Money Mindset

Money Mindset discusses the experiences and opinions of a middle-aged professional on the topic of money, including: financial planners, investment experiences, part-time income sources, real estate investment and private sales, web site income opportunities, changing professions, home office organization, money education for kids, and many other subjects I have experienced first hand or even just thought about.

Thursday, February 08, 2007

Million Dollar Consulting

There aren't too many books I've read that have had a real and immediate impact on my income prospects for the next 3 months. Alan Weiss' Million Dollar Consulting is one of them.

As a consultant, I was stuck in the rut of having to work as many hours as I could to earn money on per diem contracts, ones that pay only for each hour you work. I was also pretty dependent on a small number of clients, whom I felt would begrudge me looking for work at other clients.

Two things I have learned from this book. 1 - Switching to "value-based pricing" for contract work is easier than I thought, giving much more earning potential. 2 -writing a proposal that "gets accepted every time" is much easier than I thought.

For me, I enjoy having a variety of types of work going on at one time. When I am on a single contract that focusses on one thing, my mind starts to wander, making it harder to focus. When I have two or more contracts, I work on what my mind knows is most important. That gives me a chance to balance work on each contract. Value-based pricing fits well here because it does not demand that I work a certain number of hours per day on a particular contract.

Other things I expect to learn from this book, and a set of audio CDs I've ordered from Alan, are how to create "Intellectual Property" and sell it as part of my marketing efforts. I can see everything starting to feed on itself. I am very excited about my own field of work; much more than I was a year ago.

I recommend this book for any consultant looking to take the stress of "feast or famine" out of the equation.

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Saturday, February 03, 2007

Mortgages Can Be Fun...Really!

When investing in Real Estate, the first obstacle people come to that seems to be out of their control is the First Mortgage financing application. (It's not really out of your control unless you aren't aware and prepared.) People generally don’t apply for mortgages very often, so it can be a long, confusing and stressful process if you aren’t prepared for it.

The best way to ensure a smooth application process, and hopefully approval, is to know the banker's requirements and be prepared with all the information they need. Most lenders need at least the following:

- a copy of the offer to purchase

- the year it was built, what type of construction and heating

- an appraisal (which they usually coordinate, but may charge you for)

- a loan application, which takes more than a few minutes to locate all the information and fill it in

- the loan application will usually ask you for your income (which may need to be verified by an accompanying letter from an employer), a net worth statement that includes all assets and liabilities (or debts)

- authorization to do a credit check (which they will do using Transunion - or Equifax -

- either leases for the rental property or a signed letter of intent to lease.

If you submit the above information, forms and letters to a banker before they ask for them, they will be very impressed, and will likely find the time to work on your application before the many incomplete applications on their desk. In fact, you could be their most memorable Client if you actually show them you know how to help them get your approval through without any hitches.

NOTE: You'll notice I use the term "banker" above, which could be a bank or a mortgage broker. You don't deal with "Lenders" directly; the bankers do. I'll post another time about the differences between bank loan officers and mortgage brokers.

In Ontario, you can usually borrow up to 75% for a small residential property (or up to 85% with a high ratio insured mortgage).

It’s one of the biggest hurdles, but when done correctly, can be straightforward, and will allow you to build a good relationship with your banker or lender. This is one of the most important parts of Real Estate investing.


Tuesday, January 30, 2007

My Top 3 Lessons Learned from Real Estate Investing

I was recently asked, "What are the top 3 things you have learned from investing in Real Estate". It caught me a bit off guard. But after thinking it through, here's what I came up with:

1) Location is still key. There's usually no point investing in a beautiful property, with all the amenities, even if it has great cashflow if the location is bad. If you aren't looking at what the growth potential, or the downside potential, is for the area, you could end up being very disappointed. It's pretty easy, once you know what to look for to pick an area of your city that is likely to beat the city's average growth rate over the next 5 or 10 years. Also, if you invest in any renovations, they can be worth a) the cost of materials in a flat market b) less than the cost of the materials in an area that is in decline, or has a dump about to expand down the street c) more than the cost of materials in an area where new development is happening and transportation links are being expanded nearby.

2) Nothing is as easy as the infomercial gurus say it is. In principle, you can simplify the steps to "analyze, buy low, fixup, sell high", but there are a lot of ethical and time-management decisions to be made along the way that will swamp anyone who doesn't have good social skills, self-discipline and work ethics, and a great deal of persistence.

3) You have to spend a lot of time learning the various aspects of Real Estate Investing to bite off a chunk that you can work with. If you spread yourself too thing trying to make every potential deal work all by yourself, you will burn out (and run out of money fast). Once you know the economic model and the type of people who complement your abilities, you can focus on becoming an expert a a "part" of the real estate market that you have a good chance of succeeding in.

There's no silver-bullet, unless someone hands you a lot of resources and time.

- Scott

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Wednesday, January 24, 2007

Keeping an Eye on Your Money!

Just a note that I have had some fraud attempts made on me personally over the past few months. They are easy to miss if you are busy.

1) A credit card I had not used in a year suddenly had a transaction on it. I wouldn't have noticed for quite a while except that I try to download my transactions and categorize them for budget tracking purposes every week or so.

2) In a squash club in a small town, I accidentally brought in my wallet which was in the rear pocket of my jeans. When I came out of the game to get dressed, the wallet was in a pocket I never use. Fortunately the only thing missing was $25. But now I have to watch my account balances to make sure nobody is using my credit card numbers.

I find Quicken to be a good way to force yourself to look at balances every few days. But you have to keep your eyes open all the time for strange occurences that could be related to fraud, social engineering or phishing.

- Scott

Tuesday, January 23, 2007

Starting a Tipping Point

Did you ever wonder how a social trend or fad starts? Wouldn't it be cool to start one yourself?

I recently listened to the audio CD set of the book "The Tipping Point" by Malcolm Gladwell. It's an interesting model that tells you what kinds of people are usually involved in what he calls a "social epidemic". It has close parallels to epidemic behaviours of illnesses.

Examples include crime waves in NYC, Hush-Puppies' resurgence, the cult of the "Ya-Ya Sisterhood" book, etc.

I recommend it. You may even learn who you need to network with, and what kind of message to spread that could promote your idea or product.

- Scott

Friday, January 19, 2007

Four Basic Reasons to Invest in Real Estate

Every time I see someone advocating that "Stocks are clearly better to hold than real estate", I have a reflex reaction in my mind that says, "If they thought about it in a different way, they could be much wealthier, with a much more secure position at any given time."

For example, in Ramit Sethi's blog "I Will Teach You to be Rich", I see a comment from a poster saying they think stocks are better to hold, but that the proceeds from real estate could be put into stocks.

One of the best ways I've seen it put is on the web site for Flagstone Properties, which summarizes Dolf de Roos' 4 questions to ask yourself when comparing Real Estate to stock based investments.

Basically, it explains why:
1) Real Estate is secure. Banks will lend you money to buy Real Estate, but not stocks or mutual funds
2) Gains in Real Estate are multiplied when you borrow on a mortgage.
3) The value of Real Estate can be manipulated by the investor much easier than stocks.
4) You can buy Real Estate at a bargain because of market inefficiency.

There are other good reasons, such as using home equity loans for downpayments means you don't need to save up the cash (ROI is again multiplied), and the interest costs on mortgages are tax deductable (they aren't in Canada for your principle residence, but they are for income properties).

To me, its a no-brainer. Your mileage may differ, but if I do my due diligence on the property and the people I use to manage, maintain, buy and sell, then I can't see a more secure or profitable investment.

- Scott

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Tuesday, January 16, 2007

Budgeting "Apples to Apples"

It's very difficult to keep a budget in your head when you are busy with your job, and your spouse is working, and you have kids doing things throughout the weeks and months. I used to think I could keep it straight in my head. But what I've found is that while you can save a bit of money by paying things as they come up, it ends up costing in terms of "stress" and unexpected hits on your bank account.

Recently, I've decided to move everything I can to monthly, and if possible, automatic payments. Where that's not possible, I try to put money into a separate account, automatically on a monthly basis to cover things like taxes and major expenses I know I'm going to have.

The link above has a table to work out monthly expenses. I find it is better for me to take the hit on interest and smooth out my cashflow.

- Scott

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Monday, January 15, 2007

Eat That Frog!

I just wanted to share a small piece of editorial comment on a book by Brian Tracy, the famous speaker and success coach.

For Christmas, I asked for the audio book version of Brian's book "Eat That Frog!". It was just what I needed to refocus my energy and priorities on my own personal goals. It is a great summary of many useful time management techniques you can put to use without learning a new time management system. I've studied several in my life, but was not usually able to make them work for very long.

As I look back, the best time management I was able to use for an extended period was called "Ascend", which was from Franklin, which eventuall became "Franklin Covey". But the key was in how it made you prioritize tasks by "A, B, C, D and E" with subpriorities. This is just one of the techniques Brian talks about. There are many others.

The most important point is that "There's never enough time to do everything you need to do in a day, but there's always enough time to do what's important to your life and career". You just have to think consciously at the beginning of each day and decide what is the biggest, most important task that you could be working on to get you closer to your goals. Then, work on that task only, since it is THE most important thing, working on anything else is a waste of time.

For another Blog on personal success and goals, check out Success Begins Today.

It's a great audio book, and there's a paper version. I highly recommend it.

I think this is another turning point in my own road to achieving my goals.

Let me know if you have any other major turning points yourself.

- Scott

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Tuesday, August 22, 2006

Finding a Niche That Fits Your Style

It Can Be Simple - But it's Not Usually Easy

In a Russ Whitney CD set I have, he makes a very true statement. "Real Estate Investing is a simple process, but it's not necessarily easy to do." That might sound trite, but I have found that it's quite true.

Of course, if you look at any business process, including running a multi-billion dollar company, it can usually be described in a simple set of rules. For example, to run a large automotive company, all you have to do is:

1) Research the market to find out what vehicles and features are in demand
2) Prioritize the things you can afford to build
3) Assign the team to build them
4) Communicate the benefits to the market, via the sales channels and advertising
5) Take orders and deliver products
6) Set up customer support and sales channel support programs
7) Set up service and parts channels, and advertise their advantages
8) Do more market research to see how you are doing, and what you can do better
9) Improve the processes and repeat the cycle

If a car company can do this, they will sell a lot of cars and make a lot of money.

In real estate investing, most gurus will tell you (for free) that all you have to do is:

1) Locate motivated vendors
2) Analyze opportunities to see if the house can be bought cheaply enough, and can earn enough rent (after fixups) to carry itself "fully financed". Fully financed usually means with 90% mortgage or greater.
3) If you can hold the property long enough that it will appreciate a bit, you can usually refinance and get any down payment you made back out, and start again.

That's the super-simplified message, and it is easy to understand, but not so easy to do without spending a lot of time digging below the surface to address a lot of different issues. Those issues grow exponentially, and that's where the gurus make their money. They know you won't get far without having a "system" that tells you what to do at each decision point.

I've spent the last 5 years digging into various models and systems for making money in real estate. Each one looks promising, but the biggest problem I usually find is that, at some point, the investor has to either make tough decisions, or speak face-to-face with a seller, a buyer, a banker, a trades person, a lawyer, an accountant, or someone else. It's not that these are very difficult things to do, in theory. It's that most people are not strong negotiators, and they will hit barriers with each of these face-to-face meetings or conversations.

You have learn and practice how to deliver the message you know needs to be delivered at that time, and it has to be credible. A banker will not take you seriously, unless you have an answer to all his/her questions.

The whole thing just takes so much study and practice, that I imagine most people eventually give up, having spent thousands of dollars on guru's courses, just to learn "it wasn't for me". It's like any other job. You have to enjoy it, and it has to fit your style and strengths.

The good thing is, if you do enjoy it, you can usually find team members to compensate for your weakness. But you have to be good at some part of it, or you will be paying everybody else on your team, and nothing will be left. I've experienced that more times than I've intended.

Real estate investing is a great business to get started in part-time, because you can learn and have fun, and make money. There aren't many hobbies you can make a lot of money at. Collecting rare coins, art, stamps, etc. might pay off pretty well, but it's not as exciting.

When you tell someone you invest in real estate, it is fun to hear their comments. But it is something you have to have some passion for. One of the reasons I like the Real Estate Investment Network so much is that they make you think about what you want out of life, and your "life's vision that is so compelling that you can't help but act on it".

REIN also stands firmly on the side of integrity. You can't run any business for long when you flirt with the grey areas of the law and ethics. I can do a whole other post on whether you can run a successful business without selling your soul and and losing your integrity. I prefer to keep mine.

But you have to spend a lot of time going down paths to discover what business model fits your style. A lot of them won't be for you, and a lot of them can get you into trouble, if you don't practice good business sense.

I believe I've found a system that can work in the long term, and I can make use of all the lessons I've learned. Putting it all together to work in an area you enjoy, and for which you have lots of energy and passion, is what makes your own business style.

... Scott

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Thursday, August 17, 2006

Soul Soul Searching and Refocussing

I just realized it's been 4 months since my last post.

So, what's happened? I just found I was getting so de-focussed, I had to re-evaluate all my activities. I have also been spending time on budgeting.

The bottom line is that I have decided to focus on two main efforts for the time being: consulting and real estate.

Consulting is currently my career, which everyone needs to have. Even Robert Kiyosaki says you should go to school and get a good education, but not necessarily so you can get a good, secure job. But when you are starting to make a shift from being an employee to a self-employed, business owner or investor, you have to keep a steady income to support your family and other financial commitments. With a clean slate, as a young adult, it should be much easier to start by focussing on becoming an investor.

So, consulting is the business I do to support my life-style.

Real estate investing is what I consider to be the best way to build equity, but I don't believe you can easily get rich quick with real estate, unless you have a number of pre-qualifying circumstances you can leverage. I may talk about that at another time.

For the moment, my efforts in real estate investing are being concentrated on finding solid cash-flow opportunities, assuming a 25% downpayment. I would advise anyone interested in real estate investing to start by aiming to buy at least one rental property for themselves. Then, the best way to expand your investing business is to become known as an expert and look for joint venture partners to provide future downpayments. A solid business model can be created that will not require you to put down as much of your own money.

For more information on how to do this in Canada, I recommend using and to start by reading "Investing in Canadian Real Estate using the ACRE System" by Don R. Campbell.

There may be faster ways to build wealth, but I don't think there is a better way for people who want to buld it with integrity and ethics. The REIN approach allows you to treat real estate investing as a business that you can be proud of, and to be professional. They teach you how to attract investors who have money and ideas that align with yours.

So, it may be that most of my future posts will relate to running a consulting business, or building a real estate investment portfolio through Joint Ventures.

Hope to post again soon.

Thanks for reading.


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Saturday, April 01, 2006

Feast or Famine

I have been doing consulting for almost 3 years solid, with no noticeable breaks. The money has been good. But as contracts come to an end, there's always a time when you think about what might happen if you couldn't get work for a while.

While the economy is good, and I have very marketable skills, this is the first time I have had to look for work. I'm realizing that it would have been easier today if I'd been doing more marketing on an ongoing basis.

So, based on what I've learned from the Joint Ventures Forum at, I have started to look for ways to put significantly more leverage into my consulting practice marketing. I am looking to partner with complementary businesses for referrals. I am also starting up an industry-based forum on Yahoo, where referral fees are encouraged.

One thing that you may not think about much, but when you take a leadership role in creating a community of interest, your value grows quickly. People start to think of you as the point person for things in your industry.

I have a lot of ideas on what I can do with my business, and have a bit of time now to get some things started, while at the same time, becoming visible as a leader.

I've also started reviewing old CDs and tapes from people like Robert Kiyosaki and Zig Ziglar. The stuff is motivating the first time you listen to it, and you remember a few key phrases. But even with the good ones, it's not until you listen to them a few times, and come back to them after you've read or listened to others, that things start to come into perspective.

One guru I have had trouble listening to on CD is Michael Gerber. He's the author if The E-Myth, which everyone says is good for entrepreneurs. I understand the idea of working ON your business, and not IN your business. But the tape set "The E-Myth Revisited" is very slow and introspective. It just makes me want to punch the CD player and make him get to the point.

Anyway, I feel that a lot of good things are going to come from this work break. While it's scary to think that each day I don't work is costing me a lot of money, I have faith that it will come if I keep my mind on succeeding.

I just noticed in the past few days that when I debated calling someone or going to see someone about my needing to line up more work, I almost always come away with a new lead.

Every decision you make leads you to where you are today. It becomes easy to sit and search the Web for information, or to update my Website (or blog). But the real payoff comes from meeting and talking to people. Try to take every opportunity to talk to people. But do it with a mindset of "what opportunities am I learning about when I meet with this person?" Of course my previous post about spending time with people who will help you grow is still relevant.

So, during the so-called "Famine" period, I'm gearing up my marketing in several fronts. My plan is to maintain as much activity as I can during the "Feast" period to keep the funnel full, and build my reputation as a leader in my field.

... Scott

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Saturday, March 25, 2006

Mind Over Money... Which is Worth More?

I believe it doesn't matter how much money you have. How happy you are has more to do with you mindset regarding money than how much money you actually have at any given time.

As the gurus often remember, I think it was Henry Ford who, when someone asked him what he would do if he lost all his money, said something like, "I'd make it all back in 5 years."

However, I think there is a difference between having a healthy attitude toward creating wealth and believing you have a bottomless pit of money to throw around on "Doodads", as Kiyosaki calls them.

In fact, it seems to me that when it comes to money, the less you can live on, the happier you'd be, no matter what the circumstances.

(Note: I drafted this post a few weeks ago, before the post about Feast or Famine. Even though I'm now technically in the Famine phase, I feel like it's an opportunity to take actions that will benefit me both in making money and in saving money through good times and bad. )

... Scott

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Tuesday, March 21, 2006

Your NIQ... or Network Income Quotient and NWQ

You'll hear this in most guru seminars and books. Things like "Your Network is Your Net Worth". I wasn't sure what this meant when I first heard of it. I thought it just meant that the more people you knew, the more you were worth... well, sort of.

But I have learned a bit more about what they mean. In one of Robin J. Elliott's bootcamps we discussed the exercise where you place a dot in the middle of a page. Then draw a small circle around the dot and place 4 dots on the circle. Name the dots with the names of the 4 people you spend the most time with. Then draw another circle just outside that one, with the names of the next 4 people you spend the most time with... and so on.

Now, the important thing is to estimate the income and/or net worth of the people on the circles around you. I'm not sure how the rest of the exercise went exactly, but it helps you put into perspective what the financial capacity of the people closest to you is.

It makes sense that as the income or net worth of the people closest to you goes up, you will be influenced by them in ways that changes your mindset on money and finances. It's a good exercise.

Being an engineer, I like to try to quantify things, so I think of it as a "Network Income Quotient" or NIQ.

So, try this. After you've labelled the incomes of each of the 4 people around you, take their average income.

For example, Joe ($45K), Fred ($40K), Alice ($55K), Mr. Boss ($100K) have incomes totalling $240,000.

Now, divide that total by 4 to get $60,000. That's the average income of the people you spend the most time with.

Now, your NIQ would be that average divided by your income. If the number is greater than 1, then your NIQ is hopefully increasing your net worth. If you spend more time with people who make 2 or 3 times your income, you can get NIQ values of 2, or 3. If you can get that number to be closer to 10, you will find your knowledge of money and finances becomes much greater.

Then, once you see where you are, try making a conscious effort to increase your NIQ by spending more time with people who have higher incomes.

But is Income the Best Indicator?

If you do the same exercise with net worth (total assets minus total debts), you will also learn things about how the people around you are affecting your attitude on money. I would call this your NWQ (Network Worth Quotient).

You can do it both ways NIQ and NWQ. You may find professionals who make a lot of money (high NIQ), but may not be increasing their NWQ. Try to find people with NIQ and NWQ that are much higher than yours to spend time with and learn from.

Just be careful if you hang around people with a high NIQ but a relatively low NWQ. These people don't seem to know or care how to manage their money, since they have not managed to put much of their earnings to work on building their assets. You will probably pick up their poor spending habits without having the income to sustain them. That can be very dangerous.

... Scott

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Tuesday, March 07, 2006

An Update From My Financial Planner

After posting my earlier blog article about choosing a financial planner, I got the following comment from my planner:

Scott -

The reality of the trillion dollars that is supposed to transfer hands in the coming decade has led a wave of people into the investment and financial planning space. Everyone is getting into the business because of the potential. Because of this, the consumer of these services and products is inundated and confused with all the choices and designations and products.

Too much choice often leads to paralysis and besides, its their hard earned assets and who can you trust anyway.

I've come to conclude the following when I think of how the average person should choose a financial planner;

1 - Designations - There are only a few respectable designations in my mind suited to creating a financial plan: a CFP, RFP and CHLU. There are a few other designations for specialists in divorce CDS and the elderly EPC too although they are in addition to the others. But even individuals with these designations often haven't actually completed and implemented a plan.
So along with designations, you want to ask about experiences and see what a plan involves. The actual planning document is not as important as the implementation of I, so asking a lot of questions about how the plan is implemented and tacked is important.

2 - Compensation drives behaviour - when it comes to investments, a commission approach only works for the do it your selfer - and most individuals are not interested or experienced or have the time to be DIY's.

Paying a fee for the plan and either a flat fee for implementation and management of the assets or a percentage of the market value up to a maximum amount is the only way to ensure the advisor is as interested in your success as you are.

3 - Diversification - If the planner is only recommending managed money (funds or managed accounts) you have to wonder if he/she is really managing risk for their clients. Along with Wills and appropriate insurance, pensions, annuities, and of course investment real estate need to be considered in the mix.


Thanks, Rich!

... Scott

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Passive Income

Passive income is simply income that your investments generate each month. It takes no additional work for it to happen. If you invest in assets that generate cash each month with no money from you, then eventually, the passive income stream will exceed your monthly expenses. When that happens, as long as your monthly expenses don't keep increasing, then you have "infinite wealth", meaning you can retire and live off of your investments.

Oops, My Expenses Grew, Too!

I mention "as long as your monthly expenses don't keep increasing" because I realize that if you don't make a conscious decision to budget and pace your spending it gets very easy to change your lifestyle to match your new passive income. There's nothing wrong with increasing your standard of living as your means increase, but just realize that you won't be able to retire until you make an effort to live within your means.

OK, There's Still a Bit of Work...

So, the way I look at it, if you are looking to retire on passive income, the only work you should need to do to "stay retired" is to manage your expenses to stay within your means.

For more discussion on passive income, please read the link below posted on Robin J. Elliott's blog.

Passive Income at Real Success Blog.

Should you decide to go further with Robin Elliott, and join the Joint Venture Forum, which explains how to generate passive income with no money and no risk (but some education and a small amount of time), please indicate that you found him through "Scott at Money Mindset Blog".


... Scott

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Thursday, March 02, 2006

It Doesn't Take Money to Make Money

This is a simple statement. However, you might be surprised at how some people interpret this universal "truth".

Many investment gurus will make this statement. Inevitably, they have proven it, using their own success as a testamonial. So, it must be true.

What I have found is that there is usually a way to structure investments so that I end up with an asset, and ultimately, I have no less money in my bank account than I did before I made the investment. This is based on theory, and I do know a few people who are doing this.

By most people's definitions, this kind of investment approach could be called "creative investing".

I have tried several investments using these approaches. In some, I have been able to make an investment, and within a few months, I have a new asset and no less money in my bank account. This doesn't mean I didn't use money to get the asset. It's all in the definition and implications.

Sometimes you can ask people to sell you a house and hold 100% financing, which means you don't need to put any money down up front. Of course there are likely to be land transfer taxes and legal fees. So you can't really say that you don't need "any" money. But it's not impossible.

For me, the key thing is that it is much "easier" for me to make an investment if I have some cash to put into the deal. Then, there are ways to get back the money I put in within some period of time, so I can use it for my next investment.

Someday, I hope to have the skill to partner with people in a way that leverages someone else's money and my skills in putting together investment opportunities. I believe it can be done. But it requires a lot of knowledge about what partners are looking for in an investment. It may not appear complicated, but it is not necessarily easy, depending on your investment knowledge, experience and credibility.

If it was a simple AND easy thing to do, I think most people would at least know someone who is doing it, and eventually most people would be doing it. I don't know very many people who are able to do this. But I'm working on being one.

It doesn't always take cash out of my bank account to invest in an asset that will earn me money, but without the skills to do it right, I think it is much easier if you have the cash.

So, I'd plan on spending a lot of time (and money) developing my ability to invest without taking money out of my bank account.

Let me know what you think by posting a comment below.

... Scott

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Friday, February 24, 2006

Picking a Financial Planner

It used to be that I thought anyone who worked as a professional in the field of money could do financial planning. Not that they don't all know how to budget, plan and track money, but I've learned that there's more to financial planning than that.

I have consulted with, and paid, 3 different accountants in my career (not including my current accountant), in hopes of having them help me achieve my financial goals. It wasn't until I read the book "Rich Dad, Poor Dad" by Robert Kiyosaki, that I started to understand why accountants aren't financial planners. In fact, no single professional is likely to be able to do all my financial tasks for me.

It turns out that there is a wide range of financial planners out there. Quite often you will see the designation "CFP" after their names, which stands for "Certified Financial Planner" (Big surprise!). However, very often someone with this designation is qualified to represent a number of insurance companies and mutual fund companies.

It is very important to understand that CFP's are usually paid a commission up front, and annually by the companies they are affiliated. There's nothing wrong with this, but it's common sense that they are trained and incented by these companies to sell their products.

Once I decided to seek one out, I found that most did not recommend real estate as part of a financial plan. As a result, these planners did not own real estate. This was a shock to me. The basic fact is, recommending investment in real estate does not provide the financial planner with any reward. Therefore, many planners won't recommend anything other than RRSPs and mutual funds.

So, the spectrum ranges from pure "mutual fund salesmen" or "life insurance salesmen" to impartial "non-incented" advisors who charge for their services and are independent of companies.

Of course, most people probably can't afford to use a completely impartial advisor. You could, however, rationalize the fact that such a person could earn you more net worth than their fee by many times. So, it probably is worth it if you pick one that is competent.

I chose to work with someone in the middle, but closer to the impartial side. Firstly, the fund groups available to CFPs are very diverse now. So, in the realm of insurance and mutual fund based investments, they can pick just about any investment strategy and find vehicles in their portfolio that fit.

The important question is, how does a financial planner feel about investments outside their affiliated fund groups? Can they fit that concept into their plans?

Just the fact that a planner understands the importance of multiple streams of income, and the value of leverage (as in mortgaged real estate) is a big indicator. A better indicator is whether or not a planner actually owns investment real estate themselves.

In the model presented by Robert Kiyosaki, there are 3 levels of financial plans for investors. There is the "safe secure" financial plan, which most CFPs are capable of creating for you. Then there is the "rapid growth" financial plan, which a more full-service planner can help with. This level has more aggressive and creative investments. Then there's the "plan to get rich". The latter is hard to find people who can do, and they will charge for their services. I believe it's important to make sure you've got the "safe secure" plan, and if you are interested in speeding up the wealth creation process, then add the "rapid growth" component with the help of a planner.

A lot of people (especially engineers) feel that they should have the math and problem solving skills to set up and manage their own financial plans themselves. Maybe some can, but I don't believe that's really the best use of their time and their acquired skills.

So, to summarize, it is important to shop around for a financial planner who can help you build a "safe secure" financial plan. It should include covering all the bases including having a will, and life insurance. But they should be able to review your personal and business objectives, map out a plan for how to best use your assets, and help you build a team of advisors such as lawyers and accountants.

If you don't hear from your planner at least once a year, I would be worried. It is ultimately your responsibility to monitor who is in charge of your investments, and make changes if you aren't happy with the way your financial plan unfolds.

If you have questions, please feel free to post a comment.

... Scott

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Thursday, February 23, 2006

Making use of home equity for investing

Before I started investing in real estate, I really thought it was years away before I could gather enough money to put into investments of this size. After I read a few books on real estate investing I realized that this wasn't true. I discovered that being the owner of my own residence makes it very possible because there is often value that you can borrow against for putting downpayments on investment properties.

Secured Lines of Credit

The concept of a secured line of credit can make it much more achievable. What I did was take out a secured line of credit on my house. First of all, I used a mortgage broker that can shop around for the best rates. They also know how to approach the lenders who give the kinds of terms you need as a real estate investor.

The main mortgage lenders in Canada will usually lend up to 75% of the value of your house on a line of credit that is really a mortgage (either a first or second mortgage). They will not usually allow you to owe more than 85% on your house in total mortgages. When you are borrowing more than 75% of the value of your house, the portion above 75% usually costs you in terms of a higher interest rate (eg. 10% rates or more, compared to 5 or 6% for a first mortgage of no more than 75%).

The equity is defined as the difference between the current appraised value of your house (what they think you could sell the house for), and what you still owe on the house. As long as you are not going above 75% (or 85% for a second mortgage) in debt, you may be able to borrow against equity that has been accumulating as you pay down your mortgage, or as your house appreciates in value.

An Example Line of Credit for Investment

If I bought a house for $100K with a 25% downpayment (75% mortgaged) 10 years ago, I might have paid down $20K, and maybe I now owe just $65K on the mortgage. In that 10 years, my house might have appreciated by $60K. That means that the house is worth $160K and I owe $60K. A bank might allow me to owe up to $120K in first mortgage debt (75% of $160K). If I have good a good credit rating and a solid income, I might qualify for a line of credit of $60K ($120K minus $60K owing on my original mortgage).

With $60K, I could buy a $160K investment property with a 25% downpayment ($40K). I would keep the other $20K available on the line of credit to cover any emergency repairs or mortgage payments during vacancies. This way, expenses that can be treated as tax-deductable for the purposes of investment property can all be kept in the same account.

It's important to keep in mind that as you use your available secured line of credit, the equity in your house decreases. You should think of your mortgage as being the total of any original mortgage plus any secured line of credit balances.

How Do I Use a Line of Credit After the Downpayment?

I also use a line of credit that requires only interest payments each month. Since the interest is tax-deductable and princpipal repayments aren't, this is actually to the investor's benefit. If you're really lucky, or make it clear to your mortgage broker, you might find a line of credit that allows you to automatically capitalize interest payments.

What that means for me, as a landlord, is that if rent payments are late, or there are vacancies, then mortgage payments, taxes and everything else can be covered on the line of credit, plus the interest payment on the line of credit gets added back onto the principal amount. So, if the rent cheques don't get deposited by the day the interest is due on the line of credit, the balance goes up for a few days. Then, when rent cheques are deposited, the balance goes back down to cover the related expenses.

Investments Shouldn't Adversely Affect Your Monthly Cashflow

So, with the right structured line of credit, I can ensure that my investment related expenses don't impact my day-to-day cashflow. The way I look at it is, any money that a bank would loan me for investment purposes is money I should have working for me instead of being worried about getting my home mortgage paid off.

The banks actually like this setup because they get more opportunities to collect interest from you while you are accumulating net worth with leveraged assets.

... Scott

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Sunday, February 19, 2006

The Rat Race - we learn it at a young age

I talk a lot about Robert Kiyosaki and his books. That's because he's been one of the biggest influences on me. If it wasn't for the book "Rich Dad Poor Dad". I would probably still be working in a permanent full-time position, barely getting by, and getting deeper in debt (bad debt, that is).

One of Robert Kiyosaki's biggest initiatives has been educating not only adults, but kids, about the subject of money. I think this is extremely important, and something that has been lacking in most school programs.

Kiyosaki has developed a number of games that aim to teach while entertaining. We purchased the "Cashflow for Kids" game a couple of years ago, and our kids actually enjoy playing it. I think it has started getting them to think of where money comes from and where it goes.

If we can start to break the cycle of "keeping up with the joneses" (what he calls the Rat Race), by teaching our kids about it, then maybe they have a chance of retiring earlier than we do.

Just a note about the links that I put in this Blog. When you see the ads in the Google box at the top, they are chosen and placed by Google. When I place text links on my site, it may be informational, or it may also be an affiliate link, which is another part of my recent education about making money. I will write about affiliate programs as a source of income in future posts. I have started to join some programs, but I only plan to link to affiliate programs of merchants that I believe have good quality and value.

Here is the link to the Cashflow for Kids game...

... Scott

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Friday, February 17, 2006

Financial Success and Investment Gurus - Who Do You Trust?

No excuses. This is a long post. But my intent is to give you some insights that could save you a lot of time, or at least set your expectations about working with gurus of investment, real estate or success in general.

What about the gurus?

In a previous post, I mentioned in passing that the claims of some "get rich" infomercial gurus aren't exactly what they seem to be. The pitch usually looks "to good to be true", and because people are in such bad shape financially these days, it is easy to be open to things that look like quick fixes for your situation.

The ongoing debate about "get rich quick" schemes will continue forever. The main thing I've learned is that it's good to be skeptical of everything until you have met someone in person who is active in the area you want to move into, and can tell you, in detail, about recent deals that worked for them. If you see a "recent deal" testimonial presented as a video clip that's used in an introductory seminar or infomercial, then it's probably not that recent.

That's not to say that everyone who puts testimonials on video are running scams. But you have to realize they have a marketing department and a marketing budget. From experience, I know that marketing departments often stretch the truth much farther than the average person would (even more than the person giving the testimonial would stretch it).

Don't give up!

You can still learn important concepts from some of these gurus, and even the free seminars can teach you something. But I don't believe there are very many successes among the people who go to the free seminars, then pay $1,000 to $5,000 for the "institute" version (2 days), just to face the prospects of more courses. I attended a Russ Whitney free seminar, then a $2000 course in 2004. While there was a ton of information I would have had to learn by reading several books, and some good motivational speaking, I was surprised that so many people signed on for further training at a cost of at least $10.000 or more.

What did I do?

My feeling was that I might have been able to reach financial freedom in as few as 3 years if I paid for training or mentoring. But if I kept to my own plan, I might be able to do it myself in 5 years. I elected not to pay for the training. I don't regret that decision. In fact I have met a "testimonial guy" from one guru's video ads, and while he is probably contractually obliged to not say anything negative about his guru's system, I can tell that the real story is not as bright as the video portrays. It's often much harder to do than they say it is.

By all means, though, read as much as you can on different aspects of financial success. Even if you are advised to take action immediately, make sure you know the risks and are comfortable with them before you do anything. As real estate guru "Dolf De Roos" says, "The deal of the decade comes along about once a week." It's not far from the truth.

A Breath of Fresh Air

The good news is that "testimonial guy" and I have recently both found a breath of fresh air amid all this slick marketing machinery. It takes another change of mindset from realizing that RRSPs aren't the only kind of investment you can do part time without watching the markets every day.

This one just needs you to take an inventory of who you know and what they need. Most people don't really care about your needs, but if you can help others to be successful, it will eventually come back to you.

Money, Time and Risk

That's why I think Dollar Makers is such an innovative, common sense approach to building wealth. I only recently joined, but this blog is a direct result of changing my mindset in this way. So, I am actually looking for people who need help with their businesses. I can connect them together in a process called Joint Venture Brokering. It sounds complicated, but it's a wide open space with room for everybody to help each other. It takes no money, very little time, and has virtually no risk. These are things that most gurus can't honestly claim about their systems.

Robin J. Elliott

Robin J. Elliott is not so much a guru as a prolific business enabler. The Joint Venture Forum that he runs is a growing "High-Value Business Network". There is a code of ethics that is strictly enforced, which gives you the environment of trust that is often missing in other niches.

Instead of repeating everything myself, I am including (with Robin's permission) an excerpt from his Blog below, which contains many other valuable articles, located at:

You Can Create Time and Money Freedom

You want to be free to do what you like, when you like, right?You want to be free to go where you wish, when you wish, and to be able to afford to buy what you want. Ayn Rand said, “Freedom is to ask for nothing, to expect nothing and to depend on nothing.” Sounds good to me.

But, to many people, this just seems like an impossible dream.In fact, you can create this freedom in your own life to a large extent. It won’t happen overnight, but it can happen. You can consciously and systematically create this free lifestyle. I have. And you can, too. This is a technology, not some “Pie in the sky” scheme. It’s not MLM or Network Marketing. It’s proven and it works. Here is a simple plan to create freedom in your life: more than enough time and money and independence for you.

We should remember that Robert Kiosaki, in his “Rich Dad, Poor Dad” book, told us that you don’t need millions in the bank to retire. What you do need is more passive income than you need to live comfortably on. That’s not what some “financial planners” will tell you; they want to sell you lots of risky stocks and bonds and they tell you that you need millions in the bank. So, if you need $5,000 a month to live on and your income exceeds that, plus you have a little financial cushion stashed away for unexpected costs, you’re looking good!

And we all know that it’s better, by far, to have multiple streams of income than just one. That way, we reduce our risk, don’t we? Not all your eggs in one basket. Have many baskets, so you can afford to drop some and still survive. Spread the risk. That way, you don’t lie awake at night, worrying about losing your income because of a crash in the stock market, a grumpy boss or a dishonest business associate.

So, step by step, this is what we need to create time and money freedom and peace of mind, and all the quality of life that brings with it; ten simple steps:

Reduce and remove debts and overhead. Most people buy things they don’t need and can’t afford, with money they don’t have, to impress people they don’t like.

We need to reduce our monthly expenses and cut away the fat. Do you really need two cars and all the flash? The less you need to live on every month, the easier it is to get free. Take a good, hard look at your expenses and lifestyle. Do your things own you?

Make sure you are properly insured against lawsuits and unexpected loss. Get many quotes and be very careful which salesperson you talk with. Remember, the salesperson wants as much commission as he can get out of you. A healthy dose of skepticism is a good thing here. When I was offered dental insurance and I looked at my benefits and costs, I decided to do without. It has saved me thousands of dollars. Read the small print; insurance companies really don’t want to pay you.

Incorporate your business for protection and definitely have a business – the tax breaks are excellent, especially if you’re a Joint Venture Broker as there are many more deductibles, including trips, entertainment and the like.

Remove unnecessary costs and especially regular costs from your life. Visit your bank manager and the competition bank manager and an accountant. Look at refinancing and reorganizing your debts, line of credit, credit cards and mortgage – this exercise alone can save you a fortune and radically reduce your monthly costs.

Simplify your life as much as possible. What can be cut out? What is working, and what is not working? Are you attending a club or group out of habit, but not really getting any benefit anymore? And it’s costing you money? How much time and money will you save by leaving?

Educate yourself. Read Robert Kiosaki’s books. Read Ayn Rand’s “Atlas Shrugged”. Read “Think and Grow Rich” – again. Attend courses. Don’t go out and spend a fortune on schemes and dreams and “get rich quick” schemes. Be very careful. Attend free seminars but don’t buy stuff when the speaker turns into a used car salesman at the end and the mindless herd goes scurrying to the back of the room to buy his overpriced products. Sleep on it first. Don’t get emotionally whipped up. The more you learn, the more you earn. Understand money and debt. We don’t have money problems; we have thinking problems.

Align yourself with winners, not whiners. If we mix with people who are richer, wiser and more successful than we are, we will earn more as we learn more. Be open-minded and get that ego out of the way. People who are free can teach you how to be free.

You don’t learn by talking; you learn by listening and then applying the new information.In everything, maintain the Joint Venture Broker mindset: “No Money, No Risk, Very Little Time.” You don’t have to pay for things when you understand Joint Ventures. You can trade, barter and JV.

Become a Joint Venture Broker and create multiple streams of increasing, passive income.

Maximum potential, unlimited opportunities, no geographic limitations, no industry limitations. Anyone can do it, regardless of education, age or background. All you need is access to a telephone. If you have internet access, even better. Work from home, a car, a beach, a forest, a hotel, an airport, or a wheelbarrow if you like.

And you don’t have to go out and buy a business, sell stuff, sign leases, employ people or buy inventory. You can use existing resources – everything you need is available through other people and other businesses.

For more information, free podcasts, free teleclasses and seminars and much more, visit: and

Copyright Robin J. Elliott


So, there you have it. This is where I am right now; helping to build the JV Forum, working to develop my own network that is connected to dollarmakers, and aiming to prove that this new model for small business marketing success will work.

... Scott

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Wednesday, February 15, 2006

Saving Money on Travel, or Making Money From Travel Agent Referrals -

In return for making you read my philosophical blather, I suppose I should put in some real tips on saving money and making money.

This one comes as a result of a real estate seminar I attended that was put on by the Russ Whitney organization. You may have seen him on early morning infomercials telling his story about how he was working on a pig farm for minimum wage, got fed up with it all, and lived the American dream by becoming a real estate millionaire in something less than 5 years. (There is at least another article or two on real estate gurus and becoming a "real estate millionaire" which sounds much better than it is...)

Anyway, in this case, there may still be a way to get something of value for free. When you register to go to one of the free seminars coming to a hotel in your city, they will tout a "free gift" that they are offering just for showing up.

If you go and sit through the free introductory seminar, you will hear about Russ' amazing story (told by one of his sales people), and a couple of times throughout the seminar they will mention "discounted travel" that you will also have access to, or the opportunity to set up your own "travel agency".

They have a deal with a company called "Global Travel International", based out of Florida, I think. In any case, at the end of the seminar, they hint that you can sign up for this great deal if you buy the $2,000 real estate course coming in the next month (after the traveling road show moves on). If you go to the Russ Whitney web site, you will see a signup button. On the list of hotels where you can choose to sign up, it clearly states that you will receive a free gift worth $195, just for attending the seminar.

That free gift is the introductory registration fee for the affiliate program of Global Travel International (GTI). This is where the value is. Normally it costs about $200 US to join GTI, but here you get it free for sitting through a one hour seminar.

GTI is an interesting concept. It's a bit like a Multi-level Marketing business, but in the travel agency industry. You can choose to sign up and as soon as you send them a picture of yourself and fill out the forms, you will get a valid travel agent ID card.

You may already know that travel agents get big discounts on lots of things. There are also things called FAM (familiarization) trips where agents get to go for a very small free on new promotional vacations.

Another benefit is that they set up a fully automated travel agency web site for you. And any trips booked on that site earn you an agent's commission. You can see what the travel booking site looks like, and book trips on it, at .

Or you can just book trips by phone on their 1-800 number and earn commissions. You can't combine a commission on a trip for yourself and a travel agent's discount as well. But it's still a discount no matter how you do it. Airlines don't offer much, if any, commission any more. But hotels do.

The last benefit is that if you refer others to become agents, you get $50, plus a cut on their commissions (like an MLM). I've used it and it does save me a lot. I haven't earned commissions yet. Just a note that the second year and each year after require about $200 per year in membership fees. But by that time you should know whether it's worth renewing the membership.

If you don't like this idea, another way to save on travel is with CAA memberships. They are good value in themselves for roadside assistance, but the travel benefit is also sometimes good.

... Scott

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Monday, February 13, 2006

Starting Your Own Business -

Ever since I was young, I always sort of assumed I would someday have my own business. I remember going with my parents to a relative's house that had just been built, and seeing their new 3 car garage with new cars in it.

My Dad said, "You can't afford this kind of lifestyle when you're working for someone else." I think that was the moment when I implicitly decided I would have to have my own business. This was one of the few times I remember someone trying to give me career advice that I actually believed. Most times since then, when people have said things like, "You need to do a Master's degree immediately following undergrad, or you'll never do it at all...", I sub-conciously set out to prove them wrong.

I guess I must have let the dream slide a bit, because in university I chose to do more technical courses than management courses when I had the chance. Computers were just too much fun to give up for artsy courses like "Organizational Behaviour".

But shortly after graduating, I decided that I needed to prepare for being "management". I saw too many unprepared technical people being put into management positions they weren't ready for. So, after 3 years of fulltime work, I "retired" and went back to school for a Masters in Business Administration. This actually disproved the advice I had been given; that I'd never do it if I didn't do it immediately after undergrad.

Anyway, after finishing my MBA, I still had no distinct idea of what kind of business I would own myself. I kept working my way up in management of small software companies.

The day I figured it out was when I attended a Product Management course and saw a guy with an independent consulting company who charged $1000 per person for a 2 day seminar. There were about 50 people in his average class, which he ran twice a month rotating through several cities, plus on site seminars for $10,000 each. Let's see, nice hotels, work 5-10 days a month, earn $100K per month (minus hotels, airfare and conference room costs). Now I'm glad I took that MBA course!

I haven't got there yet, but I am still working on building the content for seminars.

During the next 6 years, I couldn't help but realize that all the time and effort I was spending as an employee was helping someone else become successful and wealthy. On top of that, I found it harder and harder to buy in to the visions of senior management when I often had doubts about their strategy or tactics. Mostly, I didn't feel my skills were being used as effectively as they could have been. I was drying out on the vine. I had very little control over my own destiny.

I felt that the simplest way to start building my own business was as a consultant in the areas of technology that I knew. This would also allow me to quickly build up experience with multiple clients and technology challenges.

I just started by looking at the list of partners on my employer's Web page. Then, I looked at the partners' partners, until I got a good view of what kinds of companies might need consultants with my knowledge. It didn't take long to narrow down a few candidates in the local region near where I lived.

Next, I prepared a short introductory telephone script and called the president of each one (they were relatively small companies, with fairly accessible executives).

I set a 3 month minimum limit on my first contract opportunity. Either that, or a full-time position for a while just to get familiar with consulting. It took 2 years of constant calls and emails before I got an offer. In fact, it never rains, it pours. I got two full-time offers and a 3 month contract offer that would probably have renewal possibilities. That's what I did.

Immediately, the excitement of running my own company took over. I did whatever I could to show I was thorough and giving good value to the client. Then, word began to spread among client contacts to the point where I am confident of being able to sustain demand.

I have no regrets after 2 years of independent consulting. The most significant advice I can give, in hindsight, is to:

  1. Have a long list of potential clients to call on;
  2. Have enough of a cash buffer (whether it's in savings or a line of credit) for those "long receievables cycles" (they do happen) and downtime between contracts;
  3. Try to pay yourself on a regular, fixed budget;
  4. Get an accountant you trust, and don't haggle over his hourly rate. Just make sure he is professional and has integrity (and uses tax software - my first accountant did tax returns by hand!);
  5. Listen to your accountant's tax advice but don't expect him to be your big picture financial planner. They are most valuable in planning for taxes;
  6. Get a financial planner who can help with your retirement plan (check the yellow pages)

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