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Archive for the ‘personal’ Category

Recovering Financially from a Divorce

Posted by Paul on January 5, 2007

I went through a divorce which started in 2003 and last about 18 months before the final decree was issued. It was the most financially stressful period of my life. I lost about 25 lbs (good for some people, but my weight was down to 125 at one point). Me ex did not work and so all the financial burden was on me. During one 3 month period a Judge ordered me to pay all of my take-home pay to my ex. I literally had to beg for money from my relatives in order to eat.

Legal fees were atrocious. I paid over $20K to my lawyers (I fired the first one after he failed to get me weekend visits with my kids) and after the divorce was finished the Judge came back and ordered me to pay nearly $10 to my ex’s attorney. I had to assume responsibility for all of our mutual non-secured debts and at one point had over $70K in unsecured debt. On the plus side, my attorney negotiated a good financial settlement. I got the tax exemptions for the 3 kids, most of my 401k and a 85% of payments to my ex are counted as alimony rather than child support (good for tax deductions). I still own half of our house which will be sold when my youngest graduates from high school.

You may feel I screwed my ex, but she is not suffering either. She does have to work now and is quite capable (she has a BS in Engineering but doesn’t use it). She also receives about $35K a year from me and still lives in a 3100 sq ft home and drives the newer car.

Now many people going through divorce take years to recover. I first participated in, than latter led a DivorceCare group at my church for a couple of years. It was an eye-opening experience. It certainly helped me get through the divorce emotionally and spiritually much faster than most people might. However, I did see many people struggling financially for many years after their divorce.

My assessment of their financial situation was that it was largely self-imposed despite their constant complaints about the lack of support from their ex’s. Most lived in homes or apartments that they could not afford or would go out and buy new cars or new clothing. They had no plan on how to recover financially or improve their lives – just anger at their situation or depression. They did little or nothing to change their financial situation, beyond trying to work more hours at a low paying job.

Now, I wouldn’t be honest if I didn’t say that there were times I felt overwhelmed financially, but I never felt hopeless. Instead I developed a plan that has propelled me back to a better financial situation then I was in before. Here’s what I did:

  1. I moved to the cheapest apartment I could find and scavenged furniture.
  2. I liquidated every penny I could and put all my energy into paying off unsecured debt
  3. I tried to move as much of my debt to zero or low interest rate loans
  4. I drove an old car
  5. I never ate out – I cooked everything myself from scratch whether alone or when my 3 kids visited
  6. Once my debt was down to manageable levels, I bought a real estate course and started searching for a distressed seller
  7. I used a loan from my 401k to buy a house that I found at $33K less than market value – so “nothing down”. The payments were slightly higher than my rent but offset by the interest and property tax deductions on my income tax turned this into a wash
  8. I used the “instant equity” I had created from my house purchase to get a HELOC loan and found a second house at far below market value from another distressed seller. We spent $16K fixing it up in our spare time and created more net worth
  9. This year we are focused in expanding our real estate investments and expect to create another $50-$80K in net worth.

Has it been hard? yes! Has it been a lot of work? yes! Did I have time? No! I’m now married with 4 teenagers. I still attend almost all of their after school sports meets and other school activities. I spend time with them helping with homework. But I don’t watch TV or waste time on non-essential activity. I still don’t spend money on non-essentials (my only purchase has been a new bed when I re-married). Now I have to give credit to my new wife as well. She has supported every decision and worked along side me while we rehabbed our rental property. Her love and support have been essential to my financial recovery.

Can you do what I did? Sure. Will most people? No. I learned while in Amway that most people would rather complain then act. God created an abundant Universe and I believe we have the right and maybe even obligation to take advantage of that.


Posted in finances, money, personal | 1 Comment »

The Courage to Be Rich

Posted by Paul on December 21, 2006

I was reading an article titled The Courage to Live Consciously by Steve Pavlina and was reminded (again) of the root reason for my current financial state -living too much in my fears.

How would I live if I had no fear at all? Have you ever asked yourself that question? When I was involved with Amway I often asked myself this, but had long forgotten about the question or my answer. Recalling back to the days I used to travel long distances to show the Amway business plan to prospects, I often would be driving home late at night listening to self-improvement tapes and sometimes would catch a glimpse of this awesome lifestyle that I could lead should I succeed – great friends, financial security, wonderful family and spiritually connected. But by the next day, trying to do my job with only 4 hours sleep, I slipped back into negative thoughts about why I would not succeed (fatigue can kill dreams).

Now I’m not totally a wuss. In some areas of my life I have a lot of courage. I relish heights and have no fear of dropping off the side of a mountain, I’ve had 20′ boa constrictors crawl over my back. I love speaking in front of large crowds (I’ve given speeches before 10,000 people) and I have never had a fear of investing money. I don’t really have a fear of failure, but I do have a fear of success. And I have had a very real fear of being rejected by other people in one-on-one situations.

Life shrinks or expands in proportion to one’s courage”.

Anais Nin

The word courage is derived from the Latin “cor” which means heart. Steve Pavlina seems to think that courage is more about mental decisions. However, for battlefield decisions the Marine that falls on a grenade is not making an intellectual decision, but a very real emotional one. He (Steve) thinks that our decisions are not “fight or flight” based because the real danger to most of us is mostly in our mind – not life or death decisions our ancestors (or today’s soldiers) faced.

Steve lists lots of practical advice to overcoming your fears (making list of possible negative aspects of you decision, breaking them down and setting goals to overcome them, becoming more educated, etc.). Maybe this helps some people, but I have tried this logic with only limited success.

So how do I gain the courage to be rich? My only good analogy is when I am at the top of a very steep ski slope and can’t see the trail past the edge of my skis. I simply push forward over the edge and trust in my ability, God and my instincts that I will make it down the slope. I am totally immersed in the moment, not worrying about falling, breaking a leg or anything negative.

I think that business success will take a similar route. When I was in Amway I was 99% committed to my success. I invested heavily in tools, seminars, travel. I would drive anywhere to show the plan to people, but I withheld myself in one critical area out of my comfort zone – I wouldn’t drop off that cliff when I was in the presence of a stranger. I have a colleague I work with who I admire greatly for that quality. For him everyone is a friend whether a CEO or the girl at the drive-through window. In seconds this man establishes rapport with strangers, a trait I envy.

So is becoming rich just about courage? To a large degree it is and a very emotional decision. It is about putting yourself on the line, about immersing yourself 100% into what you are going to achieve and blowing up the bridges that would allow you to retreat. That retreat has for me been too easy ( I make a six figure income at a job). But my job will never allow me to get rich.

“Successful people expect the best, and they generally get it, because
expectations have a way of attracting to us their material equivalent,”

Tom Butler-Bowdon

When I started in real estate the first time 20 years ago, I didn’t have a plan, wasn’t organized and invested based on poor information. But I also failed to commit myself 100% to making it work, so I retreated to my job and let it bail me out. This time I am better organized, have good market data, have a planned exit strategy, know what I want to buy and am not letting emotion drive my purchase or selling decisions. But I still have the opportunity to give up – I’ve got 4 teenagers to care for with associated activities, a wife who wants my time and still have that 8 hours every day to exchange with my employer. I don’t have time to do this ( I could reason).

I’m 53 and I have no hope of retiring before my late sixties based on my financial position. I had not planned to be in this position, but that’s because I never did stick with a plan to do it. So its going to take relentless persistence to succeed. And ultimately, the courage to push myself over the edge.

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My Chinese wife

Posted by Paul on December 19, 2006

My wife will be returning to the US next week after having spent a month in China helping her mother recover from a stroke. She is a gem of a woman and a perfect wife and I am counting the days until her return.

Some people ask me why I married a Chinese woman. There are tremendous barriers just between the sexes, much less between two very different cultures without a common language. My wife speaks good basic English, but we have much difficulty communicating complex ideas. And sometimes the cultural viewpoints are so divergent that we cannot make sense of each others view points at all.

There are 1.3 billion Chinese living in the same geographic area as the US and the way they have learned to deal with that abundance of people is sometimes unique and strange to us. In China, you focus on yourself and family first. For example, getting on a bus means pushing your way past the elderly or pregnant or children, otherwise you never will get on. I think the Chinese (I’m generalizing here and don’t mean to offend the many kindhearted strangers that have helped me) find the degree to which we our are “brothers keeper” a strange concept (My wife doesn’t understand American generosity towards strangers.). On the other hand, the Chinese are fierce defenders of their immediate family. Their loyalty to family is something that is quite rare in the US.

My wife grew up during the Cultural Revolution. The stories she tells of her childhood are of extreme poverty that I can imagine as much worse than those in the US experienced even during the Depression era. She is also deeply affected by many events where outspoken critics of Mao were executed. Her parents lived their entire lives in a home with no indoor plumbing and no heat (at the same latitude as Buffalo, NY), until she purchased them a home 2 years ago.

After graduating from college she moved 1000 miles from home to the Northwest Tibetan plateau where she married, only to have her husband abandon her after her daughter was born. She sacrificed her own food to feed her baby, studied to earn an accounting certificate and eventually was able to find a job in the southern most Chinese province. For several years she was separated from her daughter who was raised by her mother in the northeast.

Like most Chinese, she is an ardent saver. She lived meagerly and saved her money. When her bank went bankrupt due to legal shenanigans, she found a job in the middle eastern part of the country at a large bank where she moved up the corporate ladder. At that time China started allowing people to buy “houses” (really what we call a condo), so she took her savings and a small mortgage (which she paid off in 5 years) to buy a nice home. Her parents came to live with her there for several years to help with childcare.

So what are the qualities that I have found so compelling in the woman?

  • respect – she respects men and me in a way that I had not experienced from an American woman. Our culture so devalues men now that the weak, disrespected male is the norm on TV. “Women-talk” is often nothing more than male-bashing.
  • strength – her upbringing and life experience have made her one strong woman. Many people assume Chinese women are timid – this could not be further from the truth. Certainly those that are my wife’s age have experienced too much to be intimidated by anyone or anything
  • love – when she is with me I am pampered in a way that is unimaginable to most Americans. I don’t think this is uncommon in Chinese-American marriages. The more she does this, the more I am motivated to find ways to love her back – its been an un-ending upward spiral

Now I could go on, but suffice it to say I am one lucky man. My wife never had to read The Proper Care and Feeding of Husbands because she lives it.

If you would like more information on this topic visit CandleforLove.com

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How to get rich

Posted by Paul on December 15, 2006

One question that many people ponder over throughout their lives is the question of how to get rich or least financially independent. The vast majority of us have been schooled in the time-honored wisdom that the best route is to go to a good college and get a good job. Then we spend our lives exploring the stock market or real estate or network marketing or a business or buying lottery tickets or suing someone if all else fails, without really understanding the basic concepts that will realize our dreams.

I’m going to give you the secret (I sound like a salesman here, but I’m not selling anything) and it is so simple, welll….duh!

There are two immutable’s in getting rich:

  1. Leverage
  2. compounding (also known as interest or the time value of money)

If you understand these two concepts and use them positively, I can guarantee that you will be rich. Now most people spend their lives either not using these or using them in reverse. For example:

  • they work at a job (trade their hours for fixed dollars) and spend all that they make
  • they incur bad debt (reverse compounding)
  • they use leverage with extremely high risk/reward ratios (for example, lottery tickets)

Many of us have read stories of poor ministers or spinsters that die and have millions of dollars in their estate – these people lived on meager incomes but used compounding( the time value of money) in their favor to accumulate wealth. In WV I lived across the street from a 92 year old spinster who had several million dollars in AT&T stock. She had purchased some small amounts from her employer when she was working a summer job in high school and 70 years later – voila!

I want to distinguish between bad debt and good debt. My Chinese wife believes that all debt is bad, but I think it is correct to say that investment debt that has a reasonable risk/reward ratio is acceptable (think of your home). Debt incurred to buy that HDTV is bad debt (but damn do I want one 😦 Guess I’ll have to achieve some financial goals first!)

So what is leverage? Basically it is when you use a tool to allow you to be more financially productive. There are many tools that you can use:

  • starting a business and hiring employees to get more work done (good risk/reward)
  • franchising your business (good risk/reward)
  • using the Internet to leverage your efforts (good risk/reward)
  • buying real estate with small down payment (good risk/reward)
  • investing in commodity futures (poor risk/reward)
  • using margin accounts to buy stocks (poor risk/reward)
  • investing in a college education (may be a poor risk if you choose the wrong major!)

What about ways to use the time value of money or compounding to your advantage:

  • saving 10-15% of your income -especially in a IRA or 401k (excellent risk/reward)
  • investing in stocks (could be good or poor risk depending on your diversification)
  • owning a completely paid for piece of real estate (good risk/reward)

I’m not so sure that college is the best use of investment dollars. With a typical education costing $40k/yr, the $160k invested at 9% for 35 years will yield $3,266,000.

So what should you do? Here’s my list:

  • put some money into an emergency fund
  • pay off all bad debt – use a snowball formula
  • accumulate 3 to 6 months of expenses into very liquid savings
  • invest 15% of your earnings into a Roth IRA or 401k (especially if its is matched)
  • buy a house from a motivated seller – don’t make an emotional purchase
  • start a business (our tax laws provide magnificent deductions for businesses not employees)
  • systematize your business (see E-Myth Revisted) so it doesn’t run you
  • invest in real estate

And stop buying lottery tickets! That’s my perspective.

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Real Estate Goals, Mission, Strategy

Posted by Paul on December 13, 2006

I wrote about some of my real estate goals yesterday.  Since then I have completed reading The E-Myth Revisited and have been inspired to create something grander.  Maybe this is just my tendency to go to extremes working again or maybe I am finally getting it.

 Gerber makes the case for developing your business as a “franchise” whether or not you plan to actually franchise it. The point is that once you put the elements in place, the business can run without you and you can actually achieve some financial independence.

He has seven parts of the strategy

  1. Primary Aim
  2. Strategic objective
  3.  Organizational strategy
  4. Management Strategy
  5. People strategy
  6. Market strategy
  7. Systems strategy

I’ve used my new favorite tool pbwiki to create our business mission, strategies and listed our 2007 goals in the sidebar.  Take a look here or click on link under blogroll “Real Estate Goal wiki”.

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Maybe not luck at all

Posted by Paul on December 12, 2006

In the book Tales of Power by Don Juan he says “The basic difference between an ordinary man and a warrior is that a warrior takes everything as a challenge while an ordinary man takes everything as a blessing or a curse”.

Steve Pavlina tackles this issue in a post on the Shrug Effect. His point is similar to Don Juan in that the average person is quick to dismiss the success of high profile people to the breaks they had in their life rather than be responsible for their own breaks. Spiritual people tend to count their blessings, secular people just look at their bad luck, but neither group tends to see everything as a challenge.

Now I can’t dismiss the possibility of luck. Certainly it was bad luck to be on one of the planes hijacked on 9/11. But I’ll wager that vast the majority of our life is governed by decisions we make from minute to minute. I’ve talked previously about luck and was hoping for some better luck in my new real estate ventures.

I think the cumulative effect of decisions we make from an early age often determine part of our personality, what kind of relationships we develop in life, our career choice and financial success. When I was in high school I would occasionally go to a school dance. But I wouldn’t dance. It was too far outside my comfort zone to ask a girl to dance. There were other young boys that were less attractive than me, had worse personalities but didn’t have the fear to take a chance. They learned from trial and error what the girls liked – often developing humor as a way to attract a girl.

Looking back to my college years I can see clearly that the people that succeed financially were not necessarily the ones with the best grades. It was often the ones who had the largest network of contacts. Was this my bad luck not to make hundreds of friends or a decision not to get outside my comfort zone and make friends. It was easy to study my engineering books and get good grades. That certainly got me a good job offer, but in my company it takes lots of people skills to climb to the highest levels.

The same certainly was true for my experience in Network Marketing with Amway. The people skills that I had failed to develop all my life through my fear of people stopped me from making it. And I still wasn’t willing to get outside my comfort zone – even for the millions of dollars of potential income. As I mentioned in my post on SMART goals, I never believed and wouldn’t try.

I’ve been busy creating a business plan and goals based on The E-Myth Revisited and feel much more confident that I will succeed – not because I’ll have better luck, but because I have made the decision to treat each challenge as an opportunity to get better.

From A Separate Reality

You should know now that a man of knowledge lives by acting, not by thinking about acting, nor by thinking about what he will think when he has finished acting. A man of knowledge choses a path with heart and follows it”

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Medical Catch-22

Posted by Paul on December 12, 2006

I started to take prednisone for a medical condition last week. The information sheet indicated that steroids lower your immunity. So I thought it would be a good idea to get a flu shot this year. I never have gotten one before, but it seemed like a good idea. Well, the doctor refused to give me one!  Seems that since steroids lower your immunity the doctors and pharmacy companies doen’t want to get sued if you have a reaction. So they would rather you catch the flu naturally and suffer a long time than risk a lawsuit. This is most absurd.

My wife has been taking prednisone for 15 years and never had trouble getting a flu shot in China. Of course, China doesn’t have the lawyers and lawsuits we have. Her parents are convinced our medical system is so bad here that they don’t want to risk a visit.

We are worried about losing to the terrorists – I think we have already lost to the lawyers.

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Posted by Paul on December 11, 2006

I’ve been thinking a lot about goals for my real estate business recently. I’ve read that most people never set goals of any kind and fewer than 5 % of people actually write down their goals. I guess I have been one of the few that do this but not sure why I haven’t achieved all my goals.

At the corporation where I work we have been forced to set goals (and document the results at year end) for many years. We use the S.M.A.R.T methodology.

SMART stand for:

  • Specific
  • Measureable
  • Attainable
  • Realistic
  • Tangible
  • When I was involved in the Amway business, the successful people constantly discussed goal setting and writing goals down. They would even supply specific formulas to attain each type of goal. For example to make X$ you had to:

    • Sponsor XX people
    • Show the business plan to XXX people
    • Contact XXXX people
    • Meet XXXXX people

    I would write down these extensive plans about how to achieve my goals. I could easily make call, show the plan and sponsor my fair share of people. But I could not meet people and never generated enough momentum to keep new people coming in faster than others dropped out. For me, meeting XXXXX people was an unrealistic goal because I did not believe that I could achieve it.

    So after attending a real estate seminar I am again writing down some goals

    For 2007 our goal is to purchase 4 single family homes with at least $20K profit potential and sell at least 2 of the properties I own.

    To break that down into details:

    1. Find sources of funding of at least $500K
      • develop relationship with a loan broker
      • get a source of hard money financing
      • develop some sources of private money funding
    2. Create a source of motivated sellers
      • work with Realtors to find old listings, desperate sellers
      • direct mail 50 letters per week to people filed in lis pendens (pre-foreclosures)
      • direct mail 100 postcards to absentee owners per week
      • put up bandit signs
      • set up website (www.JinnaProperties.com)
      • business cards
      • install phone line
    3. Make 3 purchase offers per month
      • call all contacts from advertising
      • look at 10 properties per month (use Realtors if not enough from ads)

    After reading The E-Myth Revisited I decided that I needed some other goals. Gerber has us ask “How must my “business-as-a-product” work in order for it to successfully attract not only customers but also employees who want to work there?”

    1. Create a business mission
    2. Create systems to automate all of the above so that the business does not run me

    I was reading a blog by StevePavlina today and read this statement

    I remember the moment when my financial situation began to turn around for the better. I can trace everything back to a specific shift in my mindset that happened in late 1998. Up until that point, my focus was largely on ego-driven goals, and no matter how hard I worked, my financial situation kept getting worse. Eventually I was so fed up that I abandoned that mindset and replaced it with a new one. I said to myself, “Living just for myself is getting me nowhere. I’m going to concentrate on making a contribution instead. If I go broke, then at least I’ll go broke doing something worthwhile.” ”

    I can remember when I was in Amway and the people that made it to the highest levels of success were on a mission. They were not in it just for the money anymore but seemed to have a higher purpose that allowed them to overcome their fears and move outside their comfort zone. I remember I had that sense for the first 3 months I was in the Amway business, but somehow started having a fear of success, fear of failure and no longer could see the people I was talking with as successful. In fact, I inwardly was very cynical of most people I talked with despite their braggadicio attitude. So it became more and more difficult for me to talk to anyone about the busines.

    So part of my overriding concern for my real estate business is that I just not focus on the specific monetary goals, but develop a mission statement. I think, just like in Amway, I need to be able to convince the sellers that I am not just there to take advantage of them but have a greater purpose to help them solve their problems.

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    Networth IQ

    Posted by Paul on December 9, 2006

    I found a website NetworthIQ that allows you to record and compare your networth to others by age, occupation, education, income, etc. You can see where I stand in this chart. I am about average for my education level but well below average for income and age. Looks like I have a lot of work to do. You can see my profile here. Hopefully, when I post my Dec 2006 results it will swing upward again.

    net worth compare

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    Net Worth

    Posted by Paul on December 6, 2006

    The Chart below summarizes the changes in my net worth over the last 7 years. My networth showed a decrease this year due to a payout from my 401k to my ex-wife. You can see that I had held my level of debt relatively steady for several years but it has mushroomed since my divorce. Part of that was legal debts but the two big changes have been due to purchases in real estate. After the divorce I lived in an apartment for a while but felt I was throwing away my money and since I didn’t have head of household status or mortgage interest deductions my taxes were very high.

    So I bought a couple of real estate courses and after months of searching found a house that had been for sale for 6 months. The original owner had transferred and sold his house to a relocation company. It was the middle of winter and they had not received any offers on the house. So I made an outrageously low offer and they countered. We ended up about $33k below the price the relo company had paid for it. The appraiser still thought it was worth the relo price, so the broker was able to get me a mortgage without paying mortgage insurance. I borrowed a 10% downpayment from my 401k and so got into the house with nothing down and instant equity position.

    The large changes in debt this year was due to the purchase of a rental property which I discussed here. You can see that I am cash poor but have some paper worth. Probably not as much as a person my age should have. My immediate problem is 4 teenagers who want to go to college. Only one may be scholarship material so, you can see why I am motivated to do something besides my job.

    cash $1537
    RE Value $585040
    Credit card debt $7320
    Mortgage Liability $489,037
    401k $167,280
    Net Worth $256,004


    net worth

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