The Butler Project

If you’re the curious sort, you probably already know Mark and I are brother and sister who share the same birthday. In celebration of our day, I’m posting a few pictures of our third and seventh birthdays. You can see Mark below, contemplating his third birthday wish.

I gotta tell you, with two kids born in April, my mom got a lot of mileage out of the double birthday bunny cake! See how convenient it is to put his candles on one ear and mine on the other?

Here we are working on one of the earliest Butler Projects–figuring out what Mark got for his birthday. That’s our middle brother, Nate on the left in the Hardee’s hat (probably our first choice for birthday dinner) and me on the right, looking smug with the certainty that he will not get anything as cool as my new Barbie furniture.

PS. Image credits go to Dad, and my mom did all the rest.

In my goal to consistently interview millionaires, I often have to pursue people for weeks before I can finally spend 15 or 20 minutes on the phone with them.

Mike was no exception. He owns an advertising company, with around 50 employees and millions of dollars in contracts ever year. That being the case, he’s a hard man to pin down. I first contacted his assistant in January, and it wasn’t until six weeks later that I finally got him on the phone.

When we finally did talk, the conversation lasted a little over eight minutes. He had this urgency in his voice - completely polite, happy to talk with me, but not wasting any time. It was a nice change of pace from other interviews I’ve done, where the person I was talking to didn’t have to be quite as succinct in his answers.

Mike got straight to the point. Here are two of his answers:

Mark: If you could only give me one piece of financial advice, what would that advice be?

Mike: Get rich slow. Eliminate debt first, don’t go for the home run. Don’t swing for the fences. [A] single at a time is what [will] win. Big risks and betting big on grand opportunities could possibly win big for you, but be careful how you bet, because you could lose it all. So, it’s get rich slow…eliminate debt, and get rich slow. Don’t borrow money. I’ve been able to build this business totally without debt.

[I asked him a question about what he would say to the sales reps I manage, and I've altered it only slightly to make it apply to all of us, whether we're thinking about our careers, our businesses, or our financial goals:]

Mike: You’re the master of your own destiny. If you’re not self motivated, and if you can’t come up with your own business plan, and see your way to move yourself forward, you’re going to lose. You’re going to die. Get in another job. If you’re not self motivated, and can’t make your own business plan, if you’re depending on your company, or somebody else to furnish you with what you need for success, you won’t succeed. You need to figure it out. You’re an entrepreneur. You have figure out how you’re going to do it. The answer isn’t in a book, it’s in your head.

So there you have it. Some might say that a lot of his advice is trite or cliche, but you have to remember that thirty years of business ownership is behind those words. For three decades, this man has managed employees and clients to the tune of millions and millions of dollars, and he’s had some serious setbacks along the way.

So before you pass this advice off as something you’ve heard a thousand times before, think about who is offering it, and think about how closely it mirrors the advice of the other millionaires I’ve interviewed.

Last Friday I talked about what it would mean to your financial situation if you could earn an extra $500 per month. Using that $500 wisely will make a huge difference to your financial goals if you’ll stick to it over a 15-30 year period.

Here’s the problem: most of us don’t have that kind of attention span, and it’s hard to stay enthusiastic about goals that won’t really pay off for a couple of decades.

So, today I wanted to take the idea of the extra $500 a few steps further. See, you always hear about how money compounds, and how a little money invested at a conservative interest rate over a long period of time will make you financially independent. It’s a sound philosophy, and I don’t challenge it. I hope everyone that reads this will save and invest as aggressively (and wisely) as they can.

But what about those of us that don’t want to spend the next 30 years becoming financially independent? Is there a faster way to do it, without falling into a ridiculous get rich quick mentality?

I believe there is. If you want to become wealthy in less than 15-30 years, you have to leverage more than your money and the financial markets. You have to leverage yourself. The Richest Man in Babylon says a key to becoming financially independent is to “Increase Thy Ability to Earn.”

There’s more to the wealth equation than spending less and saving more - you also need to consider what earning more would do for your situation, and how it would accelerate all your financial goals. And I’m talking about more than an extra $500 per month.

Let me see if I can stretch you mentally a little. Work through this mental exercise with me, and see what you come up with. I’ll warn you in advance that you’ll finish this exercise with more questions than answers. That’s the point.

I’m going to give you a Six Year Plan for earning an extra $100,000 per year. Write this down, because it’s bulletproof. There is only one prerequisite to making this plan work: you have to be willing to invest the time. How much time? 15 hours per week.

Year 1

In year one, you’re not required to earn any extra money at all. What you have to do is invest 15 hours per week into the discovery of how you could earn an extra $500 per month. Read, research, talk to people, investigate, figure it out. The only questions that really matter in year one are: 1)How could I make an extra $500 per month?, and 2) Am I willing to do the work associated with the opportunities I’m finding?

Are those easy questions to answer? Nope. Is becoming wealthy and independent easy? Nope. Deal with it. Do the work.

By the end of year one you need to have chosen a vehicle for earning your extra $500, and you need to have started doing the work associated with making the extra income happen. Your time requirement is still 15 hours per week.

Year 2

By the end of year two, the $500 should be rolling in every month. You’re not rich yet, but who couldn’t use an extra $500 per month? For anybody making less than $60,000 per year, that’s more than a 10% raise, and for anybody making less than $100,000 per year that’s at least a 5% raise. Not bad at all.

Year 3

You’ve entered year three now. Year three has only one purpose: figure out how to turn that $500 per month into $1,000 per month. How? Great question. Figure it out.

By the end of year three you will have found your answer and you’ll be making an extra $1,000 per month. I hope nobody disputes that $12,000 on top of whatever you’re household income is makes a big difference to your stress level and your belief in your financial goals. This is some real progress.

Year 4

Guess what you need to do in year four? That’s right. Figure out how to turn the $1,000 per month into $2,000 per month. Again, the question is How? And again, the answer is you tell me. But oh what a difference that $2,000 per month is going to make when you have it.

According the Census Bureau in 2006, median family household income is about $59,900 per year. An extra $24,000 per year would represent a 40% increase in income. And all you have to do is anwer that question: How?

Year 5

You’re making a great supplemental income at this point, but we’re not finished.

You’ve completed year four of the six year plan, and in year five you have just one task. Turn the $2,000 monthly income into a $4,000 monthly income. And remember - you’re only allowed 15 hours per week to work on this project. Seem impossible? I guess it probably does to many of you. But somebody is going to figure out How, why shouldn’t it be you?

By the end of year four, you’ve succeeded, and an extra $4,000 is flowing to you each month. At this point, you’ve probably seen some changes in your lifestyle. Your ability to pay off all debt and invest wisely has been multiplied ten times or more. If you stopped here, and managed your money wisely, you’d be virtually guaranteed financial freedom in a relatively short period of time.

Year 6

I wouldn’t stop though. If you can just get through year five and throw yourself into year six, there will be a big reward.

In year six, double your extra income one last time. Take it from $4,000 per month to $8,000. I know I said $100,000 per year, but hey - you got this far. I’m sure you can figure out a way to make the extra $4,000 that will get you to a nice round $100k.

A lot of the people who read this post will call it ridiculous. “It’s not that simple - you can’t just earn an extra $500 per month and expect to double it every year for five years.” Maybe they’re right. Let’s say you throw yourself into this and you only get half way to the $100,000 goal? Are you still a lot better off? What if you only get 25% of the way to the goal? I don’t think you’d turn down an extra $25,000 per year.

The only question is “How?” There are ten thousand different answers to that question, and they’re all right. To end, I’ll give you another one of my favorite quotes. This comes from Peter Drucker, management legend:

“We greatly overestimate what we can accomplish in one year. But we greatly underestimate what we can accomplish in five years.”

$500 per month. What difference would it make in to your financial goals if you could scrape together an extra $16.67 each day? You could…

1. Pay off Your Mortgage

If you’re a fan of the school of thought that says get rid of all debt first, including your mortgage, you could apply the extra $500 per month toward that loan and it would make a drastic difference in how much interest you paid and how long it took to pay off your home. Here’s an example:

$250,000 Conventional Mortgage, 6.5%, 30 Year Term

If you make no additional payments, your total interest expense will be $318,861.22.

If you apply your extra $500 per month to your mortgage, your total interest expense will be cut by more than 50%, to $155,345.27, a savings of $163,515.95.

2. Pay Off Your Credit Cards

If you owe even $5,000 at 18%, it will take you about 26 years to pay off the card, and by the time you’re finished with it, you will have paid $7,115 in interest.

If that doesn’t blow your mind (it should), think of it this way: if part of that balance was a pair of shoes you bought your 14 year old son for $75, by the time you were done you would have paid a total of $129 for those shoes, and you’d finish paying them off when your son was 40.

If you applied the $500 per month to that $5,000 balance, you’d pay it off in 11 months and only end up paying $458.11 in interest. That’s an interest savings of $6,656.89.

3. Accelerate Your Retirement

Let’s say you’re saving $250 per month in a mutual fund at 8% annual return.

After 30 years you’d have $372,589 in your account.

If you added $500 per month to that monthly savings plan, you’d triple your final result to $1,117,769.59.

It’s Common Sense, So Why Aren’t You Doing It?

None of the math here is mind-blowing, right? And it leaves an obvious question: “Sure, that’s all fine, but I don’t have an extra $500 per month, or anyway to get it.”

Don’t accept that kind of thinking for yourself. You gain a huge amount of power in your life when you stop saying “I can’t.” and start saying “How can I?” I can’t shuts your brain down, depresses you, and becomes a self-fulfilling prophecy.

“How?” Is the Most Powerful Question

“How can I?” triggers the creative and enthusiastic parts of your brain, and if you’ll ask yourself that question enough times, I guarantee you’ll soon have a flood of ideas.

True, most of your ideas won’t pan out. But only one of them has to work in order for you to put things in motion for you to achieve your goals so much faster than you would have otherwise.

Start asking yourself the question “How can I make an extra $500 per month?” and invest the mental and emotional energy into making your ideas a reality. It will be worth millions of dollars and even better, peace of mind.

For the last two and a half years Dan has built up his multi-million dollar company. Many times during our conversation, the subject of entrepreneurship came up. Dan is passionate and, obviously, very knowledgeable about building your own business. Three times he gave me the same advice:

Mentors and Money

Dan: Be careful with entrepreneurship. . . Number 1, find a mentor, someone who’s done it before that can teach it you. Once you really know the business [and] how to do it, the second thing is [to] make sure you have money.

The industry that I’m in right now, I did it during college; I knew it really well. I had the capital to do it . . . [but] my business took a lot more money than I originally thought it was going to take. I was lucky that I had it sitting in a bank account, and I was able to go to people and say, “Hey can I pay you a little bit later? We sold a lot more than I thought we were going to, so I had to make a much larger investment. I’m a little bit short on cash, but can I wait until this next month and pay you you know, 9% interest or something crazy to make it worth your while to do it?” And all the guys that I did that to were accommodating.

Entrepreneurship wise, that’s what I tell guys if they’re looking into it. 80% of businesses fail in two years. 94% fail in 5. It’s tough to be able to survive; you’ve really got to know what you’re getting into. . . . if you’ve got the experience, and you’ve got the money . . . you can go for it. Get into it. . . start slow.

Image credit: ?????ARG

People

Dan also talked a lot about people and their importance in the entrepreneurial equation

Dan: My professors used to tell me, “You bet on people, you don’t necessarily bet on a business.” If you’ve got the right guys in place, they’re going to make [the business] work no matter what happens. Come hell or high water, they’re going to find a way to make it profitable and make it successful. . . . It’s almost like you’ve got to find the right person that has that determination.

Recruit the right people with the same mentality. [If you're] working upstream with people that don’t want to follow you, get rid of them! Get the right people on the bus to start out with and grow.

[It's] like the old phrase goes, you know, “show me who your friends are and I’ll tell you where you’re going to be in 5 years.”

But it’s not just people Dan turns to for help. When I asked him about the #1 book he would recommend to people trying to be more successful, he said Dale Carnegie’s book, How To Win Friends and Influence People. He went on to tell me how books can help everyday.

Dan: [Read] self help books– it could be anything, it could be Tony Robbins, it could be sales books, it could be Zig Ziggler, Tom Hopkins, whatever . . . Just get in the habit of reading, even if it’s only for 20 minutes a day or a half hour a day where you wake up and you start your day with that and it just gives you ideas; it gets you in the right mind set. [Basically] you need a personal mentor, and I use a lot of those books kind of as that to get me upbeat and get me going.

Finally I’ll leave you with one of my favorite things Dan told me:

Business is so much fun. There’s so many different games, but most businesses are fairly similar. [And] once you get that safety and security, you realize too it’s not the money. The money is not the thing that you like, it’s the chase. It’s the chase of the money. It’s building something and providing jobs and changing peoples’ lives, that’s the fun thing.

In Friday’s Millionaire Interview post I introduced you to Dan, a 30-year-old multimillionaire. As you may recall, Dan sold home service accounts door to door during the summers he was in college. (To protect Dan’s privacy I’m referring to his company as a “home service company.” Some examples of home services include carpet cleaning, lawn care, window washing, anything you might hire people to come to your home to take care of on a regular basis.)

One summer Dan sold 530 accounts–a new company record. The next summer he “wanted to do something ridiculous.” He said he “was so bored with [selling door to door]. I’d done it for so long. I was naturally good at it but I’d never really put in all the hours; I’d never worked that hard. . . I’d never really tried to push myself to the limit.”

So, knowing that 530 was the all time highest sales record, he set a goal to sell 1000 accounts in one summer.

Dan: [I sold] 903. My goal was 1000. I didn’t quite get there.

Mark: Ok, so you failed miserably and got to 903. . . But how did you do it?

Dan: I started doing everything I possibly could . . . really silly things like, you know, put your goal up on your mirror and read it in the morning and read it at night.

And before I’d said, “That’s lame. I don’t need to do that in order to get my sales.” But I started doing it early . . . four months before I went out in the summertime and by the time I got there . . . the reason why it works is because you’re so committed to it; it becomes part of you. . . part of your personal commandments.

He also talked about distractions that could have ruined his chances of reaching his goal:

Dan: [If] you take an extra 15 minute break or [the other salesmen would say] “Hey, let’s swim in the pool a little bit longer on our break.” Or…”Let’s go to a [late] movie.” You know, “It gets out a little bit later; we’ll get out of the doors a little bit later.”

But with Dan,

There was never a question of that.

And nobody ever would question me, “Hey Dan, do you want to take a little bit of time off?” “Let’s go take a break.” It was, “Hey, I’m here to work with you Dan. Just show me what you’re doing, and I want to sell like you.” And that’s what helped . . . having people around you that . . . inspire you. I think if you surround yourself with successful people you’re going to be in the right position.

Like the old phrase goes, “Show me who your friends are and I’ll tell you where you’re going to be in 5 years.”

See how Dan avoided some typical time traps? He decided early what he was and was not going to do: no breaks, no time spent messing around. He also says the other guys he was working with could see what he was doing; they respected him and supported him. Four months with no breaks sounds like serious self discipline to me; I asked Dan what attribute had contributed most to his success.

Dan: I don’t think there’s any other attribute than just determination. Just being absolutely committed to what you want. You set your mind to something and say, “I’m going to do what ever it takes as long as its honest and ethical to get to that point.” I’m going to work, and it’s hard work.

You know, most of the stuff I do does not take a rocket scientist. I think almost anybody could do it. The place where they fail is in the ability to act and actually go out and do it every day. Not going home and siting in front of the TV and watching TV. I hardly ever watch TV at all. Or feeling like they’ve got to do all these little things all the time that makes them happy. If you can make your business what’s fun for you to do, you’ll do extremely well at it. And that’s what I’ve done.

I don’t look at (laughing) [my home service] as something that’s necessarily fun, but you find ways to make that challenge fun. You find ways to improve it, you try to think outside the box.

I heard once that 90% of the books that people buy (regardless of what kind of book it is)…90% of people who buy them [never] get past the first chapter, and I look at most people out there like that: I think there’s 10% on top, maybe only 5% on top and everybody else is kind of the same way: they just lack the ability to act and commit.

Things come up. They’ve got family. They’re trying to support their kids at the same time they’re trying to do real estate deals on the side or watch the stock market at the same time, and it’s just too much for them and they’re shut down.

In terms of my greatest attribute, I just think it’s just, it’s commitment. You make commitments to yourself and other people and you keep them. And that’s what people respect. And that’s what everybody lacks, I think. People just can’t be committed. There’s so many dreams that are just thrown in the dumpster because they’re not willing to go out a work a little bit. Work hard.

So there you have it–COMMITMENT: doing whatever it takes (as long as it’s honest and ethical) to reach your goal.

Dan set a crazy summer sales goal, and he achieved it. His formula for reaching his goal looks something like this:

1. Know yourself, and set a goal that really pushes you to your limit.
2. Start doing the “silly little things” early, way before you need them.
3. Let people see what you’re doing, but don’t let them distract you from your goal.
4. Surround yourself with people who inspire you.
5. Make your business what’s fun for you.
6. Do the hard work.

What crazy goals are you going to set? What kind of commitment will you give to achieve those goals? How will you avoid obvious pitfalls and time wasters? We’ve all learned something from Dan’s experience, the question now is how will you apply it to your life?

I recently interviewed Dan, the 30-year-old owner of a multi million dollar home services company. After listening to my interview with him several times, what I come away with is awe for his belief in himself and his ability to power through and get the job done.

Home services you wonder? What the heck are home services? Well, in the interest of protecting Dan’s privacy (and, no, that’s not his real name), I’ve elected to refer to his company as a “home service company.” You could put his service in the same category as carpet cleaning, lawn care, window washing, you know, the things we hire people to come to our homes and take care of on a regular basis.

Dan got started in college, selling home service accounts door to door during the summers. In one summer he sold 530 accounts, top in the company at that point and made “something like 150 thousand.” Yes, that’s 150 THOUSAND DOLLARS, in one summer, while in college.

Dan: I wanted to make over 200 thousand the next year, and I wanted to do something different, something where I could say, “You know what, I gave my heart and soul to this and that’s what made it fun for me.” I was so bored with it; I’d done it for so long. I was naturally good at [sales], but I’d never really put in all the hours; I’d never worked that hard. I was always good enough or better than everybody else but, for my own self, for Dan . . . I’d never really tried to push myself to the limit . . . I wanted to do something ridiculous.

So, the next year Dan set a goal to sell 1000 accounts in one summer.

Mark: I have a good friend, he’s actually one of the owners of the company I work for; he sold [home services]. He had one month where he sold 200 accounts, and that was this astonishing event, I mean, nobody does that. You did 903 in a summer?

Dan:You know it’s really hard; I did a little bit over 200 [a month] for four months.

Mark: If I can ask, what are the commissions on 900 accounts?

Dan: (Laughing) You know, back then it wasn’t as much as it is now. But it was enough. 15% of the contract, so it was ah . . now it would roughly be . . . 200 bucks a sale.

Mark: (doing some quick calculations) umm . . . that’s $180,000.

Dan: And I also was a team leader, and my team put on over 4000 accounts and I think I made a 5 percent override off of that.

Mark: 5% override off how many accounts?

Dan: 4150

Mark: With a 400 dollar contract value?

Dan: Right

Mark: (a lot more mental calculations . . . .carry the one . . . .stall a minute) So that’s 1.6 million? Wait, what’s 4000 times 400? I think it’s 1.6 million. You’re 5% on that would be, umm. . . would be about 80 grand.

So, apparently he made his goal of 200 thousand that summer. And, apparently he was hooked on home services, because after college he started his own company, and today it’s worth millions of dollars.

I asked Dan if he ever specifically decided to achieve financial success or if it was just something that sort of happened.

Dan: I think I knew for a long time . . .I tried to study why I am the way I am. [Just previous to starting my business] I told people “I can be a millionaire if I want within this next year or several years.” Most people told me, “Yeah that’s the plan.” or “I hope that goes well for you.” And I remember just thinking man, you guys just don’t know me that well, and I thought that was sad that people don’t know what my abilities are.

When I was young, my dad was a CEO, so I was lucky to have a guy that set a role model, you know, a really good role model. My dad was probably in the top 1% of income in the nation, but he had some rocky times. It was feast or famine . . . we had a huge ridiculous house, it’s probably worth 4-5 million dollars now . . . tennis court, just huge massive property . . we had a lot of nice cars but my parents were a little more economical when it came to cars. But he was the president of [a company] and he basically fixed it up, and then they sold it out from underneath him . . .it was during the recession, (I think back in ‘91) and it was just really tough. We were in a smaller town . . . there was just nowhere to work there. He had to go to [bigger cities] and he would literally travel back and forth every week. Five days out of the week he would spend his time in an apartment.

I think that’s where I got a lot of my work ethic. I saw what my dad was willing to do in order to support us. I said, “Yeah, I can do that if worse comes to worse; there’s always a way. At the same time, it scared me to death because I had my mom telling us you know, “We might lose the house this next month, and we just don’t have the money for that right now.” And I just hated that. I thought, you know, “This sucks.”

I don’t want to put my kids through that. And . . . I was probably a horrible kid. I was cruel to my parents and made some pretty horrible comments to them at the time, saying, “I’m not going to put my kids through this.” But, you never know. That’s why I pushed as hard as I did. My number one goal when I got out of college was to become a millionaire as fast as I could, so I didn’t have to work. If I sold my company today. . . for [millions of dollars] and put it in the bank, I could live off interest for the rest of my life if I choose to.

Once you get that safety and security, you realize too, it’s not the money. The money is not the thing that you like, it’s the chase. It’s the chase of the money. It’s building something and providing jobs and changing peoples’ lives, that’s the fun thing. And you eventually get over the money thing.

So, that’s the Reader’s Digest version of Dan’s story. You can see he was motivated and he got the job done, but it wasn’t always easy for him. In my next post, I’ll show you some of the obstacles Dan ran up against, some of the obstacles he purposely avoided, and the attribute he claims is the most important in his rise to financial success.

Yesterday afternoon as I drove my 11-year-old son to baseball practice, the news came on the radio. The announcer mentioned something about the IRS.

“What’s the IRS, Mom?” came the question from the back seat.

“Well, it’s the Internal Revenue Service; the part of our government that collects taxes.” (Can’t you just hear my “Mom Voice?”)

“Oh yeah, you hate them don’t you?”

Wow. I didn’t think I had displayed such strong emotion about paying taxes, but he had obviously picked up on some strong feelings somewhere.

The fact of the matter is we in the U.S. do hate paying taxes, don’t we? In fact, it would almost be un-American not to hate paying taxes.

And why is that?

image credit: Mat Honan

When you honestly examine your feelings, you probably recognize you have a whole bag of mixed (negative) emotions about tax time. Obviously we don’t like paying them, and for sure, most of us don’t understand the tax code. Paying taxes often feels like wasting money we have worked so hard to accumulate. Many feel they are being penalized for being successful, others enjoy a refund, but know they could have been smarter with that money. Perhaps the biggest problem with taxes is simply that they are complicated, stressful, and require extra work on our part, not to mention having to pay someone else (hopefully a qualified professional) to examine our income, expenditures, and record keeping for the past year.

I think it’s safe to say that filing and paying taxes is the pits, our tax code is horrendous, and the government often seems to waste the hard earned money we send them.

Take a minute to think about your taxes. Hate them. Feel the stress associated with tax forms and receipts, deductions and filing deadlines. Imagine the money leaving your bank account, or worse, being added to your credit card balance. Notice how your body reacts to these thoughts. Notice your chest, your stomach, your shoulders, your hands. Can you feel the stress? Do you like how you feel?

Now, in the spirit of my recent posts on gratitude, you can do a few things to change your attitude about taxes and release some of the negativity associated with them.

Gratitude is all about noticing and appreciating.

In terms of taxes, it’s about noticing and appreciating the benefits you enjoy that are paid for with your tax money.

For me, it only takes a moment to come up with a few taxpayer-funded things I am truly grateful for:

• I really like driving 75 on our generally smooth and clear highways. The lines painted there keep me and the other drivers safe.
• I love my son’s kindergarten teacher. Our taxes pay her salary and for the upkeep of the building. I appreciate the bus system that gets him to and from school safely each day.
• I love our national park system. From paved trails to back country outhouses, the amenities provided by our tax dollars help my family enjoy our foray into nature.
• Whatever you think about the war in Iraq, I feel gratitude for our military and it’s impact on our country’s history.

Now, take 60 seconds to notice and be grateful for the benefits of taxpayer money you enjoy. Think about the things you would miss if tax money was not available to pay for them.

image credit: dark embrace

Again, notice how your body reacts to your thoughts. Notice your chest, your stomach, your shoulders, your hands. Do you feel differently than you did before?

I know all these references to feelings may sound like crazy talk. If you aren’t in the habit of paying attention to your body’s reaction to your feelings, it’s probably difficult to do. But even if you haven’t been paying attention, your body has still been reacting to your feelings. Now you have a choice: the feelings of stress and negativity you associate with taxes, or the feelings you felt as you considered the benefits of taxes with gratitude. It’s your choice.

It’s okay to acknowledge our tax system isn’t fair, and is by far too complicated. It’s even better to work to change what you see is wrong. Either way, you have a tax return due April 15. Now you have a choice: pay your taxes grudgingly and endure the stress and negativity associated with them, OR file with gratitude and see the abundance all around you.

Part II of Our Interview with a Millionaire - G

Yesterday, we introduced you to “G”, a Real Estate Broker, Investor, and Entrepreneur. After reading the interview, you’re probably not surprised that he describes himself as a “Type-A guy”.

What is not as obvious from yesterday’s post is his investment strategy: for G, peace of mind is much more valuable than bigger pieces of the pie. Part II of the interview will shed some light on how he has achieved financial freedom while minimizing his risk and stress levels.

Mark: How do you approach your real estate investing?

G: [There are] two mindsets: one is the mindset of “I’m going to establish good credit, and then I am going to leverage myself to create avenues to purchase or invest via financing.”

My philosophy has been completely the opposite of that. A lot of [my success] has just been timing and luck of the market. When I went in 12 years ago, things were really inexpensive relatively speaking, so I was able to capture a lot of appreciation in real estate, and create wealth that way and then reinvest. I have bought [property] as I can afford [it].

I don’t leverage anything. I don’t leverage my house; I don’t leverage my properties. Occasionally I’ll pull a loan, and I try to pay it off, but I’ve kind of bought as I could; if I couldn’t, I didn’t.

And so, I’ve bought…less attractive [real estate] deals that maybe had less attractive returns, but nonetheless had a high return. [T]hat’s been my philosophy that has worked.

I’ve tried to never be in a position where I was leveraged, where if the market did turn, as it has in Colorado, and in Utah, and everywhere else in the nation, I wouldn’t find myself upside down.

All the rental properties that I own, I own without having an obligation to answer to if… renters move out or whatever. So, that’s been my approach, and will probably continue to be my approach going forward.

I’m not a big stock market guy. I don’t like throwing darts and trusting somebody else that I have absolutely no idea of what capabilities they have.

Mark: I’ve talked to other people who say, “Leverage everything you possibly can.”

G: Right. Both theories theoretically could create wealth. One’s just a much more stressful way to do it, and it just hasn’t worked for me. I’m just not that type. Even though I am a Type A guy, it just is too stressful for me, it affects my mood and my personality, and it just doesn’t work.

What personal finance advice would you give me?

G: I’ve never paid interest on a credit card, I’ve never allowed myself to get beyond my means, and that has been a great source of peace for me and my family…if I can’t do it, I just don’t. It’s not worth the risk to me.

[I]t is a high-debt society, and it’s everybody keeping up with everybody, and it becomes kind of a competitive deal out there, especially with younger couples. But I would… tell [you] to stockpile cash as much as [you] can possibly save, and then to eliminate debt.

Contrast G’s philosophy and peace of mind with what is going on right now with our economy. America is fighting off a recession, and is doing it in the face of a virtual meltdown in the housing and mortgage market. If you have turned on the news or picked up a newspaper in the last 12-18 months, you have surely seen headlines similar to these:

“The housing market is crashing”
“Foreclosures are at a three-year high”
“Sub-Prime woes drag down Dow Jones”

And chances are that you, or someone you know, is hurting financially because of the economy. Good people are losing their homes to foreclosure; others are declaring bankruptcy because they have run up credit card debts of $25,000… $50,000… even $100,000. And who is the biggest debtor of all? That’s right, the US Government, with debt now in the TRILLIONS.

It is probably not realistic for most of us to pay cash for our homes; a mortgage may be the only way that you can afford a house. But there are practical ways that you can apply these principles in your life? A good place to start is by reading (or re-reading) our post on budgeting.

Interview with G, a Real Estate Broker, Investor, and Entrepreneur

About a month ago I had the chance to talk with G, owner of a successful real estate brokerage and also a respectable portfolio of rental properties. He started in the mid-nineties “really from zero, from Pell grants”, and in the last ten years or so has built his businesses to the point that he has total financial independence.

G went into real estate straight from college, helping “hundreds and hundreds of families” get into their own home. But it hasn’t been easy; he has built his success on “hard knocks and just having to scrape my face a little bit and learn the hard way…”

A self-professed “hands-on” businessman who still makes the big decisions for his companies, he has first-hand experience on what it takes to be successful, both in his business and personal life.

My interview with G will probably cover a couple of posts; this one will focus more on attributes and attitude.

Mark: As you look back over your career, do you ever remember a…particularly tough setback or obstacle that you had to overcome, and what you learned from the experience?

G: In real estate, you don’t make any money when you help buyers unless you can get them financed. So the lending side of real estate…was a struggle because my initial few years were 80 [to] 90% dealing with the Hispanic community, and there weren’t very many avenues to facilitate their loans. So I was doing so much work and not being compensated because there just weren’t traditional loan brokers that served the Hispanic community.

I had to get through that, and end[ed] up actually creating my own mortgage company that’s been a good source to help them.

Mark: [W]hat do you think has been the attribute that has contributed most to your success?

G: Just a high level of determination. I’m very much involved in the day-to-day, and very active in the decision-making. I haven’t been one that has been able to explode this into a franchise formula or anything like that because I’m still very hands-on and kind of a control guy. I want control and if I mess up, I want to be able to look in the mirror and say “I messed up”, versus somebody else that I entrusted.

I’m always working, if that makes sense, whether it’s on the phone, [or] I’m in the car.

[Note: He was in his car on his cell phone for this interview.]

I don’t really listen to the radio; there’s not really a lot of downtime in my day, so I try to be productive in the amount of work hours I give myself.

I don’t go out to lunch; I eat lunch in my office. I just really try to focus and get things done while I am available…because there [are] other church callings and things like that that I have to give time to, and I’ve got 5 girls and so I’ve got to try to achieve balance there.

That’s been probably my greatest attribute, just to be able to balance and be highly effective during the time that I have.

[G went on to describe his philosophy on working...]

I just feel that a lot of people, especially that are in an hourly or W-2 environment don’t give everything they [can] give. When you’re self-employed, if you don’t produce, you don’t make any money that month. So the time that I do have is time that I really focus on creating income versus just messing around on the computer, wasting time doing whatever, you know, I just use the time to create income.

[Later in the interview, we talked about how to be successful in a commission-based environment (my day job). GJ had some great advice that he shared on being successful; I think it applies in any professional situation, not just sales.]

Mark: I manage a group of about 18 [people]. What would you tell [them] as far as how to become successful?

G: I guess what I would tell them is sort of what I told you. I would counsel and suggest that they do everything in their power to eliminate debt in their lives … cutting up credit cards, [etc.]

I would do everything I could do to better their social skills, you know, better their ability to get along with all kinds of people, because you are going to face all kinds of personalities, whether it’s a person or on the phone…

[Get to] where you can adapt and immediately recognize, “hey, in a few minutes in this conversation, I can see where this guy’s buttons are based on the dialogue that we are having.” That’s a real thing out there - you can kind of ride that [social skill] and make yourself less threatening to [people] if you can understand what kind of personality you are dealing with…

[His comments were actually directed toward my sales reps, but do you see how the advice has universal application? He followed with more on maximizing your time.]

G: And to give…as much as they can of an honest day, a lot of times people will try to kind of pick out the best hours, [and say,] “you know, 6:00-9:00 is my most productive time, so I am going to slack from 2:00-4:00”, or whatever. But the most successful guys I have seen have not ever really had a slacking moment because they will pick up the one or two [sales] that were in that 2:00-4:00 segment that the other guys missed out on, just because they worked harder.

For example, I have partial ownership in a pest control company, and that type of mentality where you are running door-to-door, as opposed to just walking and taking a long lunch. Over time, when you add [it] up, 6 months of doing that, you missed 20 or 30 sales.

[If] I am going to go work out, I’m not going to go just to spend an hour and do some light reps. I’m going to bust my brains out until I’m sweating and I’m feeling an impact and a change in my body. The same thing applies with my work style; if I’m going to work and spend the time to do that, I’m really going to go after it… sometimes you just gotta take a break, but…treat it as precious time, because [you’re] not going to get it back.

Think about your own life—are you getting the most out of every moment, or do you have your own “2:00-4:00” slacking time? Are you letting the other guy get those extra sales (or whatever applies to your profession), letting them get the advantage, or are you “busting your brains out”?

Tomorrow we’ll look more at G’s financial and investing philosophy. You’ll be interested to see how a real estate professional doesn’t seem too worried about what’s going on in the market today.