It seems that the US does stop for 4th July celebrations for about a week or two … go figure! But, just when I was beginning to think that the 7MITs feel that they have enough to go on without our help, Jeff pops up with this interesting post … for all of you with real-estate and/or stocks in your future, what’s the huge breakthrough that Jeff has discovered?! It’s right here in his post …

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As a quick recap…

• My life purpose is to “Lead and develop leaders.”
• My number is 10 Million on 1/1/19
• My current Net Worth is $672,290
• My annual required compound growth rate is ~ 30% +/- a couple %.  I’m finding this number is fluctuating a bit, but seems to average out to right around 30%.
• My selected growth engine is real estate investment and individual stocks

According to Masterson’s Table I should be able to generate ~ 30% with my growth engine.  Over the past couple weeks I’ve been researching both elements of my motor to determine whether I believe Masterson’s results.

What follows are my predictions, guestimates and silly wild a$$ guesses as to what I might be able to expect in annual returns and its affects on my number.

Now I make no claims as to the accuracy of these results.  Remember, it’s product of my research online and work with a calculator.  I welcome all comments and corrections.

Real Estate: In this first round I only considered residential real estate.  I need to repeat this exercise for commercial real estate and hope this post will generate some discussion in that regard.

In my analysis, I initially considered my returns as a percentage of the property value.  Then it dawned on me that my actual growth should be determined by how much of my own skin I have in the game.  In other words my returns are a function of the down payment I put into the property.

I assumed I would be buying properties in the $150K range with 20% down (i.e. $30K).  I planned for a 30 year loan at 6% and positive cash flow with an anticipated holding period of 10 years.  Tax benefits and purchase discounts (e.g. good deals, foreclosures and tax liens) were NOT considered.  I view them as icing on the cake.

Bottom line for me: the business fundamentals of the property must be sound before I lick the icing.

10% is nothing to sneeze at, but when you compare the returns to the amount of money I’d potentially be investing (the down payment), it quickly becomes apparent why real estate investing can be so attractive.

Individual Stocks: When it comes to stock investing, I’m going to stick to the value investing principles made famous by investors such as Warren Buffet and laid out in books like Phil Town’s “Rule #1″.  I will be doing my stock analysis centered on the requirement to make 15-20%.  Also many of the stocks I anticipate investing in will likely pay dividends on the order of 3-5%.  Putting the two together, I think I can possibly gain 18-25% annually with this approach.

Revving the Engine: Simple math here throws out a potential annual return of 68-75%.  Wow!  That’s basically double what Masterson came up with.  I’m not claiming Masterson is wrong, but if I were writing a book, I’d probably low ball the results a bit hoping that most folks would see better than published results.  I’m hopeful that was his approach.

Pulling My Little Red Wagon: If I hook up my growth engine to my little red wagon, I can begin to see how achievable my number really is.  Here I projected my current net worth ($672K) out to where I think it will be on 1/1/10 based upon my recent growth rates, then started running the math on an annual basis at 68% growth.

This of course assumes my entire net worth is fed into the engine.  I can tell you right now, I don’t have the intestinal fortitude to pump it all straight into the machine.  Although it would mean reaching my number in about half the time I’d planned.  That’s a plus!

Another way to look at the numbers is to ask the question, “How much of my net worth do I need to feed the growth engine in order to hit $10M by 1/1/19?”  The answer to that question is 49%.  I can live with that.

My profile then begins to look like:

Conclusions: I can most likely use a combination of real estate and stock investment to reach $10M by 1/1/19.  I should anticipate returns on the order of 30-68% and be ready to commit between 49%-100% of my net worth to this investment strategy.

What do you think of my analysis?

The Transition

Josh’s strategy has been clear from the start – and, with a slight ‘jump’ in Net Worth recently, due to a positive outcome on a trade (a.k.a. bet) and a stake in a pharmaceutical company, he should soon have the capital to do what he wants to do: start a hedge fund of his own. Anybody ready to throw their money in the ring, yet (7MITs aside, due to the 7 Golden Rules)? If so, why? If not, why not?

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At this point in our journey, it seems appropriate to graduate from the foundational principles of Money Making 101 and to immediately enroll in Money Making 201 activities. Similar to sequential classes in school, 201 principles are well rooted in 101 principles, so a strong foundation in Money Making 101 is imperative.

The most important principle I’ve taken away from Money Making 101 is to keep my finances as simple as possible. I’ve determined to use only one credit card, and only for purchases related to my automobile, such as gas, parts and service (I just can’t pass up the 5% cash rebate). All other purchases are to be made with cash or debit card. Another financial amendment starting in June will be automatic deductions from my checking to my brokerage account, this will be the second most important deduction after my tithe.

Speaking of tithing, I experienced a slight increase in my net worth this past month, it currently stands at approximately $450,000.  Obviously this has caused my required compounding growth rate to decrease, but after  exploring the housing options in Westchester County recently, I’ve increased my number to slightly under 9 Mil, leaving my required compounding growth rate around 53% (I guess this is an improvement from 170% not too long ago).  My date remains unchanged at 6 years, 6 months from now.

To achieve 50+% compounded annual growth, I plan to start a hedge fund, possibly within the next year. Once the fund is established, I will consider myself partially retired because trading doesn’t demand much of anything I wouldn’t or couldn’t do if I didn’t have to work at all. As long as I have a computer, internet connection and phone, I could trade from anywhere, and frankly, the strategy I use doesn’t demand much research time. The assets I’m invested in currently have very little risk while potential future increase is large. I expect the managing executives of the company Titan Pharmaceuticals (the company I own a small stake in) to do as they recently described as “maximize the value of our current assets… for our shareholders while minimizing expenses”. The only viable option I see is for the company to be sold to the highest bidder and when the avenue for egress has been offered, I will sell my shares and start the hedge fund.

Just Numbers

Mark discovers that living his “Life’s Purpose” too early can have a financial cost … do you see something a little ironic in this?

What advice can you give Mark?

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I’ve been tracking my numbers using Quicken for a while. I remember using it a lot more a few years ago when I have the 2001 edition. It is more manual but at least I know I need to work on it to keep it updated. Unfortunately, I upgraded to the 2007 version. The conversion didn’t go quite well and I lost some of the reports I used to keep track of my income and expenses. 2007 includes automatic updates which makes me use it lesser and I do lose track on my expenses as we discover below.

How do we compare the usage of Quicken and NetworthIQ?

Although I prefer to use Quicken, it is harder to add notes to it or get involved with other like minded people. I haven’t been leveraging NetworthIQ that much although there are good information among the Questions and Tips.

Over the last year, I have been struggling in terms of aligning my goals towards achieving my number. I seem to do quite well following Money Making 101 and some of its rules, but I haven’t quite make it to Money Making 201 with much success yet. I did experiment with stocks and options trading, some real estate investments and a half-hearted effort to do something online. My main enemy has been time where I am unable concentrate on any one of the investment activities and unable to cope when my current work requires extra effort (working nights and weekends).

Some of them are my own doing where I choose to travel to various destinations and enjoying life. I may have put too much emphasis on  the “enjoy life” part of my life’s purpose.

Let’s go through our current exercise where we focus on our “Income Statement” and “Net Worth Statement”. The reference will be the numbers from my NetworthIQ profile.

Income Statement

My current monthly net income after taxes is about $6,425

I haven’t tracked my expenses in detail for a while even though I’ve been using Quicken and I’m surprised to see some areas where I can easily cut down.

Current Monthly Expenses (average for the last 12 months):

• Housing – $980
• Gifts (gifts for family and friends, mostly family) – $925
• Auto – $267
• Entertainment (been to many concerts, musicals, activities and events) – $266
• Utilities – $256
• Dinner and Lunch outside – $228
• Vacation (low number since I’ve used airline miles for 2 international trips) – $224
• Charity – $191
• Misc (Electronics, Clothes, Insurance, Cash) -  $406

The total is about $3,743.

This indicates a savings of $6,425 – $3,743 = $2682

The $2682 goes into the 401K ($891), ESPP ($1248), HSA ($162) and building cash reserves or fund investment activities ($381).

My income and expenses will definitely change in the near future since the above numbers does not include my new residence and potential rental income. These numbers are not available yet but the Net Worth Statement below did take my newly acquired primary residence into account.

Net Worth Statement

Using my NetworthIQ profile, you can see that my current assets are:

• Cash     $21,016
• Stocks     $22,387
• Retirement     $78,781
• Home     $209,900
• Other Real Estate     $141,300
• Cars     $8,500
• Business accounts (savings, checking, investments) $4,500

The total is $486,384.

However, the liabilities are:

• Home Mortgage(s)     $183,420
• Other Mortgage(s)     $108,966

Total liabilities: $292,386.

Current Net Worth: $486,384 – $292,386 = $193,998

Well, it didn’t really take very long, but my FIRST sales site is up and running … feel free to visit, and sign up to receive my 2nd eBook for FREE (don’t buy the 1st eBook mentioned in the ‘sales letter’ … it’s also available FREE to all of my readers, here).

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Ryan also has an altruistic Purpose that mainly requires time. But, he also recognizes the need for philanthropy – not to mention a little personal ‘financial maintenance’ (read: debt reduction) …

In one of the most effective and enlightening self-improvement exercises I’ve ever done, I’ve calculated my “number” and put a lot of thought and research into determining what the things I need to achieve my goals and life purpose.  Now separating what things are needed for my goals, and what is necessary for achieving my life purpose is proving to be a little bit more dicey.  With my purpose being to “build relationships that build dreams”, I suppose I technically could do that now, in my spare time.  The biggest problem with that is, with two small kids and a lot of hours on my “day job”, spare time, is a lacking resource.  So, to truly effect the lives of others in a major positive way, I feel I need to replace my income and be debt free (~$225,000/year and a $660,000 mortgage).  However, I can subtract about $45,000/year because I won’t have a mortgage payment.

This would certainly give me a lot more time to devote to helping others, but it would be a lot easier to get things moving on the philanthropy front if I had some funding to devote to giving people a hand up.  I think $5000/ month ($60,000/ year) is a good start and if more is needed, fund raisers and other tactics can be employed at that time.

So it appears that, setting aside the dreams (some materialistic, some not) of my family and myself for now, to achieve the purpose of building dreams (for others), I will need (approximately and minimally), $5,460,000 in today’s money.

($225,000 – $45,000 + $60,000) * 20 + $660,000

… standing with your back against the wall

I had thought my “rear deck” speech was ready to go. I had worked on it previously in another stage of this experiment and was happy with what I came up with.. The problem is, my life changed direction in the few weeks time that passed between writing it the first time and being asked to describe my Life’s Purpose and rear deck speech as one of the 7 in training. And so… I started over, to redefine my purpose, and it hasn’t been an easy task! It felt a bit like that carnival ride – you know the one that you climb into this space ship-like-globe and stand with your back against the wall? When the ride begins, the entire thing begins spinning, and as it reaches top speed, the floor drops out from underneath you (but the speed of spinning keeps you held plastered against the wall and no one falls with the floor!) Only… for me, in my real life ride, I did start to fall down with the floor as it was ripped out from underneath me – lucky for me though, I realized what was happening and climbed back up the side and took my place, ready to exit the ride and move forward.

It’s easy to say all that I do not want in life. I made the decision right out of college 6 years ago that I didn’t want to work for someone else – even though I didn’t realize WHY I was making that decision at the time. It was disguised by having my first son right out of college and thinking I chose the self-employment route in order to have more time with him. (This is true of course, I am pleased my decision allowed me to be home with him and raise him and home again when his brother was born three years later, but I think it was more than wanting to be a mom at home.) I can’t function in the constraints of a cubicle and rules established by someone else, rules that can’t be challenged. My one “real” job was in a government office. I worked full time for almost three years while in college, and it was a place where ideas were not welcomed. You did what the procedure manual described, exactly how it was described, and there was no reason to ever make any changes to procedure! This is not an environment I could live out my life’s purpose in, day after day.

What I see as my life’s purpose hasn’t changed much due to the drastic redirection of my life. The purpose, after all- is why I’m here, why I choose to live my life the way I do, but the way I would describe this life to my grandchildren sixty or seventy years from now in the rear deck speech has changed.

After considering what I don’t want, and trying to pinpoint the things in life that I do want to experience or have, I have come to the conclusion that my life’s purpose is not much different than the others I’ve been reading here. (Maybe that is why we’re all here together? Because it takes certain personalities to actually live their purpose??) Above all, I want to enjoy quality time with family and friends – and by quality, I mean experiencing life together and without the constraints our finances typically place on us. For instance, I would love to travel with my children as they get older – and experience different cultures and just see and do things we can’t do staying in one place all the time; financial resources are required to make that happen. So often, families fall into the trap of rushing around to get to school and work, rushing around afterwards to get homework and family chores done, and enjoy maybe one or two vacations together each year if they’re lucky because there isn’t time or money to do more… and while they may be in it together- it’s not experiencing all there is to experience in life is it?

For me, my purpose in life is to have that quality time with family and friends, and the financial resources to enjoy life to it’s full capacity (traveling, entertainment, the time to help others realize the same). The financial resources that make it possible to live out this purpose would have to be gained through projects and work that mean something to me, that make a difference in more lives than just my own. I think I’ve already started one possibility of reaching that goal through my writing program, and am excited to realize I could be very close to achieving my dreams. Above all, I feel the need to make decisions in life that are based on more than just money – which means the money must be there and available so that it stops preventing me from taking action.

To my grandchildren… sixty or seventy years from now, I’d love to be able to pull them into my lap and tell them the story of how grandma’s drive and motivation made it possible for them to live life the way they are living it. I’m not even talking about the possessions they might have as a result of my reaching my “magic number” – but how they have the time and ability to experience life with their parents and friends, the time and desire to help out in their communities and volunteering… and how they are learning about other cultures by visiting them, rather than out of books or from television. I’d love to teach them that having passion and determination opens doors to whatever it is they need to reach in their own lives- and I’d love to be teaching them this based on my real life experience. Do what I do, not just what I say.

Photo credit: MumbleyJoe

In Search of Mark’s Life Purpose

I’ve done similar exercises before like setting SMART goals, creating life mission and vision – but none of them took up a whole month to complete. I’ve never been this serious, taking time to go through the exercises. It was a rewarding experience – I’ve learned a lot about … myself!

Now is a great time to revisit my notes. I find some of my answers rather interesting. For example, question 4 from “Let’s get started!” reads, “What do you dream about? What do you daydream about?”. I don’t day dream a lot but I wrote this down:

“I dream about being in interesting places, being able to acquire vast amount of knowledge and learning new things.

I daydream about being able to time travel and to relive the experiences of different time periods.”

The second part might be a little difficult. I don’t think I can find a time machine – but it does show that I love to travel, experience different things, learning, and discover new things. I think of myself like a Maven (hopefully) as described in Malcolm Gladwell’s Tipping Point.

One thing that surprises me is that money is not one of the things that are important to me! The most important things to me are to be happy, to enjoy good relationships, to be able to contribute and to learn anything I want. Right now, for some reason, I want to be able to play Beethoven’s Moonlight Sonata 3rd Movement which requires a lot of time to learn (I’m not up to that level yet). That means I need to create more time for myself and others which in turn requires a lot more money.

I’ve read somewhere (probably from the Cashflow 101 board game) that “Money is not the most important thing in life, but it does seem to affect everything that is important”.

The Rear Deck Speech

It is hard to imagine myself being a bearded old man talking to young kids. How can we compete for attention these days with so many distractions? I did describe the setting where it is comfortable and informal. There are not a whole lot going on which gives me a chance to say something.

I don’t have the entire speech word for word but I did lay out the contents. It is definitely going to be about my life experiences. I did write about overcoming setbacks in my early years and how persistence and optimism helped me overcame it. I did tell these young kids about not being afraid to make mistakes as there is always something to learn from them. The best is to make them while we are young. Always view challenges as opportunities. There are some blank areas which will be eventually filled with experiences in this grand experiment.

My Life’s Purpose

The cumulative exercises from the beginning till “A little Self-Myth Busting” help formed my life’s purpose:

“To be a good steward of the resources I have, enjoy good relationships with family and friends, and enjoy life!”

It is simple! I know I’m not going to live forever and the resources that I have will be passed on when the time comes. However, I do want to make sure that the resources are put into good use – helping someone get a good education, benefiting family and friends but not spoiling them.

Travel did not turn up in my life’s purpose explicitly but my family and friends are around the globe. To maintain good relationships, I think I will need to travel a lot

It is so important to enjoy life – it has a lot to give!

Mark is traveling again. Where?

Ryan’s Life Purpose

Ryan is the first cab off the rank (well done!) by posting about his Life’s Purpose … feel free to weigh in (ask questions; make a comment, or whatnot) … I know that I have a question or two … for example, Ryan: what do you think it will take to live this kind of life (in time, and money terms) … in a general sort of way – we’ll get to the specifics soon enough?

Why are you here?  An easy enough question to answer when you’re at Burger King, but slightly more complicated when we’re discussing your entire reason for taking up space on this planet.  For the lucky few, the answer is incredibly obvious and found early in life.  For the rest of us it takes some serious soul searching and is constantly a work in progress.  

I was not born with the super human abilities of a Michael Phelps or the acting abilities of a Robert Deniro, but am just “pretty good” at a lot of different things.  The proverbial jack of all trades, master of none.  So for me to figure out what I am here (on earth) to do, I asked myself what I am passionate about, what drives me.

Looking back on my life thus far, and my many different jobs, three simple things have remained constant.  I’m a people person, and I like to solve problems and be creative.  I have utilized these interests in my professional life primarily by building relationships with people and learning about their problems or wants and finding solutions for them to fix/fill those problems/wants (some of you might know this process as sales!).  While this has been fulfilling to a degree, I do not currently feel as though I am utilizing my talents to the best of my ability, but believe that I can develop these skills to effect real change (hopefully positive!).

So that leads me to My Life Purpose, which is to build relationships that build dreams.  I need to help people in life changing ways.  I feel as though I can build the kind of relationships that will enable me to build dreams.  My dreams and the dreams of others.  Not with simple hand outs, but by being creative to help them help themselves, and each other (through things like networking).  My dreams include being financially able to have the resources and time to devote to others while still providing a good life for my family.

This purpose statement certainly resonates with me, but I do feel like it lacks clarity in my mind.  In other words, I’m not exactly sure how I’m going to do it, but I’m nearly certain it’s what I want to do.

When it is all said and done, and my next of kin are discussing my journey through life, my hope is that they see me first as a loving and caring father, grandfather, and husband.  Then as a good stewart of my talents and resources by striving to constantly learn and better myself while always helping those less fortunate than me.