every set of actions that need to be taken. As I'm going through this, I find myself going less on experience, being new at this, and more on gut feel and what seems to be logical to me.
So, to continue the titular metaphor, I end up cutting many crooked furrows in the effort to plow this field.
Yes, I'd like very much to be better prepared. Still, forward progress brings the new experiences from which I learn.
So, just as the quality of my blog posts improves as I gain experience writing, so the quality of my decision making improves as I gain experience making these decisions.
My dear readers, give yourself permission to learn, permission to make mistakes, and permission to learn from those mistakes and do better as you go along.
The way some of us were raised, that is perhaps a bit challenging. I understand - I live with that, also. Seek advice from some one you trust to help you get through the challenges of the past and break out forward, into your future - a better, brighter future with fewer worries about finances and income.
Let's do it together!
We'll talk again soon!
Take care - be well!
Much Success!
If you've been following this blog from the early posts, you've probably noticed that I'm getting a little better at it. The early posts ramble a bit and the focus often changes from the title subject to something related and back again, sometimes more than once in the same post.
That's really just a manifestation of one of my personal challenges. I'm a bit ADD, and as I'm writing, my focus tends to drift off onto tangents. Sometimes, I end writing multiple posts in one day, but actually publish very few of them.
One of my adopted mentors, Robert G. Allen, once said this about perfectionism and waiting until everything is just right: "I'd rather see a crooked furrow than a field unplowed".
That's from Robert Allen's "Wealth Training" cassettes, circa. the late 1980s, early 1990s.
Crooked furrows are a specialty with me. I think that drove my ex-wife nuts because I'm not hesitant to try something and have it not work. That's rather a good bit outside her paradigm.
As I'm going through this financial independence experience, I'm finding that I often end up proceeding on actions even though I would like to be better prepared to take those actions. Rather than feeling the confidence of preparedness, I end up falling back on the confidence of my own ability to pull things together, even if the actions taken earlier perhaps weren't done the best way to facilitate success later on.
In my former career - Information Technology - I was often called upon to find creative solutions to difficult situations, sometimes because earlier actions were taken that either could have been done better or perhaps should not have been taken at all.
In my pursuit of financial independence, there are indeed many decision points, and they arise every day, in every set of actions that need to be taken. As I'm going through this, I find myself going less on experience, being new at this, and more on gut feel and what seems to be logical to me.
So, to continue the titular metaphor, I end up cutting many crooked furrows in the effort to plow this field.
Yes, I'd like very much to be better prepared. Still, forward progress brings the new experiences from which I learn.
So, just as the quality of my blog posts improves as I gain experience writing, so the quality of my decision making improves as I gain experience making these decisions.
My dear readers, give yourself permission to learn, permission to make mistakes, and permission to learn from those mistakes and do better as you go along.
The way some of us were raised, that is perhaps a bit challenging. I understand - I live with that, also. Seek advice from some one you trust to help you get through the challenges of the past and break out forward, into your future - a better, brighter future with fewer worries about finances and income.
Let's do it together!
We'll talk again soon!
Take care - be well!
Much Success!
Saturday, May 22, 2010
A Point of Decision
Hello! David J here again bringing you more of the steps on my journey toward financial independence.
Now that we've discussed some of the first building blocks to put in place in your business, we've probably already passed the point where we need to decide what our business will do, what business we'll actually be in - specifically.
Still, it's worth another look just to make sure we've set the right direction and chosen a good path.
I'll still stay within the concept of using real property to build income and net worth. So, let's see what kinds of choices we may have within that domain.
One choice might be to generate cash by doing deals. This might be wholesaling, short saling or just about any "flip" strategy. One approach to that choice might be to do a few wholesale or short sale flips to build up some cash, then take on a rehab or two while still doing flips.
That specific strategy is for generating cash and, since we don't necessarily hang on to the properties long enough to incur any major liability, we don't necessarily need to establish a business structure or entity. Flipping as a sole proprietor may be sufficient.
Again, let me interject here that I am -NOT- an attorney, accountant, etc. and do not offer any legal, financial or investment advice. I merely offer suggestions of topics to discuss with your professional people. It is up to -YOU- to select and develop your own strategies.
That said, let us continue...
Generating cash requires constant activity. You do a deal, you generate cash. Lather, rinse, repeat, ... but when you stop doing deals your cash stops coming in.
Generating cash FLOW is another matter and rather a different strategy. Instead of flipping properties, you're actually taking physical possession of them and holding them for the cash flow they generate.
As a wholesaler or short saler, you're flipping properties and deals and not actually taking physical possession of the subject property before you pass it - or the contract on it - on to the next buyer. You can probably do very well using only transactional funding and needing little to no cash or credit of your own.
As a holder of property your financial needs change a good bit. Instead of transactional funding, you may need equity or joint venture partners to provide the funding you may not be able to come up with to acquire and hold the property. Thus, you may be sharing the monthly cash income with your co-investors and partners.
Some of the webinars currently going around talk about "commercial" multi-family properties, meaning multi-unit properties of 6 units or more. One point made there is that many of those deals can be done with owner carry-back; that is, the current owner carries a note on the property in lieu of a cash down payment. So, as the buyer, you - or your business entity - may only need to come up with enough cash to cover closing costs, inspections, fees, and other miscellaneous charges involved in the actual closing. So, it's possible to acquire cash flow without shelling out big money up front.
When holding properties for cash flow, new questions of liability arise - questions that do not come up in the course of flips.
Here again, I'll caution that what follows here are suggestions. I do not and can not give legal, financial, or other advice myself as I am not a licensed professional in those areas.
To limit your liabilities, discuss with your legal and other professionals possible strategies to protect your properties from claims against each other. You want to devise a strategy such that one property being the subject of a claim of liability does not negatively impact the others you may control, directly or indirectly.
Since that strategy typically includes one or more business entities, it makes sense to use the credit building strategy for each one of them, as discussed in the previous post, "The First Thing".
To summarize the decision points, then, these are the choices:
Sole Proprietor
The sole proprietor is essentially you "doing business as" yourself or another name. You bear all the liabilities, the business's credit is your personal credit, and the business's finances are your personal finances. Sole proprietor may be good for a business which, for example, generates cash as we discussed earlier. No assets are held for any appreciable time; thus, only a little liability is typically encountered.
Business Entity - LLC, Corporation, etc.
The business entity is essentially a virtual legal "person", separate from its owner. The company's liabilities can be separated from the owner. The company's finances and credit stand alone, and do not reflect the credit or finances of the owner, nor do they effect the credit or finances of the owner. Thus, someone with terrible credit can set up an entity and establish very good credit for it while still rebuilding their own credit at a different pace.
The choice we make depends on the goals and function of our business.
We'll talk again soon!
Take care - be well!
Much Success!
Now that we've discussed some of the first building blocks to put in place in your business, we've probably already passed the point where we need to decide what our business will do, what business we'll actually be in - specifically.
Still, it's worth another look just to make sure we've set the right direction and chosen a good path.
I'll still stay within the concept of using real property to build income and net worth. So, let's see what kinds of choices we may have within that domain.
One choice might be to generate cash by doing deals. This might be wholesaling, short saling or just about any "flip" strategy. One approach to that choice might be to do a few wholesale or short sale flips to build up some cash, then take on a rehab or two while still doing flips.
That specific strategy is for generating cash and, since we don't necessarily hang on to the properties long enough to incur any major liability, we don't necessarily need to establish a business structure or entity. Flipping as a sole proprietor may be sufficient.
Again, let me interject here that I am -NOT- an attorney, accountant, etc. and do not offer any legal, financial or investment advice. I merely offer suggestions of topics to discuss with your professional people. It is up to -YOU- to select and develop your own strategies.
That said, let us continue...
Generating cash requires constant activity. You do a deal, you generate cash. Lather, rinse, repeat, ... but when you stop doing deals your cash stops coming in.
Generating cash FLOW is another matter and rather a different strategy. Instead of flipping properties, you're actually taking physical possession of them and holding them for the cash flow they generate.
As a wholesaler or short saler, you're flipping properties and deals and not actually taking physical possession of the subject property before you pass it - or the contract on it - on to the next buyer. You can probably do very well using only transactional funding and needing little to no cash or credit of your own.
As a holder of property your financial needs change a good bit. Instead of transactional funding, you may need equity or joint venture partners to provide the funding you may not be able to come up with to acquire and hold the property. Thus, you may be sharing the monthly cash income with your co-investors and partners.
Some of the webinars currently going around talk about "commercial" multi-family properties, meaning multi-unit properties of 6 units or more. One point made there is that many of those deals can be done with owner carry-back; that is, the current owner carries a note on the property in lieu of a cash down payment. So, as the buyer, you - or your business entity - may only need to come up with enough cash to cover closing costs, inspections, fees, and other miscellaneous charges involved in the actual closing. So, it's possible to acquire cash flow without shelling out big money up front.
When holding properties for cash flow, new questions of liability arise - questions that do not come up in the course of flips.
Here again, I'll caution that what follows here are suggestions. I do not and can not give legal, financial, or other advice myself as I am not a licensed professional in those areas.
To limit your liabilities, discuss with your legal and other professionals possible strategies to protect your properties from claims against each other. You want to devise a strategy such that one property being the subject of a claim of liability does not negatively impact the others you may control, directly or indirectly.
Since that strategy typically includes one or more business entities, it makes sense to use the credit building strategy for each one of them, as discussed in the previous post, "The First Thing".
To summarize the decision points, then, these are the choices:
Sole Proprietor
The sole proprietor is essentially you "doing business as" yourself or another name. You bear all the liabilities, the business's credit is your personal credit, and the business's finances are your personal finances. Sole proprietor may be good for a business which, for example, generates cash as we discussed earlier. No assets are held for any appreciable time; thus, only a little liability is typically encountered.
Business Entity - LLC, Corporation, etc.
The business entity is essentially a virtual legal "person", separate from its owner. The company's liabilities can be separated from the owner. The company's finances and credit stand alone, and do not reflect the credit or finances of the owner, nor do they effect the credit or finances of the owner. Thus, someone with terrible credit can set up an entity and establish very good credit for it while still rebuilding their own credit at a different pace.
The choice we make depends on the goals and function of our business.
We'll talk again soon!
Take care - be well!
Much Success!
Tuesday, May 18, 2010
The First Thing
Hello! David J here again bringing you more of the steps on my journey toward financial independence.
First off, apologies for the extended absence. "Life happens", and lately there's been a lot happening, including the background work and research which made this post possible.
Since you're reading this post, I'm assuming you've read the previous post, "Before The First Thing". If you haven't read it yet, read that one first, then come back to this one.
O.K. You've set up your business entity structure. My recommendation is to have a structure of multiple entities as Darius Barazandeh recommends.
If you used my recomendations from the previous post on how to raise money to build your business entity structure, then you already have some experience in the business, and probably have some cash left from that experience. Getting your business entity structure established doesn't take a lot of cash, but for some of us, even the little it takes is more than we have that we can spend on anything other than food, shelter and other basics.
If you are fortunate to still be "above water", then you may be thinking that the next step is to start doing deals and start raising some cash.
Well, that would be one way to proceed, and if your needs dictate, then go ahead on to the next post in the blog (which as of the moment, I haven't written yet) and start doing your deals. Then, come back here and continue reading.
On the other hand, if you can afford to take some more time to prepare and continue building your foundation, there is still another series of steps to take to bring your businesses "to life": infuse them with some cash.
Statistically, 95% of new businesses fail in the first five years, and in some 80% of cases, this is due to lack of capital or funding. You can beat those odds by taking the time up front to allow the business to capitalize itself rather than using your personal assets and credit lines. We've all heard stories about folks who, not knowing that these strategies exist, maxed out their credit cards and mortgaged their homes up to hilt and beyond to get start up money for a business rather than allow the business to capitalize itself.
Now as I see it, there are at least two ways to do that:
1. Line up some cash investors
2. Acquire business credit.
WHAT??!! Business Credit??!! What'ya talkin' there DJ?
Well, stated plainly, I'm talking about your businesses lining up credit for themselves. Rather than use your personal savings or credit to provide the startup capital for your business entities, each one acquires its own lines of business credit.
When you established your business entities, each one was given a tax identification number, better known as an "EIN" or "Employer Identification Number". This number identifies the entity just as your own social security number identifies you. However, your business and its EIN are entirely separate from you and your social security number. So, any credit the business establishes is not reflected in your personal credit history. Of course, the reverse is also true: each business entity's credit history is entirely separate and your personal credit history does not reflect on that of your business.
That means each business entity must establish its own credit and its own credit history.
So, how do we establish credit for a business entity?
This comes in several phases.
In the first phase, we establish each entity with the business "credit bureaus".
In the world of personal credit, there are three major credit reporting agencies:
- Trans Union
- Experian
- Equifax
In the world of business credit, there are these major credit reporting agencies:
- Dun and Bradstreet
- Equifax Commercial
- Experian Business
For a business entity, you want to establish each entity with Dun and Bradstreet as well as Equifax Commercial and Experian Business.
When you register your business with Dun and Bradstreet, it gets a "DUNS" number which is the identification number used by Dun and Bradstreet to track your business's credit history. D and B then gives your business a "Paydex" score based on how well your business manages its credit history. Paydex scores range from 1 to 100, with 80 or better being considered good. The score is based on reports from a minimum of five reporting sources over the course of four consecutive months.
When you register your business with Equifax, it gets an Equifax identification number. Equifax then gives your business an "Intelliscore" credit score based on how well your business manages its credit history. Likewise, Intelliscore scores range from 1 to 100, with 80 or better being considered good. The score is based on reports from a minimum of two reporting sources over the course of four consecutive months.
In the second phase, we leverage the credit history of each business entity and begin to acquire lines of credit for each business entity.
Once your business is registered, the next step is to go out and start building some business credit in a small way. For example, establish a store account with some business supply companies. You'll see terms like "Net 30", which means the net amount owed is due within 30 days. Then use that credit to acquire the business basics, such as telephones, calculators, desks, chairs, cases of printer paper, ... whatever your business needs, without getting silly or frivolous. Remember: you're still using your own money! In-store services may be useful as well, such as having letterhead or business cards printed, getting promotional items such as pens with your company name and logo on them which you can use as "leave behinds" when meeting personally with buyers, sellers, real estate agents and the like.
Be sensible, and don't go overboard.
Once your businesses have begun to use those small store credit accounts, and have built up a bit of history - even before the full four months have elapsed - then you'll be in a position to begin approaching lenders.
Here's where we discover another reason to have multiple business entities in our structure.
See, each business can acquire its own lines of business credit. As an individual, we usually only have one Social Security Number. So, we only have one credit history. Likewise, each business has its own single credit history. However, each of us can have any number of businesses. The best part is that by keeping our personal and business credit separate, our businesses can have excellent credit, even if we don't.
Now, at the time I am writing his, I do not have access to a list of lenders who are receptive to businesses with little or no history. So, the remainder of this will be entirely based on what I have learned from others.
When your business applies for its lines of credit, you may be wondering about the income of your business. If you've been doing deals while establishing a credit history for your business, then you already have some performance history upon which to base your projections for the future. On the other hand, if you haven't closed any deals by the time you go out and apply for business credit, you can base your income projections on the expected income from deals which have not yet closed, or possibly even on your projections for what you feel is reasonably expectable for your business to be able to do for the periods being requested by the lenders. In either case, this may be referred to as either "stated" or "projected" income.
Now - all that said, there -IS- an easier way to do all of this if you can come up with some cash or credit to pay for business credit services.
Servicers exist who can help your company(-ies) establish their lines of credit.
On such servicer is Nevada Corporate Headquarters, Inc.. As their name implies, they provide services for establishing coporations and LLCs in the State of Nevada. Nevada has laws regarding LLCs and corporations which make it a very advantageous state in which to form your business entity. Again, I cannot provide any form of legal advice, so take this as my personal opinion and treat it accordingly - your mileage may differ, perhaps greatly. Discuss this with your legal and accounting professionals and work with them to develop your business credit strategy.
...or, if you want help with everything along the way, enlist such services by way of one of their affiliates, such as Tom Kish and his CashFlowExperts organization. Apologies for not having a link to his site. Google him, or view one of his weekly web "broadcasts" at Tom's TV Show. He usually does it live on Saturday mornings at 12:00 noon Eastern, 11:00am Central, 10:00am Mountain or 9:00am Pacific. Tom is based in Nevada (Las Vegas); so, he's on Mountain time.
Try as I might, I could not find a way to do all this with "no cash, no credit". The services mentioned here do have costs associated with them. There's just no getting around that. Apologies.
If you've been doing flips to raise cash, do one or two more to come up with the cash you'll need to acquire these business credit services. That may take some patience while the deal flips happen, but it will be well worth the wait in the long run.
The good news is this: for less than $5,000 you may be able to obtain access to cash lines of business credit which will allow you to grab that super-steal-of-a-deal income property without using your own credit or getting a mortgage loan in your own name. Build credit for a business entity, then use the entity's credit to buy the property in the entity's name. Then, the cash flow can go toward the debt service -AND- your "salary" (again, talk to your legal and accounting professionals about business entities and their cash flow).
Worth thinking about, eh?
We'll talk again soon!
Take care - be well!
Much Success!
First off, apologies for the extended absence. "Life happens", and lately there's been a lot happening, including the background work and research which made this post possible.
Since you're reading this post, I'm assuming you've read the previous post, "Before The First Thing". If you haven't read it yet, read that one first, then come back to this one.
O.K. You've set up your business entity structure. My recommendation is to have a structure of multiple entities as Darius Barazandeh recommends.
If you used my recomendations from the previous post on how to raise money to build your business entity structure, then you already have some experience in the business, and probably have some cash left from that experience. Getting your business entity structure established doesn't take a lot of cash, but for some of us, even the little it takes is more than we have that we can spend on anything other than food, shelter and other basics.
If you are fortunate to still be "above water", then you may be thinking that the next step is to start doing deals and start raising some cash.
Well, that would be one way to proceed, and if your needs dictate, then go ahead on to the next post in the blog (which as of the moment, I haven't written yet) and start doing your deals. Then, come back here and continue reading.
On the other hand, if you can afford to take some more time to prepare and continue building your foundation, there is still another series of steps to take to bring your businesses "to life": infuse them with some cash.
Statistically, 95% of new businesses fail in the first five years, and in some 80% of cases, this is due to lack of capital or funding. You can beat those odds by taking the time up front to allow the business to capitalize itself rather than using your personal assets and credit lines. We've all heard stories about folks who, not knowing that these strategies exist, maxed out their credit cards and mortgaged their homes up to hilt and beyond to get start up money for a business rather than allow the business to capitalize itself.
Now as I see it, there are at least two ways to do that:
1. Line up some cash investors
2. Acquire business credit.
WHAT??!! Business Credit??!! What'ya talkin' there DJ?
Well, stated plainly, I'm talking about your businesses lining up credit for themselves. Rather than use your personal savings or credit to provide the startup capital for your business entities, each one acquires its own lines of business credit.
When you established your business entities, each one was given a tax identification number, better known as an "EIN" or "Employer Identification Number". This number identifies the entity just as your own social security number identifies you. However, your business and its EIN are entirely separate from you and your social security number. So, any credit the business establishes is not reflected in your personal credit history. Of course, the reverse is also true: each business entity's credit history is entirely separate and your personal credit history does not reflect on that of your business.
That means each business entity must establish its own credit and its own credit history.
So, how do we establish credit for a business entity?
This comes in several phases.
In the first phase, we establish each entity with the business "credit bureaus".
In the world of personal credit, there are three major credit reporting agencies:
- Trans Union
- Experian
- Equifax
In the world of business credit, there are these major credit reporting agencies:
- Dun and Bradstreet
- Equifax Commercial
- Experian Business
For a business entity, you want to establish each entity with Dun and Bradstreet as well as Equifax Commercial and Experian Business.
When you register your business with Dun and Bradstreet, it gets a "DUNS" number which is the identification number used by Dun and Bradstreet to track your business's credit history. D and B then gives your business a "Paydex" score based on how well your business manages its credit history. Paydex scores range from 1 to 100, with 80 or better being considered good. The score is based on reports from a minimum of five reporting sources over the course of four consecutive months.
When you register your business with Equifax, it gets an Equifax identification number. Equifax then gives your business an "Intelliscore" credit score based on how well your business manages its credit history. Likewise, Intelliscore scores range from 1 to 100, with 80 or better being considered good. The score is based on reports from a minimum of two reporting sources over the course of four consecutive months.
In the second phase, we leverage the credit history of each business entity and begin to acquire lines of credit for each business entity.
Once your business is registered, the next step is to go out and start building some business credit in a small way. For example, establish a store account with some business supply companies. You'll see terms like "Net 30", which means the net amount owed is due within 30 days. Then use that credit to acquire the business basics, such as telephones, calculators, desks, chairs, cases of printer paper, ... whatever your business needs, without getting silly or frivolous. Remember: you're still using your own money! In-store services may be useful as well, such as having letterhead or business cards printed, getting promotional items such as pens with your company name and logo on them which you can use as "leave behinds" when meeting personally with buyers, sellers, real estate agents and the like.
Be sensible, and don't go overboard.
Once your businesses have begun to use those small store credit accounts, and have built up a bit of history - even before the full four months have elapsed - then you'll be in a position to begin approaching lenders.
Here's where we discover another reason to have multiple business entities in our structure.
See, each business can acquire its own lines of business credit. As an individual, we usually only have one Social Security Number. So, we only have one credit history. Likewise, each business has its own single credit history. However, each of us can have any number of businesses. The best part is that by keeping our personal and business credit separate, our businesses can have excellent credit, even if we don't.
Now, at the time I am writing his, I do not have access to a list of lenders who are receptive to businesses with little or no history. So, the remainder of this will be entirely based on what I have learned from others.
When your business applies for its lines of credit, you may be wondering about the income of your business. If you've been doing deals while establishing a credit history for your business, then you already have some performance history upon which to base your projections for the future. On the other hand, if you haven't closed any deals by the time you go out and apply for business credit, you can base your income projections on the expected income from deals which have not yet closed, or possibly even on your projections for what you feel is reasonably expectable for your business to be able to do for the periods being requested by the lenders. In either case, this may be referred to as either "stated" or "projected" income.
Now - all that said, there -IS- an easier way to do all of this if you can come up with some cash or credit to pay for business credit services.
Servicers exist who can help your company(-ies) establish their lines of credit.
On such servicer is Nevada Corporate Headquarters, Inc.. As their name implies, they provide services for establishing coporations and LLCs in the State of Nevada. Nevada has laws regarding LLCs and corporations which make it a very advantageous state in which to form your business entity. Again, I cannot provide any form of legal advice, so take this as my personal opinion and treat it accordingly - your mileage may differ, perhaps greatly. Discuss this with your legal and accounting professionals and work with them to develop your business credit strategy.
...or, if you want help with everything along the way, enlist such services by way of one of their affiliates, such as Tom Kish and his CashFlowExperts organization. Apologies for not having a link to his site. Google him, or view one of his weekly web "broadcasts" at Tom's TV Show. He usually does it live on Saturday mornings at 12:00 noon Eastern, 11:00am Central, 10:00am Mountain or 9:00am Pacific. Tom is based in Nevada (Las Vegas); so, he's on Mountain time.
Try as I might, I could not find a way to do all this with "no cash, no credit". The services mentioned here do have costs associated with them. There's just no getting around that. Apologies.
If you've been doing flips to raise cash, do one or two more to come up with the cash you'll need to acquire these business credit services. That may take some patience while the deal flips happen, but it will be well worth the wait in the long run.
The good news is this: for less than $5,000 you may be able to obtain access to cash lines of business credit which will allow you to grab that super-steal-of-a-deal income property without using your own credit or getting a mortgage loan in your own name. Build credit for a business entity, then use the entity's credit to buy the property in the entity's name. Then, the cash flow can go toward the debt service -AND- your "salary" (again, talk to your legal and accounting professionals about business entities and their cash flow).
Worth thinking about, eh?
We'll talk again soon!
Take care - be well!
Much Success!
Monday, March 29, 2010
Delegating
Hello! David J here again bringing you more of the steps on my journey toward financial independence.
An interesting e-mail came my way today. The writer says that when Thomas Edison discovered the way to record a human voice, it is said that he called in a model maker and had the man sketch the machine for Edison's idea.
In recent posts, I've mentioned that I've been reading "The Four Hour Work Week" by Timothy Ferris. One of the key principles Timothy talks about in the book has to do with team building and delegation. That is, build the team and coach them. One person can only do so much, yet when you "multiply yourself" by teaching key skills to others you multiply the amount of work that can be done in the same time frame.
Here, we see that Edison called in someone to do some work for him. Edison would have had to take his own time to do the engineering and produce the drawings. Instead, he hired it out and was able to work on his own tasks while the model maker handled the task of designing the device.
It is also written of Henry Ford that with the touch of a button he could summon someone to his office who could perform research on a concept, run an errand, propose solutions to engineering problems, ... whatever Ford needed.
History shows time and again that great leaders were great delegators, great team leaders, great coaches who could assemble the individuals or teams they needed to accomplish tasks of any size or complexity. Their celebrated accomplishments were the result of their leadership more than their own physical efforts.
In their beginnings, of course, these same leaders did do most of their own work. This taught them how to do the work, and break the work down into tasks that could be distributed among the members of their teams. As time went by, they moved from a physical role to an executive role - a leadership role.
Of course, teams are no more or less successful than any individual. Teams are what some authors call a "mastermind": the product of the members' collective minds and personalities.
Sometimes, teams "get it wrong" and it falls to the leader to redirect them and have them start again.
That is a trying time for many first-time leaders because the temptation to "take over" and "do it yourself" is strongest when a team has erred. There's a word for that temptation: co-dependence. That is the time when the leader must summon their greatest inner strength, provide direction to the team, and have them start again.
The goal in any endeavor is the desired result. The effort is journey, not the goal. So, when an effort misses the mark or goes astray we must back-track as needed, re-examine what everyone brings to the team and then channel those contributions into a new effort. The leader must, when needed, help the team explore new options they have perhaps not considered, or may have considered and not pursued. In the end, however, it is team which must be led to success in achieving any desired result, rather than the leader pushing the team aside.
As we are building our business in this blog, I am learning and passing my learning on to you, my good readers.
In next post, the promised "The First Thing" post, we'll talk more about how we leverage ourselves, build our team and start moving tasks through this "machine" we are building.
In "Before the First Thing", we already talked about the first team members we bring on board: Business Attorneys and Accountants to help us decide how to structure our business entity so it stands by itself and does not expose our home, our savings and our personal property to unnecessary risk. We could take the time to study the law and accounting in great depth, or we can do our due dilligence to verify that what we discuss with our legal and accounting professionals truly is the best decision for us.
In the next post, "The First Thing", we'll discuss the other members of our team: real estate agents, title companies, sources of funding, and more.
In some of the other correspondence which has been coming my way, the writers have discussed how the Government put so much focus on "The American Dream of Homeownership" that the greedy people developed the schemes and financial "products" which contributed heavily to the downfall of the U.S. economy. Everyone got so caught up in the euphoria of quickly rising prices and housing values that they lost track of what was backing those values and supporting those prices. When the support got kicked out from under them, both prices and values fell leaving economic chaos in their wake.
Cleaning up after that falls to us, the real estate investors, to clean up after them and turn their mess into the "fertilizer" which returns neighborhoods, villages and cities to vital, growing communities.
That's part of what this journey is all about, in addition to the pursuit of financial independence.
We'll talk again soon!
Take care - be well!
Much Success!
An interesting e-mail came my way today. The writer says that when Thomas Edison discovered the way to record a human voice, it is said that he called in a model maker and had the man sketch the machine for Edison's idea.
In recent posts, I've mentioned that I've been reading "The Four Hour Work Week" by Timothy Ferris. One of the key principles Timothy talks about in the book has to do with team building and delegation. That is, build the team and coach them. One person can only do so much, yet when you "multiply yourself" by teaching key skills to others you multiply the amount of work that can be done in the same time frame.
Here, we see that Edison called in someone to do some work for him. Edison would have had to take his own time to do the engineering and produce the drawings. Instead, he hired it out and was able to work on his own tasks while the model maker handled the task of designing the device.
It is also written of Henry Ford that with the touch of a button he could summon someone to his office who could perform research on a concept, run an errand, propose solutions to engineering problems, ... whatever Ford needed.
History shows time and again that great leaders were great delegators, great team leaders, great coaches who could assemble the individuals or teams they needed to accomplish tasks of any size or complexity. Their celebrated accomplishments were the result of their leadership more than their own physical efforts.
In their beginnings, of course, these same leaders did do most of their own work. This taught them how to do the work, and break the work down into tasks that could be distributed among the members of their teams. As time went by, they moved from a physical role to an executive role - a leadership role.
Of course, teams are no more or less successful than any individual. Teams are what some authors call a "mastermind": the product of the members' collective minds and personalities.
Sometimes, teams "get it wrong" and it falls to the leader to redirect them and have them start again.
That is a trying time for many first-time leaders because the temptation to "take over" and "do it yourself" is strongest when a team has erred. There's a word for that temptation: co-dependence. That is the time when the leader must summon their greatest inner strength, provide direction to the team, and have them start again.
The goal in any endeavor is the desired result. The effort is journey, not the goal. So, when an effort misses the mark or goes astray we must back-track as needed, re-examine what everyone brings to the team and then channel those contributions into a new effort. The leader must, when needed, help the team explore new options they have perhaps not considered, or may have considered and not pursued. In the end, however, it is team which must be led to success in achieving any desired result, rather than the leader pushing the team aside.
As we are building our business in this blog, I am learning and passing my learning on to you, my good readers.
In next post, the promised "The First Thing" post, we'll talk more about how we leverage ourselves, build our team and start moving tasks through this "machine" we are building.
In "Before the First Thing", we already talked about the first team members we bring on board: Business Attorneys and Accountants to help us decide how to structure our business entity so it stands by itself and does not expose our home, our savings and our personal property to unnecessary risk. We could take the time to study the law and accounting in great depth, or we can do our due dilligence to verify that what we discuss with our legal and accounting professionals truly is the best decision for us.
In the next post, "The First Thing", we'll discuss the other members of our team: real estate agents, title companies, sources of funding, and more.
In some of the other correspondence which has been coming my way, the writers have discussed how the Government put so much focus on "The American Dream of Homeownership" that the greedy people developed the schemes and financial "products" which contributed heavily to the downfall of the U.S. economy. Everyone got so caught up in the euphoria of quickly rising prices and housing values that they lost track of what was backing those values and supporting those prices. When the support got kicked out from under them, both prices and values fell leaving economic chaos in their wake.
Cleaning up after that falls to us, the real estate investors, to clean up after them and turn their mess into the "fertilizer" which returns neighborhoods, villages and cities to vital, growing communities.
That's part of what this journey is all about, in addition to the pursuit of financial independence.
We'll talk again soon!
Take care - be well!
Much Success!
Serendipity
Hello! David J here again bringing you more of the steps on my journey toward financial independence.
Found an e-mail from my coach in my Inbox today. In that message, he asks these two questions:
(quote)
What are the 5 main concerns that you have as a real estate investment beginner?
Also, what questions do you think a beginner would have?
(end quote)
... to which I responded:
(quote censored)
Wow, Man!
You sure know how to ask questions loaded with dynamite!
I'll have to work on this over the weekend, but I can start out with this:
One of the beginner's biggest fears is going to boil down to "fear of the unknown".
Now, when I say that, I'm sure the first thought which flashed through your mind was related to "fear of doing something they've never done before", "going where they've never been before", "having what they've never had before", and so on.
When I say "the unknown", however, what I mean is this: there are essentially two levels of "the unknown" to which I refer:
1. Stuff you know exists but you know that you don't know it.
This is sometimes referred to as "conscious incompetence". There is knowledge available which you know you need to acquire and which you also know you don't currently possess.
2. Stuff you don't know exists, and which is necessary for what you're doing or trying to do, and which you don't currently know.
This is sometimes referred to as "unconscious incompetence". There is knowledge available which you DON'T know exists and which you DON'T know you need to acquire, thus you also don't know whether you currently possess that knowledge or not.
Probably the most paralyzing fear is the fear that there's something out there which can hurt us a lot if we don't know it, but we don't currently know what it is and we don't know how to discover it.
(end quote)
As I've been preparing the upcoming post, "The First Thing", I've been going over everything in my head and prioritizing what should be first, after we've set up our business entities.
One of my earliest adopted mentors took a very special approach to this topic. His real estate investing seminar was entitled, "Wealth Training" rather than including anything directly indicating real estate in the title. The whole first day was dedicated to addressing the many issues we all seem to "grow up" with:
- Never enough money
- Study, get your degree, get a good job, live below your means, save for retirement
- Lather, rinse, repeat with your own children
Most of us are raised with the idea that scarcity and struggle are the way of the world. Our teachers and employers further indoctrinate us into that mindset.
No one teaches us that not only CAN we break free of those bonds, it is natural for us to do so.
Our natural drives guide us TOWARD financial independence. Many of us can remember having a lemonade stand in our youth. We still see them today as pass through our neighborhoods in the summertime.
All the while, however, our environment molds us to be dependent upon an employer or someone else for our income and livelihood. We literally have to be trained to be "employees".
As I write this on a cool Saturday morning - 41 degrees with a good breeze and sunshine muted through high clouds - I'm thinking that the first thing to address is our mindset.
We need to prepare ourselves for financial independence.
Now, be realistic here. This is not a topic that can be addressed comprehensively in a blog post, or even a many hundred page document.
We can, none the less, "draw back the curtain" and discover some of what has kept us where we are, and kept us from becoming what we want to be, doing what we want to do.
Look for that to be coming soon.
We'll talk again soon!
Take care - be well!
Much Success!
Found an e-mail from my coach in my Inbox today. In that message, he asks these two questions:
(quote)
What are the 5 main concerns that you have as a real estate investment beginner?
Also, what questions do you think a beginner would have?
(end quote)
... to which I responded:
(quote censored)
Wow, Man!
You sure know how to ask questions loaded with dynamite!
I'll have to work on this over the weekend, but I can start out with this:
One of the beginner's biggest fears is going to boil down to "fear of the unknown".
Now, when I say that, I'm sure the first thought which flashed through your mind was related to "fear of doing something they've never done before", "going where they've never been before", "having what they've never had before", and so on.
When I say "the unknown", however, what I mean is this: there are essentially two levels of "the unknown" to which I refer:
1. Stuff you know exists but you know that you don't know it.
This is sometimes referred to as "conscious incompetence". There is knowledge available which you know you need to acquire and which you also know you don't currently possess.
2. Stuff you don't know exists, and which is necessary for what you're doing or trying to do, and which you don't currently know.
This is sometimes referred to as "unconscious incompetence". There is knowledge available which you DON'T know exists and which you DON'T know you need to acquire, thus you also don't know whether you currently possess that knowledge or not.
Probably the most paralyzing fear is the fear that there's something out there which can hurt us a lot if we don't know it, but we don't currently know what it is and we don't know how to discover it.
(end quote)
As I've been preparing the upcoming post, "The First Thing", I've been going over everything in my head and prioritizing what should be first, after we've set up our business entities.
One of my earliest adopted mentors took a very special approach to this topic. His real estate investing seminar was entitled, "Wealth Training" rather than including anything directly indicating real estate in the title. The whole first day was dedicated to addressing the many issues we all seem to "grow up" with:
- Never enough money
- Study, get your degree, get a good job, live below your means, save for retirement
- Lather, rinse, repeat with your own children
Most of us are raised with the idea that scarcity and struggle are the way of the world. Our teachers and employers further indoctrinate us into that mindset.
No one teaches us that not only CAN we break free of those bonds, it is natural for us to do so.
Our natural drives guide us TOWARD financial independence. Many of us can remember having a lemonade stand in our youth. We still see them today as pass through our neighborhoods in the summertime.
All the while, however, our environment molds us to be dependent upon an employer or someone else for our income and livelihood. We literally have to be trained to be "employees".
As I write this on a cool Saturday morning - 41 degrees with a good breeze and sunshine muted through high clouds - I'm thinking that the first thing to address is our mindset.
We need to prepare ourselves for financial independence.
Now, be realistic here. This is not a topic that can be addressed comprehensively in a blog post, or even a many hundred page document.
We can, none the less, "draw back the curtain" and discover some of what has kept us where we are, and kept us from becoming what we want to be, doing what we want to do.
Look for that to be coming soon.
We'll talk again soon!
Take care - be well!
Much Success!
Tuesday, March 02, 2010
Before The First Thing
Hello! David J here again bringing you more of the steps on my journey toward financial independence.
Enough talk - it's time to start building a business.
However, I'm going to start from a different place than you might be expecting.
Most folks start building a business before they have laid a foundation. The foundation of any business is its structure as a legal entity.
Now, understand: I am -NOT- an attorney or a CPA, and this blog post is -NOT- intended to offer either legal or financial advice. Take whatever you learn here to your own legal or financial professional and get qualified advice and assistance BEFORE you take action on ANYthing. I can only suggest topics to discuss when you meet with your professional person.
Now, that said, let's consider what the REAL foundation is in any business - YOU! ... ME!
I chose the title of this post intentionally: "Before The First Thing". One of my adopted mentors, Robert Allen, posited this in his "MasterPlan" strategy: "Feared Things First".
Now, what do most of us usually say or think? Don't we say "First Things First"? How many of us are experts on analyzing a situation and determining what the most important task should be? Most of us believe we can do that effectively, and most of us are correct. However, even in making that distinction, we still apply our own "filters" to those distinctions.
The concept of Feared Things First forces us to consider which of the tasks before us we see as being the most daunting: what do we look forward to the least for whatever reason?
Now, what happens when we get that "800 pound gorilla" out of the way? Makes the rest of it seem like a walk in the park, doesn't it?
So, one bit of advice I will put forward to you, my good reader, is to dig in your heels and face that daunting task. Get it done, get clear of it and enjoy the rest of the process.
As to the actually laying the foundation for your business, you might think the first thing to do is to line up some funding, select letterhead and business cards, design your marketing plan and materials, and so on. Those are all valid early steps, of course.
In truth, the first thing to address is to structure your business so that your assets - your personal possessions and personal property, real and otherwise - are protected, and that your tax liabilities are limited within the law and what it allows.
Structuring your business involves working with your legal and accounting professionals to design a business entity structure which achieves these basic goals.
Now, again, I am not qualified to advise anyone on how to do that. So, I'm going to make some recommendations as to where to find some information to help you get started with the process of structuring your business entities.
The people I'm going to recommend here have come to my awareness by way of the many webinars and teleconferences I've been attending as mentioned in my earlier post, So Many Gurus, So Little Cash and Wealth, Youth, Dignity and Pop Culture.
The Short Sales Riches guys, Chris McGlaughlin and Nathan Jurewicz have an attorney on their team by the name of Jeff Watson. Now, Chris is himself a licensed attorney, as well. Jeff Watson is someone they have hosted in their webinars and who has worked with them in developing their strategies. If you search the web for "Jeff Watson attorney real estate" you will find a number of resources through which you can gain access to the information he has compiled and which he offers for sale.
No, I haven't forgotten No Cash, No Credit. Stay with me and read on. I do have a suggestion on how you can get started generating cash even before you have yourself properly structured and protected. In fact, lack of funds is probably the biggest reason why people go out and start generating income before they have their business structure in place.
That's very dangerous because then complacency takes over. "We've done this much without the business entities, we can go a bit further and address that later." So, we go a bit further, and a bit further and ... next thing you know, the letter from the lawyer or the IRS arrives and then its too late. Old habits die hard, y'know.
Another fellow who is highly knowledgeable on the topic of business entities is Darius Barazandeh. In fact, its a specialty with him. I've listened to a number of his presentations and he puts out a lot of information to help the listener understand the importance of properly structuring your business entities and then properly operating those businesses to protect against lawsuits.
It's no big secret, I'm sure, that in today's society people look at lawsuits as a way to easy money. Just go after the "deep pockets" for any reason they can find. If we don't protect what we have built, we can easily lose it all.
So, what about "No Cash, No Credit"?
Well, in later posts I'll provide details on how to do this. I'll just lay out the basics here.
Essentially, what I recommend is to stick your neck out - quite literally. As is said, "The bumble bee cannot fly according to aerodynamics experts. However, the bee does not know this. So, it flies, anyway." I once saw a poster in a recruiter's office which said, "Consider the tortoise who makes no progress - until he sticks his neck out."
No, I'm not promoting being irresponsible or unethical. All I'm saying is to have the courage to learn how to do this by going through the process. Take each step deliberately. Notice what knowledge you need to accomplish each step, find someone, or a book, a free webinar, etc., so you can learn what you need, then take that step and proceed to the next. Then, "lather, rinse and repeat".
The first step I'm going to recommend is not usually the first step most folks think of in the process of buying and selling properties. The step I'm going to recommend taking first is to locate buyers. One little-to-no cost way to do that is to find a real estate agent who will provide you with a list of properties which recently sold in your area. Preferably, you will want to find those sales within the last six months where the transaction was all cash. This is where you will most likely find buyers who are in a position to acquire other properties and probably do so as part of their own real estate business.
Now, the list you get from the real estate agent is not likely to contain all the information you need. You may only get a list showing the property address, some limited description of the property, and the price for which it sold. It might not give you the buyer's name, address or contact information. That's going to be the part where you put in your "sweat equity". You can take that list to the county courthouse or, if your county keeps its on-line records fairly recent, you may be able to get the information you need from the county's on-line resources or website. Once you have the buyer names, you might find some phone numbers in the public listings. Business people usually prefer to be found. Private owners usually want to be left alone.
Once you get the contact information for the buyers, do a mailing to them. You WILL have to pay for postage when using the USPS. No getting around that. Handwritten letters are best, but automation is a valid second choice. You want to let them know that you can offer other properties they might consider and how they can get in touch with you. The ones who respond will become the basis of your buyers list. Correspond with them and find out what types of properties they want to buy. Then, find properties for them to consider.
There are other ways to attract buyers, but we're going for "No cash, No Credit" here.
Next, you need to find properties for sale below market value. Real estate agents will be helpful here, as will FSBO (For Sale By Owner) agencies such as "BuyOwner", "Help-U-Sell" and others. There is no shortage of motivated sellers these days. You really "cannot swing a dead critter without hitting" one or more, much less walk down the street without tripping over them.
So, there's the key pieces: finding buyers, finding sellers, and matching buyers with properties for sale.
All you need to do now is read up on assignment of contracts and you've got the basic pieces of a real estate wholesaling business. You get an assignment fee for letting some other investor buy you out of your offer to purchase a property which meets their investment criteria.
Be advised, also, that simply offering a contract to buy a property will require SOME "good and valuable consideration" to make the contract valid. So, you will need to find SOME funds you can use to make your assignable contract a valid offer to purchase.
That's the basics of what you'll find in those real estate home study courses that the "gurus" sell for anywhere from two to eight weeks worth of take-home pay. I've only provided a thumbnail sketch of the process. There's a lot more to learn as you go through it.
So, now you can have a way to make enough money to get the information and assistance you will need to build a business entity structure which will allow you to continue to acquire income and assets, and keep them both - and yourself! - protected from lawsuits and an unnecessary tax liability.
Let me say this again (copy-and-paste, really):
I am -NOT- an attorney or a CPA, and this blog post is -NOT- intended to offer either legal or financial advice. Take whatever you learn here to your own legal or financial professional and get qualified advice and assistance BEFORE you take action on ANYthing. I can only suggest topics to discuss when you meet with your professional person.
We'll talk again soon!
Take care - be well!
Much Success!
Enough talk - it's time to start building a business.
However, I'm going to start from a different place than you might be expecting.
Most folks start building a business before they have laid a foundation. The foundation of any business is its structure as a legal entity.
Now, understand: I am -NOT- an attorney or a CPA, and this blog post is -NOT- intended to offer either legal or financial advice. Take whatever you learn here to your own legal or financial professional and get qualified advice and assistance BEFORE you take action on ANYthing. I can only suggest topics to discuss when you meet with your professional person.
Now, that said, let's consider what the REAL foundation is in any business - YOU! ... ME!
I chose the title of this post intentionally: "Before The First Thing". One of my adopted mentors, Robert Allen, posited this in his "MasterPlan" strategy: "Feared Things First".
Now, what do most of us usually say or think? Don't we say "First Things First"? How many of us are experts on analyzing a situation and determining what the most important task should be? Most of us believe we can do that effectively, and most of us are correct. However, even in making that distinction, we still apply our own "filters" to those distinctions.
The concept of Feared Things First forces us to consider which of the tasks before us we see as being the most daunting: what do we look forward to the least for whatever reason?
Now, what happens when we get that "800 pound gorilla" out of the way? Makes the rest of it seem like a walk in the park, doesn't it?
So, one bit of advice I will put forward to you, my good reader, is to dig in your heels and face that daunting task. Get it done, get clear of it and enjoy the rest of the process.
As to the actually laying the foundation for your business, you might think the first thing to do is to line up some funding, select letterhead and business cards, design your marketing plan and materials, and so on. Those are all valid early steps, of course.
In truth, the first thing to address is to structure your business so that your assets - your personal possessions and personal property, real and otherwise - are protected, and that your tax liabilities are limited within the law and what it allows.
Structuring your business involves working with your legal and accounting professionals to design a business entity structure which achieves these basic goals.
Now, again, I am not qualified to advise anyone on how to do that. So, I'm going to make some recommendations as to where to find some information to help you get started with the process of structuring your business entities.
The people I'm going to recommend here have come to my awareness by way of the many webinars and teleconferences I've been attending as mentioned in my earlier post, So Many Gurus, So Little Cash and Wealth, Youth, Dignity and Pop Culture.
The Short Sales Riches guys, Chris McGlaughlin and Nathan Jurewicz have an attorney on their team by the name of Jeff Watson. Now, Chris is himself a licensed attorney, as well. Jeff Watson is someone they have hosted in their webinars and who has worked with them in developing their strategies. If you search the web for "Jeff Watson attorney real estate" you will find a number of resources through which you can gain access to the information he has compiled and which he offers for sale.
No, I haven't forgotten No Cash, No Credit. Stay with me and read on. I do have a suggestion on how you can get started generating cash even before you have yourself properly structured and protected. In fact, lack of funds is probably the biggest reason why people go out and start generating income before they have their business structure in place.
That's very dangerous because then complacency takes over. "We've done this much without the business entities, we can go a bit further and address that later." So, we go a bit further, and a bit further and ... next thing you know, the letter from the lawyer or the IRS arrives and then its too late. Old habits die hard, y'know.
Another fellow who is highly knowledgeable on the topic of business entities is Darius Barazandeh. In fact, its a specialty with him. I've listened to a number of his presentations and he puts out a lot of information to help the listener understand the importance of properly structuring your business entities and then properly operating those businesses to protect against lawsuits.
It's no big secret, I'm sure, that in today's society people look at lawsuits as a way to easy money. Just go after the "deep pockets" for any reason they can find. If we don't protect what we have built, we can easily lose it all.
So, what about "No Cash, No Credit"?
Well, in later posts I'll provide details on how to do this. I'll just lay out the basics here.
Essentially, what I recommend is to stick your neck out - quite literally. As is said, "The bumble bee cannot fly according to aerodynamics experts. However, the bee does not know this. So, it flies, anyway." I once saw a poster in a recruiter's office which said, "Consider the tortoise who makes no progress - until he sticks his neck out."
No, I'm not promoting being irresponsible or unethical. All I'm saying is to have the courage to learn how to do this by going through the process. Take each step deliberately. Notice what knowledge you need to accomplish each step, find someone, or a book, a free webinar, etc., so you can learn what you need, then take that step and proceed to the next. Then, "lather, rinse and repeat".
The first step I'm going to recommend is not usually the first step most folks think of in the process of buying and selling properties. The step I'm going to recommend taking first is to locate buyers. One little-to-no cost way to do that is to find a real estate agent who will provide you with a list of properties which recently sold in your area. Preferably, you will want to find those sales within the last six months where the transaction was all cash. This is where you will most likely find buyers who are in a position to acquire other properties and probably do so as part of their own real estate business.
Now, the list you get from the real estate agent is not likely to contain all the information you need. You may only get a list showing the property address, some limited description of the property, and the price for which it sold. It might not give you the buyer's name, address or contact information. That's going to be the part where you put in your "sweat equity". You can take that list to the county courthouse or, if your county keeps its on-line records fairly recent, you may be able to get the information you need from the county's on-line resources or website. Once you have the buyer names, you might find some phone numbers in the public listings. Business people usually prefer to be found. Private owners usually want to be left alone.
Once you get the contact information for the buyers, do a mailing to them. You WILL have to pay for postage when using the USPS. No getting around that. Handwritten letters are best, but automation is a valid second choice. You want to let them know that you can offer other properties they might consider and how they can get in touch with you. The ones who respond will become the basis of your buyers list. Correspond with them and find out what types of properties they want to buy. Then, find properties for them to consider.
There are other ways to attract buyers, but we're going for "No cash, No Credit" here.
Next, you need to find properties for sale below market value. Real estate agents will be helpful here, as will FSBO (For Sale By Owner) agencies such as "BuyOwner", "Help-U-Sell" and others. There is no shortage of motivated sellers these days. You really "cannot swing a dead critter without hitting" one or more, much less walk down the street without tripping over them.
So, there's the key pieces: finding buyers, finding sellers, and matching buyers with properties for sale.
All you need to do now is read up on assignment of contracts and you've got the basic pieces of a real estate wholesaling business. You get an assignment fee for letting some other investor buy you out of your offer to purchase a property which meets their investment criteria.
Be advised, also, that simply offering a contract to buy a property will require SOME "good and valuable consideration" to make the contract valid. So, you will need to find SOME funds you can use to make your assignable contract a valid offer to purchase.
That's the basics of what you'll find in those real estate home study courses that the "gurus" sell for anywhere from two to eight weeks worth of take-home pay. I've only provided a thumbnail sketch of the process. There's a lot more to learn as you go through it.
So, now you can have a way to make enough money to get the information and assistance you will need to build a business entity structure which will allow you to continue to acquire income and assets, and keep them both - and yourself! - protected from lawsuits and an unnecessary tax liability.
Let me say this again (copy-and-paste, really):
I am -NOT- an attorney or a CPA, and this blog post is -NOT- intended to offer either legal or financial advice. Take whatever you learn here to your own legal or financial professional and get qualified advice and assistance BEFORE you take action on ANYthing. I can only suggest topics to discuss when you meet with your professional person.
We'll talk again soon!
Take care - be well!
Much Success!
Monday, February 15, 2010
What Is Financial Independence?
Hello! David J here again bringing you more of the steps on my journey toward financial independence.
As I write this post today - Feb 11, 2010, I'm listening to Jim Fleck's webinar for his mentoring program.
As he was speaking, the thought flashed through my mind, "What Is Financial Independence?"
What does "Financial Independence" mean?
Well, it might mean different things to different people.
To some, Financial Independence might mean having all the money you'll ever need.
That might be someone who won a multi-state lottery of several hundred million dollars, netting them, say, $100+ Million after taxes. How often does that happen?
It might be someone who inherited a huge fortune like the "poor little rich girls", the Hilton sisters. How often does THAT happen?
It might be someone who develops a product that turns out to take over the consumer market. How often does THAT happen?
To others, Financial Independence might mean having the knowledge and systems in place to generate your own income and not be dependent on an employer, perhaps even being an employer.
When I say "Financial Independence", that's what I mean by it: being able to create one's own income without depending on someone else's company or someone else as your employer.
As I'm reading "The Four Hour Work Week" by Tim Ferris, I'm finding an amazing explanation of the difference between working people who don't want to be working people and financially independent people who already appear to have what the working people want.
I see myself as being in the transition from being a working person to a financially independent person. So, I reflect some of the working person's paradigms, and I already understand some of the financially independent person's paradigms.
For example, working people who want for more may say that they would like to be their own boss. The financially independent person, on the other hand, will say that they prefer to employ others as part of their team.
Yes, I want to have control of my own work time.
However, I also have a coach, and will probably seek out more coaches to help me reach my ultimate financial destinations. At times, the coach is the boss because they are directing me where I need direction. I know I need direction in many areas so I seek out coaches to help direct me and help me find what I need to learn and ways to learn it.
At the same time, there are those I will need to do things for me and who I will pay to do what they do. The team will include, among others, real estate sales agents, appraisers, contractors and handymen, title companies, and more.
In short, I just wanted to clarify what I'm talking about in this blog. When I say "Financial Independence", I mean the ability to provide my own income and lead my team to achieve my financial and personal goals.
Clarity, focus and being specific are always important. For example, a goal of "having more money" is too ambiguous. You need to specify a target amount and a time frame. For example, to have $10,000 within 90 days is a specific target and one can hit that easily.
Define your goals clearly and define your targets specifically. In order to reach the target, we need to see it clearly.
I hope this helps you in your goal setting and in preparing you to join me on the road ahead.
We'll talk again soon!
Take care - be well!
Much Success!
As I write this post today - Feb 11, 2010, I'm listening to Jim Fleck's webinar for his mentoring program.
As he was speaking, the thought flashed through my mind, "What Is Financial Independence?"
What does "Financial Independence" mean?
Well, it might mean different things to different people.
To some, Financial Independence might mean having all the money you'll ever need.
That might be someone who won a multi-state lottery of several hundred million dollars, netting them, say, $100+ Million after taxes. How often does that happen?
It might be someone who inherited a huge fortune like the "poor little rich girls", the Hilton sisters. How often does THAT happen?
It might be someone who develops a product that turns out to take over the consumer market. How often does THAT happen?
To others, Financial Independence might mean having the knowledge and systems in place to generate your own income and not be dependent on an employer, perhaps even being an employer.
When I say "Financial Independence", that's what I mean by it: being able to create one's own income without depending on someone else's company or someone else as your employer.
As I'm reading "The Four Hour Work Week" by Tim Ferris, I'm finding an amazing explanation of the difference between working people who don't want to be working people and financially independent people who already appear to have what the working people want.
I see myself as being in the transition from being a working person to a financially independent person. So, I reflect some of the working person's paradigms, and I already understand some of the financially independent person's paradigms.
For example, working people who want for more may say that they would like to be their own boss. The financially independent person, on the other hand, will say that they prefer to employ others as part of their team.
Yes, I want to have control of my own work time.
However, I also have a coach, and will probably seek out more coaches to help me reach my ultimate financial destinations. At times, the coach is the boss because they are directing me where I need direction. I know I need direction in many areas so I seek out coaches to help direct me and help me find what I need to learn and ways to learn it.
At the same time, there are those I will need to do things for me and who I will pay to do what they do. The team will include, among others, real estate sales agents, appraisers, contractors and handymen, title companies, and more.
In short, I just wanted to clarify what I'm talking about in this blog. When I say "Financial Independence", I mean the ability to provide my own income and lead my team to achieve my financial and personal goals.
Clarity, focus and being specific are always important. For example, a goal of "having more money" is too ambiguous. You need to specify a target amount and a time frame. For example, to have $10,000 within 90 days is a specific target and one can hit that easily.
Define your goals clearly and define your targets specifically. In order to reach the target, we need to see it clearly.
I hope this helps you in your goal setting and in preparing you to join me on the road ahead.
We'll talk again soon!
Take care - be well!
Much Success!
Wednesday, February 03, 2010
Too Good To be True?
Hello! David J here again bringing you more of the steps on my journey toward financial independence.
Just got an e-mail from my coach which turned a light on in my head.
He mentioned "dream-stealers", including our own internal skeptic. You know - that voice inside which tries to remind us, "If it seems to good to be true, it probably is".
Well, I can't do much about the people around you who try to tell you, "That won't work!", and "You can't do that!" or "That's unethical or illegal!". Unless these people are significantly better off than you are - unless they are financially independent - they probably don't know what they're talking about. They just want to steal your dream so you don't look better than they are. It's their way of asserting "power" over you by trying to dissuade you from something potentially lucrative, but which they may view as a scam or something underhanded, exploitive or otherwise dishonorable, or they are just plain jealous.
THERE IS NOTHING UNDERHANDED, EXPLOITIVE OR DISHONORABLE ABOUT ACHIEVING FINANCIAL INDEPENDENCE!
As for your own internal skeptic, let me make this crystal clear: There is NOTHING "too good to be true" about achieving financial independence.
Achieving financial independence takes:
- guts: courage and a staunch, unshakable commitment
- a willingness to do what others won't
- a willingness to hang tough in the face of obstacles and adversity
Whatever strategies you choose to employ in your own personal journey, remember that there are no "plug and play" systems out there for acquiring income. If anything, they'll be "plug and pray". Any one who offers you a guarantee of any kind should be considered suspect. Even the FTC is getting into the act requiring that the various gurus who present their material on the web provide disclaimers that the results they are touting are exceptional and not necessarily typical. As they say, "your mileage may vary".
Expect to learn pieces of strategy that others have used to achieve their own financial goals. It will be up to you to assemble your own strategies based on the results and examples of others.
This is why individual results can vary so greatly. Here's an example:
If you've never seen the movie, "The Karate Kid" with Ralph Macchio and Noriyuki "Pat" Morita, find it on your favorite rental source and give it a look. Part of the story includes a Japanese (Taiwanese, actually) American who is an expert in "Kara Te", as he pronounces it. He is asked by a high school student to teach him self-defense. So, he instructs the student to do as he says without question, and arrive at his home early the next morning. Then, and on subsequent mornings, he gives the student a series of tasks to perform: one day waxing some old cars, the next day sanding the floor of the wooden walk in his yard, the next day painting the fence and the next day painting the house. After painting the house, the student is still there when the master returns from a fishing trip. The student asks when he will start learning to defend himself and becomes impatient with the master's answer, where upon the master explains that the student HAS been learning, and then offers quite a surprising demonstration of what the student has learned.
When it comes to achieving financial independence, some folks have a better than average knack for seeing how the various strategy pieces fit together and work to develop a synergy which produces a desirable result. It comes naturally to them. So, they take for granted their own abilities and the results they achieve believing that it is reasonably expectable that everyone can do what they have done.
Others - like me - need a bit more help seeing how the various pieces fit together and what nuances are unique to the individuals employing those pieces and strategies. For the rest of us, it doesn't come naturally - we need to learn it. We need a master who can break it all down into pieces, even if it's not immediately obvious just what each piece is, and how it all fits together.
That poses a challenge to the gurus. It is a rare talent to be able to break a strategy down into small, easily understood pieces. Not all - in fact, quite few - of the "gurus" can do it. They don't teach us "wax on - right hand, wax off - left hand", "sand the floor, big circles", "paint the fence, up - down", "paint the house, side - side", because they don't know that they should or why they should. They only know what worked for them, and that it worked for them.
That is to say, they can see the forest, and can tell us how to find the forest but have less awareness of the trees and how to deal with them.
Truly being able to teach successful strategies to others takes being able to understand both the forest AND the trees.
How successful I will be in passing my knowledge on to others remains to be seen. I hope you'll leave comments for me and tell me how I'm doing.
We'll talk again soon!
Take care - be well!
Much success!
Just got an e-mail from my coach which turned a light on in my head.
He mentioned "dream-stealers", including our own internal skeptic. You know - that voice inside which tries to remind us, "If it seems to good to be true, it probably is".
Well, I can't do much about the people around you who try to tell you, "That won't work!", and "You can't do that!" or "That's unethical or illegal!". Unless these people are significantly better off than you are - unless they are financially independent - they probably don't know what they're talking about. They just want to steal your dream so you don't look better than they are. It's their way of asserting "power" over you by trying to dissuade you from something potentially lucrative, but which they may view as a scam or something underhanded, exploitive or otherwise dishonorable, or they are just plain jealous.
THERE IS NOTHING UNDERHANDED, EXPLOITIVE OR DISHONORABLE ABOUT ACHIEVING FINANCIAL INDEPENDENCE!
As for your own internal skeptic, let me make this crystal clear: There is NOTHING "too good to be true" about achieving financial independence.
Achieving financial independence takes:
- guts: courage and a staunch, unshakable commitment
- a willingness to do what others won't
- a willingness to hang tough in the face of obstacles and adversity
Whatever strategies you choose to employ in your own personal journey, remember that there are no "plug and play" systems out there for acquiring income. If anything, they'll be "plug and pray". Any one who offers you a guarantee of any kind should be considered suspect. Even the FTC is getting into the act requiring that the various gurus who present their material on the web provide disclaimers that the results they are touting are exceptional and not necessarily typical. As they say, "your mileage may vary".
Expect to learn pieces of strategy that others have used to achieve their own financial goals. It will be up to you to assemble your own strategies based on the results and examples of others.
This is why individual results can vary so greatly. Here's an example:
If you've never seen the movie, "The Karate Kid" with Ralph Macchio and Noriyuki "Pat" Morita, find it on your favorite rental source and give it a look. Part of the story includes a Japanese (Taiwanese, actually) American who is an expert in "Kara Te", as he pronounces it. He is asked by a high school student to teach him self-defense. So, he instructs the student to do as he says without question, and arrive at his home early the next morning. Then, and on subsequent mornings, he gives the student a series of tasks to perform: one day waxing some old cars, the next day sanding the floor of the wooden walk in his yard, the next day painting the fence and the next day painting the house. After painting the house, the student is still there when the master returns from a fishing trip. The student asks when he will start learning to defend himself and becomes impatient with the master's answer, where upon the master explains that the student HAS been learning, and then offers quite a surprising demonstration of what the student has learned.
When it comes to achieving financial independence, some folks have a better than average knack for seeing how the various strategy pieces fit together and work to develop a synergy which produces a desirable result. It comes naturally to them. So, they take for granted their own abilities and the results they achieve believing that it is reasonably expectable that everyone can do what they have done.
Others - like me - need a bit more help seeing how the various pieces fit together and what nuances are unique to the individuals employing those pieces and strategies. For the rest of us, it doesn't come naturally - we need to learn it. We need a master who can break it all down into pieces, even if it's not immediately obvious just what each piece is, and how it all fits together.
That poses a challenge to the gurus. It is a rare talent to be able to break a strategy down into small, easily understood pieces. Not all - in fact, quite few - of the "gurus" can do it. They don't teach us "wax on - right hand, wax off - left hand", "sand the floor, big circles", "paint the fence, up - down", "paint the house, side - side", because they don't know that they should or why they should. They only know what worked for them, and that it worked for them.
That is to say, they can see the forest, and can tell us how to find the forest but have less awareness of the trees and how to deal with them.
Truly being able to teach successful strategies to others takes being able to understand both the forest AND the trees.
How successful I will be in passing my knowledge on to others remains to be seen. I hope you'll leave comments for me and tell me how I'm doing.
We'll talk again soon!
Take care - be well!
Much success!
Monday, January 18, 2010
The Nouveau Riche
Hello! David J here again bringing you more of the steps on my journey toward financial independence.
As I write this, I have just begun reading a "new" book. Well, new to me - it's been around for a few years: Tim Ferriss's "The Four Hour Work Week".
In the book, Tim refers to "the New Rich". I prefer to say "Nouveau Riche". To me, it feels more traditional. Tradition is important to me and, in the early 21st Century, I suppose that makes me a living anachronism. Today's society has jettisoned much of the tradition and treasured heritage (read: "legacy") of our parents and forebearers.
Note that this is not to be confused with a Multi-Level Marketing (MLM) scheme which goes by the name of "Nouveau Riche 'University'". Any implication that I am in any way associated or aligned with them is absolutely false and incorrect.
Although I've just begun reading "The Four Hour Work Week", I highly recommend it to anyone who is searching for something more in their life: beyond job searches, unemployment, the pursuit of escape from - I'll "invent" a new expression here - middle-class poverty, ... whatever you're seeking, even and especially if you yourself don't even know what you seek.
Sometimes, just being open to new possibilities is enough to bring them forth and into your awareness, and do so in abundance (a variation on "the Law of Attraction").
I wanted to get these thoughts recorded before they could slip away from me. This is based on something I learned from Tony Robbins some years ago: never "leave the scene" of a decision without taking some action toward its fulfillment. I try to never "leave the scene" of a noteworthy thought without making some attempt to record it.
So, even though this post is a bit short, I did want to get it onto the blog right away. I'm very excited to be reading this book. 2009 was such a challenging year and 2010 holds so much hope that I'm really getting pumped up about it!
In the spirit of the book, I'm devoting 80 percent of my efforts to those activities which produce 80 percent of my results. This is based on the Pareto principle which is cited in the book, but which I also learned from one of my adopted mentors, Robert G. Allen (of "Nothing Down" fame). So, these posts will be fewer and further between for a while as I ramp up my income producing efforts.
Check back with this blog every week or so. I'll make it a point to have something to share with you and get it posted by Sunday evening, at the latest.
We'll talk again soon!
Take care - be well!
Much success!
As I write this, I have just begun reading a "new" book. Well, new to me - it's been around for a few years: Tim Ferriss's "The Four Hour Work Week".
In the book, Tim refers to "the New Rich". I prefer to say "Nouveau Riche". To me, it feels more traditional. Tradition is important to me and, in the early 21st Century, I suppose that makes me a living anachronism. Today's society has jettisoned much of the tradition and treasured heritage (read: "legacy") of our parents and forebearers.
Note that this is not to be confused with a Multi-Level Marketing (MLM) scheme which goes by the name of "Nouveau Riche 'University'". Any implication that I am in any way associated or aligned with them is absolutely false and incorrect.
Although I've just begun reading "The Four Hour Work Week", I highly recommend it to anyone who is searching for something more in their life: beyond job searches, unemployment, the pursuit of escape from - I'll "invent" a new expression here - middle-class poverty, ... whatever you're seeking, even and especially if you yourself don't even know what you seek.
Sometimes, just being open to new possibilities is enough to bring them forth and into your awareness, and do so in abundance (a variation on "the Law of Attraction").
I wanted to get these thoughts recorded before they could slip away from me. This is based on something I learned from Tony Robbins some years ago: never "leave the scene" of a decision without taking some action toward its fulfillment. I try to never "leave the scene" of a noteworthy thought without making some attempt to record it.
So, even though this post is a bit short, I did want to get it onto the blog right away. I'm very excited to be reading this book. 2009 was such a challenging year and 2010 holds so much hope that I'm really getting pumped up about it!
In the spirit of the book, I'm devoting 80 percent of my efforts to those activities which produce 80 percent of my results. This is based on the Pareto principle which is cited in the book, but which I also learned from one of my adopted mentors, Robert G. Allen (of "Nothing Down" fame). So, these posts will be fewer and further between for a while as I ramp up my income producing efforts.
Check back with this blog every week or so. I'll make it a point to have something to share with you and get it posted by Sunday evening, at the latest.
We'll talk again soon!
Take care - be well!
Much success!
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