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.

Saturday, February 11, 2006

A Change of Mindset About Money -

Up until my late 30's I was pretty much just trying to do the same thing as everyone else we knew when it came to financial and retirement planning. Not much.

When I got married around age 30 and we were expecting our first child I remember reading David Chilton's "The Wealthy Barber". This was a very unique book that put personal finances in perspective from the point of view of a young man learning that his unassuming barber was actually quite wealthy and wise about financial planning and investment. I never had a barber like that, but I did have a high school teacher that was rumoured to be a millionaire.

I remember the first order of business in that book was to have a will made up by a lawyer, which we did. Very depressing conversations. Then came life insurance, which we did. Being an analytical person, I spent way too much time trying to figure out exactly how much either of us would need if one of us died, and how much the guardians would need if we both died...

Then, I think it was the "pay yourself first" philosophy where you arrange for your employer to deduct 10% of your pay and put it directly into a tax-sheltered retirement savings plan (RRSP in Canada). Ten percent seemed like a lot, but you get used to it eventually. You also get tempted to cut back when times get tough. But that's not the answer.

Then, after about Chapter 4 we seemed to fizzle out and put the book on the shelf, thinking we were well on our way. Or at least we were no worse off than anyone else.

As kids and house maintenance expenses were added to our list of priorities, we barely noticed our increasing line of credit balance. Then, one day I realized that our consumer debt was a significant fraction of our savings. So, our net worth was not really making any progress. We were also approaching 40. Something had to be done, and fast. However, in financial planning and investing, I've come to realize that most things that happen "fast" aren't usually good for me.

In 2001, we saw Robert Kiyosaki on Oprah, talking about his book,
"Rich Dad, Poor Dad"
. He talked about investing in assets which created cash flow. So, we decided to read it. Somewhere in that book was a major life-changing revelation fo us. We actually had some equity building in our house, and were not making very good use of it.

The Rich Dad, Poor Dad book was an easy read, again because it put finances in the context of someone's life. Real estate was an area I really hadn't thought much about as far as investing goes. But while Kiyosaki doesn't say it's always the best investment, he does say that it is a good way to build equity relatively quickly, if it's done right.

So, I set about learning how to do it right. Something I've learned about investing in real estate, it's easy to learn many things about doing it right, it's actually pretty easy to do, but there are also many things you learn on the spot, as you do it... like tenants don't think like home-owners, and owners shouldn't think they know what a tenant wants or how they will handle any given situation.

Being a landlord is full of fun surprises. But for me it has been worth it. The main reason is, I use a Property Manager. For people who aren't interested in learning about a whole new lifestyle, I highly recommend using one. It doesn't relieve you of all headaches, but it makes it much more manageable for the average person with a full-time job.

Realizing how much more I could be doing to build equity for retirement, through real estate, was a huge change in my outlook for the future. Everything started looking brighter. I had more confidence, and I was actually excited about starting what really is my own business of buying houses.

I will post many more comments on real estate investing in future. So come back again.

... Scott


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