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Start Late, Finish Rich: A No-Fail Plan for Achieving Financial Freedom at Any Age (Finish Rich Book

David Bach

Start Late, Finish Rich by David Bach

Give yourself a break already

We've all made financial mistakes or procrastinated on our financial goals. "I could have" or "I should have" is pretty common theme amongst those of us in our mid-40's. David starts off the book by saying, "The past will continue to be your future if you drag it along with you!" He advises to forget all of your mistakes and decide today to move on.

Important points:

• It's not about the money--it's about living the life you were meant to live.
• Money buys you freedom.
• It's never to late to start.

There are chapters dealing with getting out of consumer debt, especially credit card debt. I'm past that, so I sort of skimmed those chapters.

SAVE MORE

• Decide to pay yourself first
• Open a retirement account (i.e. 401k)
• Start funding it with 12 1/2% of your gross income.
• Make it automatic

David is all about automatic. Automatic savings, automatic paying of a tithe (see below), automatic paying your mortgage down early, etc. ACTION: I opened a 401k at work at maxed it out for 2007. Bach believes in diversifying equally among stocks, bonds and real estate. The equity in your home counts towards your 1/3 real estate portion of your portfolio.

BUY A HOME

Bach is big on buying a home vs. renting. He also believes in paying off your mortgage early by using your mortgage company's bi-weekly payment program. It will make minimal impact on your cash flow, but decrease the number of years and total interest significantly. ACTION: I am accelerating payments AUTOMATICALLY on my mortgage to get it paid off 6.5 years earlier and save over $100k.

GET A RAISE

Bach says the fastest way to increase revenue is to ask for a raise or, if your self-employed, raise your prices. "I've seen people go from being on the verge of getting fired to doubling their income in six months by getting their act together. All it takes is turning around the impression people have of you."

• The reason people are stuck in life is that they don't know what they want.
• You have to decide what you want, put in in writing, and then move toward it.
• Direction if crucial. You will never get anywhere in life without it.

THE SEVEN MAGIC QUESTIONS

1. What is the most important thing I do for my boss?
2. What does my boss think I'm uniquely qualified to do?
3. What would my boss be afraid to tell me about my job or how I do it?
4. What would my boss say I could do to add more value to my job?
5. What could I do to be my boss's "dream team" employee?
6. Knowing what he or she has learned about me in all the time I've worked here, would my boss hire me today?
7. What would my boss say it would take for me to get a raise in the next six months?

• The bottom 20% have no clue
• The middle 60% want a clue
• The top 20% have a clue. The top of the top are called "clue creators" They go beyond simply having a clue to owning a clue.

What is the 20% you do that produces 80% of the results? Maximize that thing and minimize everything else.

ACTION: Learn how to develop an entirely new income stream without having to leave your job. DONE. This is what I'm doing with the Concierge position and the MFO.

START YOUR OWN BUSINESS

• Start a franchise. See Entrepreneur Magazine
• Sell stuff on Ebay
• Start a MLM business

INVEST IN REAL ESTATE

These chapters go beyond owning your own. Overall, real estate appreciates on average about 6% a year. But, since your leveraging your money (i.e. only putting down 20%), you get 5x that return cash-on-cash. So that 6% could be closer to 25-30%. Here's a summary of the real estate chapters:

• Strategy #1: Weekend investor. Buy your first home. Live in it for a few years. Then, rent it out. Borrow against the first house and buy a second house. Live in that for a few year. Rent it out. Buy house #3. And so on. START LOOKING NOW with the goal of buying your 2nd home within 12 months.
• Strategy #2 Buy homes with tax abatements.
• HUD Homes for sale
• FDIC Low to moderate income housing
• US Department of the Treasury 
• IRS Auctions 
• US Department of Veterans Affairs
• Buy Foreclosures
• www.foreclosure.com
  

IT'S NEVER TO LATE TO GIVE MORE
Having a purpose bigger than money is critical to long-term happiness, joy, and personal fulfillment. Having nice stuff is great, but living a life of meaning is even better. Your life was meant to be lived with a purpose higher than simply accumulating wealth--and that purpose is to give more.

Tithing--You can give by donating your time, energy, expertise and money. Those who give lead more abundant lives. If you automatically tithe, you essentially have decided to pay yourself second.

Over the years, I've seen firsthand that the "have mores" give more. I've also seen that the fastest way to feel rich is to give more--and that those who give more become rich faster.

The myth of retirement.
If you put off what you want to do with your life for decades, with the idea that you'll enjoy your life after you retire, you will ultimately miss your life. The happiest retirees are people who have lived full and meaningful lives.

THE LIVE RICH QUESTIONS:
What makes you happy? Be honest. Think about all areas of your life.

• What makes you happy at work?
• What makes you happy at home?
• What makes you happy with friends and family?
• What makes you happy when you are by yourself?
• What to you love to do?
• What would you do with your life today if you were not afraid of failure?
• What is not working in your life?
• What are you currently doing that prevents you from experiencing joy?
• What is working in your life?
• Who right now in your life is subtracting value from your life?
• Can you fix any of these relationships or should you let them go?

This is your mission in life: to find what you are meant to be doing while you are here. It is the hardest thing there is to do, and it is the most important thing to do. If you are doing today doesn't create joy in your life, then you may not have found what you are meant to be doing. If you have not found what you are meant to be doing, it can be tough to live rich.

The Janitor: How an Unexpected Friendship Transformed a CEO and His Company

Todd Hopkins

The Janitor convey's six principles that he learned from his wife.

1. Recharge vs. discharge
2. View family as a blessing, not a responsibility
3. Pray, don't pout
4. Pass it around
5. Don't spend; invest
6. Leave a legacy

How to Retire Happy, Wild, and Free: Retirement Wisdom That You Won't Get from Your Financial Adviso

Ernie J. Zelinski

How to Retire Happy, Wild and Free

By Ernie Zelinski

"To fear retirement is to fear life." This is one of the strongest themes of the book, which focuses equally on who you want to be as well as what you want to do in retirement and life.

• It is a great opportunity to pursue your goals and dreams while you are still young, energetic, and healthy enough to enjoy them. In addition, retirement may be your last shot at being the person you would like to be. (p. 23)
• Some people opt for semi-retirement because they like the field that they're in and the people they work with. Writing & consulting were listed as options that fit this profile well.
• Work part time as a transition strategy, mainly for enjoyment.
• It takes courage to retire early, especially if you don't have to. (p. 35)

The Main Point: This is NOT an investment book. If you're looking for financial advice, read something else. If you're looking for advice on what you need to really enjoy the years AFTER you need to work for a living, then this is a book for you.

Retirement may be your last shot at being the person you would like to be. (pg. 23)

LEISURE

• The degree to which you can handle leisure will determine the overall quality of your retirement.
• "Leisure consists in all those virtuous activities by which a man grows morally, intellectually, and spiritually. It is that which makes a life worth living."
• The endless pursuit of status, power, wealth, and fame by achievement-oriented individuals begins and ends in unhappiness.

Affirmation for the Connoisseur of Life

"I am now a Connoisseur of Life. I am too prosperous to work long and hard hours. I have earned my prosperity and deserve the right to enjoy a creative and satisfying lifestyle. I am too spiritually evolved to have an identity based on my work, possessions, and net worth. Instead, my identity is based on more profound things, including my creativity, my generosity, my spontaneity, my sense of humor, my peace of mind, my passion for new experiences, my happiness, and my spirituality."

• The more people are satisfied with the purpose and meaning in their lives, the easier they feel retirement is. As is to be expected, personal and emotional life are greatly enhanced when there is purpose and meaning to one's existence.

Ernie's Worldview

Many people have rejected the idea of retirement for the sake of idle pleasure. Ernie would actually agree with that. This book parallels Halftime and Success to Significance by highlighting the importance of pursuing your calling  in the last 30 years of your life.  For example, Ernie writes:

• "A major purpose can take the form of a personal mission, a true calling, or a passionate pursuit."  pg. 50
• "Being involved in activities with a major purpose will not only keep you mentally and physically active, it will also provide you with emotional and spiritual fulfillment." pg. 57
• Ernie quotes from Richard Leider's book, ..Heeding your Life's Calling. He says people can find their calling by answering the following questions:

1. What gift do I naturally give to others?
2. What gift do I most enjoy giving to others?
3. What gift have I most given to others?

FRIENDSHIP

I found one of the most profound parts of the book on page 144-145. Ernie writes:

"The University of Michigan researchers found that solid social support was the dominant factor in determining whether retirees were happy and satisfied four years after leaving the workforce. The people who were most pleased with their retirement years had sixteen friends or good acquaintences that they could rely on compared with fewer than ten that were typical of the unsatisfied retirees. Unfortunately, many retirees, men more so than women, don't have many solid friendships to fall back on once they quit working. All things considered, happiness is one of the chepest things in the world when we secure a good part of it through friendship. Indeed, even ten minutes in the company of a good friend will make any extremely difficult and depressing day worth living. To retire happy, wild and free, virtually every one of us needs friends with whom we can interact personally, philosophically, and spiritually."

Hot Commodities: How Anyone Can Invest Profitably in the World's Best Market

Jim Rogers

Hot Commodities

By Jim Rogers

Jim Rogers retired in 1980 at age 37. Rogers made his money investing in commodities. He believes that stocks & commodities alternate in their bull markets, which last 18 years each. He thinks the last bull run in stocks ended in 1998 and that the bull market for commodities will go until 2015. He claims that when commodities go up, stocks go down. Commodities are driven by WORLD supply and demand, so China, India and other emerging growth markets are very important.

• NOTE: This theory differs from Rich Dad, Poor Dad: Who Stole My Money, which says there is a 20-10-5 cycle. RDPD says the commodity bull would be 2000 through 2010. He thinks stocks should pick up in 2008 and continue until 2016 because baby boomers would be forced to remove it from their IRA's and 401K's because they have reached the mandatory withdrawal age of 70 1/2. In either case, 2000-2010 are bull market for commodities according to both authors.

Rogers created his own commodities index called the Rogers International Commodities Index (RICI), which he invests in. He believes commodities are just as safe a investment vehicle as stocks. In fact, more commodities are traded all day than all US stocks combined. Rogers analyzes each investment vehicle and concludes that commodities are the choice vehicle right now.

NOTE: Oil & Gas make up the two highest portions of the commodities trading. So, I'm already heavily invested in commodities. Rogers says the US had approved 25 LNG ports in Gulf of Mexico and East Coast, but environmentalists have blocked them.

• Commodities included in this book include: oil, natural gas, metals, and sugar.
• Rogers believes commodities are the best hedge against a declining or sideways stock market. In fact, commodities have been a better hedge against inflation than stocks or bonds for the past 45 years.
• The US can no longer control the world economy. China is representing the largest growth and will soon be the largest purchaser of commodities. NOTE: This is what kills many of Dent's boomer theories. The economy is driven by world supply & demand, not US alone. Therefore, the US baby boomers cannot be overly influential. For example, there are 300 million Chinese who are under 20 years old. That's more than all the people in the US combined.
• Investing in commodity companies (like oil companies) is NOT a substitute for investing in the commodity directly. The cumulative performance of futures is triple the cumulative performance of matching equities, according to a Yale study. The stock market can influence the price of a commodity-based company, but the commodity itself is influenced directly by the world supply & demand.
• Another way to play commodities is to invest in markets that are exporting commodities. Brazil is the largest producer of sugar. Venezuela is oil. Chile is copper.
• Rogers is not bullish on Russia or Africa. There's way to many political instabilities with those nations.
• Rogers invests in commodities through his RICI index fund. I'm not sure how he does this yet. He does not play the futures option market. Futures can be purchased on huge leverage (5% margin accounts).  He talks a lot about the futures market and how it is traded. However, this is NOT a trading manual. It's an introduction to commodities and a motivational guide at best.
• Rogers has traveled the world 6 times. He is extremely bullish on China and believes they will become the economic superpower within 15 years. He is so bullish that his granddaughter is learning Chinese. He believes they will be the number one purchaser of commodities within a few years. That means, the US is competing with China for resources. China is a creditor nation, while US is the biggest debtor nation.
• India is no match for China. Not even close. Huge infrastructure issues like roads, and phones, for example. Education isn't nearly as good.
• We are in a secular bull market for oil. The issue is supply & demand. Russia and Venezuela cannot get the oil to market fast enough to make a significant impact.
• "As much of a fan of commodities as I am right now, gold is not my favorite. I own some gold personally, as does my baby girl, and gold also makes up 3 percent of the RICI. But other commodities will do much better in this bull market."
• The commodities investor must try to look at gold as just one more commodity among many whose prices might rise and fall, depending on the forces of supply and demand.
• Rogers also discusses lead, sugar, coffee.
• The commodity bull market will show signs of ending when all cars are small and wind farms are dotting the landscape. In other words, we're reeling from the high price of energy.

Run It Like a Business: Top Financial Planners Weigh in on Practice Management

Richard J. Koreto

Run It Like a Business, by Richard J. Koreto

• Chapter 2: Bits & Bytes
• The SEC & NASD have strict rules for electronically storing and backing up client records.
• PDA programs are available to download from DST or another aggregator using E-Z Data's client data system.
• Asset Management Software.
• Centerpiece is owned by Schwab
• Techfi by Advent

• Chapter 3: Know Thyself
• Worth magazine has an annual list of top financial planners that serve wealthy clients.
• Most people just can't start with high net-worth clients
• Fee-only is more popular with wealthy clients
• NAPFA is a fee-only association
• Create a pie-chart of your income streams
• The key to growth is getting the RM's in place to handle clients. One example was 6,500 clients handled by 18 planners (361 each).
• Broker-dealers are getting nervous because an increasing amount of planners are going fee-only.

• Chapter 4: Sell Yourself
• "With a little effort, you can become known to both local and national publications. Top planners have found these connections pay off. 'The press has bee among our best allies.'"
• Press release. Get quoted.
• Write articles. Local paper. Magazines.
• Public speaking.
• Electronic newsletters

• Chapter 5: Master of the House
• If you're in the affluent marketplace, then 60 to 90 clients is the optimal number.
• Hire the necessary administrative staff to deliver the wow.
• Hire an office manager.
• Delegation is not abdication.
• Give away a slice of your job description.
• Do we know any other top CFP's?
• The planner is the main cog. Hire around them to make sure they are just planning.
• One simple rule: our financial advisors must devote 100% of their time either talking to clients or preparing to talk to their clients. Everything else is delegated to support staff.
• Adding people
• The next generation of CFP's. They're well grounded in basic financial planning knowledge, but need to learn how to build a plan and work with clients.
• Don't let a client think they've been "demoted," because they no longer speak directly with you but with a new associate, for example. Assure your clients that you are still the one behind the scenes, that you are still looking out for them.
• Internship program

• Chapter 6: Schmooze or Lose
• You have to show your clients that they are important
• CRM. Keep track of all client contacts. Plan regular visits. Keep track of HOW people want to be contacted.
• Reach out with a blog
• Schedule time with wealthy clients monthly.
• Email newsletters can help you stay connected.
• High net worth clients are busy and expect a lot of personal attention.

• Chapter 7: Doing Well By Doing Good
• Volunteerism can really buff your image, but it has to be honest.
• You've got to perform well for your clients if you're handling their investments.
• Many professional organizations have formal assistance for financial planners to give back.
• Page 175 has a good sample conversation about how to introduce a new planner to a client without making them feel like they're being handed off to a 2nd tier person.
• "I will be the one working with you primarily, but xxx will be working with you as well."

• Chapter 8: The University of Life
• www.lifttheburden.com is an excellent source for a RIA.
• Read a lot to stay up with market trends.

• Chapter 9: Building an Empire and Selling It
• David Grau, president of Business Transitions, with runs FP Transitions, a Website--indeed a system--for buying and selling FP practices. No planner should try to sell a practice without having a look at the FP Transitions site and considering them as a broker for the transaction.
• Advisors are already up to 2x recurring revenue for their practice.
• "You are buying future income streams, with relatively low overhead."
• The assumption is that the seller with deliver those clients with no additional costs for doing this.
• Includes a non-compete from the seller.

• Appendix
• www.etelligentconsulting.com

Rich Dad's Who Took My Money?: Why Slow Investors Lose and Fast Money Wins! (Rich Dad's)

Robert T. Kiyosaki

Part of the Rich Dad, Poor Dad series of books by Robert Kiyosaki

Summary

I thought this was one of the best books in the RDPD series. It was written after the 2000 stock market crash, so it has a very sarcastic "I told you so" sort of feel. Kiyosaki tries to debunk the concept of "diversifying and investing for the long term." He says the "fast money" moves money around while the slow money loses.

The book attempts to answer the question, "How should I invest $10,000?" by asking several stereotypical people (i.e. the salesperson, etc.). For example, the salesperson says, "Trust me. Invest for the long-term." This sets up the person to spend absolutely no time learning about investing. The answer to this is to take matters into your own hands and to become an educated investor. If you aren't willing to take that step, then put down the book and let somebody else handle your money. But don't later ask, "Who took my money?"

Intro

Right off the bat, he highlights the difference between real estate & stock market investing. The big difference being leverage & insurance. It's the first chart, that inspired Dr. Reinholtz to go out and buy a condo instead of investing in the stock market. In real estate, you make money using a small portion of your money and a bunch of other people's money (OPM). In this case, the banks. In addition, the income is passive and can be sheltered through 1031 exchanges to defer the capital gains tax.

Capital Gains vs. Cash Flow

The message of the book is to invest for cash flow, because capital gains will also follow. His order of priorities is:

1. Cash flow.
2. Leverage
3. Tax advantages
4. Capital gains

Even though Kiwosaki has these priorities, he often contradicts himself. For example, he would say that real estate is good even if you just break even, because the tax advantages and capital gains will make up the difference. Nevertheless, I think these priorities are interesting. Personally, I'm made several investments where tax advantages were first priority. Why? Because keeping money is always easier than making new money.

Also, by putting leverage 2nd, you would really want to learn options, because that is the only way to really leverage & insure stocks. Not totally true, you can always get 50% leverage by buying on margin. You can also get cash flow by investing in high dividend stocks.

Ask a businessman. Businesses are taxed differently than ordinary income. You can really make some huge money here.

Ask a Journalist. In this chapter, Kiwosaki suggests that you ask any potential financial advisor, "Do you earn most of your money as a financial advisor or as an investor?" If it's not as an investor, than forget them. He says don't trust journalists because they write for advertisers. He says you be able to discern between fact, opinion and principle. The only good thing some publications provide is an insight into business trends. For that, he recommends reading Fortune Small Business.

Ask a gambler. In this chapter, Kiyosaki introduces the 20-10-5 cycle and how it affects the investment game. Simply put, this theory states that the stock market is in favor for 20 years. When the 20 years are over, the market crashes and for the next 10 years, commodities such as oil, gold, silver, real estate, gas, soybeans, pork, rise in value. The 5 of the 20-10-5 clcle means that every 5 years some tragedy happens, such as the 1987 stock market crash or the 9/11 massacre.

If this 20-10-5 cycle holds true, than 1980-2000 were the 20 year cycle for stocks. In years 2001-2010, commodities will be in favor. Clearly, oil has been on a tear. So has gold.

Kiyosaki also recommends that an investor considers control and how it differs among different types of asset classes:

Owning your own business

You are in control

Owning real estate

You are in control

401(k)'s

Who is in control?

Mutual funds

Who is in control

Equities (stocks)

Who is in control?

Ask Newton. In this chapter, Kiyosaki says that trends, not diversification are the keys to making money. He lists demographics, debt, interest rates,

Ask Father Time. In the year 2016, the first baby boomer turns seventy and a half and that is the approximate time the house of cards will come tumbling down, leading to the biggest stock market crash in the history of the world. Harry Dent predicts the same thing will happen, but says it will happen in 2010. I think Kiyosaki's is more accurate.

The Power of Power Investing. Kiyosaki says its more powerful to invest in 3 asset classes: business, real estate, and paper assets. He also gets into the "accelerators" of each asset class.

How to find great investments.

• The best time to buy is when the market is down.
• California, already very crowded, is expected to have a population increase of 18 percent over the next two decades.
• In the 20-10-5 cycle, the next disaster should hit around 2006.
• "This 20-10-5 cycle lets me know that stocks will probably be coming back in favor around 2008 and I will remind myself to consider selling my gold shares at about that time."
• "I will continue to invest in real estate. Real estate property values only go up if there are people who want to rent them."

How to be a great investor.

1. Earn/create. You want passive income, not earned income.
2. Manage. Control the asset. Use it to your advantage.
3. Leverage. Use OPM.
4. Protect. Insure it. Hedge it.
5. Exit. Try not to trigger a taxable event. Example: Using a 1031 exchange rather than selling it.

Conclusion: Winner or Loser?

Interesting that Kiyosaki uses a half-time grid:

Qtr 1: 25-35

Qtr 2: 35-45

Half-time

Qtr 3: 45-55

Qtr 4: 55-65

When do you win (i.e. get out of the rat race)?

"The best part of playing the game of money, regardless of whether I was winning or losing, is that I got better at the game."

How to Retire Early and Live Well With Less Than a Million Dollars

Gillette Edmunds

1 comment

How to Retire Early and Live Well, by Gillette Edmunds, 1999

Summary

This book makes the case for having a diversified portfolio of 3-to-5 non-correlated asset classes. The asset classes are NOT just stocks & bonds as so many "diversified" portfolios suggest.

Can You Retire Today?

This chapter provides formulas for figuring out if you can retire. It provides insights into tax savings that you derive when you are living completely from your investment income. For example, investment income has NO employment taxes. NOTE: As I have found out, you can virtually eliminate taxes, which is like giving yourself a 40-50% raise. It also makes the point of telling the readers that withdrawals from tax-deferred accounts are taxed at ordinary tax rates, not capital gains rates. The author has NO tax-deferred accounts in his portfolio.

If you Retire Today, Beware!

When living off of investments, it is not helpful to spend all of your time worrying about market crashes and ending up on the street. If you do, you will not be effective in picking out the right real estate or foreign stock fund. Your results will suffer. Good investment results are much more important, however, than reducing your spending to zero. You should easily expect to get 8% from your investments if you work at it. You must do well on your investments if you are to live well in retirement.

Determining Your Retirement Portfolio

The author recommends diversifying into 3-to-5 non-correlated asset classes. He lists the asset classes below:

ASSET CLASS
EXPECTED LIFETIME RETURN

• Emerging market stocks 14%
• US small-company stocks  12%
• US large-company stocks  10%
• Foreign-company stocks   10%
• US real estate                 10%

• US oil & gas                     8%
• Corporate bonds               7%
• Foreign bonds                  7%
• Treasury bonds                6%
• Municipal bonds                5%
• Money markets and CD's    4%
• Treasury bills                   3%
• Gold                               3%

Not all of above are non-correlated. Also, there are many vehicles for investing in the above classes. For example, real estate can be invested directly in homes or commercial property, publicly-traded REITs, limited partnership tenants-in-common, etc. REITs follow the stock market, whereas private held real estate does not. For example, CA real-estate did very well during the stock market downturn of 2000-2002. The investment vehicle within an asset class depends on how much time you want to spend on that investment. The more time you spend, the more direct your investment. For example, I'm a direct investor in oil & gas, whereas I am a tenant-in-common for real estate. I also buy stocks, as opposed to index funds or a venture-capital investment in a private company.

NOTE: My current portfolio is 75% weighted in oil & gas. Obviously, that is a big risk. I have very little in the stock market and real estate. The bottom line is that you should only have a maximum of 1/3 of your portfolio in any one investment class.

You'll never make a target goal of 8-10% by putting everything in treasury bills or money-market accounts. You would have to have a LOT of assets and really low expenses to pull off that strategy. The prudent thing is to live off your investments in the same proportion that you invest in them.

Foreign Stocks & Emerging Markets

The author recommends heavily getting into foreign markets. He says the value of the dollar will continue to fall because other countries are catching up to our economic conditions. "Emerging market currencies have a long way to go, as do their economies. But someday, Mexico will have an economy as strong as ours and the peso will move up against the dollar as a result." Non-US stocks are excellent investments for retired investors because they can have up years when all your other asset classes have down years.  Gillette recommends buying international index funds after 2005. I looked up several that exclude Japan and put them in my action item list.

ACTION ITEMS AS A RESULT OF THIS BOOK

• Calculate my current asset allocation. Done. Turns out I'm 75% allocated in oil & gas. At most, I should be 33% in this asset class. I won't be making any additional oil & gas investments. Instead, I will take any oil & gas distributions and investing them in other asset classes.
• Your home equity is NOT an asset class. Don't include it in your portfolio. The author also recommend paying off your mortgage if you are living completely off of your assets. This helps eliminate the worry of a sudden market downturn.
• Foreign indexes like EEM, might be a good way to get exposure to foreign markets. Ex-Japan is the way to go. You can get country specific with ETFs if you want.