David Finkel's Wealth Blog: January 2007

Sunday, January 28, 2007

Wealth Tip: Are You Rich Yet? (cont'd)

Everyday I meet people who make a good living and yet secretly fear that they can never quit their job. They don't know how to make money or how to make their money work effectively and safely for them. They never learned how to move to Level III investing – how to create passive streams of income while working 10 hours or less per month.

Or, maybe you're like hundreds of thousands of Americans who have a lump of cash somewhere – pension plan, home equity, or maybe an inheritance – and don't know how to convert that cash into steady, secure cash flow that shows up each and every month without you having to work more than 10 hours per month. Remember the secret isn't just getting rich – it's having the money and income streams and the time, health, relationships and just general love of life to enjoy it all.

Let me give you one more "what if" and then I'll tell you about a special offer that might be just perfect for you. The only downside is that you’ll have to act fast if the offer is appropriate for you because the event happens this coming weekend in Las Vegas!

Okay, here's the final "what if." What if you've got some money now, maybe even a lot of money, or a high income job or profession and the thing that's keeping you up at night is worrying how much longer you can keep up at this pace? If you lost everything, how long would it take for you to be right back where you are? If the answer is "never" or "a really long time", then there is one big hurdle you have to keeping the money you have. That hurdle is something we call your Wealth Operating System™ (W.O.S. for short.)

Your W.O.S. is the sum total of your emotional associations and beliefs about wealth, money, rich people, and financial success. You can spot a person who has a low W.O.S. when they get rich. That's the guy who hits the lottery and is bankrupt in 18 months or the lady who owns a piece of real estate that goes up in value, sells it and loses everything in bad investments. Make sure your W.O.S. allows you to be wealthy. Otherwise, you'll lose it all when you get it.

There is one more secret to feeling that you're rich in your life. Give some of it away. It's only when we feel wealthy that we can give from our abundance. Giving money or your time is the surest way to prove that you have enough. That's why being a Maui Millionaire also includes giving through time, talent and money to causes that you are deeply passionate about.

I hope you have a great week ahead of you and look for another free ebook (in case you missed last week’s FOUR free ebooks) in the next two weeks.

My best to you,

David

Thursday, January 25, 2007

Wealth Tip: Are You Rich Yet?

Hi Friend,

About two months ago my friend and business partner Diane Kennedy shared with me that line from a Forbes magazine she had read last year. The story dealt with people who had hit it rich with real estate investing or small businesses and how so many others were looking on, wondering what just happened. There was this idea that everybody should be rich and if you weren't, hey, something must be wrong.

Of course, the way you define rich might be the true indicator on whether we're there or not. In my new book with Diane, The Maui Millionaires, we talk about the difference between being a Maui Millionaire™ and a "regular" millionaire.

A Maui Millionaire has the money, plus the time to enjoy it.

A Maui Millionaire has the money, plus the relationships to enhance it.

A Maui Millionaire has the money, plus the deep-seated conviction that what she's doing in the world truly matter.

Unfortunately, a lot of people think that they have to destroy their health, spend all their time and let go of meaningful relationships in order to get rich. The problem is that they're often told there is a lot they have to do in order to become a millionaire. There isn't any time, they're told, for anything else.

What if you could learn how easy it really was to make money? How it can become automatic and easy, showing up? In fact, at the Mini Maui Wealth Weekend in Las Vegas (Jan. 20-23), we were able to show how it might only take adding up your current assets and masterminding with the right people to suddenly change your life. Let me give you an example.

Have you ever considered that it might be possible to be a millionaire after just two years, even if you're starting right now in debt? That's what happened for Kelly and Rob – they went from over $70,000 in credit card bills to a million dollars in real, solid net worth (not counting their principal residence) in just a little over two years after attending the premiere event Maui Mastermind.

Tune in soon for more discussion on this topic.

My best to you,

David

Thursday, January 18, 2007

Wealth Tip: Three Keys to Financial Fluency - the Final Key

Key Three: Learn the Distinctions Between Level 1, Level 2, and Level 3 People When It Comes to Money, Wealth, and Personal Finances

When Diane and I were formatting how we wanted to teach the Financial Fluency workshop we knew we wanted to really emphasize the differences between the way Level 1, 2, and 3 wealth builders approached money and personal finances.

Here are a few of the key distinctions that Diane and I have been developing over the past year to teach this January:

Level One people’s retirement plan has as it’s goal survival. They depend on Social Security, a company pension (if it still exists), family, and, saddest of all, a part or full time job.

Level Two people’s retirement plan is a 401k and pension plan they actively invest in, in addition to Social Security. Their focus is in building a “nest egg” and they doing their best to die before they run out of money. (Not my idea of a “secure” retirement.)

Level Three people’s retirement plan is a secure portfolio of passive, residual investments that include real estate, business interests, income producing intellectual property, and other equities. They don’t worry about dying before they run out of money. Rather their focus is on how to live fully and leave a meaningful legacy behind them that touches the lives of latter generations. Money is abundant for them and rather than focus on how to get enough, they know that they have MORE than enough, and their focus is how to use this money to touch people’s lives.

Here’s another example of the differences between these three levels.

Level One people learn about wealth and finances through the mass media. They passively consume a warped input on wealth and money, and don’t see that their version of wealth is a caricature, and not accurate.

Level Two people learn from actively consuming the mass media and financial press. But what they don’t realize is that most of what they are learning has been filtered for them by two big influences to teach them how to live the Level Two wealth plan (get a good education, find a good job, work hard, save, invest, 40 years later retire on 75% or less of your earlier income, and do your best to stretch your money so it lasts your entire retirement.) The first influence is the financial services industry which is inheritely rewarded when you follow the “traditional” plan. The second influence is the media itself—filled with level two journalists who are still w-2 employees teaching you to be wealthy.

Level Three people learn by actively seeking out high quality books, workshops, and mentors to help them. They look to the mass media and financial press not to learn what to do, but rather, to learn what the MASSES will do, so that they can use this insight to find overlooked opportunities and ways to lower their risk.

I’m sorry if I’m a bit of a soapbox on this one, it’s just a subject that I am very passionate about. While I’m out of time to teach more about financial fluency in this week’s eletter, I’ll keep coming back to it over time, mixed in with tips on investing in real estate, to growing your business, to protecting your wealth, and how to save on your taxes (actually I’ll let Diane write on this one, but I’ll just send you what she says since she’s the best tax strategist/CPA I’ve ever worked with.

My very best to you,

David

P.S. I’m working to arrange another gift for you next week—a special ebook surprise from my partner and tax strategist Diane Kennedy. It may take me a few weeks to get it done, but I’ll keep you up to date on my progress!

P.P.S. Just a quick reminder that on January 20-21-22-23rd Diane and I are holding two back to back 2 day wealth workshops. The first is the
"Mini-Maui" wealth weekend, and the second is the “Financial Fluency” workshop. For complete details just click here!

Monday, January 15, 2007

Wealth Tip: Three Keys to Financial Fluency (cont'd)

Key One: Learn to speak the language of money

Yes my friends money has a language all its own. And this arcane language is essential to all who desire to master money.

The language of money is accounting—dollars and cents, credits and debits, assets and liabilities.

Now you don’t have to run out and become a CPA (the world is filled with ordinary CPA’s who never become wealthy), but you do need to be able to READ and MOVE in the language of financial statements. It’s no accident that “accounting” and “accountability” have the same root word!

My very close friend Diane Kennedy (who happens to be one of the rare finds in the world—a CPA who is wealthy and can make the language of money so intuitive and easy to understand)—once told me that the wealthy almost always have good book keeping and regularly review their personal and business financial statements.

Is this an area of strength for you? If so, build on it. If not, do whatever it takes to learn this essential skill. You can join Diane and I in Las Vegas later in January for the Financial Fluency workshop, or buy and read some books on accounting. Either way if you want to wealthy it is essential that you speak the language of money.

Key Two: Learn to Speak the Language of Business

If the language of money is debit and credits, liabilities and assets, then the language of business is contracts and agreements.

Again it isn’t essential that you become an attorney, but it IS essential that you learn how to use attorneys. It is essential that you understand the major elements of a business agreement, and how to document your business relationships so that you’ve put it all down on paper.

I’ve watched far too many investors and entrepreneurs get into BIG trouble because they felt intimidated by contracts and abdicated responsibility to other people—their attorney, or worse yet, to the other side’s attorney!

Level three wealth builders have developed a fluency for understanding agreements and intelligently using attorneys and the legal system for growing their wealth.

For me this was one of the most fun areas to get ready to teach at the Financial Fluency workshop because I’m one of those weird individuals that actually enjoys a good contract. I’m the guy who reads the rental car “boilerplate” at the rental counter and then marks changes to it before I sign. (It’s almost embarrassing to admit that but I’m hoping you will still love me.)

And this brings us to the final key to financial fluency…which I will share with you later in the week.

Until then, my best to you,

David

Thursday, January 11, 2007

Wealth Tip: The Three Keys to Financial Fluency

Hi Everyone,

The New Year has begun and it’s time to focus in this week on the one of the biggest keys to wealth—financial fluency.

This is a big topic on my mind because Diane and I are hard at work finishing up a book that has two major sections devoted to it, plus we are also teaching a workshop later in January on this topic. (“Financially Free: How to Become Financially Fluent and Build Level Three Wealth”)

I also have a special treat for you all. I'm giving you FOUR EBOOKS for you for free. See the link at the end of this email to download the pdf’s of these four free ebooks.

Now, let's get into this week’s wealth and investor tips…

The Three Keys to Financial Fluency

First of all, what is financial fluency? Well over the last several years you’ve been listening to me talk about the three levels of wealth building.

Level One wealth builders are just getting started. They are focused on getting enough of a financial education so that they can get started, and also on making the leap of faith to be wealthy.

Level Two wealth builders are focused on actively building their asset base. These are the investors who are buying houses to reap the long term (and often short term) profit. These are the entrepreneurs who are building their business in the growth phase. And these are the people who are investing in growth investments to get compounded growth on their side building their net worth.

And then there are Level Three wealth builders. These are the people who have moved from active investing to PASSIVE RESIDUAL INCOME. These investors have shifted a significant portion of their focus from investing for capital gains to investing for cash flow.

Level One investors tend to be financially naïve.

Level Two investors are financially literate. But literacy isn’t enough in today’s world. To become financially free and enjoy Level Three wealth (passive residual income streams) you need to go past where most ordinary people stop.

Level Three investors are financially fluent. They move in the world of money, investments, and business with grace and ease. They have the confidence that comes from KNOWING the fundamentals of money.

And there are three keys to being financially fluent. I will share those three keys with you on my next blog post.

In the meantime enjoy my New Year’s gift to you.


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FOUR FREE EBOOKS!
Like I promised, just click here to download your four free ebooks. They include:

eBook One: 21 Advanced Deal Structuring Strategies
eBook Two: 14 Advanced Negotiating Strategies
eBook Three: The Ten Deadly Deal Analysis Mistakes
eBook Four: How to Mastermind Your Way to Millions

Mini-Maui Workshop and Financially Free Workshop
If you want to learn more about wealth and money, join us for the Mini-Maui workshop and Financially Free workshop. These workshops are back-to-back on January 20-21-22-23rd in Las Vegas.

The Mini-Maui workshop (with ALL proceeds going to charity) will help you master the five core wealth strategies of Maui Millionaires™. The Financially Free workshop will teach you the essential skills to become financially fluent.

To find out how you can save $1,000 by registering for both, just click here!

I hope to see you there!

My very best to you,

David

P.S. I’m working to arrange another gift for you next week—a special ebook surprise from my partner and tax strategist Diane Kennedy. It may take me a few weeks to get it done, but I’ll keep you up to date on my progress!

P.P.S. Just a quick reminder that on January 20-21-22-23rd Diane and I are holding two back to back 2 day wealth workshops. The first is the “Mini-Maui” wealth weekend, and the second is the “Financial Fluency” workshop. For complete details just click here!

Monday, January 01, 2007

Wealth Tip: The Two Keys to Investing Intelligently in the Current Real Estate Market

Key One: Remember Fundamentals

Now that in most areas of the country the market has shifted, fundamentals matter more than ever.

If you are buying for the short term (i.e. to immediately resell either by flipping the deal to another investor wholesale or selling it to a retail buyer) then you need to be buying cheaply enough so that when you factor in holding costs, closing costs, repairs, etc. that you will still conservatively make a profit.

If you are buying for the long term make sure the property can afford to pay for itself. CASH FLOW is king! I’ve watched to many would be investors forget this and take marginal deals with little equity and even less cash flow just because a motivated seller was willing to deed it to them. In a tightening real estate market sellers will be willing to walk from the house, but this doesn’t mean that you should take it. If you plan to keep the property then it must cash flow with a cushion (or at the very least have some other plus in the deal to make it worthwhile to do, like very low price you’re buying at.)

I was talking with my friend Stephen, he was actually featured in Diane and my newest book, The Maui Millionaires. He has three real estate businesses: a development company, a rental property business, and an “Ugly Houses” franchise. He shared with me that in his local market he has to be very picky about which deals he’s even going to take. If he’s buying for cash he wants to make sure he really is buying cheap enough (he goes for 50-60 cents on the dollar, but the max you should ever pay is 70% of the as is value.) If he’s buying on terms (like a subject to deal or a lease option deal) he needs to have the property cash flow well or he’s not interested. He’s a smart investor and I think you would do well to heed his advice.

Two: Use Debt Wisely

There are so many loan programs available for investors now—conventional fixed rate, interest only, negative amortization, ARM’s, option ARM’s, etc. The key is to use any financing intelligently.

This means making sure you choose financing that truly fits your long terms goals.

For example, if you are buying a house to fix and flip, then a short term hard money loan might very well be appropriate. But I recently saw an investor who intended to turn her property fast but got stuck with the home for over six months on the resale market. The high interest rate “short term” loan she got from a local hard money lender at 12% (plus 5 points up front) turned out to be a very expensive loan to use to hold the property that she wasn’t having much luck selling. In this case the bottom line was that she paid too much for the property considering all the repairs she needed to do, and got into trouble on the back end.

Another example is an investor who refinanced out a lot of his equity with an option ARM (a loan where you as the borrower can choose three different payment options—1. To make the full PITI payment. 2. To make an interest only payment. 3. To make a negative amortizing “minimum payment” where you loan balance grows.)

After several years of great cashflow he enjoyed from making the minimum payment the lender ended up recasting the loan because according to the terms of the loan, if the total loan balance grows by a certain amount the lender can redo the whole loan and the borrower MUST pay the full PITI payment. As you can imagine the borrower in this situation went from a positive cashflow to a big negative cashflow. And with the dip in the real estate market refinancing his way out wasn’t so easy.

The bottom line is for you to make sure your financing is appropriate to your intended plans, plus that you have a built in margin of safety in your deals.

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I hope you enjoyed the wealth and investor tips this week.

Here's wishing you a great 2007!

My very best to you,

David

P.S. Just a quick reminder that on January 20-21-22-23rd Diane and I are holding two back to back 2 day wealth workshops. The first is the “Mini-Maui” wealth weekend, and the second is the “Financial Fluency” workshop. For complete details just click here!