This unique Guided Learning Experience is about wealth … real wealth.

But, what does that mean? We’ll be working on that together … very soon.

First, let me ask you a question:

Exactly, how rich is ‘rich’?

It might surprise you to learn that there is no universally accepted answer to this question … but, in our first lesson (called a Key Learning Experience, because they are mostly interactive), you will have a chance to tell me how much money you are aiming for.

And, I will make a promise, whatever ‘number’ you have in your mind today, be it $1  million, $5 million, or even $50 million:

Within just a couple of weeks from today your Number will change!

In just a couple of days, I will share my own $7 million 7 years journey, but I didn’t always have that Number ($7 million) in mind … in fact, until I began that 7 year journey, I didn’t have any number in mind … no wonder I was still $30k in debt.

But, more on that later.

For today, let me explain why there is no universally-accepted Number:

Recently, a US-based research consultancy asked its wealthy clients how much money they thought people needed in order to be considered ‘rich’.

The problem is that they asked people who were already Rich!

So, most wealthy people said $5 million net worth, but some said as much as $25 million.

This large variation was related to how wealthy the person being asked the question was … the more they have, the more they spend, so the more they believe it takes to be ‘rich’.

Only one in five said $1 million, which is what many people just starting on the road to wealth believe means ‘rich’ … when you get to $1M tell me if you are ready to retire (I’m quite certain that the answer will be NO!).

I think the ‘number’ is somewhere between $100 million and $1 billion …

… as one Billionaire said recently, after his company stocks grew five-fold in less than 12 months moving him from $1 Billion to $5 Billion net worth: “once you get past the first Billion the rest doesn’t matter.

By my own standards, ‘only’ having made $7 million in 7 years (starting in 1998 being $30k in debt), I am not at all rich.

But, I am wealthy!

I am wealthy because I can afford to live my ideal lifestyle – the lifestyle that I am living now – for the rest of my life … without needing to work!

Now, we aren’t slouches (nice house in a great suburb, the ‘right’ cars, schools, vacations, etc.) but we have no helicopters or Lear Jets … but, we aren’t rich, and I have calculated that my desired lifestyle, while lavish doesn’t require me to be $100 million to $1 billion ‘rich’.

And, I am pretty sure, neither will yours.

So, to determine when you are ‘rich’  – or, at least wealthy – you first need to determine your Number:

Your Number is the amount of money that you need to have ‘in the bank’ (actually in Passive Investments : bank accounts, investment properties, stock market … anything that makes YOU money even while you are asleep) to produce enough income for you to live your current (or desired) lifestyle for the rest of your life (which means, the amount has to be indexed for inflation).

I’ll show you how to find your Number in this first module of the $7 Million 7 Year Wealth System. And, in the remaining modules, I’ll show you how to get there … and, stay there!

Open 1 clinic, 2 clinics, or 3+ clinics? What would YOU do? These are non-trivial questions: make the wrong move and you can defeat any chance that you had to reach your Number.  So, how NOT to leave this critical decision to chance? Well, Scott ‘benefited’ from his turn ‘under the spotlight‘ so, we already have some insight as to where he is heading with all of this.

Now, you can read Scott’s latest thinking … what do you think? And, can you help Scott ‘only’ get 12% compounded on his money?

________________

Ok, now that i’ve laid it all on the table about my plans and strategy to get to my number of 4 million in 9 years, I’ll just summarize a few things.

First, I’ve realized that opening clinic after clinic after clinic in multiple succession is not necessarily an optimum plan to get me to my number faster. Running the numbers on opening 3 clinics as fast as reasonably possible does not produce a higher number within 9 years than opening 2. The reason being, is that takes capital, to the tune of around 100 grand to get an office up and running and cashflowing positive, not to mention it takes valuable time and a big drop in salary while it’s developing.

If i’m moving things along at warp speed, I can cashflow positive an office in 6-8 months, but looking at the numbers, this sudden drop of 100k to open an office, coupled with the fact that I have to hire a new associate PRIOR to starting up the next office, spend at least 6 months minimum training them to run an office by themselves before I can turn them loose on their own at my old office and they can be reasonably capable, pay them a fair salary during this training period (while they aren’t producing a dime of income and actually dropping the clinic performance, due to patient lack of trust in a new doc a well as my focus being so much on the new doc and less on running the practice), continuing to pay them and increasing salary while i’m at the “new” office building(this drops my salary from the previous office dramatically and remember, i’m not making anything on the new one until it cashflows positive) etc…etc…

NOW, if my goal was to work for 12,15, or even 20 yrs, you would see that NUMBER double and even triple on the backend. Once you own 3 clinics and they all have well trained docs, all cashflowing very well and everyone is happy, it’s easy to have cashflow to the tune of 50k per month to invest. This builds quite a Number very fast, but this process takes a few years before the plane even gets off the runway. It’s a helluva 15-20 years plan for major wealth, just not a good 7-10 year plan.

Now double checking, triple checking and quadruple checking my math says that if I can achieve a 12% gain on my cashflow, while keeping my lifestyle the same, I can accumulate 3.2 million in roughly 9 years by continuing out my contract over these next 29 or so months, then getting an associate asap and moving on with the next clinic startup and just sticking with 2 clinics. At that time, I can sell both clinics for roughly 300k each and when adding those funds to my other assets (home equity at that time, rental property equity, etc…) that will put me right around 4 million in 9 years.

Now, I have to make sure I can produce 12% per compounding with this cashflow…..the next question is, how do I get this rate of growth on my money? Stock market coming out of a recession? Continuing to add rental properties and hopefully great foreclosure buys to my portfolio? Steadily purchasing tax lien certificates in states with a high return rate? Buying the commercial properties that these 2 offices reside in? A combination of all the above?

Also, just for kicks, I ran the numbers on just owning the one clinic the entire 9 years and not even opening a second office, keeping our lifestyle the same and investing all the cashflow. Interestingly, it produces very close to 3 million in those 9 years if I can get that same 12% return. Now think about that one for a minute. 2 clinics “only” produces 200-300k more over that 9 years (plus the 300k value of the second clinic itself if it were to be sold, so I guess i’m looking at more like a 500-600k difference in the end at 9 years) so you can see from the above example, the multiple clinic ownership REALLY needs time to take off and produce meaningful results. Definitely not a get rich, really quick plan, but more of a “get REALLY rich in 20 yrs” plan.

Any suggestions?

Best ways to almost guarantee at least a 12% return on your money?

As we head into the July 4th holiday weekend it’s an opportune time [AJC: did you think I was just going to let you sit on your deck watching the fireworks when there's serious millionaire-making to be done?! ] to consider your journey: assessing whether the ad that you have placed on Craigs List will actually be able to do it’s intended job …

… will it take you to your Number on (or before) your required Date? Will it do the job?

Note: You need to be a Premium Member to view this content:

Good Luck!

This is one of our last structured exercises …

… soon, our paths to our Number will begin to diverge and we won’t be able to neatly keep every one of the 7 Millionaires … In Training! – and, our readers – on exactly the same path.

Right now, though, we have one of the most important MM201 exercises of all: Assessing whether the ‘ad’ that you have placed on Craigs List will actually be able to do its intended job!

Will your selected Growth Engine actually have sufficient ‘grunt’ to carry you to your Number on (or before) your required Date?

Will it do the job?

So, you have chosen business, real-estate, stocks or some combination of all (for most of our MITs this is true) as the vehicle to carry you to your Number, and you chose it based upon:

a) a calculation of your required annual compound growth rate, and

But, is having faith in Michael’s guidelines good enough for YOU … do you want to put your entire future in the hands of somebody else, or do you want to come to your own conclusions?

Even if you are a person of immense faith in others (is naïveté a better word?) as am I, are you really guaranteed a, say, 50%+ compound growth rate if you choose to start a business, as Michael Masterson’s table suggests?

Of course not! Let me give you an example:

In 1998, when I undertook as similar analysis, I had already decided that my little finance company was incapable of growing enough to reach my Number / Date … it wasn’t the Craig’s List ad that I needed to run!

So that left my fledgling call-center business to do the job; but, at that time it was growing VERY slowly with just 5 customers in 5 years … and, was losing $5k a month. Yet, something told me that this was the place to start looking for my Growth Engine …

…. here are the steps I took in order to confirm my suspicions:

i) Find my Number / Date: this was then $5 Million in 5 Years

ii) Decide where the bulk of my Number was going to come from: selling my business in (target Date) 2003 for (target Number) $5 million

iii) Decide what income/profit the business would need to generate in order to be ‘worth’ that much to a typical buyer: well if these types of businesses sell for 3 to 4 times annual earnings, then my business would need to generate, say, $1.5 million net profit each year by the time 2003 rolls around.

Note: other businesses may have different multiples; e.g. doctors’ surgeries might be based upon a multiple of sales; RE might be based on a ‘capitalization rate’ of, say, 7% for commercial, etc.

iv) Decide if/how my business could get from -($5,000 x 12) to +$1.5 mill. in just 5 years: in my case, I realized that my business would need to have almost every single large corporation (both private and public) in order to reach my Number!

So, I ran some ‘what if’ scenarios with a spreadsheet and realized that if I could change my business model to include a number of new lines of business, not only could I reach my Number, but I would only need to be exactly 1/11th of the size of the public company whose annual report I modeled my own numbers on.

 Unfortunately, soon after, the government changes some rules that would have required millions of dollars in capitals security bonds to secure the necessary licenses for the type of business that I wanted to move into, to it was back to the drawing board for me!

v) Once I realized that the business/investment could NOT go from i) to iv) satisfactorily, then NO PROBLEM (well, after a few sleepless nights and a lot of soul searching): I wrote a NEW Craig’s List ad and went back to Step (i) …

You see, I ran some new ‘what if’ scenarios on my spreadsheet and realized that if I could simply change my existing business model to assume major overseas expansion … and, the numbers worked!

At least on the spreadsheet …

… I quickly realized that finding the capital to fund the expansion (and open operations centers in multiple countries) would also require a lot of capital that I didn’t have, but I ‘solved’ that problem (at least, on paper) with the idea of setting up each overseas operation as a separate joint-venture!

From that point on, the rest was ‘simply’ about the execution …

Now, what about you? Can your Craig’s List ad take you to your Number? If not, what are you going to do about it?

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We’re not ‘playing in the sandpit’ any more

As Josh found out I like to put our 7 Millionaires … In Training! under the virtual ‘spotlight’ when they have an issue, question or decision of note. It doesn’t mean that there’s anything wrong, it just might mean an opportunity to examine their current strategy with all of our readers … you never know where the next Million Dollar Breakthrough is going to come from!

___________________

Scott is busy working on our next exercise [AJC: watch for more details in an upcoming post!] and realizes that he has reached a bit of a fork in the road:

I’ve been putting some numbers to the test the past couple of days. It’s funny, I had began getting elated because I felt like I would be able to easily get to my number a few years earlier at my current growth rate, but as i’m crunching the numbers on my plans and everything, i’m finding that I’ll ‘just barely’ arrive at my number in about 8.5 to 9 years = the exact amount of time left that I determined in my original 10 year plan, lol.

‘Barely’ scares me a little because – besides the obvious: Scott makes his exact Number of his exact Date [AJC: sure ... and, I'm a balding hippopotamus ], Scott is likely to:

- Overshoot his Number by his Date … yay!

- Undershoot his Number or delay his Date … potential disaster, IF Scott’s Number/Date is critical.

In other words the benefit of overshoot is far outweighed by the potential that he simply won’t make his Number by his Date … so, we have to do a little more work. I asked Scott to clarify, according to his current plans:

1. How many practices does he need? And, according to what opening schedule?

2. Did Scott also assume owning the properties and build in some allowance there?

Scott said:

I just ran the numbers again for:

Owning 2 clinics, the first one outright in 30 months of course and then getting another one off the ground in approximately 1 year after that by using 100k of my ‘war chest’ money to open the office. I’ll have around 150k ‘left’ in that war chest after using the 100k to open clinic #2.

I also factored in keeping my current rental property, getting it refinanced to get rid of the interest only scam mortgage that I currently have on it asap(jeez, I was so financial dumb when I bought that house) and factoring in an appreciation rate of 4% per year(this may be pushing it too due to the current market, but it is in one of the most sought after parts of the city for families), plus factoring in the $500.00 per month extra cash flow from that property earned to go into the war chest.

Factoring in purchasing both of the commercial properties that both offices operate in at estimated values of 300k with a 25% down payment and a 10 year mortgage term each and selling them at the end after enjoying at 6% per year increase in value for a few years(once again, this may be pushing it!).

I also factored in the cash savings along this trip to be getting 12%(dunno if this is realistic or not, but if we come out of a recession, I would think I could at least get that kind of a return on my accumulating cash by investing in a few good stocks??)

This took me to right at 4 million in about 9 years from now if I sell the practices off for their fair market values(around 300k each), sell the commercial properties that they sit on for a reasonable price, taking into account equity gained from regular mortgage payments and estimating the 6% per year appreciation, selling of the rental property and gaining a 4% appreciation each year from this year forward, taking into account equity gained from regular mortgage payments applied to that mortgage and adding this all to my number, AND on top of all this, getting 12% on the cash flow from these 2 businesses along the way by investing in stocks after the ‘war chest’ money was used to get the second clinic off the ground and down payments were made on the 2 commercial properties to acquire them.

So, here’s the picture: again, it’s very rosy in that just owning a couple of nice medical practices and plowing the profits into RE can produce an incredible Number, like $4 million in as little as 8 to 10 years …

… but, there are some risks:

- Scott just ‘barely’ makes his Number according to this plan, and

- there are some assumptions, particularly around the returns from stocks, that bother me.

In fact, I’m wondering – if Scott reran the numbers assuming just, say, 8.5% return on cash invested in stocks, and again at, say, just 4% (assuming the cash just sits in the bank) as a ‘sensitivity test’ … would that change the outcome dramatically? If Scott’s model is highly dependent on this return, then he really has a stock strategy to get to his Number, and that’s pretty speculative!

Now, the final piece of information that I need to share before turning this over to you, is that Scott COULD offer to buy his partner out of his existing practice now … Scott can’t be certain if his partner would sell or not, and for how much, but he’s estimating about $200k. This would:

a) pretty much eat up all of Scott’s savings – and then some – for the next couple fo years or so – hence, ‘kill’ Scott’s stock investment strategy, but

b) potentially allow him to open up his second practice now rather than wait for 30 months before the practice would otherwise just be given to him (saving him $200k in the process).

Now, Scott’s busy crunching some numbers on all of these alternatives, but what advice can you give him? How/where should Scott invest (business? RE? Stocks? All? None of the above?)?

Most importantly, which fork in the road should he take?

The Exciting Adventure Ahead

Now is the time to get the engines going and steer in the right direction toward our Number by our Date.  Taking a look back at my notes and goals reveals that we’ll need a bit over 4 million by 2018 to live our life’s purpose and according to our required annual compound growth rate, we’ll need to average right at around 38% moving forward. I firmly believe in all of my heart that this is doable for us over the next 9 years. Here we are almost 1 year into this grand experiment and we’ve already far exceeded that compound growth rate for the first year(I believe last year when we first estimated this, it was closer to 40% required, so we are moving along nicely).  We had a 67% growth rate for the previous year. I would really LOVE to reach this number well before 2018. If we can shave a few years off, by all means, i’ll do what’s necessary!

According to the table by Micheal Masterson, http://7m7y.com/2008/11/13/draft-how-high-is-your-mountain/, we’ll need a combination of real estate and stocks together with small businesses as our vehicle to get that compound growth rate.

After thorough discussion on this forum and throughout this experiment, it appears that the best order of those modalities would be for me to start up additional businesses(in my case, clinics) and use the cash flow from these small businesses to purchase real estate(possibly starting with the commercial properties that these practices reside in) and stocks.

I believe that now is a better time than ever to make this all happen since not only do I have terrific experience in running a successful practice, but also in training associate doctors to actually run a new practice startup to possibly duplicate my own results.  Health care always does well in the midst of a recession(lots of stress as well as odd jobs being performed for people to keep paying the bills, this adds up to health problems and injuries). So getting a new practice up and going to successful numbers is in good favor, purchasing real estate is terrific right now due to the bursting bubble, low prices and dirt cheap financing(Phil Town also suggests that commercial real estate will continue to drop in prices as business failures flatten out) so that’s a check, then hopefully the cash flow will be occuring in perfect timing as we crawl out of a recession and all those wonderful, undervalued companies(and their dirt cheap stocks) begin to move back up in stock prices.

Anyway, this is my prediction or delusion! lol. Now my only delima in this whole situation is this; I’m currently under contract for the next 30 months to run this clinic I currently practice in. The deal is, 50% ownership of this practice was given to me by my previous employer(who has owned and operated multiple clinics for many years) and this 50% ownership was to span 3 1/2 years, at which time the other 50% would be given to me(for all my previous service). In essence, I worked for him as an associate for 4 years, made a good base salary, plus good bonuses(which my wife and I used along our Money Making 101 journey) then I made the move to the new clinic that was just getting going on it’s numbers and the deal began. The 3 1/2 year working span at 50% ownership at this new office was pretty much my payment for the other 50%. Well, it’s been a year that i’ve been there, so 30 months are left and I don’t want to do anything to jeopardize this deal, I want complete ownership of this clinic in 30 months, but at the same time, I feel that my hands are tied during this time period and it’s nearly impossible for me to open another clinic until i’m free of this deal.

If I owned this clinic completely at the moment, this would all be simple; I hire an associate dr fresh out of school, take them in as my padawan for around 6 months and train them pretty intensly on how to run this practice as I have and how to duplicate my results(as well as have a nice period where we are both working in this clinic, so that existing patients get comfortable with this doctor), then step away from this clinic, let this doc run the show for a fair salary and attractive performance-based bonus system, plus full benefits and I go and start up practice #2 and repeat! (Actually, the moment I have practice number 2 up and cash flowing positive and ready to hand over to trained associate #2, I could techically step away and begin to live my life’s purpose because we will have superceeded our “monthly number” in passive income, ala what such authors as Robert Kiyosaki, T. Harv Eker and Timothy Ferris teach =  Get to your monthly number in passive income and then you are ‘out of the rat race’ or you have ‘won the money game’ or you are on a ’4-hour work week’.)

The interesting thing about this idea would be that I could still keep a “foot in the door” sort of speak to still practice a bit(I do love helping patients, I just don’t like the daily grind and the ‘have to go to work’ situation or the daily dealings with insurance, so being available for occasional associate dr requested days off or 1-2 time per year vacation weeks for them or a bit of part time coaching would actually be kind of nice and fun to get to do). This idea would actually set us free MUCH faster and my passive income from these 2 offices would FAR exceed the income that getting to our NUMBER would provide. (If these 2 doctors generated only 75% of what I currently generate on average in practice and if I paid them a generous 6 figure income that was even more than I made as an associate plus full benefits for them and their families, my personal passive income total from these 2 offices added up would still be in the 20-25k per month range while my NUMBER would provide a little over 16k per month in income). Needless to say, my wife and I would still live on the 16k per month via our life’s purpose and would invest the extra money to grow our portfolio at the same time.

I guess i’ve sort of parlayed an interesting set of questions and possibilities for me in this post and where I am right now. Any suggestions?

Anyhow, my businesses might look like this in an ad:

Wanted: A very successfully run healthcare practice, specializing in spinal rehabilitation, exercise, massage therapy as well as other holistic services such as nutritional advice and expertise. Professionally run to the highest of clinical standards with a well-trained, goal-oriented staff, necessary equipment and supplies. Low monthly overhead, time-proven practice and business design system already in place, extremely high cash-flow and yearly profit margins, ongoing community marketing programs in place, all in a state and local community that harbors terrific heath insurance coverage for these services.  Totally turn-key, fully developed business design, everything from new employee training techniques, to patient marketing, to patient scheduling, to treatment programs and proven care systems are all in place and can be duplicated, expanded upon and repeated in additional clinic ventures and startups time and again. The commercial property that the clinic resides in may be purchased at reasonably assessed property value and additional rents may be collected by adjoining business that resides in the same building, once building is purchased.

After much ado, we are back with the newly upgraded, bigger, better faster 7m7y.com: home of the 7 Millionaires … In Training! ‘grand experiment’ in millionaire-making

You may not notice much change, but ‘under the covers’ is a small block supercharged chevy engine in place of the 4 cylinder Corolla engine that we had in place before …

Let me know what you think!

Adrian.

Liftoff!

Well, as I mentioned before, we actually lifted off before we reached the launch pad …. ooops

But, in personal finance – thus, this ‘grand experiment’ – we’ll actually be doing a lot of back-tracking even as we move forward at great (I hope!) speed …

… in fact, some horses have jumped right out of the gate so fast, we’ve had to gently coax them into slowing down, just a tad

Horses and rocket ships? Now there’s a broken analogy, but it’s all in a good cause, because:

As promised, we are now moving into MM201

For at least a few of the 7 Millionaires … In Training! the past few months has seen a confirmation that their MM101 strategies are sound (but, I don’t know any who shouldn’t have made at least a slight shift in their thinking?), but for others, change is required.

I’m retired at 49 [AJC: and, I intend to stay at this age for my 'blogging persona', much like a perpetually 10 y.o. Bart Simpson] … if I had this advice in front of me when I started out (probably in my mid- to late-20′s would have been the right-frame-of-mind time for me), I would be retired before 35 and be living my Life’s Purpose already …

…. it really is just a 7 year project IMHO, give or take a little

Some of the keys that we have learned already are to:

1. Set a solid base (bankroll management, respect for money, delayed gratification) without going over the top (it’s just not necessary to live totally ‘frugally’)

2. Have a very clear understanding of the ‘why’ (your Life’s Purpose), the ‘what’ (your Number), and the ‘when’ (your Date)

3. Select the right ‘how’ i.e the MM201 ‘tool/s’ that are most appropriate for YOU to get YOU there

… the ‘who’ is pretty straightforward: it’s only YOU who can make this happen!

Under the spotlight: Josh

I’m starting a new ‘occasional series’ where we put one of our 7 Millionaires … In Training! – or, any other reader – under the spotlight when there is an interesting or unusual aspect of their journey towards their Number / Date that needs to be discussed.

Josh is the lucky first participant, as a result of some discussion that we have had online (with this post) and via e-mail (that I will summarize below) …

… this is designed as a discussion – Josh and I are looking for YOUR thoughts!

___________________________

I told Josh (via e-mail):

Listen, you’re keeping me up at night … and, believe me, this project isn’t usually what does that! So, here’s my concern:

Professional poker players KNOW that they need to manage their bankroll carefully; this means:

- Not risking more than 15% of their bankroll in any one session
- Breaking up their ‘windfall’ winnings in a similar manner to the 1/3 x 3 method that I outlined for you in that post.

Note: if your income comes from external sources you can ‘fiddle’ this a bit e.g. to make it 50/50 passive v trading or even 1/3 passive and allocate fully 1/3 x 2 to trading. Also, I’m not here to tell you how much of your trading account to risk on one ‘bet’ …. if you want to follow your system for 100% of the trading account in one ‘hit’, go for it.

But, if you DON’T come up with a better bankroll mgt ‘system’ than Bet It All, you will have problems later; look, this is MM101 For Traders and if you don’t make the habits now when you DON’T need them, you definitely won’t have the habits when you DO need them!

So, I’ve got some ‘special homework’ for you, Josh:

1. Buy/Read that Jesse Livermore book (you’ll love it, anyway) … esp. for how high he ‘flew’ and how far he eventually crashed. You have to KNOW this will happen to you one day if you don’t do what’s necessary NOW: http://www.amazon.com/Jesse-Livermore-Worlds-Greatest-Trader/dp/0471023264

2. Come up with a ‘bankroll management system’ that will work for you under all circumstances (i.e. now when Josh = No Commitments and later when Josh = mortgage, school fees, family commitments, etc., etc.) … and, I don’t want to hear “bet it all now so that I have a LOT of money to split up more wisely later” One system for all circumstances!

3. Think about what/how you will deal with the ‘passive investment account’; read this series of posts CAREFULLY:

http://7million7years.com/2008/09/08/if-its-not-passive-its-active/

http://7million7years.com/2008/09/09/how-to-build-a-perpetual-money-machine/

http://7million7years.com/2008/09/12/the-perpetual-money-machine-begins-to-wind-itself-up/

http://7million7years.com/2008/11/06/your-perpetual-money-machine-wont-start/

I’m happy to bounce ideas around, but this is your ‘homework’ …  and, it will help me sleep better if you come up with a GREAT plan – one that you, hopefully, actually intend to keep to

Josh responded with:

[I] hear what your saying, basically discipline myself now, so when I have a lot of money, it won’t be an issue (is this what your saying?).

I agree in theory, and in 95% of practice, but right now it seems foolish to have cash sitting on the sidelines in a sub-par investment when it could be really working, because blue chip or good MLP dividend stocks aren’t going to help me GET to my number, but will help me maintain it. And right now I’m still not there.

This is my plan. Lets assume I have 500,000 now. The minimum I would like to start a hedge fund with is 500,000, but  I would also like to purchase an apartment soon which costs between 750,000-1.2mill, the purchase of the apartment is important because I would like to get married soon (six months). So I’m thinking….

Once I have the apartment = 1.2 mill (worst case) I can start the hedge fund = 500,000 Lets just round up to 2 million dollars.

Once I have the apartment + the 500,000, I can understand dividing the cash into separate investment strategies to minimize risk at that point because there’s nothing to rush for, since I’m basically retired at that point anyway.

Also I plan to break the 20% rule, and own my house free and clear. This stems back to basic biblical principles of the borrower being servant to the lender. Let me know your thoughts

BTW: Josh also says that his “closing value of assets under management for today is $477,000″, which is quite a sum for a young man …… to build from and protect

____________

Josh and I would love to hear your thoughts

In Review

If Scott achieves the same compound growth rate over just the next 12 months that he says that he has achieved over the past four years, he’ll reach his Number in less than a year and be almost twice as rich as Warren Buffett in just 4 more years! That’s the power of compounding …. of course, you need to fuel up the tanks with rocket fuel to reach those heights so the same tools that worked before (saving, saving, saving … with some high income thrown in for good measure) have a limit that is quickly reached … in other words, Scott’s annual compound growth rate will start to slow down (in fact, it’s already a ‘paltry’ 67%), unless he adds something with a lot more octane to the mix.

In fact, Scott is already building up his “‘war chest’ to use for business startups, purchasing stocks and real estate” … any suggestions?

____________________

Well, here’s another brief review of my journey to financial freedom so far.  I’ve gotten a lot out of Money Making 101, or more specifically, the exercises have driven home valuable lessons that I learned before becoming one of the 7 MIT from reading books by various famous finance authors, taking seminars on finance and wealth building, as well as the personal punishment that I usually put on myself to be financially responsible, lol.

I don’t think there’s anything that I need to change, everything is moving along as I had planned for it to. We have no consumer debt, no car payments, no personal loans. The biggest sin on our list financially is my student loan, which is fixed at 2.85%, so for obvious reasons, we are simply making the normal minimal payments on that loan, so we can maximize our required annual compound growth rate. We have actually been saving 50% of our take home, net income.

Our number is still pretty much the same, 4 million in 10 years(of which there are 9 years left!) and our required annual compound growth rate is 40% which can be met with a combination of small businesses, real estate and some stocks. I calculated that when we actually started 4 years ago, we had a net worth of NEGATIVE -$225,000.00 and today our networth should reach $200,000.00 by next month(or pretty darn close) which means that over the last 4 years, we have had a growth rate of over 2450%. Now of course it may not necessarily keep up that kind of pace (but who knows!).

Looking at the last 12 months, we have grown 66.67%, so it looks like we are moving in the right direction and with some of the Money Making 201 plans that I have, we will reach our number far sooner than our originally planned date in 2018, or overshoot our number by a good margin. The main goal this year for us is to stock pile as much cash in our ‘war chest’ as possible to use for business startups, purchasing stocks and real estate.

We have saved over 40k in cash so far this year so our current strategy is to fund an emergency fund of around 15k into the rental property savings account to be used as a buffer against any damages or any vacancies as Adrian stated to do. Then leave around 15k in our own personal ‘emergency fund’ to be left alone for any damages or emergency on our own home front. This leaves 10k in our ‘war chest’ that will now be built upon month after month and used for Money Making 201 purposes. We should have between 60k-80k in that chest by the end of the year to use  for this purpose.

Right now i’m so torn on which move to make first with this investment money. Do I take advantage of some amazing and almost unheard of growth potential that the stock market can provide as it begins it’s upswing? Do I purchase the building that my practice resides in first, effectively cutting out paying rent and paying it to myself instead?!?(also enjoying the possibility of real estate growth that a COMMERCIAL property can provide under the right conditions) AND collecting rent from the business next door in the same building. Or do I use this money to open up another practice, spend the next year overseeing it develop, begin to make overhead and then cashflow sometime the following year, adding not only a large increase to our networth due to the value of the business once it’s developed, but this extra monthly cashflow which can be used to fuel other investments.

Or do I divide the efforts into all 3??(Sounds like the badword: DIVERSIFICATION, so perhaps I should focus instead   )

Any advice or help would be greatly appreciated!