Running For Your Financial Life!

Which of these two business situations would you rather be forced to replicate over and over again?Having to sell a ton of small items at a small price point OR selling a whole lot fewer items but at a much larger price point?In this instance, let us use the difference between selling a $1.00 hamburger vs. renting a $140,000 house.

When you sell small items that don’t generate a lot of profit, you have to sell a train car load to make a decent amount of money. If the profit is only 50 cents per item, then to have a shot at making enough money to live on (let’s use $50,000 per year) means you would need to sell 100,000 of these small items in a year!That would mean selling 274 units per day, 365 days per year with no time off for vacation or sick days.This fast-paced assembly line of sales would be extremely stressful to keep running smoothly and it would be difficult to manage this business for decades.

On the flipside, if you had a business whereby you “sold” a rental property to a tenant and they paid you $1,400 per month, you would not have to do too many of these transactions to equal the high volume, low dollar business we discussed above.To make the same $50,000 per year would only require someone to “sell” 3 rental units and then the money would come in month after month.Three sales in a year vs. 100,000 sales!That is such a huge difference both in the quantity but also the quality of life a person would have to manage regarding the many issues each of these business situations would present to the owners.

Of course, if it were that easy then everyone would be doing it, right?So let’s identify the two biggest reasons people do not become real estate investors:

1.No Money

2.No Skills

And for some people, the answer would be “all of the above.”I understand this completely because I was once in that same boat.In fact, I still don’t have the necessary skills to fix anything in a house (including the one I live in).I am fond of saying my favorite tool in the tool belt is my checkbook!It is much better to pay a professional to fix something in my house rather than have me do it wrong, get mad, and then have to pay somebody even more money to fix something I did completely wrong!

Since I had no skills or even the desire to learn these skills, I knew I had to form a team to do real estate investing.Luckily, my day job surrounded me with money so at least I had a comfort level with the world of lending so that was a start.

The original reason I got into the banking business in the first place was not to become a career banker.Rather, I thought this would be a good place to park myself so that I would be exposed to a large variety of businesses so that I could decide which business would be the best one for me to run one day.

There was only one problem with this plan.Every time I met a business owner and saw all the junk they had to do and put up with like government red tape and employee turnover, it made me stop and think.Maybe staying in banking wasn’t such a bad idea after all!

The profession of a banker was respectable but it could not solve the one major issue that is the downfall of most jobs.Basically, a person with a job has one source of income called a paycheck that is controlled by the employer and this spigot of money can be turned off at any time for any reason.Not exactly a comforting situation to be in when you have four young children and a wife depending on you to bring home the bacon.

After reading Robert Kiyosaki’s “Rich Dad Poor Dad” book, I finally connected some of the missing dots and decided to pursue the number one rule of the rich:The rich do not work for money.Rather, they work to build assets that generate passive income.

So, this gave me a mission and a strategy to pursue.I wanted to achieve a monthly passive income that would exceed my monthly living expenses.It was at this point, I would not be a dependent on the payroll of corporate America and I could call the shots as to what I wanted to do with my life and my time.When you think about it, shouldn’t that be the same goal for just about everyone you know?The question is, how many of them are actually doing something about it?

This week, there was an article in the Wall Street Journal detailing the story of a 68-year-old woman from California who had been a millionaire and had filed for bankruptcy protection with $15 in her checking account.In order to retire she had to cut her living expenses to the bone and decided the only place she could afford to live was to move to Iowa.

Unfortunately, she had jumped into house flipping before the crash in real estate and this was not a sustainable business model.When times were good, she made $80,000 per year.When the tide turned, she made zero and there are very few people that can live without any money coming in whatsoever.

This cautionary tale was warning the impending massive hordes of baby boomers to get their financial house in order or they, too, would be taking a horrific drop in their standard of living.It is much better to start this journey to financial independence at the earliest possible age than to have the hard decisions thrust upon you when you do not have the time or energy to do anything about it.

Besides, if a person could figure out how to achieve more passive income than expenses at whatever age, that person would be so much further ahead than the average wage slave that there is no comparison. It would be like running a foot race with Usain Bolt.Only he is off the blocks at the sound of the starter’s gun and his competition is not even on the track because they don’t know where to even start.A turtle could beat someone in a foot race if they race against someone who doesn’t even know where to show up, right?