My First Step To Financial Freedom

So for just over a month, I have been moonlighting as an investment consultant where I have been given the green light to take some of the technical knowledge that I have gained about investing in the stock market and to put it into real practice.  I am not required to put in any given number of hours, and I am not paid an hourly fee, so this is really not a job.  My passive income generated from this is based on a percentage of the monthly profit that I generate off of the account.  I classify this as passive income, because after some initial struggles and mental blocks that I had to overcome, including having the strength to make decisions even when I wasn't 100% confident in myself, eventually this can develop into an opportunity where i put in very little time and effort every month and will continue to earn monthly income off of the profits.  Also, since I didn't have to put any money into the account, my return on investment (ROI) is infinity, thus proving that there are such things in life as an infinite ROI.  

Now I'm definitely not in a position where I am ready to walk away from my career, nor am I even wanting to.  I have found that the confidence I've gained knowing that I can truly achieve financial freedom and it's not a matter of if, but when, has instilled in me a stronger work ethic when I am at my job.  Now I'm even more determined to work harder while I'm there because the bigger I can make my quarterly bonus, the more money I will have to invest and the faster I will achieve financial freedom.  If you can't tell, I'm pretty excited about the opportunities that are starting to find me.  Tomorrow I will be travelling out of town to investigate another potential income opportunity for me that if you had told me 6 months ago was a possibility, I would have told you that it would be impossible.

I truly hope that those working towards financial freedom can gain a little bit of confidence from what I'm writing here.  If you have your own success stories, please send them to me.  I would love to start a network group of people that are working towards financial freedom so that we could bounce ideas off each other and keep each other motivated.  If anyone is interested, let me know.

How To Attain Your Goals

Corporations are very good at setting goals and putting together a plan to achieve those goals.  Since most of my career has been in sales, I've learned from past managers how my sales targets are generally the last thing calculated and come down from the upper corporate ladder after the "brass" has figured out how much the company wants to grow for the year.  After that, it was my job to utilize my skills to hit that goal.  In my personal investments, side businesses, and passive income opportunities, I've realized that something that has seriously hindered my progress and even contributed to failure in a couple of ventures is that my goals were either undefined, too weakly defined, or completely off-base.  Goals are absolutely vital to success in escaping the "Rat Race" and gaining financial freedom.

A goal is something you plan to achieve, in its simplest definition.  If you don't plan to achieve it, you won't take action; then it's a dream.  A goal needs to be specific and measurable.  It should have a time element, possibly milestones along the way to track success, and maybe even an earnings target.  A goal should also be attainable.  If you set your goal way too high, you'll either never get started because the task seems so daunting or give up on yourself way too fast after the slightest setback.  But on the flip side, don't let yourself off the hook and stay in the same rut forever.

Here's an example of a poorly constructed goal: "I want to retire comfortably and not have to worry about money."  It's a great idea, but it's vague and unattainable without getting some clarification.  Remember: without action, even the best goals are nothing more than just a dream.  

Are You a Saver or an Investor?

Last night, I read an article on US News and World Report (you can see the article here) about how the majority of "investment experts" are now recommending members of Generations X and Y (I'm at the tail end of X, my wife is at the beginning of Y) to set a retirement savings goal of at least $2 million.  I could write a post every day for at least a month about where I disagree with this article.  However, the one thing that I focused on is that the investment advisors's recommendations are to "save money in your retirement account and build a nest egg."  I did a word count and throughout the article, the word "save" shows up 11 times.  They talked about saving a lot.  I also did a word count on "invest".  Guess how many times the word "invest" showed up?  None.  The only time the term investment came up in the article was in reference to the people advising us to save.  On the surface, this makes sense.  Most people do believe that saving for retirement is investing.  I went to the dictionary to compare saving versus investing.



Save (v): Keep safe or rescue (someone or something) from harm or danger.
Invest (v): To commit (money or capital) in order to gain a financial return.


It looks to me like saving and investing are not the same thing at all.  Instead, I believe it's a decision (choice) between the two.  Some people save for retirement and hope their nest egg will last them when they retire at 65 (or later, as the article suggests).  Others invest their money, build passive cash flow, and have a much higher chance of success.  I've known both savers and investors and one thing I can say about them is investors seem to enjoy investing a lot more than savers do saving.  Even though investors do lose sometimes, it's just part of the game.


Now I'm not saying don't ever save money.  It's important to have an emergency fund set aside as a buffer (about 3 months of income is my buffer).  But for my overall retirement plan, I am choosing to be an investor and I plan on retiring way before the age of 65.  I believe the key reason I will achieve this is because I first chose at the age of 25 to become an investor instead of a saver.

First Steps

Tonight, I took my first real step towards escaping the Rat Race.  I did market research and technical analysis over the past couple of nights with the stock market and placed 2 orders tonight that should get filled Monday morning when the market opens.  Even with all the education, knowledge, and skill that I know I've put into my decisions (and I could easily have done more than 2, I'm just starting small for now), it's still pretty nerve racking taking that first step.  I was talking with someone yesterday who told me that the stock market is gambling.  If so, it's designed that the people with financial education basically flip the odds and are playing as the house rather than the gambler, and I hope to someday feel that confident in my own skills.  Only through winning, losing, and learning as I go will I continue to develop.  One of my coaches in my financial education explained to me that it's the learning from the successes (and even more importantly, from the failures) that separates the rich from the poor.

What Would You Give Up For A Little Extra Cash?

So there's been quite a bit of change going on in my life and my family's life.  My wife just got a job (temporary contract with a Federal Contractor, but can be extended) that will take her away almost every day of the week for the near future and leaves me alone with the kids from the time I get off work until I put them to bed.  I know it's going to be a struggle, but we have our financial goals as a couple and a family, and the extra income will definitely help us towards achieving them.  For us, it's worth the short-term sacrifice if it helps us get to the point where we don't have to worry about which bills to pay or how to make a little extra money here or there.


Which brings me to an article I read on Yahoo about what people were doing to make extra money and why they were doing it.  There were people doing mystery shopping for gas money and typing up foreclosure lists to avoid being put on it, but the one that stuck out in my mind the most was a guy named John from California, who has a full time job and then also teaches 3 night classes per week.  He enjoys teaching, but says it's hard on him and his family because sometimes he doesn't get home till 11pm.  His quote that stuck out in my mind is "Still, when you have a family to provide for, you have to make sacrifices and you damn well better do it." 


If I had the opportunity to meet this man in person, I would want to ask him what his plans were to increase his financial wealth so that in a couple of years, he doesn't have to teach at night anymore.  Or perhaps he can retire from his day job and only teach at night, and be able to see his family a lot more.


Everything I have in life I attribute to my family.  My parents raised me, my grandparents spoiled me, my sister kept me humble, my kids keep me going, my wife is my rock, and my parents continue to counsel and teach me to this day.  Within reason, there isn't anything I wouldn't sacrifice to spend more time with my family.  That's why I am taking risks and starting to build passive income streams.  That's why I currently have 6 financial books checked out of my local library and have a goal to read all of them by the end of September.  I'm building up my financial IQ and my passive income so that when the time is right, I can finally look to my family who has supported me all the while and we can celebrate the success of my early retirement together.


Good luck to everyone and god bless!

Recent News

I read 3 articles today on Yahoo that dealt with financial news.

The first was an article about Bank of America Merrill Lynch and Morgan Stanley and the likelihood of a global recession on the horizon. Essentially, it was a doom and gloom article for the economy and did list several indicators that can point to an eventual 2nd recession.  However, when asked for an odds ratio, both companies gave the odds at about 1/3 on whether or not we will have a recession.  Of course, let's not forget that it took Ben Barnanke, the Chairman of the Federal Reserve, a year AFTER the last recession started before they could clearly state that the US had been in a recession for a year.

The second article was about the recent downturns in the stock market and how different financial planners from across the country were advising their clients to sell off some of their funds and move the money into cash or Treasury funds.  I found it pretty entertaining that someone had mentioned that they could not afford to lose (as an investor) 4-5% in a $5,000,000 retirement account (That's $200,000 - $250,000).  Over a 2 week period, that could be considered a typical swing depending on how aggressive the investment strategy is.  However, the question is: if someone isn't willing to take that kind of short term loss, why were they invested in the stock market that heavily at the time?

The third article was about personal finance, and was part of the financially fit series on yahoo, which I would highly recommend to anyone that is looking to increase their financial knowledge or needs help staying in the black.  This particular article was about where the average consumer unit (a statistic created by the US Bureau of Labor Statistics) and it shows for the average consumer unit what percentage of their income goes into 7 major categories and gives you the opportunity to measure what you spend against the averages just to see how you stack up to the average.  My goal is to someday be spending well above those averages dollar-wise, but be well below those averages percentage-wise.

The best piece of advice I can give anyone is to increase your financial knowledge.  It's not something we're really given in school.  Most of us don't even get it in college.  It's something you have to go out and search for.  If you're looking for a place to start, let me know and I'd be glad to share where I got started.

Good luck to everyone!

Financial Advice From Millionaires?

I just finished reading this article where Paul Sullivan, a columnist for the NY Times, meets with an investment group of self-made millionaires called Tiger 21 and they go through all of his finances and then proceed to challenge, or grill, him on what he is doing and why.  There is some sound advice in the article, and I would recommend reading it.  I've linked the article here.

While the advice is good, I have to say I found myself wanting more.  In the article, at the very end, Mr. Sullivan states that the group mostly made their money from having high paying jobs and investing well, or from starting businesses and building them up.  While in the meeting, he makes no mention of whether or not Mr. Sullivan's portfolio is in line with his retirement goals or if he is taking advantage of the investment opportunities that come his way.  In this article, I kept reading about how they were in good financial shape because they save money, but nowhere in the article does it talk about investing wisely and making your money work well for you.  I suppose you can only ask for so much free advise from a group of millionaires.  If you want to join their ranks, you're going to have to learn to think like them and play by their rules.

Good Luck and God Bless!

Getting Paid More From Your Job - Good Luck

So I just read this article on yahoo! finance about how to approach your boss and ask for a raise.  They advise assessing what you are worth inside and outside of the company, using websites that list average salary information for your position, and formulating your request by possibly asking for other non-monetary perks, such as extra vacation time or having them pay for conferences, etc.  It seems that the days of being a top performer and being able to walk into your boss's office and ask for a raise and have an open conversation about it are long over.  I've gone through professional negotiation training in the past, so I'm pretty comfortable negotiating in just about any situation, but when it comes to your salary, as an employee, your power is pretty limited, especially here in Texas.  The only leverage you have is you can leave at anytime (for most employees, the at-will law in Texas holds legal precedence over anything).  However, your employer can also terminate you at any time with or without cause.  You have no additional leverage in your job (short of threatening to leave) unless your employer is nice and feels like you deserve more money.  Here is the link to the article.

Rather than having to go to a boss and asking for a raise, wouldn't it be much more empowering to first strengthen your financial education and then build your own passive cash flow outside of your employment?  That way, if you want a raise, you can find an opportunity out there and build it yourself.  There are many ways that people can strengthen their financial education.  If you would like some guidance on first or next steps, please feel free to send me an email and I will be happy to help.

Good Luck!
Jacob

Finding A Job Versus Finding Cashflow Opportunities

So I have been looking for a new job for almost 3 months now.  In that time, I have viewed hundreds of job postings, submitted a few hundred applications, received a few dozen responses, and had over a dozen interviews.  This has taken hundreds of hours of work to complete.  Once I have a job and know that my family and I can be taken care of for a while, I feel if I take this same hunger and approach and apply it to finding opportunities to increase my passive cashflow, then that will take me even closer to retiring quicker.  Something that has stuck out to me is how methodical finding a job really is.  Even when you utilize your network and reach out to them, it still takes time and effort.  If I am willing to put this much time and effort into finding a job that I do not plan on doing all my life, then how much time and effort should I be putting into finding good strong cashflow opportunities that could potentially set my entire family up for generations of wealth and success?

Is It Better to Save Wisely or Spend Wisely?

So it's been a few months since I've posted to this blog.  A lot of things have been going on, but I'm still happily pressing forward and looking for new ways to retire faster.  Being unemployed right now has given me a slight preview of what retirement could be like, so I know one thing: I won't be the person that just retires and then does nothing.  It's just way too boring.

What prompted me to post a new entry was a couple of articles: one discussed how people can save money in their normal everyday lives, and the other discussed the changes that the wealthy have made in their spending habits in the past few years.  What piqued my interest is how the articles pointed out a very obvious point: almost everyone was hit hard by the recession, yet it seems that the habits that people are trying to change are different based on income.  People that make more money (according to the article) have transitioned to being more cautious about their purchases and finding more value in what they buy, where the article that was targeted for the lower to middle class listed 22 tips to save $100 / week.

Now I could spend my time going through every item on this list and trying as hard as I can to save $100 / week, or I could take that time and effort and either put it into something that may put well more $ than that in my pocket.  Or I could take that time and effort and reinvest it into the things that really matter most, like my family or my education.

Will Your 401(k) Be Enough?

I came across this article today on Yahoo, and the title is enough to make anyone nervous.  "Retiring Boomers Find 401(k) Plans Fall Short".  The first graphic in the article shows that for the median household headed by a 60-62 year old person, they will ultimately fall short of their needed retirement income (85% of current income) by about $30K ($4K if you have a pension).  They ask a financial advisor in the article what his recommendations have been, and for some, it's go work a part time job into your 70's to make up the difference.  I'm only picking and choosing parts of the article to mention here.  I highly recommend reading this article.  But I challenge you to ask questions while you're reading the article.  I've listed just a few here that came to mind.

Why are so many people falling short?
Didn't financial advisors give them good advice?
What can I do with my money to make sure I won't wind up in the same place when I retire?
Is getting a part time job the best way to make money in retirement years?
If pension and 401(k) isn't enough, how else can I invest money to make money?

If anyone comes up with any more questions, please feel free to comment or send me an email with the questions.  I am planning to do a short series of posts here over the course of the next week or two outlining the different asset classes (investments) that exist and what some of the pro's and con's are.

Good Luck!
Jacob Short

What To Do With My Tax Return?

Well now that I've filed my tax return, the next logical step in my thought process is what should I do with the money I'm going to get back soon?  Buy a new TV, video games, maybe some furniture, do some remodeling, new wardrobe for the wife?  There are so many options out there when you're about to receive a large sum of money, and so many companies out there ready to take advantage of the weak-willed.  There are companies ready to give you a loan today based on your expected return, in case you can't wait the 2 weeks for the direct deposit or 3-4 weeks for the check to arrive.  Car dealerships start offering incentives to double your tax return if you put it towards a down payment on a new car.  The best piece of advise I can give you is to plan out what to do with the money you're going to receive from your tax return (if you're due a refund) BEFORE you actually file.  That way you will be less tempted (not completely free, we all have the little devil on our shoulder sometime) to watch that money go away.  In the game of retirement, controlling frivolous spending is as important, if not more important, than making good decisions about investments.  If you're someone that struggles with money discipline, like myself, then I challenge you to decide what to do with your tax refund before filing for your taxes, and sticking with that plan once you actually have the money in your hand.  If you can accomplish that goal, you're one step closer to achieving your financial dreams.

Good Luck!

Jacob

The Wonderful World of Taxes

So I just finished filing my 2010 Tax Return, and am due to get a significant return on my taxes.  There's not really anything I can do to reduce my tax liability during the year because in sales, your commissions are withheld at the highest tax rate.  I've never heard a sufficient answer from any company where I've worked as to why this must be the case, but I suppose it is one way that the IRS can use your money for up to a year until you file your return to get it back.

One of the main reasons why I'm trying to get out of the Rat Race and retire is so I don't have to pay as much taxes.  Percentage wise, the rich have a much smaller tax liability than the poor, and that's because they literally wrote the book on tax law.  I've included a link here to an article that compares 4 of the most common tax prep solutions available, so for those who haven't started filing their taxes and plan to do it themselves, it would be worth a look.

Good luck to everyone getting your hard earned money back from the IRS this tax season!  If you're one of the few that actually gets close to even on their tax return, or winds up owing less than $500, I tip my hat to you.

Jacob

What's Your Retirement Plan?

I speak with people all the time and everyone has different plans on how to retire.  However, the conventional wisdom has always stayed pretty much the same: Invest in a mutual fund or an IRA up to the max allowed for tax savings, and assuming a decent rate of return, you should have a sufficient nest egg to retire on once you've hit 65.

I don't know about you, but so many things in that one statement do not fit into what I would consider wisdom.  Now, even the financial planners that have been stating this for years are starting to doubt themselves.  I came across this article in the NY Times and it discusses how the financial calculators used to estimate what someone should be putting aside for retirement may be faulty.  You can read the entire article here. (Caution: It's a pretty lengthy article).

To summarize, most of these financial calculators are designed where in order to hit your target goal, your money has to double in the final 10 years of the trade.  Also, my biggest issue with these calculators is that they always calculate using an average rate of return over a prolonged period of time, but the financial markets are cyclical.  Also, for someone who has retired recently or is getting ready to retire, the past decade has not been kind to them.  There are other ways to take control of your retirement by educating yourself on alternative investment strategies and taking chances.  I believe that most people are afraid to take any kind of financial risk, and it's not necessarily failure, but lack of any great success that keeps them from reaching their financial goals.

Good Luck Everyone!
Jacob
"You miss 100% of the shots you don't take."
 - Wayne Gretzky

Investing in Financial Markets: Traders and Trends

Something that troubles me is how the majority of people in this country have very little control over their retirement.  Most people are inadequately funded for their retirement based on their age, and their money is typically invested in Mutual Funds of some kind.  I'm not denying that there aren't some benefits to these accounts.  However, with a little financial education, you can have much more control over your retirement and be able to take control of your retirement.

The article that I've linked to below discusses the different kinds of traders in financial markets as well as trends and why we care about trends in financial markets as individual investors.  You can read the article by clicking here.

If you have any questions please feel free to email me by clicking here.

Good luck everyone and enjoy the weekend!

Jacob Short

Investment Strategies: Wholesaling

I received an email from a newsletter that I subscribe to that talks about many different strategies that people can use to invest and work on getting out of the "rat race".  I strongly believe that it's not the strategy that decides whether people succeed or fail at investing.  It's when someone doesn't strictly follow the playbook.

The first article in the newsletter talks about a real estate strategy called wholesaling.  I won't go into all the details here, but I will post a link to the article.  In layman's terms, wholesaling is a straightforward strategy where instead of buying the property yourself, you are buying and selling contracts to other real estate investors.  You act as the middle man for the transaction.  It sounds simple, but like many other investment strategies, it's simple to learn, and takes time and effort to master.  I did a quick online search and found different courses teaching wholesaling strategies that range from less than $100 - over $5K.  I would recommend finding someone that currently invests in wholesaling and learning as much from them and asking them to recommend an education program as well.  For those interested in reading the full article about wholesaling, click here.      

Hopefully this will serve someone that reads this blog as their ticket out of the rat race.  Maybe it will even be my own.

Thanks for reading!
Jacob

What Do You Make?

At work yesterday, someone sent out an email that had a link to a poem by a slam poet named Taylor Mali where he encourages us to speak in declarative statements. It's very motivating and I highly suggest anyone that cares about how they present themselves in daily conversation to check it out. However, I also searched on youtube after seeing this video and found another poem of Taylor's. It's about a dinner party he attended where a lawyer is criticizing teachers and then asks Taylor (who is a teacher) to be honest and say what he makes (i.e. $$). It's a great video and you should check it out as well. It really doesn't matter how much money you make as long as you believe that what you're doing is making a difference in the world. Some people choose their career to make their mark. Others have a job or a business, and choose to invest their time into a non-profit organization or charity and make a difference. Many others just don't make a difference at all and become a burden to society. I've chosen a slightly different path just because I feel that in the grand scheme of things, it will help me make the greatest difference in the world in the grand scheme of things.

Cheers everyone. Have a great weekend!

Return On Investment

Return On Investment (ROI) may be the most important fundamental tool in society today. Almost every significant business decision is made with at least some kind of ROI statement justification. It's something I learned about in high school to a slight degree in math class. In college, we learned how to calculate ROI for investments as well as projects inside a business. When I got my first sales job, it was one of the most critical points of my sales training, but once I started my actual job, I forgot about it and focused on product knowledge and let ROI fall by the wayside. What I've learned now, looking back, is how critical being able to understand and calculate ROI truly is. Now not every decision in life should be made with an ROI statement in mind, but when it comes to major purchases, weighing investments, and deciding on education, I believe an ROI statement is vital to each individual's success in business and in life.

How Things Have Changed

So it's been quite a long time since I last wrote an entry in this journal. Since then, I have been hospitalized, was unemployed for about 3 1/2 months and filed for bankruptcy after an unfortunate series of events, my wife left me and took the kids, and my home is being foreclosed on. However, there is light at the end of the tunnel. I am working again, which puts me back on track toward my financial goals. My wife and I are going through marriage counseling together, and we're planning to move back in together. I've been afraid to write in this for a while because of the sleepless nights and fire that it put inside of me. However, I do feel that eventually some good may just come out of it.

Last night, I went to a financial planning seminar at a fabulous restaurant where you sit and listen to a presentation and they give you a free meal (I looked at the real menu afterward and it was about a $50 meal). The presentation was very informative for most of the people that attended and quite a few of them learned about a new product they have never heard of, fixed index annuities, which offer some of the potential gains with the stock market, but none of the risk for losing money. I will probably never invest in this product for several reasons, but the main one I want to bring up here is that tying up money in this particular asset can only make me money if the stock market goes up. That's only 1 out of 3 ways that markets move. But I did get a nice dinner out of the deal.