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  • 02:39:53 am on June 1, 2009 | 10 | # |
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    Leaving the comfort zone…

    Jeff has made great progress, but he’s still at the stage where adding a single rental foreclosure can increase his Net Worth by 67%; over the next 18 months he will probably need to maintain that growth rate … another $400k in equity over the next 18 months should do it, then $800k after that. Easy, huh?! 😉

    If not, where to from here for Jeff? Any suggestions?


    MM101 is my comfort zone. I was pretty successful in the 101 zone before I made acquaintances with Adrian. With his ideas (I like to call them “the rules”) added to my current bag of tricks, I expect to have continued success in this realm with a better understanding of the mechanics of MM101.

    When I started this experiment I concluded that my number was 10 million in 10 years (by Jan 2019).

    At that point my net worth was $383K and I needed a 38% annual compound growth rate to make it to 10 big ones in 10 years. To achieve that growth I’ve been planning to make use of stocks, real estate and business ownership. That should cause me to overshoot my goal (hopefully).

    Since determining my number, I have made some positive progression.

    The foreclosure home I purchased in February has given my net worth a nice shot in the arm. As of May 2009, I’m sitting at $642K and have surpassed my minimum required growth for this year. 🙂

    Comparing the $642K with the $383K tells me I’ve had a 67% increase since December. That amounts to 1.75 years of progress toward my number. Almost two years worth of work in six months is fine by me.

    At that start of this experiment, I needed to see better than 3.16% growth each month to stay on track. I’ve been hitting monthly numbers in the 4, 5, and 6%’s for the last several. A reassessment of my required growth rate tells me (assuming I’m doing the math correctly) that from this point forward I need to continue to compound at approximately 29% annually (or 2.44% monthly).

    Now all I need to do is hook up to Josh’s rocket and I’ll be done by next week. 🙂

    A 29% growth rate probably means I need to reassess whether to start a business or not. If memory serves me correctly (I couldn’t find Adrian’s post on the topic to confirm), 29% now puts me in a category that can be achieved by stocks and real estate alone, without the need for a separate business. This could minimize some of my risk exposure and require less of my personal time to accomplish.

    This bothers me a bit, because I have been pretty excited about “making it big” on my own in an aviation related business. But if you don’t have to, it begins to beg the question, “why should you?” And it makes me think that I really need to have my business ideas clear and my personal reasons for moving forward on this one clear. My military commitment means that I have a good three years or so to think this one through, because I don’t have the luxury of chucking my day job in order to pursue a wild business dream.

    Since unbridled pursuit of a business is not possible (nor really necessary) for the time being I’ll be focusing mostly on stocks and real estate for my growth engine.

    Speaking of real estate, I’ve got another room I need to paint….

  • 06:51:23 am on May 20, 2009 | 5 | # |
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    My Recovery…

    Congratulations to Jeff, a recovering budgetaholic … he had an unusual spending month, which happens when you are trying to budget: Life gets in the way! What advice can you give Jeff, other than telling him that MY wife had to cooperate for the one month that we did this exercise … and, it was well worth it 🙂


    I started out April’s expense experiment with good intentions of writing down everything I spent money on.

    However, I ran into some challenges conducting the exercise.

    The first being, I was on travel for three weeks in April for work.  Pretty much all of the money passing through my hands (food, lodging, rental car etc.) was outside my normal habits and was being reimbursed by the government.

    It didn’t seem correct to include reimbursable travel expenses as a characterization of how I spend money.

    Another wrinkle this month was my children’s school spring break.  I had the entire family join me on travel for one week.  We don’t normally take a week’s vacation every month.  Maybe after I reach my Number, but it’s not our current modus operandi.  Again, uncharacteristic spending that I don’t think accurately paints our picture.

    The final challenge was that my wife is our family’s “Money Handler.”  By that I mean, she’s in charge of keeping the business of our household running, so she drives almost all of our spending.

    She loves me, but she wasn’t too thrilled about my request that she do all the work for my commitment to 7MIT.   🙂  I can’t blame her one bit.

    I didn’t push the issue and instead we decided we’d operate per our normal habit patterns and just give our credit card statement at the end of the month.

    In 2002 we made the transition from checks and cash finances to full up credit card use.  We use a single credit card for everything (save for a couple bills that haven’t caught up with the Internet age).  We almost never have cash on hand, hardly ever write a check and I can’t remember the last time I licked a stamp.

    Oh wait, yes I can, it was the invitations for our Christmas party.

    No, those were “peel and stick” stamps.

    Never mind…I don’t lick stamps, I don’t write checks and I don’t carry cash.

    So how did we do?

    Surprisingly well.  You may recall that we moved in February and things are still very much in the air.  I still have several boxes to unpack, pictures to hang, and myriad “honey-do’s” to attend to.

    Financially our discretionary expenses are returning to “pre-move” levels of $3500-$4000 per month.  Words can’t describe how happy this makes me.

    The most surprising thing I noticed was that we spent $1000 related to our new home (decorating, painting, and you name its).  That amount wasn’t so surprising as much as the fact that our April expenses of $3700 actually included that $1000 home improvement bill.

    Kudos go to my wife, because the only way that could happen is that she’s been SCRIMPING MAJORLY in other areas right now in order to pull that off.

    That pretty much captures the major revelations I had this month.  Not too earth shattering I’m pleased to say.

    Some of the mundane nature of my results may be due to the fact that Kelly and I have been operating under a no-budget budget since we shifted to monthly credit operations.  I don’t focus on the weeds of our spending….e.g. this nickel for this category, that dime for that one.  Rather I focus on the discretionary outflows each month and as long as we’re in the $3500-$4000 range I’m happy.

    Before 2002, I was a budgetaholic.  I’m a much happier man since my recovery.

  • 06:32:21 am on April 20, 2009 | 17 | # |
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    Quick and Dirty…

    mud-bath1I couldn’t resist adding the photo …

    But, a short post can be a sweet post, if it tells you what you need to know.

    So, did it? What else can Jeff tell us and what can you tell (well, suggest to) him?


    I feel bad even calling this a “post.”  It’s so short that it hardly qualifies as a response.

    The only changes I think I need to make at this point relate to my approach to long term investing.  As a reminder, I’m primarily using index based mutual funds in a variety of tax advantaged accounts (401K, Roth and Traditional IRAs, 529s).

    The change I’m going to begin implementing is a move away from mutual funds and into a more concentrated portfolio of individual stocks based upon value investing principles.  To help me accomplish this move, I’m re-reading Rule #1 by Phil Town and am reading Buffetology by Mary Buffett and David Clark.

    This will be a measured process of moving money.  I plan to move a portion of my money…test the results and then move greater amounts over as I see results and become more confident in the stock selection methods.  Future investments will be prioritized to non-tax deferred accounts so that I can access the funds when I deem necessary (hopefully by age 50) rather then when Uncle Sam says I can can.

    By doing this I hope to do accomplish two things….

    1. Grow richer quicker  🙂

    2. Access my money whenever I desire

    As far as my debts are concerned, I do not intend to do anything about my mortgages other than continue to pay them monthly per the amortization schedule.  I intend to pay off my $17,500 bridge loan in May.

    My other activities are in the realm of MM201 where I continue to fiddle around with increasing my income via a variety of online methods and look for opportunities to buy a business and more residential or possibly commericial real estate.

  • 01:15:10 am on April 2, 2009 | 6 | # |
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    Going Vertical

    Jeff’s got a great analogy about Space Shuttle take-offs v Navy Jet Fighters – when was the last time that you actually got to fly one of those things, Jeff? – that tells you a lot about how he thinks!

    What advice can you give Jeff from your perspective, be it stratospheric, strictly earthbound, or anywhere in between?


    I’m sure Adrian advocates an aggressive vertical takeoff profile, given the picture he chose to use of the space shuttle taking flight.

    My typical launch profile is a bit different than that of the Space Shuttle.  I’m used to starting from a standstill, checking the instruments, stroking the afterburners, taking level flight to build speed, and then pulling up to start a climb.  I’ve been launching this way for about 17 years now.  Not just professionally as a Naval Aviator, but also financially.

    However, I think I’ve may have stayed in ground effect for a bit too long financially and its now time to pull back on the stick, load up the “Gs” and take things vertical.

    But there’s more to going vertical than just honking on a big ‘ol pull on the control stick.  Pull too little or too late and you might not clear the trees at the end of the runway.  Pull too much, too quickly or too soon and you could decelerate rapidly causing you to peak out lower than you intended.  There’s a science to looking cool.

    The struggle I am having in our experiment is one of changing old habits.  I’m finding that old investing habits can be hard to break, especially those that you believe have been good ones.

    I have been a typical retirement account poster child.  I use ’em and I max ’em out.  And I haven’t done too bad along the way.  I’m on track to be comfortable later in life, not having to work until I die, nor rely upon the charity of my children.

    But being comfortable in 27 years is not why I’m here.  I want to find a time machine to shave 17 years off that clock.

    Let’s take a closer look at where things sit right now and determine if I have enough airspeed on this baby to take her vertical.


    Adrian made a nice graphic at the top of the page capturing my monthly income statement.  Before I add a little more detail, I have a small confession to make first.

    Those numbers reflect what life will look like in May 2009.  My pay is still fluctuating from my recent move and won’t settle out completely until I officially “check in” to my new command on May first.

    Monthly after tax income: $12,501 (made up of my paycheck and rental income)

    Monthly expenses: $9,512 (made up of living expenses and two mortgages)

    Monthly savings: $2,989

    My surplus is normally divvied up between a 401K, two Roth IRA’s, two 529 college accounts, and cash savings.  However, right now everything is being funneled into money market savings to replenish my cash reserves and cushion the unforeseen expenses that come with a move.


    Reviewing my net worth profile yields the following:

    Total assets: $1,355,253 (two houses, two cars, one boat, cash savings, and several retirement accounts)

    Total liabilities: $753,755 (two mortgages, one short term bridge loan tied to my home)

    Net worth: $601,498 (this is a new all time high for me)


    Reviewing all these numbers helps me understand some of my hesitation and reluctance to step away from my past investing practices.  Things don’t feel broke.

    Adding to this hesitation are concerns for those who rely upon me.  I have a wife and two kids that are depending upon the course I chart.

    What if I make a misstep in this experiment?

    What if I lose it all trying something new?

    Failure is not an option.

    If I’m going to pull back on the stick the right amount, I have some more work to do in order to determine how much “pull” is enough.

    But I’m committed to this and have been laying the ground work necessary to begin shifting my investment portfolio from mutual funds to a concentrated selection of individual stocks so that I can take this baby vertical.

    Keep your eyes on the sky.

    I’ll be the one with my hair on fire.

  • 02:45:02 am on March 16, 2009 | 13 | # |
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    I owe, I owe, So It’s Off to Work I Go….

    Another great post title 🙂

    It appears that all things Jeff-related are on a sky-high trajectory; but, when it comes to debt and liabilities is that a good thing: when is ‘good debt’ too much debt? I’m keen to hear your thoughts – as, I’m sure, is Jeff …

    Jeff’s post also shows how far our expectations have changed when we consider 8% ‘expensive’ debt – and, compared to today’s rates, it is!


    …well, that’s not the only reason.

    I’ve never been a big debtor.  At least not in terms of credit card debt nor in terms of total numbers of creditors that I owe money to.

    Presently I have three liabilities which I’ve discussed at length here on 7m7y.

    Home: $500,861 at 5.5% with 29 yrs and 11 months to go.  🙂

    Rental Property: $235,380 at 5.375% with 25 yrs left to go.

    Short term bridge loan (secured by one of my vehicles): $17,650 @ 8% with four years and 11 months left to go.

    Total debts: $754,802  Ok, so maybe that is a lot of debt.  I just don’t consider it bad debt.

    My plans are to continue to pay only the minimums on the home and rental mortgages.  I do not intend to pay either down early, although I’ve been very intrigued by some of the equity accelerator programs I’ve seen advertised recently.  But I digress and that flies in the face of Adrian’s advice.

    As for the short term bridge loan, I do intend to tackle that one in short order.  That loan was necessary to force my recent home purchase through.  The property was a foreclosure and required more cash than I had on hand in a rapid manner.  This loan will be paid in full no later than May 2009 at which point I’ll be back to only having debt that is associated with real estate.

  • 02:29:58 am on March 6, 2009 | 20 | # |
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    Flying on Auto Pilot…

    It’s interesting, as Jeff points out, the different views that each of the 7MITs have towards so-called ‘tax-advantaged retirement accounts’ … for example, Jeff views them as ‘investing’ and almost sees his investments in real-estate as ‘distractions’ from his investing strategy … I’m not here to pass judgement on any of this: rather, I want to throw it to you for your ideas?


    I find it very interesting how different and at times how similar our approaches to personal finance are.  Sometimes, almost everyone is singing the same tune…European luxury vehicles for all my friends (well almost all us), while at other times we are on completely different pages.

    Take our discussion about retirement accounts.  Some have chosen different savings methods while others have signed up for the full meal deal and drank the tax-deferred retirement account kool-aid.  I’m a kool-aid drinker.

    I’ve been drinking the kool-aid since I was 23.

    I can still hear my father telling me right after I graduated from Aviation Officer Candidate School, “You better start saving for retirement.”

    So start I did.  And I’ve been at it ever since.

    I’m not sure how to react to those who say they don’t need/want to use Uncle Sam’s tax deferred retirement accounts.  I appreciate the “damn the torpedoes, full speed ahead” approach, but I think there is a place for these types of accounts in preparing for the later stages of life.

    I do not intend to imply that I have this thing squared away.  I’m part of this experiment not because I have the answers, but because I know I can do better.  My pendulum is probably too far to one side in that I may be relying too much upon my retirement account savings and the promise of a government pension.  As you’ll see below, my non-tax-deferred savings strategy is a bit…oh, let’s call it lacking.

    I haven’t always saved a ton, but I’ve saved.  I am a classic buy and hold long-term investor.  I squirrel a way a little at a time, each and every pay check.  Yes, I’m one of those dollar-cost-averagers.  And lately I’ve been averaging down, which is a good thing.  My program is on auto pilot, managing my money and investments automatically, whether I remember to or not.

    Let’s hit the details of how I’ve been investing and saving.

    My investment and savings vehicles include two traditional and two Roth IRAs, a 401K, two 529 college savings accounts, one brokerage account for individual stocks and a money market account for my cash savings.

    On a monthly basis, my wife and I set aside the following:

    • 401K – $675 (no employer matching)
    • Roth IRAs – $833
    • 529s – $800
    • Money market savings – $1350

    That totals $3658 set aside each month.

    The annual numbers look like:

    • 401K – $8100
    • Roth IRAs – $10000
    • 529s – $9600
    • Money market savings – $16200

    That totals $43,896 set aside annually which is approximately 38% of my gross income.

    It’s enlightening putting all the numbers down on a single sheet of paper (or electrons since we’re on the Internet).  Now I know why I haven’t been able to afford my own airplane.  I’ve been saving too much.  😉

    My money is invested predominately in mutual funds in these tax deferred accounts.  I have experimented a little with individual stocks but I typically tend to lose there.  Heck, lately I’ve lost in my mutual funds as well, but who hasn’t. 😦

    For many years I went about investing completely on my own and had mediocre performance.   As much as I want to believe investing is a pastime for me, I have to admit that I’m no expert.  In 2004 I started subscribing to an investment newsletter and now follow an aggressive growth model portfolio they have put together.  My overall performance has improved dramatically but I’ve been hit pretty hard just like everyone else lately.

    My portfolio is made up primarily of low cost index funds (a total stock market index, a NASDAQ 100 index, and an EAFE international index fund).  I also have a couple aggressive growth oriented funds that are actively managed (read higher fees).  These funds are the Baron Partners fund and the Meridian Growth fund.  Additionally, I have a few shares of Garmin.

    The high water mark was in the fall of 2007 when my investment accounts topped $220K.  However, it’s now back down to around $125K as of Feb 09.  While that downturn of $95K is disappointing, my Net Worth has increased more than $100K since the Fall of 2007 because of my recent real estate purchase.

    While real estate has kept my Net Worth moving forward.  It kicked my financial airplane off auto-pilot.  I stopped all the investing activity listed above in early January and redirected it to the money market account so I could “pad” my cash to get through the financial and life upheaval that comes with a move.  I’m antsy to get my investing back on track and will slowly start re-engaging the auto pilot as my life and finances settle into their new groove.

    I have some ideas on changes I need to consider moving forward, but want to hear what you think first.

  • 02:53:03 am on February 18, 2009 | 21 | # |
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    Get Your Motor Runnin’…

    Jeff discovered something that I found out by accident fairly early on, and that’s  “I could buy a high-end used European sports car for less then a low-end new econo-box” … I used that little ‘trick’ to buy myself a 10 year old (1972 model … it was 1982 at the time) Porsche 911 S (that was the one with the ‘hot cam’ that would push you in the small of the back and take your breath away when it hit 3,500 revs) when all of my friends were buying their new Ford Taurus equivalents (ho hum … guess who was getting all the looks on the freeway?).

    For me the dynamics were: $13k purchase + $6k subsequent maintenance (gearbox rebuild cost $4k alone!) but sold for $29k (really!) … compare that to a $13k boredom-box-on-wheels that would sell for $7k in the same time frame. A $17k financial advantage, and a hell of a lot of fun in the meantime …

    Now, tell me your second hand car war-stories – and, don’t forget to help Jeff decide where he’s going right/wrong … hint: look at the boat first!

    Now, gotta go … forgot that this was Jeff’s post and I can hear him warming up his singing voice with some off-key scales 🙂


    Head out on the highway

    Looking for adventure

    In whatever comes our way

    Ok, I’m done singing, I promise.

    Heading out on the highway is definitely in my future (or maybe my past by the time this is published).  As I write this I’m knee deep, no make that shoulder deep in boxes.  The computer should have been packed up by now, but I owe Adrian and the team a post.  We head out Friday, Feb 13th on our move to Massachusetts.  I know, I know, who in their right mind starts a new life on Friday the 13th?

    Unfortunately for me I won’t be racing up and down the freeway with the wind in my hair like Adrian, nor behind the wheel of a freebie ultimate driving machine like Scott, but I’ll be motoring none the less.  Have you noticed how many members of “team millionaire” either own or pine for a BMW?

    For my next adventure on the road, I’ll be driving a mini-van.  A 2004 Honda Odyssey to be precise.  It’ll be loaded for bear with personal belongings, two kids, a dog, movies running on the DVD player and a boat in tow that looks more like a utility trailer than a sea worthy vessel.

    Bottom line…I get to look like the gypsy.

    nullMy wife on the other hand will be traveling in style.  My style that is.  She’ll be driving my 2001 Mercedes Benz E320.  She says she would prefer to drive the mini-van but  pulling the boat scares her.  She thinks it will be safer for me to drive the tow rig.  Likely story… 😉

    In general I love anything with a motor in it.  I’m intrigued by the mechanics and I’m in love with power.  Over the years I’ve owned everything from a classic American muscle-car to Japanese econ-boxes to European sports sedans.  Yes, I’ve even owned a BMW at one time.  🙂

    As a brief aside, if you are a car fanatic and ever have the chance to see the BMW Museum in Munich, Germany, I highly recommend it.  I had a great visit there in Oct 2008…but that’s a story with pictures for another day…

    My first car was a 1969 Mercury Cougar with a 351 Windsor under the hood.  She was fast, very fast, and way cool.  Sequential turn signals and pop up light covers!  I’m sure that was boss in 1969.  I was excited at 16 when my Dad paid $2700 for her.  She taught me and my brother (four years later) to drive.  I routinely did donuts in empty parking lots and raced other cars while my brother established the Olathe, Kansas land speed record in her.  He out-ran the police in that old Cougar racing home one night to make curfew.

    Between crossing the police or our mother, who was born in a dirt floor Montana ranch house, he chose the lesser of two evils.  Cross the cops.  I made this same choice several times growing up…but never ran across the police during the race home.

    May my first car rest in peace.  She caught fire and was destroyed after both my brother and I left her behind for college.  My Dad started her one day in the front driveway and the carb overflowed onto a hot engine.  The fire department handled the rest.

    After my brief muscle car phase, I turned to the Japanese.  A Honda Accord hatchback that my father bought brand new when I was a sophomore in college.  Yes, I was spoiled at this point in my life, but remember, he set my other car on fire. 🙂

    Four years later I was a fresh faced Ensign in the US Navy and I needed to buy my first “Ensignmobile.”  I had dreams of a new car but just couldn’t justify living a car poor existence for a low-end new vehicle.  At that point I started learning about the used car market.  When I discovered I could buy a high-end used European sports car for less then a low-end new econo-box, I was hooked.

    BMW was my first love.  That Ensignmobile was a 1988 535i (5 speed manual).  While I owned it, I couldn’t imagine ever driving anything but a BMW.  But then one day a Mercedes caught my eye.  Could it be?  Could I enjoy something other than the Ultimate Driving Machine?  Three Mercedes later (all used I might add) I can tell you that there is indeed life after BMW.

    I typically buy used cars so I can buy “more car” than I could afford otherwise.  My E320 sold new for close to $55K in 2001.  When I picked it up in 2005, I paid just under $23K.  Sure it had 69,000 miles on the clock, but that’s nothing.  When I look at the new cars available for less than $25K, I’m convinced that my approach to car buying works well…at least for my desires.

    We did violate the “used car” approach with the Ody.  It was closeout time, the end of the model year, and the end of the production run for the 99-04 Ody body style.  So while we purchased it new, it was at a discount.  We’ve certainly lost more money on the mini-van than on the Mercedes, but the hardest part has been watching the pristine body get dinged in the parking lot over time.  We will most likely return to the used car purchasing model.

    We own both cars free and clear.  We made some aggressive pre-payments during the life of the loans and paid both cars off early.  In retrospect, the pre-payment pain was worth it.  By paying off the loans early and shifting the money to savings we were able to stash away enough cash to enable us to seize a significant real estate opportunity when it presented itself.

    My future car purchases are well down the road.  I’d like to downsize the Mercedes, an E-class is more car than I need.  But in reality, I have no “need” to buy anything right now and with my cash reserves depleted, I’d have to finance a new-to-me purchase.  Also, Boston has a decent commuter rail and subway system that I plan to experiment with.  So I think I’m set for vehicles right now.

    Although, I do own a boat.  I bought it when it was a year old with only 25 hours on the clock for half of what the original owner paid….  I’m starting to get “two footitis” and may need to….

  • 02:45:56 am on January 24, 2009 | 19 | # |
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    Straight To The Point…

    No pictures of jets, Jeff? Straight down to business? So, THAT’S how it’s gonna be is it … ? 🙂

    In the post, Jeff is flaunting his violations of both Rules, what are we gonna do about it??!

    Seriously, Jeff has a plan and a strategy and I would be interested in hearing comments from any of our readers, including the 7MITs, of course … but, also the ‘silent majority’.

    C’mon, we all have homes, so we all have something to learn/offer here …


    As most you already know I’m closing in rapidly on “closing” on a new home.  Rather than answer Adrian’s questions by using my current home in Virginia as the frame of reference (it’s soon to be a rental business), I’m going to do a little guestimating and use my future home in Boston as the basis for my answers.

    1. What is your home’s current value?

    The appraiser hasn’t visited the home yet, so I’m going to use the low estimate from Zillow.com as my answer: $698,860

    2. What is your current mortgage?


    3. What is your current monthly mortgage payment – both as $ and as a % of your ‘usual’ after-tax income?

    $3600 / 37%

    4. How does your current setup fit within the 20% Rule and the 25% Income Rule?

    Vs. the 25% Income Rule: At 37% I’m clearly in violation of this recommendation.

    Vs. the 20% Rule: With the new home in the mix, my Networth is now approximately $509,210.  The equity I have in the home is roughly 698K-502K = $196K.

    196K/509K = 38% so I am violating the 20% equity/net worth rule as well.

    5. What – if anything – do you plan to do about it, if you currently break either/both of these rules?

    The main reason I’m in violation of the rules is that I’m making a speculative play for appreciation on this property based upon two factors.  The first being my belief that we are at or near a low point in the real estate market and the second being that I was able to purchase the property at an additional discount because it’s a foreclosure.

    At this point I don’t plan to do anything to adjust my situation with regards to the 20% rule.  I’m stretching myself to get into this house and I’m not ready (nor able) to stretch some more by doing a cash-out refi to get under the 20% rule (a cash-out refi will raise the monthly mortgage payment).

    I’m trying hard to fix things in relation to the 25% Income Rule.  That’s what my Making Money 201 strategies are all about.  Click baby click!

    6. What are your plans for your first home (if you currently rent) or your next upgrade (if you currently own)?

    Do I have to think about buying another home already?  I’m so burned out on Mortgage lenders and Realtors, I can’t stand it.

    If I must…the next home that I plan to occupy will likely not be much of an upgrade relative to the one I’m purchasing.  Size-wise, this new home in Boston is more than four people need, so if I buy a follow-on home to occupy, it will be because my family moves again.

    A move away from Boston will likely result in a sale of this new property.  I believe the mortgage payment is/will remain in excess of local rents for a few years.  I’m not interested in running a negative cash flow rental property unless there is a really good reason that I should maintain ownership of the property.  If that be the case, then I am mentally prepared to operate the property at a loss and consider the negative cash flow as an investment.

    I’m projecting the sale of the Boston property could yield 150-400K in profits depending upon what the real estate market decides to do over the next three years.  My fingers are crossed, but I’m in positive territory either way.  I’ve often heard that in real estate, you make your profit when you buy.

    With a sale, I would take the resultant profits and put some of it into a new home and some of it into down payments for several rental properties.  I’m planning to split the profits 50/50 between a new home and several investment properties.

    7. What questions/issues/opportunities, if any, that you would like to explore further do the above questions bring up?

    I find the 20% Rule and the 25% Income Rule interesting book ends to one’s approach to affording a home and how much equity to have in it as you manage money.  On one hand you shouldn’t have too much of your net worth tied up in the equity of your home (20% Rule) and on the other you shouldn’t be using too much of your after tax income to pay your mortgage (25% Income Rule).

    I’m going to caveat my next comment with the fact that I’m speaking off the top of my head and have not run the numbers in detail.

    To me these these two rules work against each other.  Strictly abiding by the 25% Income Rule limits your ability to adjust your situation relative to the 20% Rule, and religiously following the 20% Rule in some situations could force you to grossly violate the 25% Income Rule.

    If faced with this dilemma, should you knowing violate one rule to satisfy the other?   If so, which one should you sacrifice first?  I think violating the 25% Income Rule could be the greater danger.  Where is the balance point?

    Of course, this is coming from a guy who is knowingly violating both rules.  😉

  • 02:06:37 am on January 16, 2009 | 9 | # |
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    Tail End Charlie

    Besides learning a lot about military aviation – a subject that unashamedly excites me – Jeff is always fun to read; clear, concise and informative … that’s not a recomendation, just an acknowledgement 🙂

    The ‘obvious’ seems to be: start a flying school … but, Jeff – and, you – may have other ideas. Also, work backwards: how big must a flying school be in order to generate Jeff’s required annual compound growth rate? My suspicion is that Jeff – or we – would need to come up with another angle entirely … a lot of capital … or, a unique twist: anything to make Jeff’s ‘small’ business grow BIG …

    … quick!


    I have to start with an explanation, give a couple of excuses, then get down to business.  You’re probably wondering “What the heck does Tail End Charlie mean?”  It’s a term relevant to military aviation and applicable to my situation of bringing up the rear on the growth engine exercise.

    As best I can determine, the term has it’s origins during World War II and was used to refer to the poor sap who was the rear gunner in a bomber or the man guarding the rear of a patrol.  It has parallels in Naval Aviation where I’ve used it in reference to the last aircraft in formation or the last aircraft to land on the aircraft carrier.

    The term meshes nicely with the seaboard landing scenario on an aircraft carrier.  For Naval Aviators, the term “Charlie” means that Mom (the boat) is ready to recover airplanes.  In Naval Aviation slang “Charlie” stems from the fact that Mom usually has to make a big sweeping turn into the wind so she can recover aircraft.  From the sky, the boat’s wake looks like a big letter “C,” or “Charlie” in the military phonetic alphabet.  If you’re “Tail End Charlie,” you’re the last to land.

    So how did I end up as Tail End Charlie on the growth engine exercise, guarding the rear of the formation, paying homage to my fellow MITs and learning from their experiences?  A bunch of excuses is how.  I’ll save you the explanation only to say that everything else I’ve devoted my attention to this past month promises to increase my Net Worth.  So my heart was in the right place.  But I’m Tail End Charlie nonetheless.

    Here’s my Diane’s Table…

    Earn:  How do you make or want to make money Spend: How do I spend or want to spend money Ability: What am I good at or wish I was good at Do: Hobbies, Qualifications, things I want to do
    Do or Have Earned Money By: Do or Have Spent Money On: Things I think I’m good at:
    Flying Airplanes Boating Flying Airplanes Computers
    Leading People and Building Teams Computers and Electronics Leading People and building Teams Home Improvements / fixing things
    Teaching/Instructing Books Making Decisions Tinker with cars
    Mentoring “Making Money Online” Learning Cutting to the heart of an issue or problem Conducting Financial Planning, Managing Money and Investing
    By having a strong and successful family and marriage that focuses on Teamwork Cars Can simplify the complex in order to aid understanding, learning and decision making Reading
    Want to make money via: Conducting Financial Planning, Managing Money and Investing Making Plans and Strategy Boating
    Making money online Home Improvements / fixing things Leveraging the abilities of others Qualifications:
    My own business Want to spend money on:
    Viewing a situation through multiple perspectives Fly Airplanes
    Passive income streams Personal Travel Seeing the Big Picture Things I like to do via work:
      Airplanes and flying Conducting Financial Planning, Managing Money and Investing Lead People and Build Teams
      Family Learning new jobs and information quickly Teach and Instruct
    Speaking & Presenting
    Plan, Strategize and Execute
        Home Improvements / fixing things Things I wish I did or want to do more of:
        Solving Problems Buy Real Estate
        Being a Husband and Father Make money on line
        Wish I was better at: Do more mentoring
        Meeting new people Travel with my family
        Being a better mentor  

    When I step back and look at my table, several things jump out at me.  Flying, Teaching, Family and Leading/Team Building seem to be very prominent items.  Also heavily weighted are Reading/Writing, Financial Matters, Home Improvements and Making Money Online.

    I’ll save you the time counting columns on my Diane’s Table.

    The following items are consistent across four columns:

    • Flying and Airplanes
    • Teaching / Instructing / Learning / Mentoring
    • Family

    The following items are consistent across three columns:

    The Following items are consistent across two columns:

    • Cars
    • Boating
    • Computers

    I have some ideas as to what all this tells me but I’ll save that for later in the dialogue that will hopefully follow below.  I don’t want to influence the discussion before the brainstorming and feedback that I hope will come from the rest of the MIT team.  Just remember my RCGR is 38% and I plan to stretch a bit and use Real Estate, Stocks, and a Small Business to overshoot my Number.

    Until then, Tail End Charlie is “rollin in the groove” with the hook down, flaps full, three down and locked, ready to come aboard.

  • 03:31:11 am on January 5, 2009 | 7 | # |
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    Clicking My Way Into Making Money 201

    While we wait for the other 6 MITs to follow Diane’s lead, with her excellent post based on my Finding Your Growth Engine exercise, Jeff – our newest Millionaire … in Training! – welcomes us into 2009 with some insight into his own money-making plans


    Making Money 201 is all about focusing efforts on increasing your income so that you can build wealth and make some headway on achieving your Number.

    Being in the military affords me a nice and steady income (which I’m thankful for these days) but it doesn’t give me much of a chance to earn more by working harder or smarter so that I can earn that big promotion at work.  Nor can I focus on growth opportunities for the organization to improve profitability and earn more through profit sharing or bonuses.  This means I need to find an alternative, separate from the military to pursue new profits for my family.

    But what should that be?

    My required annual compound growth rate is approximately 38% to reach my Number.  I expect to use stock and real estate investments as well as some type of small business to make that happen.  I have more detailed plans for stocks and real estate that I’ll share another time, but today I’m going to focus on my options for a small business.

    Ideally, whatever I pursue should be as passive as possible.  I’m not afraid of hard work, but my time is my most precious asset.  The more income streams I can generate that require little or no time/effort to maintain, the more wealth I can produce as an individual.  I think of this as leveraging my time.

    Another reason I’m chasing passive income streams at this point in my life is that being in the military is a full time job that doesn’t leave me much room to head off in my own direction.  If I find the perfect business opportunity, I’m not at liberty to “quit” when I decide.  Therefore, my efforts need to fit with my present situation and service obligation.

    My final reason for chasing passive income is that I have some big dreams I want to pursue on a full time basis as soon as possible.  Yes, I understand the point of our exercise is to achieve the Number so we can retire and fulfill our life purpose stuff.  But I think I can get on with it sooner than 10 years from now if I can generate sustainable passive income streams to live off of.

    Currently my passive income efforts revolve around:

    – Real Estate investment – One of my 2008 goals was to begin investing in real estate other than my primary home.  However, the Navy changed my real estate investment efforts and that goal with orders to Boston, MA.  I’m going to be managing the Navy’s recruiting efforts in New England.  Drop me a line if you want to join up.  Because of this change in plans I’ve had to defer my goal just a bit, but will still be a real estate investor very soon, I’m just going in through the back door.  I have renters lined up for my VA Beach home and am closing on a house in Boston at the end of January.  The Va Beach home is renting with positive (and passive) cash flow and the Boston house is a foreclosure that I’m picking up for $200K below market.  🙂

    – An Internet approach – As I mentioned above, I need a business that I can fit into my military career.  The Internet is everywhere.  It never sleeps and my online activities can be tailored to my schedule.  I can devote some time over lunch, during my commute on the train, or even while on travel and in the evenings at home.  Thus the title of this post, I’m trying to click my way into increasing my income.

    I think of the internet as a big river money just waiting for me to dip a bucket into.  I am using several approaches to try and scoop my bucket into that river.  Mostly centered around advertising and internet marketing, I’m using several blogs (I have ten right now) to target specific niche markets.  The idea is to drive highly targeted traffic to the niche blogs which contain Google advertisements and related affiliate products.  Traffic = Clicks = Advertising and Sales Revenue.  So far the websites are paying for themselves, and I continue to build content and generate traffic via backlinks and search engine optimization.

    I’m also dabbling in running targeted Pay Per Click ads (they are at the top and right side of Google’s Search results) to sell affiliate products.  I paid for an online course to learn some of the in’s and out’s of PPC, but have only lost money so far in this area of Internet Marketing.  I’ve suspended my PPC activities for now because I need all the cash flow I can muster to finalize my real estate deals in the end of January.

    For now I’ll just focus on my niche blogs since I’ve got that breaking even.  I’ve heard “stories” of folks on the internet using this approach to make several thousand dollars per month.  I’ve only been at it for three months now and am making whopping $45/month from my ten blogs.  It’s not much, but I see the potential.

    The idea is passive income from military retirement (someday), real estate rentals, and internet income so that I can really begin to focus on what I view as my true business opportunity…building an Air Taxi business.

    You knew it had to come back to flying at some point didn’t you.  🙂

    In the mean time…Click Baby Click!

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