What Doesn't Kill Us, Will Make Us Stronger

The Event

Sometimes it takes an "event" to finally set the wheels in motion on a dream we've had. It could be the loss of a job, a financial setback, or a health scare – as Mary Ellen Tribby explains today. When used properly, the stress of that event can motivate us to massive action.

Craig Ballantyne

"If you want to accomplish anything, get out of your comfort zone." – Kekich Credo #1

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By Mary Ellen Tribby

"At this point, we can't rule out malignancy," the doctor said.

I just looked at my husband. I knew he was asking the doctor questions, but I didn't hear any words. I saw his lips moving and felt his strong hand on top of mine. But all I could think was I needed to wake up. ("This is not happening. I know I am just having a bad dream.")

It wasn't until I was in the front seat of our car that I realized it wasn't a dream. "Are we going home?" I asked. "No," my husband said. "We are going to get your ultrasound and more x -rays." "Oh," I replied.

It didn't really matter where we were going, because all I could think of at that moment were the three beautiful children my husband and I have been blessed with.

First, my thoughts went to Mikaela who was ten-years-old at the time. Without me, who would she talk to about boys? Who would show her how to put on makeup and help her pick out a college? But the most painful thought was... who would comfort her in her loss?

For the past three years, Mikaela has accompanied me on the Race for the Cure breast cancer walk.

She is well aware of the horrors of treatment.

She's often commented about people walking in honor of a loved one. For her, I knew there would be no sugarcoating the truth.

Then my thoughts shifted to Connor, my eight-year-old son (at the time) – an amazing baseball player who plays it cool with his dad and friends.

He is an undeniably sweet boy who always writes a special card for me on Mother's Day. What would he do next May? Would he pretend to write a card, not telling his teacher that he has no one to give it to?

Suddenly, I felt like throwing up. I asked my husband to pull over.

Once back in the car, all I could think about was Delanie, who was our four-year-old princess at the time. She is so used to having both my husband and me tuck her in at night. She wakes up each morning with a smile on her face and kisses to spare. Have I made enough of an impact on her life that in 10, 12, 15 years from now she will remember me?

Over the following three weeks, I was poked, prodded, and sliced.

On the 22nd day, I found out that I did not have breast cancer.

You would think that I would be so happy that I could not wait to get back to my normal routine. But no. Something happened. Going through that breast cancer scare changed my life in many ways.

You see, I've always wanted to start my own business – a business that would empower the working mom. A business that would provide the tools for EVERY working mom to lead a healthier, wealthier, and more balanced life.

It is my belief that working moms have more influence on what our world will look like than any other single group of people. Plus, they have the responsibility to match. I even purchased the URL for my new business back in July of 2007.

But I already had a job. And not just any job. I had one of the best jobs in the world. After all, I was Publisher and CEO of Early to Rise. So I kept saying, "Someday. Someday I will start that new business."

I'm not sure what kept holding me back before the cancer scare. I think the fact that I loved my job. And that, even as a CEO, I was able to enjoy quality time with my husband and three kids – from attending their baseball games, school plays, and tennis matches to taking long walks on the beach.

When I would speak at conferences, working moms who heard about my career accomplishments and wonderful family life always asked me, "How? How did you do it?" Those moms were always with me. Tucked in the back of my brain. Not forgotten, but put on hold for "someday."

But after the scare, the need to create this new business and help other working moms have the lifestyle they wanted and deserved was overwhelming. I could not "NOT" do it.

Unlike most working moms, I had developed systems and strategies for leading a complete and fulfilling life. I had escaped the guilt and the feeling of inadequacy. I had raised kids who were strong, confident, and compassionate. And I knew that I could teach any working mom who wanted to make more money to accomplish that as well.

So in one of the worst recessions America has ever seen (Remember this was the end of 2009), with one of the highest unemployment rates in history, I left the best job I ever had in my 25-year career. Three months later, Working Moms Only was a reality.

What I learned along the way will help you jumpstart any new business. You see, I did not take a dime from any investors, even though the offers were there. My husband and I took $10,000 out of our personal bank account and put that money into our new company.

Several of my industry colleagues questioned me about turning down investors and using my own money. My answer was simple. This was the way we had been teaching ETR readers to start a business – and this was the way I was going to do it.

These are the three most valuable lessons I have learned thus far:

1. Less is more.

A friend of mine recently left her corporate job to start her own marketing consulting firm. The first thing she did was find office space. I asked her why she was doing it. She told me that, with the real estate market in the dumps, space was a bargain. So she was able to rent space for $1,500 a month that normally went for three grand.

But she did not stop there. She bought a desk, chair, filing cabinets, and a couch. She spent $5,000 before she wrote a sales letter or had a website built.

After two months of trying, she finally landed her first client. That client is paying her a $2,000 a month retainer. You do the math.

Back in 2009, I had a four-bedroom house and three kids who had their own rooms. I did not have a library, den, or office. Still, I did not go out and rent space. I converted my rarely used dining room into my office. (Heck, we're kitchen people anyway.) It overlooked a golf course, and I find it very conducive to writing. When I needed a change of scenery, I would take my laptop and sit out by my pool. I did not buy filing cabinets or print business cards. I had a really good computer and I understood the value of knowing how to use it to it's fullest.

2. Work on your business every day.

When you are starting a brand-new business that is going to be your livelihood, there are no weekends. You don't get the day off because it is your wedding anniversary or your kid's birthday. You have to make sacrifices.

Now does this mean I missed Connor's birthday? Of course not. But after he went to bed that night, I worked. I worked until I finished everything I needed to do. Sure, the goal of having your own business is to get it to the point where you are living your desired lifestyle. But this does not happen overnight.

You must take your business seriously. For this very reason, I vowed that I would not work in my PJs. I still get up and go to the gym first thing in the morning. I then shower, dress, and dive into my work.

I don't stay in bed an extra hour or talk on the phone. I treat my business with respect – as I have always treated someone else's business that I was running.

I know far too many "entrepreneurs" who are still in their pajamas at 2:00 in the afternoon. These are the guys who are always asking why they are not doing as well as their competitors.

3. Know your market intimately.

It's best if you are a member of your target market. This is the road I have taken. I knew what it was like to be an executive before I had kids, and I have been a working mom for 11 years before I started Working Moms Only. I honed the new skills I needed over those 11 years. I am now in the top percentile of highly paid working moms.

If you are not personally in your target market, there are several things you can do to get yourself up to speed. Start with these:

• Study your competition. Understand what they do and figure out how you can do it faster, better, and cheaper.
• Use Amazon to get insider information about your prospective customers. Read reviews on products similar to the ones you are thinking of developing. Decide how you could address buyers' concerns and enhance the features and benefits they like.

These lessons alone will help you make more money and gain more flexibility in your business.

And this is important . . .

Yes, my epiphany spoke to my passion. However, starting and cultivating a profitable business is important. And, managing that business while procuring flexibility adds tremendous value to my life.

As you can see all three sides of the triangle, money, passion and flexibility should be considered in starting and running your business. As your business grows the priorities will shift. Some days all three may share in equality. Some days one or two may take a strong lead. Just like all aspects of your life your business in continuously evolving. 

How to Find Good People

The World's Worst Employee

Imagine paying $75 an hour (or more) for the world's worst administrative assistant. They're miserable, ineffective, and in fact, just downright incompetent. Oh, and "they" are you. Because that's what you get when you try and do everything in your business. My friend Alwyn Cosgrove explains how you can avoid this trap and find good people for your business.

Craig Ballantyne

"Imagine that you are going to create another 1,000 businesses just like this one. What would you have to do to achieve this? You would have to completely systematize your business." – Alwyn Cosgrove

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By Alwyn Cosgrove

As a business consultant, one of the most common questions I am asked is, "What's the best way to find good employees?".

I work with many successful solo-preneurs who are hitting that stage where it is time to grow their business, and that means bringing on key employees. For many people, this is an area of great difficulty and anxiety.

Before I ever answer that question, I need to give a few overall guidelines as to the overall business process and where staff actually fit in.

The first hire for most professionals should be an administration assistant or office manager. This is key. Don't spend your time doing work that a) you don't enjoy and b) you're not good at.

Consider this - if you charge $75 per hour for your work, than any time you spend doing office work means you are paying an office assistant (you) $75 an hour.

Plus, you're probably not good at it -- it will take you twice as long - so you're actually paying $150 for what would be $15-$20 work.

Add in that you'll be miserable - you are now paying $150 for a miserable, no skills office assistant. So always start with support staff before hiring more production based staff.

The Big Mac Model

Entrepreneurs need to study other businesses. Success leaves clues, and the most successful 'small business' in the world is McDonald's.

At McDonald's the food is made the same way every single time From London to Los Angeles, from Madrid to Moscow – ask for a Big Mac and you'll get one. The same style. Every single time.

You even know the recipe.... "two all-beef patties, special sauce, lettuce, cheese, pickles, onions on a sesame seed bun..."

But is McDonald's the best hamburger you've ever tasted? The answer to that question from almost everyone in the world is no. Most people even claim that they could make a better hamburger than McDonald's themselves.

So let me ask you a question? Why is no one giving you hundreds of thousands of dollars each year to make hamburgers?

What's the secret of each McDonald's location?

McDonald's don't hire experts to run each location or do every task in the business. They hire good people and train them in the implementation of SYSTEMS. Their systems are so well developed that they can hire high school kids to run a lot of their business. They even have the upsell systemized through the ubiquitous question, "Do you want fries with that?"

I've read that most independent small business start-ups fail, yet most franchises succeed. The reason for that difference is due to SYSTEMS.

SYSTEM: Save Your Self Time Energy Money

Step one when hiring additional staff: think systems.

Before you hire anyone you have to have a system in place that can easily be replicated. It doesn't matter if you hire a world-renowned expert with multiple PhD's and 25 years of experience -- unless they work within your system - they aren't a great fit to grow your business.

The primary goal of any business is to produce a consistent, replicable product or service. If it's replicable and consistent – you can guarantee results. If you can guarantee results – you're ahead of the game.

As a nice result of running a systems based we are able to hire people with lower skill levels than we would initially think. Now, notice I did not say low skill, just lower skill. We are going to hire people to run systems and educate them.

Instead of thinking of McDonald's - think of a hospital – a doctor writes the protocol and most often it is nurses that implement it. Nurses are by no means low skilled, but they are most definitely lower skilled than a doctor. Similarly, all admin tasks at hospitals are handled by lower skilled employees than nurses. It would make no business sense for a doctor to spend time taking blood pressure, temperatures or making appointments.

And remember, the ultimate goal of hiring and growing your business is to replicate YOURSELF so you can step out of the business.

Hiring someone without a system is an absolutely deadly business mistake. Hire based on your core values and train for skill based on systems.

If you do that, your business becomes a lot easier to manage. You must run a systems-based business as opposed to an individual based business. The owner/managers job is to manage the system, rather than the employee. Run the plan, not the man.

If there is a problem, we can look at two solutions.

First, was the system followed? If yes, then we need to tweak the system. If no, then we need to work on coaching and training the employee. It's that simple.

In our business at Results-Fitness in California, we make it even simpler by having all of the systems recorded in manuals (how to open the gym, how to answer the phone, how to greet every client and prospect that walks in the door, etc.).

If it's not written down and signed as completed and understood by an employee, you are improvising. Business is far too important to improvise.

So to get back to your original question – how do you go about hiring staff?

When systems are in place – it really doesn't matter. We have hired experienced trainers, beginner trainers, schoolteachers, former clients, interns, etc., and all have become excellent personal trainers because they follow our system.

As long as you have business systems and an education program in place then when hiring employees what you need to look for are personality, work ethic and core values first. As long as your new employee has brings those three attributes to the table, they will succeed in your system.

l: How to Build a 6 Figure Information Marketing Business in the Next 90 Days"

Go here now:  http://gotothewebinarnow.com/richgerman

Recently I had the opportunity to connect with a couple guys you need to meet. These are 7-figure entrepreneurs who have focused 100% of their efforts on one type of business: Information Marketing.

For those who aren't aware, Information Marketing is the most high-leverage, high-profit business for one main reason: Information is easy to deliver ... and people are always desperate to get more of it.

You should know that neither of these guys are gurus by any means. One started out as a middle school music teacher and the other started as an "IT guy" - neither of them began with ANY entrepreneurial background or skills.

Since quitting their jobs and starting Information Marketing businesses, they've each quietly generated anywhere between $17K and $39K per month consistently over the past five years. Their highest month to date is $127K in a SINGLE month.

Best of all, they've done this entirely from home with NO rented office space, NO physical product overhead of any kind, NO employees whatsoever. In addition, their information businesses require absolutely no selling face-to-face. Ever.

Since partnering together they've come up with methods for finding and selling information that I guarantee you don't know about. These methods are so fundamentally simple it's no wonder they've accomplished what they have despite coming fro m a total non-business background.

To be clear, their methods allow ANY person with average abilities and a commitment to other people to build a large consistent income.

You know I'm committed to a no-bull, results-oriented approach with you and I will not deviate from that. So let me be very straight:

You need their methods. I'm going to make sure you get them.

I am committing my energy, time and resources to getting these methods into the hands of those who are ready to own a 100% automated business that produces consistent revenues every single month.

And that starts this THURSDAY for those who are willing to do what it takes to be on this special webinar:

"The ULTIMATE Business Mode
Go here:  http://gotothewebinarnow.com/richgerman

When you read what's written there, you'll see these two guys are taking a very different approach than what you're used to seeing in this industry.

They are creating a worldwide group of Information Marketers who are building high-revenue businesses and helping create the success everyone desires.

Check it out here:

http://gotothewebinarnow.com/richgerman

An Important Question

I have to thank my mother for almost all of my success. She taught me the value of hard work, encouraged me to study hard, and from a young age, she taught me the value of saving and investing my money. You could say she started me on retirement planning all the way back in grade school. Now regardless of where you started your retirement planning, Mark Ford has an important question on the subject that you need to answer today. -Craig Ballantyne

"Problems do not go away. They must be worked through or else they remain, forever a barrier to the growth and development of the spirit." – M. Scott Peck

What's Your Magic Number? Retirement Planning Anyone Can Do

By Mark Ford
How much money do you need to retire? A hundred grand? A half million? Ten million?
It is a very important question. Getting the right answer can determine how soon and how well you can retire.
In his book The Number, former Esquire editor-in-chief, Lee Eisenberg talks about why "the number" is so important. He says that for most people, it represents a free pass to a great life without financial stress.
That's what it always meant to me. When I was in my thirties, I had a number in mind. I figured that if I could achieve a certain net worth, I could quit work and live comfortably for the rest of my life. I hit that number when I was thirty-nine years old. But I quickly discovered that amount was not the number I needed... it wasn't even close.
Your net worth includes your house, your toys, and all sorts of other assets you may not be willing to give up in retirement. But your retirement "number" is the amount of money you have to save specifically for retirement. It is a fund of assets that will eventually replace your active income and pay for your expenses... after you've quit your nine-to-five job.
Because I didn't calculate my number correctly, I had to go back to work. I picked a new number–a real number–and worked another ten years to hit it. When that day arrived, I felt fantastic. I was able to change my priorities. I devoted the lion's share of my money to non-financial goals. I never worried about money again.
Reaching your number is a great feeling. If you haven't yet experienced it, what I'm about to say will put you on the right track...
Most people fail to achieve their retirement dreams, Eisenberg notes. There are two common pitfalls that stop them, he says:
Many people enter their forties and fifties are "ensconced in a cloud of avoidance and denial about the years ahead of them." They spend their early years not doing any serious retirement planning. They sense they are far behind from where they should be, but they don't want to face the truth. These are the procrastinators, Eisenberg says.
Other people do retirement planning, but they're sloppy about it. They don't know how to calculate their numbers correctly, so they pick arbitrary numbers and hope for the best. This is the mistake I made when I first retired. Eisenberg calls these people "pluckers," because they pluck numbers out of thin air.
You don't have to be either one of these people. You can begin to realize your retirement dreams today by discovering your retirement number.
Let's do that now. Let's figure out how much money you have to save in order to quit work and enjoy retirement.
To calculate your magic number, you need to know five other numbers:
1. How much money you have saved.
2. How many years you have to save money before you retire.
3. How much money you will need in order to enjoy the retirement you want.
4. What rate of return you expect to get on your savings.
5. The average rate of inflation.
Take These Five Steps and You'll Have Your Magic Number!
I am going to give you five calculations. Each one should take just a few minutes. The entire process, including all five steps, should take no more than half an hour. Please do it now. In terms of your future wealth and happiness, it may be the most fruitful thirty minutes you ever spend.
But before we begin, I want you to write down two numbers: 8 and 12.5.
Step 1: Write down how much money you have already saved towards retirement. This should include not only liquid assets (such as cash, stocks, and bonds) but also any illiquid assets (such as an auto collection or a second home) that you plan to sell prior to retiring.
Sell the house you own (if you own one) for a less expensive house more suitable for retirement and add any profits from the sale into your retirement savings.
For example, if your house is worth $350,000 and you will be happy in a smaller house that will be $100,000 cheaper, you can add $100,000 to your retirement savings.
Step 2: Write down how many years you have before you hit your retirement age. If you are thirty-five years old now and plan to retire at sixty-five years old, that number is thirty. If you are fifty-five years old now and want to retire at sixty-five years old, that number is ten. But be realistic. If your retirement fund is small right now, you might have to work another five years to reach your goal.
I told you above that I hit my number before my fiftieth birthday. That allowed me to start writing fiction and poetry several hours a day... and take lots of vacations. Since I still liked my line of work, I continued to spend some time every day as a consultant to publishers. And that turned out to be lucrative.
Keep that in mind when you hit your number. Like me, you may decide to keep working on a part-time basis. If you do, you'll be making more than you need. Enjoy it. Don't increase your spending.
Step 3: The next step is the one most people start with: deciding how much money you will be spending each year in your retirement to enjoy the lifestyle you want.
A good way to do this is to start with how much money you are spending now on your current lifestyle. I told you how to make that calculation in an essay I wrote a few months ago, titled Three Numbers that Are Essential to Your Wealth. I called that your lifestyle burn rate. What you are doing now is figuring out your retirement lifestyle burn rate (RLBR).
Take your current lifestyle burn rate and add to it any "extras" you want to enjoy. Let's say, for example, that your current lifestyle burn rate is $80,000 a year. To make your retirement more fun, you want to own an extra car–a sports car–and join a golf club. This will cost you an extra $10,000 a year. Add $10,000 to the $80,000 and you have $90,000.
Now subtract from $90,000 any expenses that you currently have but will no longer have when you are retired. This commonly includes expenses for your children and other expenses related to having a family with children. If those expenses are currently $15,000, then you will deduct that $15,000 from the $90,000 and you will be left with your true RLBR of $75,000 a year.
Got it?
One caveat: In determining your retirement lifestyle burn rate, you have to be realistic. If you are already fifty years old, have only $300,000 in your retirement savings account, and are currently spending $80,000 a year to live... it's unlikely you will get your RLBR up to, say, $500,000.
Step 4: Subtract from that number (RLBR) any income you are confident you'll be getting during your retirement.
For example, if you trust that Social Security will still be around when you retire, you can find out what your projected yearly Social Security income will be and subtract that from your RLBR. You can do the same with any pension income you expect. And finally, if you intend to work part-time during retirement, you can deduct that, too.
Working with the same $75,000 RLBR number, you deduct $15,000 a year you expect to get from Social Security, another $5,000 a year you expect to get from some pension, and another $5,000 a year you expect to get by working as a golf ranger two days a week. This reduces your RLBR from $75,000 to $50,000.
This is your net retirement lifestyle burn rate. Save this number.
Step 5: Now it's time to figure out your magic number, the amount of money you need to save in order to retire.
Using the same example, what we are looking for is an amount of money to invest that will generate $50,000 a year in after-tax income.
So how much money is that?
Again, that depends. It depends on the return on investment you can expect to get on your retirement savings.
If you expect to get only 5% on your money, then your number–the amount you'd need to save before retiring–would be $1 million. (One million dollars generates $50,000 a year at 5%.) If you could get 10% on your retirement funds, you could retire much sooner... since you'd need only $500,000 at 10% to generate $50,000 in annual income.
So what rate of return should you plug into this equation?
That depends on what kind of investments you use. If you put all your money in municipal bonds, you could be making 3%. (Municipal bonds are yielding only 3.13% today.) You could earn about 8% by putting your money in stock index funds (since 1970, they have returned 8.14% after taxes of 20%), but I don't like the idea of having my retirement fund in an index fund because the stock market can fluctuate greatly from year to year.
A better choice would be the kind of stocks we recommend each month in The Palm Beach Letter. They are selected to give you–at minimum–an 8% after-tax return. But I wouldn't want all my retirement funds in stocks, because even the best of them are still subject to annual fluctuations.
To compensate for the temporary low yield of municipal bonds and the volatility of the stock market, I've designed a simple three-asset portfolio that should give us 8% reliably and steadily. Or as close to that as one could possibly hope for.
A Sample Retirement Portfolio Strategy
I'm thinking of a portfolio consisting of high-quality dividend stocks, high-yielding bonds, and rental real estate.
Specifically, I would recommend an allocation of 50% rental real estate, 30% dividend stocks, and 20% high-yielding bonds.
In future essays, I'll talk in more detail about how I came up with these calculations, but I feel confident that you can expect the following after-tax minimums from each of these portfolios: 3% from bonds, 6% from dividend stocks, and 12% from rental real estate.
A portfolio that gave you 3% on 20% (your high-yielding bonds), 6% on 30% (your dividend stocks), and 12% on 50% (your rental real estate) is a portfolio that will give you just over 8% overall.
The Final Step: Now we are ready for the number. To figure out your number, take the net RLBR and multiply it by the reciprocal of the expected rate of return. These are the numbers I asked you to remember in the beginning of this essay: 8 and 12.5.
Using the same example, you would multiply the $50,000 (net RLBR) times the reciprocal of 8%, which is 12.5. Fifty thousand dollars times 12.5 is $625,000. That is your magic number!
So if your net RLBR is $100,000, then your magic number is $1,250,000. If your net RLBR is $300,000, then your magic number is $3,750,000.
Get it? Just multiply the income you will need by 12.5.
In case you are lost, let me break it down for you again using the original example. The following is just an approximation...
You need $50,000 a year from your retirement savings. Knowing you can expect to get an average yield of 8% a year, you do the math and determine that you need a total of $625,000 in your retirement savings portfolio. Twenty percent of that amount ($125,000) would be in bonds yielding 3% after taxes. That would give you $3,750 a year. Thirty percent ($187,500) would be in dividend stocks yielding 6% after taxes. That would give you $11,250. And 50% ($312,500) would be in rental real estate yielding 12% after taxes. That would give you $37,500 per year. The total of $3,750, $11,250, and $37,500 is $52,500.
Now remember, that is the minimum. If you got higher yields–even moderately higher yields–you'd do better. You will have more income than you need that year. You will have a choice: either save it for a rainy day or spend it. You won't need to save it, as your retirement fund will continue to produce 8% yields.
I'd like to end here, but there is one final number we haven't looked at yet... And that is the rate of inflation.
When planning for your retirement, you have to consider the effects of inflation on the value of your portfolio. That's because in most cases, inflation makes future dollars less valuable than they are today. The $80,000 a year we've been using in this essay, for example, will still be $80,000 in ten, twenty, or thirty years... but it will buy far fewer things than it can buy today.
So how do you account for that in your planning?
One way is by owning businesses that keep pace with inflation because they are able to raise their prices to match inflation. Many of the stocks we recommend in our portfolio are of that kind. Having 20% of your portfolio in such stocks will definitely help.
Bond yields should increase in the years to come as well. Today, they are low... and our plan is based on a 3% yield. But these are likely to increase in the years ahead. So that will be some help, too.
But the main inflation hedge you have in the portfolio I recommended is the rental real estate portfolio. Real estate, as a tangible asset, appreciates during inflationary times. According to The Case Shiller Index, which has tracked real estate sales of existing homes since 1987, the average annual increase for real estate is 3.6% over this 25-year period. Compare that to the reported Consumer Price Index during the same period at 2.9%.
I didn't count this appreciation into the mix when we went through the numbers. That means that half of your portfolio will likely increase by 0.7% above inflation, not counting the positive effects you might get from your stocks and bonds.
More importantly, as a landlord, you should be able to increase your rent to match with inflation. I've been doing that with my rental real estate portfolio for more than twenty years.
These factors should go a long way towards protecting the validity of your "number." But if you want to be extra sure, you can simply use a multiplier of more than 12.5–just to be sure. In the case of our existing example, you would multiply $50,000 by, say, 14, which would increase your number to $700,000 rather than $625,000.
Again, I feel safe using 12.5 as a multiplier (for the reasons I mentioned)... but if you have twenty, thirty, or forty years to go before retirement, then you might want to use 14.
I know this has not been the most exciting essay you've ever read from me. But in terms of your retirement planning, it may be the most important.
Please take the time to do your calculations today. The moment you have your number, you'll be motivated to begin the journey of achieving it. The sooner you begin, the sooner you can retire

How I Avoided the Investment Mistakes That Crippled My Friends and Colleagues

By Mark Ford
Maybe I'm lucky.
Or maybe it's just common sense.
I've been involved in the investment advisory business for thirty years. And except for a few early mistakes buying real estate, the big financial hoaxes and bubbles that devastated so many investors never burned me.
That made a huge difference over time. It allowed me to grow my net worth year after year without a single year of loss. In this essay, I want to identify several lessons I learned, and how to avoid the biggest mistakes average investors make.
The financial life of the typical investor is marked by a plethora of hopeful speculations. Only a few dozen, at best, achieve their promise. My investment history is less exciting but more profitable. I get into trends only after they are proven, I get out as soon as they don't make sense, and I turn my back on nine out of ten opportunities that come my way.
In the 1980s, I worked for a publishing company that produced, among dozens of other financial publications, two publications that promoted penny stocks. Penny stocks were the rage back then. The financial press was full of stories about investors who got rich by buying little-known companies at fifty cents a share. My boss invested in one and tried to convince me to do the same. I was tempted. But something inside of me told me to let this bus pass me by.
I'm glad I did. My boss, a very savvy investor, lost 100% of his money on that deal. It turned out to be a scam. I remember thinking that if a sophisticated investor can be fooled by one of these cheap stock deals, I'd stand no chance.
Five or six years later, technology companies were hot. Again, the press was filled with exciting stories about all these great little companies going public. The technology sector was bigger and more legitimate than the penny stock market. And that turned out to be a problem. The success of early investors led to millions of ordinary people climbing on board. And many of them were making big profits. I remember my brother-in-law coming over on weekends and telling me, over a beer, how much money he was making.
Again, I was tempted. When you see people–people who know next-to-nothing about business–making profits month after month, you think, "Hell, if they can do that then so can I!"
I remember one deal that my brother-in-law recommended. It was a company that had a "patented" method of expanding some gizmo related to computer memory. He showed me the newsletter story about it. It explained how every major computer manufacturer in the world would soon use this new technology. It hinted that a "major deal" was pending with one of them.
I asked my personal assistant to get me the prospectus. And although I was a novice at reading them, I could tell right away that it was hardly a sure thing. Other than the president, whom they appeared to have recruited as a figurehead (and who had only a small stake in the business), the rest of company's honchos were brokers and dealmakers, not proven entrepreneurs. The "use of proceeds" was actually scary. There was too much money allocated for offices, employee salaries, and "consulting fees." What I wanted to find was a believable marketing plan–something to make me believe they knew how to sell their product at a profit. If you have had any experience in buying businesses, then you know one thing: a start-up business must devote 80% of its resources to creating the first profitable sale. That means it must be frugal with office expenses, salaries, and other non-essential start-up costs.
This company clearly had another plan. It was to make and spend a lot of the funding on everything but investing. I didn't need to know more than that. I decided not to invest and warned my brother-in-law to sell his shares. I don't think he did, because when the company went bust six months later, he never said anything to me. Investors love to brag about their winners, but they keep their losers hidden in the closets of their minds.
Flash forward another five or six years. My brother-in-law was back again with exciting new stories about making money from the internet boom. Again, he told me amazing stories. And again, I looked into a few of them, hoping to find something I could believe in. But the prospectuses for these dot-com companies were just as fishy as the high-tech offerings I had seen earlier. No, they were worse. The valuations were based on a method of selling that had never existed before: advertising fees based on "eye balls."
Do you remember that?
Forgive my skepticism, but I can't get myself to put my money down on business ideas with selling strategies that have never worked for anyone. The idea that you could invest billions of dollars attracting people to websites and then profit by selling ads in those websites seemed positively bizarre to me.
As it turned out, most of the investors in the internet boom fared no better than investors in the high-tech frenzy. There were some exceptions, but they were few and far between. My skepticism may have blinded me from a few good opportunities, but it prevented me from losing big money on hundreds of deals that went bust.
And then finally, five or six years later, we were in a real-estate bubble. By that time, I had been investing in real estate for more than ten years. I knew the game. I had made a lot of money.
But by 2006, the houses I had been buying were selling for twenty times their yearly rentals. (A single-family house that could fetch $15,000 in a yearly rental was selling for $300,000-plus.) I knew it was time to get out. I stopped buying and advised my friends to do the same. They thought I was crazy. I'm sure they wish they had listened to me now.
I don't want you to think that I kept my money in the mattress during these bubbles. In fact, I made millions by investing in private companies that I could understand and control. I got in when the economics were good. And I got out the moment they were bad.
I'm telling you these stories not to brag, but to illustrate an important point: you don't have to be a sophisticated investor to avoid making big investment mistakes. You can do so by applying a little bit of common sense.
Looking back on these experiences, I can see now that the biggest mistakes most investors make are simple ones–ones that any person with a modest amount of business experience should be able to avoid.
What follows is a list of the five biggest mistakes most ordinary investors make:
Mistake #1: Being swept away by exciting stories.
The business my boss got suckered into had an amazing story. A company in Central America was turning beach sand into gold. The company had "proof" of their success in the form of audited financial statements, geologist reports, and endorsements from investment experts. My partner even went down and saw the operation. He saw the sand going in and the gold dust coming out.
I didn't invest because the story sounded so fantastic. I remember telling him, "This sounds like alchemy." I didn't know anything about geology or gold, but I didn't need to. The story itself was just too crazy. When I hear stories like that nowadays, I am totally turned off. One part of my brain might get excited, but the smarter part tells me, "Stay clear!"
Mistake #2: Investing in businesses you don't understand.
My boss was a sophisticated investor. He had his own seat on the stock exchange when he was in his twenties and had been successfully investing since that time. But he knew nothing about gold mining. Nothing at all. His ignorance allowed him to be duped by the reports and by the fraudulent factory tour. The scam was exposed by a few people who were in the mining business. They understood the industry and they knew how to read reports with the sophistication of experience.
If you don't understand the business you are investing in, then you are investing blind. That's why we place such a big emphasis on education at The Palm Beach Letter. We don't want you investing in anything–even companies we recommend–unless you really understand how they work.
Mistake #3: Allowing yourself to be bullied by good salespeople.
I mentioned that early in my real estate career, I made some bad investments. Those were due to a combination of the two mistakes I just enumerated, plus I buckled under pressure from a real estate broker who also happened to be my landlord and, I thought, a friend.
I agreed to make the investments even though I had a hunch they wouldn't work out. I ignored my instincts because she was so good at manipulating me emotionally. Nowadays, whenever someone tries hard to sell me something, I take that hard selling to be a signal: stay away!
Mistake #4: Investing in trends too late–when the only chance of making money is to find "the bigger fool."
I got into real estate investing at a good time, when prices were already going up but also when the values were still very good. I made a lot of money as the market rose, but when I could no longer buy properties at eight or ten times yearly rental... I realized the only way to profit was to ride the bubble to the top.
But riding a bubble when the economics are bad is a fool's game. Your only chance of winning is to find someone else willing to buy you out, who knows less about the market than you do. Insiders call this "the bigger fool theory." You would think anybody with common sense would not fall victim to this impulse, but millions of Americans (including bankers and brokers) did.
There is a time to get into a trend and a time to get out. Neither is that difficult, so long as you pay attention to the fundamental economics of the deal and ignore the excitement caused by the bubble.
Mistake #5: Investing without a way to limit your losses.
Sometimes, even if you use your common sense and avoid the four mistakes I've already explained, you can lose money because something entirely unpredictable happens. To avoid this, I have a rule that I never get into an investment unless I have a way out.
When you are investing in a business deal, that way out might be a buy/sell agreement. When you are investing in real estate, it is the income you can get from renting it if you can't sell it for any reason. When you are investing in stocks for yearly gains or income, it is the trailing stop loss (that we use at The Palm Beach Letter in our main portfolio). There is always a way to limit your downside–so long as you identify what that is before you make the investment and stick to it, even if you feel like you shouldn't.
So those are the five biggest mistakes ordinary investors make. As you can see, they are all pretty obvious–the kind of mistakes that you can avoid by applying common sense.
In future issues, I'll get into more detail about each of them, and I might even come up with another one or two. Your assignment for today is to think about your own investment experiences and the investments you are making right now... and ask yourself honestly: "Am I making any of these five common mistakes?"

http://www.forbes.com/sites/roblynch/2012/01/05/ten-ways-small-businesses-can-lower-healthcare-costs-and-hire-more-people-in-2012/

http://www.forbes.com/sites/roblynch/2012/01/05/ten-ways-small-businesses-can-lower-healthcare-costs-and-hire-more-people-in-2012/

The Beta Factor

http://www.businessinsider.com/warren-buffett-the-investment-everyone-thinks-is-safe-is-actually-the-riskiest-in-the-world-2012-2


Investments that are denominated in a given currency include money-market funds, bonds, mortgages, bank deposits, and other instruments. Most of these currency-based investments are thought of as "safe." In truth they are among the most dangerous of assets. Their beta may be zero, but their risk is huge.

Facebook's stunning growth - and billionaires

http://money.cnn.com/2012/02/07/technology/zuckerberg_tax_bill/index.htm

 Facebook's upcoming IPO will make founder and CEO Mark Zuckerberg a billionaire -- but it will also stick him with an eye-popping tax bill that could reach as high as $2 billion.

Industry experts say that might be one for the record books.

"I personally have never seen a bill into the billions -- close, but not quite," said Anthony Nitti, a Colorado-based CPA and partner with Withum, Smith and Brown. "I talked to a few buddies of mine at the Big Four accounting firms, and it's something not many people have seen."

The giant tax hit is a consequence of Zuckerberg's plan to exercise stock options worth billions. The move will significantly increase his ownership stake in the company he founded eight years ago.

Zuckerberg currently owns almost 414 million shares of Facebook, but he also holds options to buy another 120 million shares at the bargain price of 6 cents a piece. Facebook said in its IPO paperwork that Zuckerberg plans to exercise those options and will sell some of his shares during Facebook's initial offering to cover the tax bill.

The type of options Zuckerberg holds are taxable as ordinary income when they're exercised, even if the shareholder hangs onto the shares and doesn't sell them. That means Zuckerberg will owe taxes on the difference between what he pays for his Facebook shares -- 6 cents -- and their market value the day he exercises the options.

Facebook said in its IPO filing that it values its shares at $29.73. At that price, Zuckerberg's options windfall would be worth $3.6 billion.

But analysts expect Facebook shares to go for a premium when they're sold to the public. A private-market trade last week valued Facebook's shares at $40 each -- giving the company an overall valuation of around $100 billion. That price tag would make Zuckerberg's options worth almost $5 billion.

Either way, the windfall lines him up for a whopping tax bill. The top U.S. marginal tax rate this year is 35%. Zuckerberg's home state of California also carves off a big slice, hitting those with incomes of $1 million or more with a 10.3% income tax.

Stock options are a tax swampland, and it's hard to estimate precisely what Zuckerberg will end up paying. But tax analysts are ballparking the total at somewhere in the $1.5 billion to $2 billion range -- a nearly unprecedented sum.

The IRS doesn't comment on individual tax bills, but an analysis of the top 400 U.S. taxpayers with the highest reported incomes for 2009 (the most recent year available) shows that the average tax bill for a member of the ultra-1% club was $49 million. The top 400 collectively paid income taxes totaling $19.6 billion.

Zuckerberg could single-handedly boost that stat significantly in 2012.

Still, accountants said Zuckerberg's tax plan is the right move.

The 27-year-old entrepreneur is famously loathe to give up any ownership control over his company, and he plans to sell only enough stock to cover his tax bill, Facebook said in its regulatory paperwork.

That means that the rest of Zuckerberg's billions will remain hypothetical paper wealth, and his financial fortunes will stay closely entangled with Facebook's.

Facebook's stunning growth - and billionaires

"He's doing it the smart way," said Stan Pollock, a San Francisco CPA who specializes in stock options planning. "We learned from the dot-com bust that people should do it that way -- sell shares to cover the tax bill."

During the dot-com bubble peak in 2000, countless tech industry workers got burned by roller-coaster stock prices. For tax purposes, the value of most stock options is fixed the day they're exercised -- even if you don't sell any of the stock. If you pay $5 to exercise an option and buy shares valued at $30, the IRS views your gain as income of $25.

What happens if the stock plunges before you sell any shares? You're still on the hook for the price it was the day you exercised it.

"People were exercising options and holding them in anticipation of the stock going up and up. The stock would go and up and up and up -- and then go down," Pollock said. "A lot of people were stuck with huge tax bills and no money to pay the bills."

Facebook will also get a significant boost from its employees' stock windfalls.

That's because companies can take a "mirror" tax deduction for stock option compensation when the options are exercised.

Thanks to its deduction on Zuckerberg's staggering tax bill and other stock-related expenses, Facebook expects to show a net operating loss this year for U.S. federal tax purposes. That means it will qualify for a refund on some of the taxes it paid last year on its $1 billion profit.

"We anticipate that this refund could be up to $500 million and payable to us during the first six months of 2013," Facebook said in its IPO filing.

Here's the ironic twist: While Zuckerberg's 2012 income will be stratospheric, his 2013 earnings could drop him straight back into the lowest possible tax brackets. At his request, Facebook's board agreed to slash his annual salary next year to $1

How to Find a Mentor You Can Trust

By Joshua Boswell

In the next few minutes, I'm going to give you a solid, bulletproof formula for picking a mentor you can trust.

But first, why do you need a mentor?

I'm using the term "mentor" here pretty loosely. What I mean is a person or system you can comfortably hang your hat on. Someone reliable who will show you how and when and where you can make money online.

There are two reasons why you need this simple formula of mine …

First, there has never been a "solo success story" in the history of the world. Every person of great wealth, health, and happiness has had someone giving them a hand up and helping them find their way.

You're not going to be the first person in history to break this pattern, so you need a person or system to help you along your journey.

Second, there is the issue of white noise.

That is what I call the constant bombardment of information, pitches, and enticements you and I face every day.

It seems like everyone under the sun has some kind of system for making money online. And, all of them are fighting and grabbing for your attention. It's like walking into an old-fashioned marketplace with 37,000 vendors hoping to sell you their wares. They shout and yell and do everything they can to win you over. The volume can be deafening.

It's also very confusing.

Which one can really help you? Which is a scam? Which is well-meaning, but just doesn't have the right stuff for you?

You and I both know that before you move forward, you need to pick something or someone to work with. Until that happens, your mental capital will be spent wondering who you should trust … and you'll be caught up in wondering if some system is right for you.

To help you get past that stagnant position, I'm giving you my personal formula that I've used for picking mentors I trust and are right for me. Here it is …

Step One: Harmonize Values and Priorities

This is the first and probably most important step. You want to know if the mentor or system you're considering harmonizes with your core values.

It's no good saying, "I don't like what that guy is promoting, but he seems to be making a lot of money so I'll follow his lead." If you do that, it won't be long before you feel frustration, conflict, and internal turmoil.

All of those feelings will stop you dead in your tracks. You'll be confused and conflicted. You'll always be wondering if what you're doing is right or not. All of that energy will take away from your ability to make money online.

Many years ago, when I started my copywriting business, I sat down and made a list of industries, products, and services I would never write for. I also made a list of activities I would never engage in.

I applied that same list to my selection of gurus and mentors. If they made their money in those sectors or strongly supported those values on my list, I stayed clear.

As I looked at my list, I saw that someone was making a ton of money in all of these industries. I also knew that some mentors in those industries were decent people … just not my kind of people. I wanted to be true to myself — no make that … I had to be true to myself so I could sleep peacefully at night.

One other thing to consider here, that's closely related … Does the mentor or system harmonize with your priorities? In other words, is following this path right for you, based on your personal priorities, goals, and focus in life?

I could have made a great deal of money in the world of financial copywriting … but, frankly, it was just not my thing.

So, my first question for you is this … does the mentor or system harmonize with your personal, internal, core values and priorities? If yes, move on to Step Two …

Step Two: Determine Congruency and Sincerity

I wish it wasn't so, but there are people in our world today that say one thing … and do another. Or, they encourage you to do something they have never done. They sell theory, not reality.

At one point, when I was in a critical phase of my life and business development, I found myself sitting across the desk from Michael Masterson. It was a rare and profitable treat for me.

We were talking about a number of opportunities I could pursue. One of them was wide-open and growing. It was a good opportunity in a good industry. He said to me, "Joshua, have you ever done anything in this industry?"

"Well, no," I replied.

"Then I think we'd better stay away from it right now. People can feel when you are sincere and are speaking from experience. You don't want to try and sell theory or guesswork. People deserve better than that."

It had a profound impact on me. I decided that in all of my efforts, I needed to walk the walk, not just talk the talk. This meant I could not get rich by selling systems and ideas that I had not personally implemented.

When you look at a mentor or system, ask yourself, "Have they actually done what they are proposing I do? Is their life congruent with their teachings?" If not, stay away. You are buying theory, not reality.

And, if you're going to put your time and money into building a business online, you deserve to know what really works and is proven.

Step Three: Reality Check

A lot of mentors and gurus out there get a little carried away in their claims and promises.

I understand why … it's very hard to be heard in the fierce marketplace today. And, for a certain crowd in the world — hype sells. The more hype … the more inflated the promises … the more they're buying.

So, in order to sell more and make a living, many mentors play the "Keep up with the Hypesters" game. If one promises you can make $5,000 a week working just 20 hours, then the next guy feels like he needs to promise you $10,000 a week in just 10 hours to even be heard. And, it can sharply escalate from there … as we have both seen.

But, here's my perspective … I love vegetable gardening. I love the process of preparing the soil, planting the seeds, weeding, giving the plants time to grow, and then finally reaping a healthy, fulfilling harvest.

There are certain laws in play here that just can't be skipped or rushed. You have to do things right, in the right order, and in the right timing.

If you plant seeds on Monday and try to harvest a week later, you'll get nothing but dirt.

Business is the same way.

There is an order, process, and timing to it all that needs to be obeyed.

So ask yourself, "Is this system or mentor promoting things in a realistic, rational order, with appropriate timing?" If not, stay away. Save your time and money.

Over the years, I have used this simple, three-step formula to protect my time, my money, and my emotions. More than anything, it has been very effective for me at turning down the volume of the "noise" that fills my life. This has made me much more focused and effective … resulting in a healthier, happier, wealthier, more fulfilling life.

This simple formula has also helped me build a great team of mentors — people that genuinely care about me, my happiness, and my financial success.

If you are serious about making money online and creating cash-flow systems, then clearing the noise and locking in a mentor is the first and most essential step. If you get this wrong, you could wander for years and spend money recklessly on things that never produce.

I know that cutting the noise and gaining a solid mentor has made all the difference for me.

It will for you, too.

How to Find a Mentor You Can Trust

By Joshua Boswell

In the next few minutes, I'm going to give you a solid, bulletproof formula for picking a mentor you can trust.

But first, why do you need a mentor?

I'm using the term "mentor" here pretty loosely. What I mean is a person or system you can comfortably hang your hat on. Someone reliable who will show you how and when and where you can make money online.

There are two reasons why you need this simple formula of mine...

First, there has never been a "solo success story" in the history of the world. Every person of great wealth, health, and happiness has had someone giving them a hand up and helping them find their way.

You're not going to be the first person in history to break this pattern, so you need a person or system to help you along your journey.

Second, there is the issue of white noise.

That is what I call the constant bombardment of information, pitches, and enticements you and I face every day.

It seems like everyone under the sun has some kind of system for making money online. And, all of them are fighting and grabbing for your attention. It's like walking into an old-fashioned marketplace with 37,000 vendors hoping to sell you their wares. They shout and yell and do everything they can to win you over. The volume can be deafening.

It's also very confusing.

Which one can really help you? Which is a scam? Which is well-meaning, but just doesn't have the right stuff for you?

You and I both know that before you move forward, you need to pick something or someone to work with. Until that happens, your mental capital will be spent wondering who you should trust... and you'll be caught up in wondering if some system is right for you.

To help you get past that stagnant position, I'm giving you my personal formula that I've used for picking mentors I trust and are right for me. Here it is...

1. Step One: Harmonize Values and Priorities

This is the first and probably most important step. You want to know if the mentor or system you're considering harmonizes with your core values.

It's no good saying, "I don't like what that guy is promoting, but he seems to be making a lot of money so I'll follow his lead." If you do that, it won't be long before you feel frustration, conflict, and internal turmoil.

All of those feelings will stop you dead in your tracks. You'll be confused and conflicted. You'll always be wondering if what you're doing is right or not. All of that energy will take away from your ability to make money online.

Many years ago, when I started my copywriting business, I sat down and made a list of industries, products, and services I would never write for. I also made a list of activities I would never engage in.

I applied that same list to my selection of gurus and mentors. If they made their money in those sectors or strongly supported those values on my list, I stayed clear.

As I looked at my list, I saw that someone was making a ton of money in all of these industries. I also knew that some mentors in those industries were decent people... just not my kind of people. I wanted to be true to myself - no make that... I had to be true to myself so I could sleep peacefully at night.

One other thing to consider here, that's closely related... Does the mentor or system harmonize with your priorities? In other words, is following this path right for you, based on your personal priorities, goals, and focus in life?

I could have made a great deal of money in the world of financial copywriting... but, frankly, it was just not my thing.

So, my first question for you is this... does the mentor or system harmonize with your personal, internal, core values and priorities? If yes, move on to Step Two...

2. Step Two: Determine Congruency and Sincerity

I wish it wasn't so, but there are people in our world today that say one thing... and do another. Or, they encourage you to do something they have never done. They sell theory, not reality.

At one point, when I was in a critical phase of my life and business development, I found myself sitting across the desk from Michael Masterson. It was a rare and profitable treat for me.

We were talking about a number of opportunities I could pursue. One of them was wide-open and growing. It was a good opportunity in a good industry. He said to me, "Joshua, have you ever done anything in this industry?"

"Well, no," I replied.

"Then I think we'd better stay away from it right now. People can feel when you are sincere and are speaking from experience. You don't want to try and sell theory or guesswork. People deserve better than that."

It had a profound impact on me. I decided that in all of my efforts, I needed to walk the walk, not just talk the talk. This meant I could not get rich by selling systems and ideas that I had not personally implemented.

When you look at a mentor or system, ask yourself, "Have they actually done what they are proposing I do? Is their life congruent with their teachings?" If not, stay away. You are buying theory, not reality.

And, if you're going to put your time and money into building a business online, you deserve to know what really works and is proven.

3. Step Three: Reality Check

A lot of mentors and gurus out there get a little carried away in their claims and promises.

I understand why... it's very hard to be heard in the fierce marketplace today. And, for a certain crowd in the world - hype sells. The more hype... the more inflated the promises... the more they're buying.

So, in order to sell more and make a living, many mentors play the "Keep up with the Hypesters" game. If one promises you can make $5,000 a week working just 20 hours, then the next guy feels like he needs to promise you $10,000 a week in just 10 hours to even be heard. And, it can sharply escalate from there... as we have both seen.

But, here's my perspective... I love vegetable gardening. I love the process of preparing the soil, planting the seeds, weeding, giving the plants time to grow, and then finally reaping a healthy, fulfilling harvest.

There are certain laws in play here that just can't be skipped or rushed. You have to do things right, in the right order, and in the right timing.

If you plant seeds on Monday and try to harvest a week later, you'll get nothing but dirt.

Business is the same way.

There is an order, process, and timing to it all that needs to be obeyed.

So ask yourself, "Is this system or mentor promoting things in a realistic, rational order, with appropriate timing?" If not, stay away. Save your time and money.

Over the years, I have used this simple, three-step formula to protect my time, my money, and my emotions. More than anything, it has been very effective for me at turning down the volume of the "noise" that fills my life. This has made me much more focused and effective... resulting in a healthier, happier, wealthier, more fulfilling life.

This simple formula has also helped me build a great team of mentors - people that genuinely care about me, my happiness, and my financial success.

If you are serious about making money online and creating cash-flow systems, then clearing the noise and locking in a mentor is the first and most essential step. If you get this wrong, you could wander for years and spend money recklessly on things that never produce.

I know that cutting the noise and gaining a solid mentor has made all the difference for me.

It will for you, too