October is now upon us. That means pumpkin lattes, pumpkin muffins, and pumpkin pie.
The air is crisp. And it’s also sweater weather. Time to break out those pullovers.
For those of you who grew up in the 90’s, you probably remember the yearly reruns of It’s the Great Pumpkin, Charlie Brown, that would come on every Halloween.
I miss those simple days.
Even though things have changed since then, some things can still remain simple. Meaning you can keep your investing simple.
I know tons of fortunes have been made in real estate. Even my home has gone up in value.
However, real estate is a very active investment. I am always looking for passive income. And stocks provide the passivity I am looking for.
I didn’t spend all that time in my youth slinging hash and serving customers for nothing. I did it to buy my freedom. To say adios to corporate overlords.
And watching the government enter another day in the shutdown, just made me want to work harder to exit the rat race sooner.
Although index funds are the best way to invest, the market has been moving up and down so much it’s enough to give you whiplash!
However, please stay the course.
Jim Cramer from CNBC show Mad Money gave his listeners a reason why years ago.
Host Jim Cramer believes that there is always a bull market somewhere, you just have to keep investing to get to it.
He was homeless for about six to nine months in 1979 after a thief stole everything from his apartment, leading him to live in his car, a Ford Fairmont, spending nights parked at highway rest stops. After graduating from Harvard and working as a crime reporter, Cramer’s apartment in California was robbed, leaving him with nothing.
And as if that wasn’t enough, they also cleared out his checking account, which held the money he needed to pay rent. He ended up getting evicted. Poor guy!
He used this time to develop a consistent saving and investing discipline that he credits with helping him become a millionaire.
He decided to invest $100 per month. He said his car insurance costs that much. His rent costs that much — and I’m saving on rent. Basically, he used the money that would have gone towards the rent to invest.
Investing during hardship: Even when he was at his lowest point, Cramer continued to invest $100 a month into the Fidelity Magellan Fund. He said that this consistent investment discipline, even when he had very little, was a key factor in his becoming a millionaire.
Lessons learned: Cramer described this period as a difficult but foundational experience that instilled in him a lasting commitment to saving and investing.
This was during his 20s.
He thinks that people in their 20s have no excuse for not putting more money into their investments — even if they think they’re broke. He says he hears from people in their 20s say they are broke all the time.
He was literally homeless! As his finances became more stable, he increased the contributions he made each month, and by the time he was 45, he had around $1.5 million. He attributes that success, in part, to starting early and consistently investing each month.
After approximately 20 years of continuous saving, Jim was a millionaire.
He says investing in the stock market is a good long-term bet.
I concur.
After hitting $500,000, I am working on my next rung on the investment ladder, which is $750,000. I estimate I can get there with consistent saving and market returns in about 2 years or 24 months.
But who’s counting.
Miriam started Greenbacks Magnet in 2016 to keep a scorecard of her goal of $1M in investable assets. Armed with a Master in Management (MiM) and a calculator, she teaches readers how to achieve financial independence while also helping them learn how to smell the roses along the way. The palpable response she got from sharing her personal finance goal in a public speaking course at Georgetown University encouraged her to share her story and teach finance on her website. She invests in AI companies as artificial intelligence is the new iPhone of the moment as she likes to invest in companies that are disruptive.
Here is Suze Orman’s FIRE protection gear: $5 million dollars to retire early. Really? Do tell. Care to elaborate. Absolutely.
It was around late 2018 that I heard talk of Suze Orman’s thoughts on the FIRE movement.
The rumblings in the financial blogsphere was that when Suze was asked her opinion about the FIRE movement on the Paula Pant podcast Afford Anything and she says, “I hate it, I hate it, I hate it.”
Suze told Paula Pant that $2 million isn’t enough for early retirement. At a 4 percent withdrawal rate, that’s $80,000 per year, which she says isn’t enough to protect you “when the floods come.”
“If you only have a few hundred thousand, or a million, or two million dollars, I’m here to tell you … if a catastrophe happens, if something happens, what are you going to do? You are going to burn up alive.”
The “Suze Slapdown” of ’18 was coined. And I thought watching WWE Smackdown was tough. Whew! They ain’t got nothing on Suze when it comes to laying the smackdown on finances.
She made headlines for saying that people who buy a daily latte are “peeing $1 million down the drain as you are drinking that coffee.” On Suze’s watch, spending at Starbucks SBUX is a no-no.
Let’s not drop out of corporate America on a whim and stop working. Get back to work.
Check out the tweet below that 2020 Democratic Presidential candidate Bernie Sanders tweeted out last year to see what I mean.
Wealthy TV "experts" are shaming millennials for buying coffee and avocado toast. But young people are broke because they’re drowning in debt and low wages.
The ruling class wants to divide the young and old to distract us from an economy that’s rigged for the richest 1%. pic.twitter.com/v4LCNpoExU
Suze Orman’s the sky is falling attitude about retiring early is not so far-fetched now during the coronavirus.
For anyone who isn’t up to speed on the FIRE acronym, it stands for Financial Independence, Retire Early. I am all for Financial Independence (FI).
This is me. Financial Independence: count me in!
Retire Early: slow down tito!
The focus of FIRE is to retire early by stopping the corporate grind and ending the rat race in your 30s or 40s, and not 55 or 65.
However, I am not yet ready to be put out to pasture. Luckily, other leaders in the FIRE movement gave some clarification and said that FIRE is not about stopping work, but finding your passion and earning passive income streams that keeps the money flowing.
The goal is to live life On. Your. Terms. So, I thought to myself okay. I can live with that.
Saving 25 times your current income and then retiring before age 40 without continuing to make money is risky.
The notion is that you can then afford to live off of your savings by limiting your withdrawals to just 4% of your assets each year.
Meaning if you earn $75,000 a year, then you need to save about $1.9 million before walking away from work. Money that was supposed to last starting from age 65, now has to starting from age 35.
The millennial had caught the FIRE bug and she was looking to hang it up within two years.
“Well, how much money do you have?” Orman asked. “Two or three million?”
No.
“A million?”
No.
“$250,000?”
Yes, but with some debt.
“Really?” Orman could only shake her head.
“Don’t talk to me about it. If that’s what you want to do, go ahead. But 40 years from now, I hope you remember everything I’ve said.”— Suze Orman, on retiring in your 20s
According to Suze, “time is the most important ingredient in your financial recipe.”
As financial blogger Mr. Money Mustache put it bluntly: “In the interview, Suze Orman goes on and on about what might go wrong, and how you need an incredible amount of money saved to protect you, just in case. But this thinking is completely backwards – money will not cure your fear, as megamillionaire Suze proves so clearly. Most high-income people are still within just a few paychecks of insolvency, because it is possible to blow almost any paycheck, simply by adding or upgrading more cars, houses, and vacations. Physical health FIRST: Salads and barbells every day, no goddamned excuses.”
Real estate financial expert and FIRE member Coach Carson posted some great advice on Suze’s opinion: “As Paula said after the interview, we should all make a practice of listening deeply to others (especially if you disagree). If you can reserve judgment temporarily, you can always learn something.”
Coach Carson says time not money is the most precious thing we have. The biggest regret is time wasted when people are on their deathbed. People do not wish they worked more or spent more time in that cubicle or corner office.
Very true. Washington Post financial columnist, Michelle Singletary, also weighed in on the interview. She says “let’s also put this debate in perspective. Many people aren’t saving enough to retire at all – early or late.”
I remember when my portfolio hit $100,000. It took half the time to get the next $100,000 and zoom to $200,000. Next stop, $250,000. That’s right a quarter of a million.
Then I was looking to moving on up like The Jeffersons to the tune of $300,000, $400,000, $500,000 and beyond. I only move forwards. I never look backwards. I could still work for another 30 years if I want to. Without putting in another penny, if I let this money ride I could have between $1 million and $2.6 million dollars. And that is if I stop investing. There is no way I am doing that.
I live for today. I live in the moment. I stop and smell the roses. I enjoy the present, but save like I am going to live forever.
Stop worrying about the world ending today. It’s already tomorrow in Australia. – Charles M. Schulz, creator of the Peanuts
I like to plan in advance. I have a plan to create a plan.
“If plan A doesn’t work, the alphabet has 25 more letters – 204 if you’re in Japan.”― Claire Cook, Seven Year Switch
If I want something, then I go get if. I get off my duff and go make it happen. Don’t complain. Go do something about it. To quote Mindy Kaling, “We are all just a treadmill and six laser hair removal treatments from being Ryan Reynolds and Blake Lively.”
Ask for credit when you don’t need it. Credit dries up like tears in a recession. That’s just my two cents. Back in the 2008-09 recession, they cut my credit lines in half. Overnight *poof* half my credit limits were gone. Like a puff of smoke.
The thing is that work gives us something to do. It lets humans be productive.
If you have $1.5 million at age 65, you have a much shorter retirement to spend on versus at 37.
What really makes the difference is that by age 55-60 many people are empty nesters, own a home, and already own most of their possessions.
You have a lot less things to buy because you have what you need already.
When you are 35, you may still have no kids, are just starting, or have a young family. You have costs that are still rising like inflation.
Empty nesters are not worried about paying for college. Its paid for. That’s in their rear-view. Juniors 529 is spent.
If you are still raising kids, it is likely you will need a decent income and a job. Kids cost…a lot. Most people are still buying homes, cars and having kids well into their 40s these days.
One of the biggest expenses that a job helps subsidize is healthcare.
Financial blogger Financial Samurai puts this into perspective: “Just know that once you get to your target number, you might find that your needs have changed. Life is unpredictable. A job helps you subsidize health care costs that are increasingly becoming a racket IMO, but it would help reduce our $2,380/month health care bill. However, I am grateful for every day.”
You want to retire early. Here is what Suze has to say.
Orman: “It would have to be in the millions . . . You need at least $5 million, $6 million.” (She later says $10 million to account for taxes.)
FIRE proponents fired back at Orman that she has it all wrong.
Really? When a government shutdown causes people to be in soup kitchen lines, then I beg to differ. Here were some of the things I read online during the 35-day government shutdown last year:
“I only have $1.06 in my bank account. I don’t know what I am going to do.”
“I can’t pay my bills.”
“I can’t afford groceries.”
“I’m scared I won’t be able to pay my rent or mortgage.”
“I can’t miss one paycheck.”
Not even one check? Even I try to keep a minimum of $10,000 in the bank at all times in savings. Just in case sh*t happens. I need that rainy day fund because when it rains it pours. Keeping a 3-6 month rainy day fund is what helps me sleep at night.
My 1-tweet financial plan government #shutdown edition. 😉
1. Save a 9-month emergency fund 2. Instead of maxing Roth IRA use extra funds for your rainy day fund 3. Do not get any student loans 4. Do not buy a new car, home, or go on vacation until rainy day acct 100% funded pic.twitter.com/Xmslbml3qC
Now to be fair, the FIRE movement is about saving and investing your money. The more, the better. If you are practicing FIRE, then, in theory, you should be able to weather any storm.
Meanwhile, Orman isn’t sweating her emergence as somewhat of a villain in the FIRE community.
Now that COVID-19 has swept across the globe, it looks as if Suze may have been on to something when she always says, “hope for the best, but always plan for the worst.”
On one of her most recent podcasts she stated that a lot of her advice on saving that eight-month emergency fund has come to roost. She now thinks you need a 3-year emergency fund.
I have always been more about FI than RE because no matter what happens in this world, I know one thing to be sure; you will always need money in the bank.
Now I’m going to sign off on this post the same way Suze Orman ended her show on CNBC every night, “now you stay safe.”
“There are only the pursued, the pursuing, the busy and the tired.” ― F. Scott Fitzgerald, The Great Gatsby
For many people out there I am sure you have heard of shows like Flip this or Sell that house. Many of them are broadcast on A&E. One of these gems was a show called Flipping Vegas.
The show starred real estate investor Scott Yancey and his
interior designer wife, Amie Yancey. What made this show stand out was the
outrageous personality of its star, Scott Yancey. He could regularly be seen
losing his mind over the tiniest of overages to his immensely short time table
he gave to flip any house. It made for great television. I felt it was the
funniest of all the house flipping shows out there.
Scott would regularly drive around in his Porsche (he loves
cars) and go from house to house that he had invested in to inspect properties.
His wife, Amie, could usually be found at places like Walker Zanger to purchase
materials for all of the homes they were flipping. The couple were constantly
bickering about house design, location, and finances. They were a riot.
What I remember most is that Scott was always very concerned
about the budget as where Aime was not. She believed that a well-designed home
sold itself. However, Scott did not always agree. He would regularly have a fit
if she spent extra money or over-improved a house. It was hilarious.
“When you have a
foreclosure sign on the house, it’s saying, ‘Vandals, homeless: Welcome. Please
strip it,’ ” Scott told The Las Vegas Review-Journal of the properties he
purchases. “We’re in a race to get it done and get it sold.”
So, without further ado, I give you what it’s like to flip
Vegas.
WHAT IS FLIPPING VEGAS?
“The houses that are the worst to buy are the ones we save for TV because we know there’s a great storyline with it.” – Scott Yancey
Flipping Vegas was an American reality television series that aired in the United States on the A&E network for 5 seasons from June 18, 2011 – September 27, 2014. Featuring the husband and wife team, Scott and Aime Yancey. The couple would fix and flip homes in Las Vegas, Nevada. It aired on Saturdays. And ran for 41 episodes.
Meet the real estate players
Scott and Aime
Vegas was hit hard by the housing crash of 2007-2009. Where
most saw disaster, Scott saw opportunity. He would buy low-priced and
dilapidated homes in Vegas, fix and flip them quick for a profit.
Setting a quick timetable of about 4 weeks and even shorter budgets of approximately $10,000. A quick fix schedule and low budget is called flipping. Spend less money equals more or maximum profit. His opposite is Aime, who buys high-end finishes that are not in the budget, without telling Scott. Let the fights over the checkbook begin.
Here is some of the banter on this show.
Real estate agent: Can you all this done in a week? It’s a
lot to do?
Scott: I turn and burn these suckers!
Aime: Scott, you’re so cheap.
Scott: Once again you are unconcerned with deadlines and bottom
lines.
Aime: Give the house a great design.
Scott: This house is an ugly girl. Put lipstick on her, we’re
not giving it plastic surgery.
That’s Scott, always keeping it classy. He works hard and
lives his life fast. He likes quick wins and flips. I’ll give him this, at
least he always kept it real.
In an interview with the Vegas
Sun, Aime said, “I mean, I feel like I’m giving birth to each of them. I
know Scott has timelines to turn them around fast, and we butt heads. He sees
the bottom line, and I fall in love with the transformation. I can’t stop
myself; I really need rehab for designers.”
They generally work with the same contractors and real estate agents to sell their houses. In addition, will also have multiple trades working on one house at the same time to keep up with Scott’s insane open house schedule (think buying a home, renovating it, and putting it on the market in 7 days). And yes, there was an episode that he tried to do this.
The show got is start from a conversation Scott had with some show business friends where he recounted how he had to pull out his Glock (he’s licensed to carry) on some homeless people that came at him with needles in a boarded up house. They recorded some footage of him (Scott paid for their expenses) at work and it got into the hands of someone at Lionsgate. That is how his reality show career got started.
Finance Lesson 101: You have to spend money to make money.
ALWAYS EXPAND
Expand. Never contract. – Grant Cardone
One of the best times to start a business is during a
downturn. Scott is a businessman who owns a real estate brokerage called
Goliath Company. He invests sells, and flips houses. In addition, Scott also
was an executive producer of the show and an author. Reality television star is
also one of his many titles.
When asked what it was like doing the show Scott stated, “It’s reality TV for a reason, but try working with your wife for 12-14 hours a day. [The producers] know our fans. They love it when I break shit, and that’s my favorite part. If I could take a bulldozer and knock out a shed, that’s great. Take a chainsaw to a wall, that’s great. Demolition is No. 1; drama is No. 2. And then education.”
The best episode I saw and my favorite was the Season 2 Episode
10 show entitled, “Yancey’s Eleven” which aired on February 16, 2013. Scott
purchases 11 unfinished villas at Lake Las Vegas for a total of $380,000 and
takes on the gargantuan task of getting them all fixed up at the same time.
A&E episode description(www.aetv.com): Scott takes on
the biggest flip of his life having purchased 11 unfinished villas in upscale
Lake Las Vegas with hopes of flipping all 11 in less than 45 days! It’s a risky
gamble that could have a huge payoff…if Scott can manage to bulldoze through
some unexpected and high-priced construction roadblocks.
Show me the money honey.
The couple then began doing seminars. A no-strings attached
sort of deal. It started out for free with a preview, but then morphs into a sales
pitch. Over three-hours attendees are enticed to pay a $2,000 fee for a second,
more intensive three-day seminar. Those who paid and made the investment in the
three-day event received yet another pitch to invest in the next level that
costs a whopping $30,000.
I, personally, can confirm the first part. I was invited to a Yancey seminar. I went and it was basically someone coaxing and goading you to spend money (not the Yancey’s as they were not there). Basically, it was a high-pressure sales pitch. The free part was just to get butts in the seats. The free meal was a cold sandwich, chips, and a stale cookie. Although, it sounded good, and everyone acted professional. I refused to spend money going to yet-another seminar. After that experience, I swore off all seminars for good.
They said most people did not complete the problem because there was work involved. So, they quit. Customers cry foul. That they were not properly trained. Scam???
Finance Lesson 102: If you are going to expand and ask people for money, then you better bring you’re A-game and deliver. Better to write a book and sell it for a reasonable price, that provide the details of how you became successful then give people false hope and empty promises. A book is at least tangible.
A GOLIATH OF A TASK
“The main thing is that in TV land, they speed everything up. They [the viewers] think, ‘Oh, wow, it’s a breeze. They come in, and it’s done.’ It takes a long time to put them together, to pick out the fit and finish and work on the quality. They only see a glimpse of it.” – Amie Yancey
Scott started in real estate at a young age. He got advice
from a friend to invest his $30,000 settlement from a car crash into real
estate as his family was doing. Scott took the advice.
Forgoing finishing college he still found a way to make a
million dollars. Even though he almost quit real estate after the downturn,
overhearing a conversation between patrons made him change his mind. When he
heard how little people were paying for properties in Las Vegas only to start
renting them out to tenants, Scott saw a golden opportunity to profit. Why not
buy at the bottom?
“At the next table, the discussion revolved around the Las Vegas real estate market and the fact that there were homes available to buy for as little as $36,000 that would rent out for $900/month. Just hearing those two numbers put Scott’s real estate brain into gear. Two things came to mind immediately, ‘You make your money on the buy in Real Estate’ and ‘fortunes are made in bad economies.'” – Scott Yancey
His task was to buy real estate at the bottom. Things have to hit rock bottom become they come back up. You can capitalize on that. It was risky and things were rough. Like me, quotes were in Scott’s mind: “Nothing great is easy” and “Debt equals drive.” Those helped him. He had this epiphany and ran with it.
Similar to the money epiphany I had in 2017. Once I figured out a way to save more, I began to do so massively. Start where I was at and work my way up. I started by saving $50 a month and then slowing increased my savings every day or month. Now, I save over $13,000 a year and increase that number every year.
Finance Lesson 103: Best time to start a business is in an economic downturn as fortunes are made in bad economies. For instance, when the stock market crashes, that is the time to buy.
COLLEGE DROPOUT TURNED MULTI-MILLIONAIRE REAL ESTATE INVESTOR
“I’m not a college graduate.” Scott told Vegas
Seven. “I went to probably five colleges, and I dropped out of them all. I
have ADD. I didn’t come from money. But you don’t need money to be a real
estate investor, and that’s what I teach people. I did my first land deal on my
own without any of my own money, and I netted $2.3 million. I can relate to
most of the people who write to me and say, ‘I’d love to do what you’re doing.
I don’t like my job, but I don’t have any money.’ Great, you don’t have to.
You’re right where I started.”
Scott was hired as a real estate runner for a real estate
attorney named Walther (Walt) J. Plumb III. His salary at that time was
$5/hour. Walt ultimately became Scott’s mentor. He also convinced Scott to get
his real estate license as his last 3 runners had all become millionaires. He
ended taking his advice and making so much money in real estate, that he left
college. He was making hundreds of thousands of dollars, which is a lot of
money for a guy in his 20s.
He was making so much money for Walt that he decided to
strike out on his own.
The $2.3-million-dollar deal allowed him to pay off all his
credit cards and buy the care of his dreams, the Porsche. And put a million in
the bank. He used his big payday to pay off debt. This is similar to what John
Legend did.
You can also regularly hear Scott complain about amateurs on
his show.
In an interview with the Vegas
Sun, Scott said, “but I think there are a lot of amateur-type flippers who
have gotten in in the last little while, and they have short fuses because
they’ve borrowed money to their properties. Scott usually pays all cash.
This is what Warren Buffet says about borrowing: “I’ve
seen more people fail because of liquor and leverage – leverage being borrowed
money.”
He says, “if you don’t know what you’re doing, leave it to
the professionals.” He stills relies on
him and asks his mentor for advice. Looking up the couple net worth online
yields results of $5 million each.
Finance Lesson 104: You can be successful without college. However, you need to decide early and when you are young what vocation you are going to do to try and make a living.
THINGS WILL AND ALWAYS DO CHANGE SO PREPARE
“Flipping is great at first to generate capital, but as an investor, the goal is to take your capital and invest it in rental properties. The rental properties pay you every month. Flipping, you make one payday; you’ll make $100,000 on a good flip. [Investing] that in a rental property [can} make you $5,000 a month. … It’s a lot less work to collect a rent check than to renovate a house.” – Scott Yancey
At one point, in an interview with Vegas Seven, Scott thought that the real estate market would change as it always did. In addition, that there is a false send of high-fiving.
Most purchases are all cash deals being done by investors.
Lots of flippers have left and are out of the flipping market. People are
buying and holding, which should be the real estate investor’s endgame. As far
as renters for his homes go, he wants good tenants that resign every year and
he only takes cash as payment. He also buys near hospitals so many of his
renters are ER doctors and nurses. Basically, those with steady reliable
incomes and paychecks.
I hear that.
I also read a real estate investing book that said a great place
to buy was near college campuses. Get those college rentals going. Not bad
advice. Pretty similar to what Scott has done.
I recently read that the government shutdown has closed up
shop 4 times within the last 10 years. That is a huge problem for RE owners.
Especially, if this trend keeps up and considering that furloughed contractors
don’t get back pay when the government reopens.
Not surprising. A home is only an asset if it can or does
feed you. You can only get access to the equity when it’s sold. The only other
way to make money is to rent it out. Either by the unit, home, or room. If you
want to start a profitable real estate business and become a landlord, then you
better have the funds to handle downturns, bad tenants, vacancies, and repairs.
Finance Lesson 105: All businesses need capital.
You can take that piece of advice all the way to the bank.
