Rob Minton - Income for Life

Why CONTROL is Critical to Your Investing Success!

Over the last few weeks, I've been blown away by the biggest "Ponzi Scheme" to hit Wall Street. On December 11, Bernard Madoff admitted that he ran a $50 billion dollar fraud. Thousands of investors have lost millions of dollars. In addition, many charities have been destroyed from turning their money over to Bernard Madoff.

A "Ponzi Scheme" occurs when the money manager uses the funds contributed by new investors to pay existing investors. The scheme can continue for years, as long as new investors are investing new money. When new investors stop investing, as they did with Bernard Madoff, the Ponzi Scheme quickly folds because funds are not available to pay to existing investors.

I have preached many times over, within the Income for Life monthly newsletter, that investors should always control their investments. Control is extremely important in wealth building for many reasons. The investors who lost money with Madoff had no control over their investments. They had no idea where their money was actually being invested. Yes, they did receive account statements showing them where their money was supposed to be invested. However, these account statements were fake.

The one major lesson every wealth builder should take from this situation is that you must control the investments you make. Controlling your investment gives you the ability to have a direct impact on the investment's performance. In addition, it protects you from loss through fraudulent money managers. As an example, consider these different investment opportunities:

1) Investing $20,000 into a mutual fund.

2) Investing $20,000 as a down payment to buy a single family investment property.

3) Investing $20,000 to buy stock in a large company.

4) Investing $20,000 to start your own "side" business.

You can ask yourself many questions to compare these different investment opportunities. In fact, most investors ask themselves the following 3 questions when evaluating different investment opportunities:

Which investment offers the best return on investment?

Which investment contains the most risk?

Which investment is the easiest?

Notice that the majority of people don't even consider "control" of the investment as part of their decision making criteria? The only two investment choices presented that give you 100% control are the single family rental property and the "side" business. These two investments, in my humble opinion, are the safest. 

The problem is that most investors are typically attracted to investments that are easy. In fact, they prefer to turn their money over to someone else and then do nothing. It's these 100% passive investments that carry the most risk. 

Take some time to study the people who have acquired significant wealth. Look to see if they controlled their investments. I'll bet you'll find that in the majority of them do. Consider the following:

Bill Gates: Bill's wealth came from Microsoft. Did he control Microsoft?

Warren Buffett: Most people believe that Buffett is a passive investor who simply buys shares of stock in good companies. This is not true. Buffett typically owns businesses outright whereby he has 100% control. In the investments where he doesn't own 100%, he typically acquires enough shares to participate in management.

Sam Walton:  Sam's wealth came from Walmart. Did he control Walmart?

I could go on and on with many more examples of wealth people. Each example would have the same commonality - CONTROL OVER THE INVESTMENT. This also means that each wealthy person was "active" with their investments. They didn't build their wealth through passive investments.

As we head into 2009, please add one question to your criteria for selecting investments. The one question you should add is:

Do I control the investment?

Happy Holidays!

Rob Minton

 

How to Use Options to Protect Your Investment

After reading the new biography titled "The Snowball" about Warren Buffett, I became interested in learning more about the stock market. I went out and purchased 6 different books on the stock market. One of the  books I purchased was instrumental in Warren Buffett's education. This book is "The Intelligent Investor" by Benjamin Graham.

Mr. Buffett specifically suggests that investors read and focus on just two chapters in this book.

Chapter 8 - "The Investor and Market Fluctuations"
Chapter 20 - "Margin of Safety - as the Central Concept of Investment"

These chapters are very educational and required if you're serious about building wealth. The principles taught in these chapters apply to the stock market, real estate market and any business that you own.  Put this book on your holiday wish list!

In addition to "The Intelligent Investor", I also read several books on stock options. I've now put my toes in the water with options. Nothing too crazy. I'll share what I'm doing with you in today's post.

My strategy has been to buy shares in good companies when the price drops. This has been fairly easy to do lately. For example, I purchased shares of one stock at around $51 share. I then turned around and sold "covered calls" on the shares I owned. Basically, I sold an option to someone else giving them the right to buy my shares at $65 dollars a share. They paid me $3.50 a share for this right. So I paid $51 a share and collected $3.50 a share and still own the stock. This means my actual out of pocket cost on this stock is now $47.50. Soon after this transaction, the stock dropped again. As I write this blog post, the stock is now trading at around $48 a share. I'm still slightly ahead because I have $47.50 invested and the stock is valued at $48 a share. Had I not sold the option on this stock, I would be down $3.00 a share.

Here are a few things to consider:

1. In Income for Life, we buy a good home and then sell the home to a tenant/buyer on a rent to own program. The tenant/buyer pays us a fee upfront for the right to buy the home at a predetermined price during the rent to own program. This is the exact same thing that I've done with my stock. I've sold someone the right to buy my stock at a predetermined price for a set period of time. As you collect upfront payments on your investment home, your cost basis in the property decreases. So if you paid $100,000 for your home and you collect $5,000 upfront from your tenant/buyer, your cost basis has now dropped to $95,000.

2. If the stock I purchased does not increase in price, I'll be able to keep the stock and the entire option payment. I can then sell another "covered call" on this same stock and collect more money. The money collected would reduce my cost basis in the stock further. The same strategy applies to our rent to own home. If the tenant/buyer doesn't buy your home, you can collect another upfront payment and reduce your cost basis further. Depending on how many times you go through this process, you can continue to drive your cost basis down on your investment further and further. In my stock scenario above, the price of the stock dropped, but I'm still ahead because of the income received from the option sold. Selling options on your assets helps to mitigate against price decreases.

3. If the stock I purchased increases in price beyond $65 a share, I'll be forced to sell my shares. I'll collect a profit of $14 a share. I cannot see how this is a bad thing. Back to real estate - if the tenant/buyer buys out your home at the predetermined option price, you'll collect a nice profit on the home, too.

The strategy I'm testing with my stock options is basically copy what we do in Income for Life with real estate.  Buy an asset, sell an option on the asset to generate additional income from the asset. I never really thought much about it, but selling options on your assets allows you to hedge against loss. This strategy can be applied to real estate, just as easily as it can be applied to the stock market. The only difference that the stock market moves at a significantly faster pace.

To be clear, I'm not suggesting you go out and start trading stock options. Stock options are risky and you can lose money. I've read several books and I'm playing the game with a very small amount of money. Instead, I'm hoping that you see how powerful it can be to sell someone else the right to buy your assets at a predetermined price.Take some time to digest this blog post, because I've dropped a pretty big investing concept on you!

If you would like to become an Income for Life Member, apply at http://wwwIFLApplication.com

Rob Minton

Short-Term Thinking Destroys Long-Term Results

For this post, I'll share a story and then explain a BIG lesson for everyone.

Last year, we rented a lovely home on Lake Norman for 3 weeks. I wrote about how I paid for this home, which is rather expensive, in one of our monthly Income for Life newsletters. In fact, the strategy to pay for this was part of my $4,000,000 Wealth Building Plan. This plan and all previous Income for Life Newsletters can be found in the member's only website!

We enjoyed the home some much that we reserved the home for 3 weeks in 2009. Because we reserved so far in advance and we were repeat customers, the owner didn't require us to pay a deposit at the time. We signed the rental contract and planned to send the deposit in December of 2008.

The owner received a request from another vacationer to rent the home during one of our weeks. Because we hadn't sent the deposit, the owner had decided to cancel our agreement and rent to the new vacationer. This isn't the end of the world, because there are many other homes available for rent. We would have simply found another home.

However, we would have never gone back to this owner and their home again.

The bad choice in this particular situation is canceling a 3 week rental with us to get a 1 week rental from someone else. The bad choice is magnified when you consider that we were repeat customers who took very good care of the home and paid as agreed previously. Even worse, we probably would have continued to rent this same home each summer going forward. This one choice would have cost this owner 3 weeks of rent each and every year.

Why do so many people make short-term choices without thinking about long-term consequences?

If you stop and think about things for a minute, you'll see that limited short-term thinking is the main reason so many people are struggling financially right now. Here are a few examples to show you what I mean:

• Do I buy the $3,000 flat screen TV on my credit card now, or save up and pay cash? Short-term thinking is on instant gratification. What happens when the credit card bill comes in every month?

• Do I lease a new car because the monthly payment is lower, when I could buy the car and actually own it someday without having a monthly payment? Short-term thinking is going for the lower monthly car payment, instead of owning the same car long-term.

• Do I postpone saving for my retirement now because times are tough economically, or go make some extra income so I can continue to save? A significant number of people have decided to stop saving for retirement now. See the retirement test at this link for the details.

• Do I stop investing in real estate today because the market is flat, or do I think long-term and buy as many properties at discounted prices to maximize my long-term wealth?

If everyone would think long-term before making any financial decisions, they would be much better off. Try your best to make best long-term decisions, not the best short-term decisions. The best short-term decisions usually have the worst long-term outcomes.

Rob Minton

P.S. Everything ended up working out just fine with the summer rental. The owner decided to stick with us! We are very excited! We now have the opportunity to be long-term tenants for them!

Can You Pass This Retirement Test?

Last week I found an interesting quiz in the Wall Street Journal titled "Measuring Your Retirement IQ." I have included a few of the questions from this quiz for you in this blog post. Can you answer these questions correctly?

1. Among households age 50-plus, how much money is held in a typical retirement account?

a. $90,000
b. $140,000
c. $190,000
d. $240,000

ANSWER: A. The median balance was $89,300 as of Sept 30, according to the Urban Institute. Given that a typical household age 50 to 59 with a retirement account has annual income of $95,000, those savings are "not enough to replace one year's pre-retirement income," the institute notes.

2. What percentage of surveyed workers age 45-plus said they stopped contributing to their retirement savings in the past year?

a. 10% 
b. 15%
c. 20%
d. 25%

ANSWER: C. One in five workers surveyed last month said they stopped putting money into a 401(k), individual retirement account or related savings plans, according to a report published recently by AARP.

3. What percentage of the surveyed workers age 45 and older said that - based on recent changes in the economy - they have considered delaying retirement?

a. 24%
b. 34%
c. 44%
d. 54%

ANSWER: B. One-third of workers surveyed last month have considered postponing retirement, according to AARP. Women are more likely than men -40% vs. 29% to be weighing that step.

4. What percentage of surveyed workers age 45 and older think they are currently saving enough for retirement?

a. 36%
b. 46%
c. 56%
d. 66%

ANSWER: A. Only about one-third of workers think their savings plans for retirement are on track, according to the AARP. Fifty-eight percent said they aren't saving enough, and 6% said they didn't know or declined to answer.

5. Among workers age 65-plus, what percentage work full time?

a. 26%
b. 36%
c. 46%
d. 56%

ANSWER: D. From 1995 to 2007, the number of older workers on full-time schedules nearly doubled, while the number working part time rose just 19%, according to the Bureau of Labor Statistics. As a result, "full-timers now account for a majority among older workers, 56% in 2007, up from 44% in 1995."

6. The median weekly earnings of full-time workers age 65-plus in 2007 were:

a. $605
b. $705
c. $805
d. $905

ANSWER: A. That compares with median weekly earnings of $695 for all workers, according to the Bureau of Labor Statistics.

Do the answers to these 6 questions scare you?

Ponder this test until my next blog post...

Rob Minton

P.S. You can see the complete quiz in the Wall Street Journal dated Saturday, October 18th, 2008.

How to Pay for College/University...

I just read an article about how expensive children are to a family. Recent estimates indicate that it costs $204,060 to raise a child through the age of 18. This doesn't even include college. Rather expensive little buggers, aren't they?

If this isn't enough, college could add another $100,000 to $200,000. Yikes...

In today's blog post, I'll share what I believe is the best way to pay for college/university. The answer might surprise you. The drum roll please...

The best way to pay for college education is to not pay for it at all.

Yep.

Well, a better answer would be - to have someone else pay for it on your behalf. And I'm not talking about scholarships or grants either.

Let's say that you believe college will cost you $100,000. To save $100,000 for your child's education, you would need to save around $210 a month and earn around 8% a year on your savings. This effort would result in $100,818 twenty years from now.

Couldn't you simply buy a nice single-family home with a monthly positive cash-flow of $210 a month?

You could then invest this monthly cash-flow into a low cost index fund and bingo, your child's college education is paid for - by someone else!

You simply buy the rental property and use the rental income to save for your child's college education.

Now, the key to this strategy is that you must setup auto-withdrawal for your $210 a month college savings. Have this money automatically sucked out of your bank account each and every month.

At the end of 18 years, you keep the single family home and your kid goes to college. Not a bad deal if you ask me.

Or you could go the traditional route and scrap together $210 from your paycheck each month. This strategy gets harder and harder as the cost of living increases.

I used this simple strategy with my two kids and each year their college savings continues to grow. The best part is that it is being paid for by my rental properties.

In the past, it was a little challenging to find properties that generated $200 a month cash-flows. This challenge has all but eliminated in the States with the soft real estate market.

In fact, if interest rates go down any further, it would be fairly easy to generate this monthly cash-flow on multiple properties.

To get started, apply for membership in Income for Life at http://www.IFLApplication.com

As a member, you'll have access to the absolute best investment properties in your area. You'll also learn how to collect higher monthly rents, which will help you reach your college savings goals faster.

Remember the old saying:

Work smarter, not harder?

Well, this saying can be applied to saving for college too.

Rob Minton

P.S. The photo used in this post was captured from an online calculator at www.math.com.

I'm not the smartest guy in the world...

(Click on the photo to enlarge)

Recently I received a statement from Social Security on the status of my retirement benefits. I have scanned in my projected benefits as summarized in this statement. You can easily see that my projected retirement benefits are scheduled to be $1,556 a month, if I retire at the age of 62.  I'm 37 right now. This means that I'll be receiving this money 25 years from now.

With inflation, this monthly benefit will probably equate to around $700 in today's dollars. Who can possibly live on $700 a month? Here is what I'm wondering...

1. Will I have enough money to be able to eat every day?
2. Will I be able to afford a car to drive myself to the doctor?
3. Will I be able to afford utilities for my home?

Lets assume that I'm completely debt free including the mortgage on my home, can I survive on $700 a month? Notice I wrote survive. Having money for fun, travel and entertainment definitely won't be an option. I honestly don't think someone could survive on $700 a month.

Now, if I'm lucky enough to work until the age of 70, I'll increase my monthly benefits to $2,908 a month. This monthly benefit, adjusted for inflation, will be around $1,300 in today's dollars. According to statistics, my average life span is to the age of 77. I'll have just 7 years of retirement.

According to my earnings record in the statement I received, which is not included above, I began working in 1986. I was sophomore in high school. This was probably my the first job when I received a paycheck. I actually began working in elementary school with a paper route. In my paper route, I made profits, I didn't earn a pay check. I guess I didn't pay any payroll taxes on my newspaper route income.

I get to work from 1986 through 2042 to be eligible for $1,300 a month of inflation adjusted retirement benefits for about 7 years.

I'm not the smartest guy in the world, but this doesn't seem like such a good deal to me. What is even scarier is the disclosure at the bottom of the benefit section above. It reads:

"* Your estimated benefits are based on current law. Congress has made changes to the law in the past and can do so at any time. The law governing benefit amounts may change because, by 2041, the payroll taxes collected will be enough to pay only about 78 percent of scheduled benefits."

Huh?

I guess this simply means that I might not actually collect a penny of social security in retirement. Here is my real retirement formula according to Social Security:

56 Years of Work = $0.00 Retirement Benefits

Rob Minton

My $4,000,000 Weatlh Building Plan

Over the years, I have read hundreds of books on investing, money management and wealth building. I've tried many of the strategies outlined in these books myself. I had some successes and many failures. I learned a great deal from each and every experience. In fact, I probably learned more from the mistakes and failures than I did from the successful investments.

I finally realized that I wouldn't make any significant progress in wealth accumulation trying all of these different strategies. Many of these strategies distracted me from bigger opportunities. I decided that I needed my own personal wealth building plan in order to accumulate my "Enough Is Enough" number. Your "enough is enough" number is the amount of money you want to accumulate to be able to live life on your terms. Go where you want to go, do what you want to do, and buy whatever you want to buy.

To formulate my own personal wealth building plan, I decided to focus my attention on wealthy people, instead of reading wealth building books. I studied the wealthiest people in the world and still study them today. (Did you know that Bill Gates is no longer the richest man in the world?) I began reading biographies of some of the wealthiest people throughout history. I've shared many of the lessons I learned from these books in previous Income for Life newsletters.

I've read biographies on Richard Branson, John D. Rockefeller, Warren Buffett, Andrew Carnegie, Kirk Kerkorian, Donald Trump, Sam Walton, Cornelius Vanderbilt, Wayne Huizenga, John Jacob Astor, J.Paul Getty, and more... All of these men would have been or currently are billionaires today.

I looked for similarities and began to notice many. 

My thinking was that If I implemented and copied the similarities, I might just be able to short cut the wealth building process. Many of the men I studied created their fortunes, on their own, starting from scratch. Their lives became my college of wealth. I don't aspire to billions of dollars of wealth. My number is $4,000,000. I figured that I could easily hit $4,000,000 simply by copying the wealthiest men in history. Success does leave clues just like Tony Robbins says it does!

I then sat down and created my own personal wealth building plan based upon the similarities I found from my studies. My plan has changed a little bit from when I started, but I'm still following this plan today.

I've never shared my plan publically - until now.

You won't find my $4,000,000 wealth building plan in some book. You also won't find it in some audio program. Why? Because it's my plan. I created it from everything I've learned in my life. The plan isn't complicated, but it does require work. I've been working this plan for several years and am three quarters of the way to my enough is enough number.

I revealed my $4,000,000 wealth building plan in our August Income for Life Newsletter. The newsletter is headed out in the mail right now as I write this post. If you act quickly, you might be able to get into our membership and get a copy of my plan. Depending on where you live, the monthly membership ranges from $29.95 to $49.95 per month. I've spent thousands of dollars on books and countless hours of my time to formulate my $4,000,000 wealth building plan. You might be able to grab it now, for just a mere $30 dollars. Apply for membership now, go to www.IFLApplication.com

FYI - I will be writing more specifically about the different parts of my plan in future monthly newsletters. I know what some of you might be thinking... Your thinking that you join Income for Life and pay your $30 to get my plan and then you can cancel your membership. This is fine if that's how you roll in life. I think it would be a big mistake because you'll miss out on some great information headed down the pike in the near future.

To your $4,000,000!

Rob Minton

The Top 10 Distinctions between Millionaires and the Middle Class

Keith Cameron Smith wrote a book titled "The Top Ten Distinctions between Millionaires and the Middle Class."  I read this book for a second time today because I'm preparing to interview Keith for our Income for Life Members. The interview recording will be sent to members in August.

I have to say Keith's little book is fantastic. He reveals the main reasons why some people achieve financial freedom and others struggle from week to week. In fact, I have found each distinction included in his book to be true based upon my own life experiences. For example, his distinction number 9 is:

Millionaires talk about ideas. The middle class talk about things and other people.

He asks a very important question in this chapter. His question is: What do you spend your time talking about? He writes, "Your words are like a ship's rudder. They determine which direction you are going in life."

The majority of people talk about problems, high prices, and other people. Millionaires seem to always be talking about new ideas they have, investment opportunities,  books they have read and other successful businesses. There is a BIG difference in the conversations, questions and thoughts of millionaires when compared to the middle class.

Within the last week, 3 different friends of ours have mentioned the Aldi discount grocery store chain. Now, I have nothing against this discount store. From what I hear, people are saving a lot of money shopping at the store. I haven't been in an Aldi's store since college. I'm not going to spend time driving all over to save a few dollars. My time is far too valuable.

Back to our friends...

One set of friends mentioned that they were excited because they heard that an Aldi store was scheduled to open soon in their area. Another friend told my wife how she saved $2.00 on a jar of spaghetti sauce.

Do you think a millionaire would have these same thoughts and conversations? Probably not.

A millionaire wouldn't even know about the new Aldi store opening. Why? Because they're too busy making things happen in their own lives. In his book, Keith repeated the old saying which you've probably heard...

"There are three types of people, those that make things happen, those who watch things happen, and those who say what happened."

What type of person are you? Are you making things happen or talking about things other people are making happen?

Rob Minton

P.S. If you would like to receive my interview with Keith Cameron Smith with August's newsletter, become an Income for Life Member. You can apply for membership here.

No more stories on the price of gas! We get it - the price of gas is high.

On Sunday, we had some friends over for a cookout. At some point during the cookout, we began to talk about the price of gas. We actually started to joke about it. Remember Y2K? Or how about the West Nile Virus? Or how about the scary weather? Now all we hear about is the price of gas...

Why does the media try to scare us every single day? Because it's great for ratings. The media doesn't care about the price of gas. They only care about getting you to watch their newscast or read their newspaper. They need the advertising revenue. More viewers means more advertising revenue. Fear sells.

The same goes with the real estate market. Oh, the market is terrible. Foreclosures have spiked in the States. Yadda, yadda, yadda...

Within all of this doom and gloom, I collect a series of checks and a $20 bill from one of my rental homes. Here they are:

These checks were made out to one of my LLC entities.They total $2,230. Add in the $20 bill and you can see that I collected $2,250. My profit after making my payment is around $500. I sure do love my little houses.

Want to know why?

Because people always need a place to live. Gas prices can hit $10 a gallon and people might begin to cut back on some of their spending. They might stop eating out. They might stop going to the mall. They might even cancel a vacation, but they can't stop living. They need a place to sleep at night. It's virtually impossible for anyone to eliminate a place to sleep. The point I'm trying to make is that a monthly rent payment is NOT discretionary. Each month, I receive check after check on my properties irregardless of what's happening in the economy.

• This hasn't changed because of the price of gas.
• This hasn't changed because of the soaring foreclosure rate in the States
• This hasn't changed because of drop in real estate values
• This hasn't changed because of the sub-prime mortgage crises

The point being that I still collect checks each and every month. My tenants go to work each day to send me a check. Why? Because they need a place to sleep. I'm getting wealthier month after month.

Are you?

Now, if your feeling the pinch from the high cost of gas, what are you doing about it? Are you working to create extra income streams? Are people going to work today to send you a check? 

POP QUIZ:

How many tanks of gas can I buy with the profit I collected above? Around 7 or 8. Who is paying for my gasoline? Me or someone else? You got it! Someone else - my tenants.

How would you like to have 7 or 8 free tanks of gas each month? Would the price of gas be such a big deal to you? Probably not! The problem is that media keeps scaring you to death. Stop watching the news. Stop reading the newspaper. You'll be happier. I promise. Take the time saved and start to learn how to create income streams. Start investing in real estate. Start collecting monthly rent checks. Be proactive, not reactive.

Instead of conserving gasoline and living within your budget, create more income.

Rob Minton

P.S. Yesterday, the stock market sunk with sharp losses. Did this impact my rent checks in anyway? Nope.

What I'm trying to teach my kids about money

Last week, I posted the video of the first part of my presentation titled "How to Teach Your Children to Become Financially Independent." You can see this video by clicking here.

Hopefully, you watched this video. Hopefully, you shared the video with other parents that you know. If you haven't watched the video and you have kids, you must watch it. Do it now. Click here to watch part one of my presentation.

Today, I'm posting the second part of the video. In this video, I share what I'm teaching my kids about money. Some of my ideas might go against what you were taught as a child. Some of my ideas might even make you say... "No Way! I'll never do that with my kids." However, I want to challange you to do the oppositte of what everyone else is doing. Don't copy the masses. The legendary Earl Nightingale once said, "Find out what the majority of people are doing and do the oppositte." This advice works for everything in life, including parenting.

Make sure you click the "Share This" button and email the video to every parent you know. We need to take massive action now to ensure that our children don't struggle over money as adults. Here is part two to my video: