• 02:06:23 am on April 6, 2009 | 9
    Tags:

    Take note of Ryan’s list of 5 things that he has learned from this ‘grand experiment’ so far … they are all important observations. Ryan may be surprised to learn that I am equally risk-averse and DO advocate a safety net …

    As Ryan asks, what advice can you give to Ryan? I’m sure that he’d love to hear from ALL of our readers, not just the  other MITs …

    ___________________

    cash-flow-ryanI’m sure there are a lot of ways to get out of debt. I’m so sure because I see ads everyday on T.V., hear them on the radio, and see books packing the shelves of Barnes & Noble all about how to do it. What you don’t see in any of those places is a reputable way to get from debt free to wealthy.

    That’s why I’m part of this experiment and it’s in that area that I’m learning a lot from this blog and from those of you that are kind enough to continue the discussion in the comments section of each post.

    Things of note that I’ve learned so far include:

    1.) Consider the percentage of compound growth you need to reach your number – and, by when – for the investment decisions you make.

    2.) As with #1, just because something (i.e.- 401k) has good tax advantages now, doesn’t make it a good investment. If it doesn’t pay out until well after you want to retire, what good is it? (Though I probably will continue my existing 401k, on the back burner, and may or may not make SMALL contributions just in case!)

    3.) I can’t get to my number with stocks, bonds, and real estate alone.

    4.) If you “strike it rich” without a pre-established goal or “number”, you won’t know you’re there!

    5.) The 25%, 20%, and 5% rules.

    I’ve also learned that risk aversion may be my biggest struggle in my personal journey. I have confidence in myself that I will succeed and rarely think about failure. That said, I have a wife and two kids and need them to be and feel secure, so I will probably have more of a safety net than Adrian might suggest.

    The other big question I currently have is which investment vehicle to go with next while I develop my intellectual property. I want to buy either a rental property or commercial office/retail space and would love to hear from any of you that have experience with either.

    Now you know what I’ve learned, and what I want to learn near term. Here is a look at my current financial situation at networthiq

    And Here are some clips from my monthly financial spreadsheet:

    Monthly Income Statement
    Income
    A.Earned Income
    Job / Self Employment Salary $28,140.00
    B.Passive Income
    Net Real Estate Income $-
    Net Business Income $40.00
    B.Passive Income Total $40.00
    C.Portfolio Income
    Interest $33.00
    Dividends $12.00
    Royalties
    C.Portfolio Income Total $45.00
    D.Total Income $28,225.00
    Total Passive Income
    $85.00
    Expenses
    E.Expenses


    Credit Card Payments $-
    Personal Expense Ryan $200.00
    Wife (mostly groceries) $900.00
    Gross Mortgage $3,301.00
    Utilities $225.00
    Entertainment $687.95
    Life Insurance
    $38.50
    Other Payments
    Auto Insurance
    $207.75
    Business Expenses
    $2,996.00
    E.Total Expenses $8,556.20



    Gross Earnings


    My “job” $19,700.00

    My company $8,000.00

    Wife’s job $400.00

    MLM $40.00

    Total $28,140.00





    IRA


    IRA $7,000.00

    Wife’s IRA $34,000.00

    SEPP $25,000.00









    Total $66,000.00









    Stocks


    GE $1,408.00

    Target $1,344.00

    JNJ $49.00

    Other $1,300.00

    Total $4,101.00





    Entertainment/Other






    Charity $100.00

    xm $12.95

    other $100.00

    gifts $125.00

    medical $150.00

    eating out $200.00









    Total $687.95





    Utilities






    Gas $28.00

    Cable $102.00

    Phone $95.00

    Electric $85.00

    Water $50.00

    Trash $15.00









    Total $225.00





    Business Expenses






    Rent $1,200.00

    Healthcare $393.00

    Child Care $250.00

    Auto Fuel $200.00

    Sepp $833.00

    MLM $120.00





    Total $2,996.00






    Mortgage

    Home Mortgage $2,100.00
    Homeowner’s Insurance
    $65.00
    Earthquake Insurance
    $20.00
    Association Fees $216.00
    Property Taxes $900.00
    Gross Mortgage $3,301.00
    % of gross income
    11.70%




    Balance Sheet
    Assets Liabilities
    Savings $45,000.00

    Stocks $4,101.00 Credit Cards $-

    $- Car Loans $-
    IRAs $66,000.00 Student Loans $-

    $- Home Mortgage $665,000.00
    Real Esate (Less Mortgage) $- Personal Loans $-
    Business Value (Net)
    Other Debt $-
    F.Assets Subtotal $115,101.00 J.Total Liabilities $665,000.00





    G.Doodads


    Home $630,000.00

    Cars $30,000.00







    Other $12,000.00

    G.Doodads Total $672,000.00





    H.Total Assets $787,101.00 K.Net Worth $122,101.00
    (Bankers Version)
    (Bankers Version)
    I.Total Assets $115,101.00 L.Net-Worth $(549,899.00)
    (Rich Dad Version)
    (Rich Dad)








    Gross Income Less Expenses $19,668.80


    Net Income Less Taxes
    $18,062.80 Amount Available to Invest this month

    Note:

    I usually use about $14,500 as an average after tax monthly income for planning purposes.
    Intend to use surplus funds for commercial or residential RE and potentially develop IP

    So what stands out to you? Any advice?

     

Comments

  • Scott 4:49 am on April 6, 2009 | #

    Ryan, you are doing awesome man. It looks like you’ve stepped your income up quite a bit recently, great job! You’re doing everything right as far as I can see and you’re in Money Making 201, the question to you will be “What to do with this cash savings that’s piling up?”

    The right answer to that question will get you to your number faster, I think.

  • Mark 7:51 am on April 6, 2009 | #

    @Ryan – Looks like a Balance Sheet from Cash Flow 101. That game encourages players to leverage themselves a lot to win quickly. I used to enjoy doing that but I’m not sure it can apply to the current environment. Are you thinking about banking on real estate too?

  • Ryan 10:09 am on April 6, 2009 | #

    @Scott – Thanks! My income has definitely been higher recently, but when it comes to commissions you never know what’s next!

    @Mark – My balance sheet is Highly influenced by the Cashflow games. FYI, if you like 101, you’ll really like 201. You can even trade options!

    @Mark & Scott – In addition to funding my IP development, I’m hoping to purchase a commercial office to lease or residential home to rent out by Q4 of this year.

  • Scott 12:26 pm on April 6, 2009 | #

    Sounds like a plan Ryan!

  • Adrian 11:42 am on April 7, 2009 | #

    @ Ryan – Obviously, your Number one concern is to provide for your family now and in the future, so you want to maintain a suitable ‘safety net’.

    You also want to build up capital to further develop your IP into a fully-fledged business, be it via licensing, JV, or striking out on your own.

    I would be looking to this before over-committing to any property deal, residential or commercial. Commercial deals will come thick and fast in the next year or two … hold out for something cashflow positive from day 1 if you can.

    You are also upside down on your mortgage; I wonder how upside down you would be if you simply sold and rented for a while (at least until you can buy that bargain commercial and/or residential foreclosure, say)?

  • Steve 4:08 pm on April 7, 2009 | #

    I am pleased to see this project going so well for you.
    It should come as no surprise that I had my doubts at first.
    But you also know I am such a fan or Rich Dad that I am happy you are not so traditional.
    It will help for readers to know that I am your 56 year old uncle and that my primary job is as a physician.
    I think you laid out a nice liability asset sheet and are aware of your expenses and trying to make the most of your investment assets.
    My only advice which was the whole reason for this note , is keep in mind a few things I learned mostly from Rich Dad.
    I read “The Richest Man in Babylon” on his suggestion and the point about paying yourself first has really stuck.
    You may need to re look at that 401K idea. If you are in a 30% tax bracket that contribution may mean a lot over the next few years as you try to earn. The fact that you can not touch it maybe a good idea. Paying yourself first means a permanent payment not putting money aside to invest. I still think the 401k has a great value to you, take advantage of all it has to offer.
    You know I turned my home into a business advantage also by turning it into a farm and producing a product . You may want to think more on those lines if you are going to look at real estate. Remember with real estate comes management and headaches and liability.
    I love my farm it is my major hobby but it is also part of my work, and definitely part of my business.
    The one area that I think you have overlooked is your MLM business.
    At present [Name Deleted] is a 5 year old company that is profitable and debt free, we have science based products that can bring health as well as wealth to those that get involved.
    In the present economy the owners have realized that people don’t only need a few hundred dollars a month from this type of venture they need replacement incomes. Presently for a $1500 investment you can get paid 33% commission rate on your recruiting efforts.
    Also the data shows that you will probably double your investment in 30-90 days. And all this takes is making 2 phone calls a day for 90 days .
    And at the end of those 90 days you will have generated a residual income that will pay you probably $2-3 k a month for the next 4 years.
    The stats are there ,the risk is minimal , the work is something you can do on the fly.
    I don’t want to be a commercial for my MLM business [AJC: sorry, had to to delete as WordPress.com forbids ‘advertising’ on this site], but I do think you have missed the opportunity so far. And that is fine, the last 5 years we were tested , we were new and untried , but all that is behind us and NOW is the time to put this business through its paces.
    Now is the time to see the possibility and take advantage of it.
    You want to be a millionaire in 7 years , [Name Deleted] has created many in the last 5, don’t sell us short , see what you already have .

  • Adrian 5:14 pm on April 7, 2009 | #

    @ Ryan – I wish that I would have read Uncle Steve’s wise words before I commented! Thanks, Steve.

    Now, let me add a couple more comments:

    – There seems to be a misconception amongst some of my readers that I am anti-401k and ‘safety nets’ … nothing could be further from the truth.

    – For you (and others) the 401k is no Miracle Drug, it’s just a capsule …. one that happens to limit what ingredients you put into it.

    – All of the 7MITs need a ‘safety net’ … I am just hoping that it will become redundant; until then, keep contributing but NOT at the expense of your plans to reach your Number; ideally, you need to find a way to do BOTH. [AJC: As my Grandpappy, the pirate, used to say: “Always keep some gold buried thar’, Sonny … if all of your grand plans turn out to be aught, at least you will not end up with naught … ARGHH!”]

    – Perhaps a self-directed retirement account might be one way to partly achieve this (perhaps do your commercial property investment via one, if the rules allow? Check with your accountant how to make this happen … but, DON’T let him give you commercial advice unless he also happens to be an investor!)

    – I am NOT necessarily a fan of Cashflow 101-style ‘unlimited debt’ strategies; see what happens when the market turns. Take a look at Andee Sellman’s game instead; here’s a sneak preview of a Guest Video that he has done for 7million7years.com that is closer to where we SHOULD be heading with debt (I will add my ‘twists’ later):

    http://members.masterytv.com/_The-Financial-Fence-Equation/video/587208/1390.html

    – MLM can be a fantastic vehicle – but very FEW have been as successful as my wife’s school friend who is living off millions a year in residual income (and, now spends his days investing in property while the millions keep rolling in) through his ‘business’. Can you be one of those ‘lucky few’? Will investing your time and energy (ALL of it!) into it get you to your Number? Will the business behind the MLM have ‘legs’ (the company has to continue in order for your income to continue)? If so, by all means, don’t discount it …

    [PS Sorry, Uncle Steve, had to delete the marketing references due to strict WordPress.com rules against brand promotion on their site; also, my comments are general and not advice to Ryan to / not to involve himself in [name deleted] 🙂 ]

  • steve 8:24 am on April 9, 2009 | #

    Hi all,
    No problem with deletion of name of MLM, that is why I had you vet the note before publication. You are 100% right about MLM. I have been in 4 , this is what I have learned . You need a product or it is a scam, you need a consumable product,you need more than one product, you need proprietary products, you need to be in a growth industry, you need to get in early when the growth is in front of you, you need a good management team, and good support , and you need to be coachable and dedicated and have goals. The reason I wanted Ryan to re look at his present MLM is that 99% of businesses fail in their first year, of the ones left only 2% are still there in 5 years. Ryan’s MLM has just pasted its 5th birthday, it has proprietary products, it is in a growth industry , it has fantastic support and management and it is on the cusp of logarithmic growth.It grew last year and every year since it began. If any of you consider MLM use my check list and save yourself time and energy and avoid disappointment.You also get the tax and business advantages with a low capital investment.

  • What to do when you are upside-down on your mortgage … « How to Make 7 Million in 7 Years™ 1:57 am on May 12, 2009 | #

    […] Ryan is a high-income earner and high-saver already so he has decided to … well … I’ll let him tell you: If I could wave a […]


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