A reader wrote recently to say that although he’s “learned a lot from PBL,” he feels that most of the advice is not for him. Why? Because he is 47 and has a net worth of only $25,000.
He is not interested in long-term saving strategies. “I don’t want a million dollars when I’m 70,” he says. “I want it now.”
Plus, he believes that many of the wealth-building strategies we recommend are only for the rich, not for people like him.
“What’s the average person to do?” he asks. “He makes $27 per hour with no chance for overtime. He has debts. He needs a new car. He can’t invest in real estate like Mark. He can’t open six businesses in Nicaragua like Mark. And he doesn’t write a newsletter with 100,000 subscribers that earns millions every year.”
Since we started publishing The Palm Beach Letter, we’ve gotten a number of letters like this. This tells me two things: We are hitting a nerve by telling the truth, and there are lots of PBL readers who have few financial resources and are worried about the future.
If you have had some of the same thoughts or feelings, this message is for you.
You are middle-aged. Your net worth is meager. Your income is barely sufficient to meet expenses, and those expenses are going up. Instead of getting stronger, the economy seems to be teetering on the edge of collapse.
So should you give up your dream of retiring comfortably one day? Should you accept the prospect of living in a shabby apartment and subsisting on ramen noodles? Should you grow bitter? Should you curse big government and big banking and big business for putting you in this situation?
Or should you take responsibility for your future well-being?
That last question was, of course, rhetorical. Yet when I hear comments such as “What’s the average person to do?” I wonder if people understand that they have options.
You certainly don’t have any choice about how our government is going to spend your tax money. And you may not have a choice about whether the company you work for is going to be in business next year. But you can choose how you respond to your current financial worries.
I believe—no, I am sure—that anyone who has modest intelligence and a positive attitude can become financially independent in seven years or less if he or she is willing to work smart and hard.
But I also understand that when you are halfway through your life and barely making ends meet, it seems like the only chance to become financially secure is to win the lottery (either an actual lottery or the stock market equivalent).
And so, when you hear some rich guy from Palm Beach telling you that you shouldn’t trade options if you have less than $25,000 set aside just for options, it may be frustrating. And when he talks about what he and his rich friends are doing—buying rental properties and starting businesses overseas—you might feel that you can’t use his advice.
If you feel that way, you are wrong. You are not wealthy now, not by a long shot. But you do not have to give up on is your dream of becoming wealthy.
It will take time and patience. You may have to change some of the thoughts and feelings you have about wealth. And you will certainly have to make changes in what you are doing, for what you have been doing has brought you to where you are.
Your path to financial independence begins with four simple steps.
1. First, accept the fact that you are solely and completely responsible for your current financial situation.
Before you react defensively, read that sentence again. I didn’t say you are the cause of your situation. I said you are responsible for it.
By taking responsibility for your current situation—even if it was “not your fault”—you assume responsibility for your financial future. That is a good thing. Hoping for someone, something, or some event to fix your problems is futile and foolish. Time, precious time, ticks on as you sit and wait.
The sooner you accept the reality that you are going to be your own salvation, the sooner your fortune will start to change.
The first and most important benefit is that you will shed the anger and frustration you have been carrying around for so many years. And then gradually, as you apply your new thinking to taking action, you will begin to feel the opposite of anger and frustration. You will begin to feel financially powerful.
The feeling that you have the capacity to create wealth is the single most important tool in your wealth-building kit.
2. Second, set realistic expectations.
I can’t tell you how many times I’ve heard people scoff at the idea of making 8% or 12% returns—the sort of returns we look for in our Performance and Legacy Portfolios. They tell me returns like those are “boring.” They want stocks that double and triple, they say, because that’s “the only way to acquire wealth.”
I once made a presentation to a small group of investors about an investment I liked. My projection was that it would provide a return of 25-35%, with some fringe benefits. A man in the back interrupted me to tell the audience that they would be wasting their money by investing in my idea. “Unless you can give us a 10-to-1 return, I’m not interested in what you have to say,” he announced. A few people applauded him.
It’s funny. I never hear wealthy people voice this idea. It is always either people that are not-yet wealthy or stockbrokers. (My interrupter looked like a stockbroker. And I think he probably signed up some clients after my presentation.)
Yes, 10-to-1 returns happen. But they rarely happen in the stock market. Your chances of building a fortune by seeking out 10-baggers (as they call them) is about the same as playing the lottery.
Know this: 8-12% is a high rate of return. If you get an 8% return, you’ll double your money every nine years. If you get a 12% return, you’ll do it in six years. You can get very rich by doubling your money every six years.
Think of it this way: Warren Buffett—the most successful investor of all time and the third-richest person on the planet—has averaged 19.8% on his investments over his entire career. Expecting to make returns that are five times what the greatest investor has made is just plain foolish.
3. The third thing you must do is to understand how wealth builders really create wealth.
The public today has been deceived on this important point by reading stories about individuals who invested every cent they had in a business idea that exploded into a billion-dollar bonanza. These are great, inspiring stories. But they are not normal. For every person who got rich this way, there are 999 who went broke doing the same thing.
I’m not diminishing these guys. They were brilliant and shrewd. But they were also rare exceptions. Using them as models is like a kid in the ghetto deciding he’s going to get rich by becoming the next Tiger Woods or Michael Jordan.
4. Your fourth step to financial independence is to recognize that your net investible income (the amount of cash you have after spending and saving) is the single most important factor in determining how quickly you will become wealthy.
I will venture to say that you have never heard any other investment newsletter writer say this. But it needs to be said. You simply cannot get wealthy by investing unless you invest enough money.
This leads us to being open to real estate and entrepreneurship. It also leads us to strategies for spending less of the income you earn on the things you are paying for now. I have developed programs for each of these strategies. One of them—which I call the Golden Buckets—will give you a clear breakdown of how to spend less, save more, and invest wisely.
One more point I want to make here: The journey to millions of dollars is earned $100 at a time.
Many people I speak to, when I talk about extra income opportunities, tell me that they are interested only in opportunities with the potential to bring them tens of thousands or hundreds of thousands of extra dollars per month. This is the same kind of foolishness I hear from people who are interested only in stocks that could maybe/possibly/perhaps give them a 100% return on their money.
To find an extra $10,000 to invest this year, you don’t need to come up with a $10,000 idea. It’s easier and smarter to come up with several $100 ideas and then repeat them over and over again.
If you are not yet wealthy and are worried that you will never be able to achieve financial independence, take heart. I’ll give you dozens of ways to develop real wealth—even if you are 47 years old and making $27 per hour.
The world of wealth is governed by universal dynamics—supply, demand, wealth, greed, etc. These dynamics are as old as civilization. Winning the wealth-building game is about recognizing and exploiting those dynamics, not denying them.
Our job at The Palm Beach Letter is to highlight those dynamics on a weekly and monthly basis and then help you make smart, enriching decisions—the sort of decisions that have made men wealthy for thousands of years.
It’s not fun to realize, in the middle years of your life, that you haven’t acquired the wealth you want. But the good news is that you can begin to change your fortunes today by taking the four steps I just told you to take. And you can take all four of those steps in the next hour—if you simply open your mind to them.
Let me be a bit more specific:
• Accept responsibility for your future. Refuse to complain, criticize, or condemn. If you want us to help you achieve your goals, trust in and follow our advice. Stop doubting it. Stop denying it. Have faith.
• Give up the foolish notion that you must get rich “now.” Be happy to earn 8-12% on your stock market investments. Realize that if you make 8% to 12%, you will be ahead of 99% of your fellow investors. Embrace the huge impact this will have on your wealth over time.
• Begin to allocate your income according to the Golden Buckets system. With every paycheck you get, first cover your necessary expenses (bills, mortgage, etc.). Then put some money toward saving and some money toward investing. Then and only then—after you have “paid yourself”—do you add to your “spending” account.
• Stop complaining about making “only $27” per hour. That’s more than a lot of people make. Be grateful you earn that much. Commit to add to that with a second income. Make an honest count of the number of hours each month you devote to television and other non-productive activities. Devote those hours to wealth building instead. Cast aside the comfortable shoes of victimization. Put on the working boots of a financial hero.
If you are willing to do that, we can help you succeed. We are giving you investment recommendations that will give you realistic 8% to 12% returns (and sometimes much more.) You can buy the books I’ve written on how to earn more money and save more money.
We are fully committed to giving our readers more valuable and realistic wealth-building advice than any other investment newsletter. We have the experience and the know-how to do it. We will deliver if you do.
Before I end this essay, I want to address two more things my 47-year-old correspondent said. And I am going to speak directly to him:
You suggest that you don’t have the wherewithal to implement some of my recommendations. You say that buying real estate and starting businesses in Nicaragua is something only wealthy people can do. You are dead wrong on this. If you are willing to work hard and smart, you can begin building a rental real estate empire with as little as a thousand dollars.
And the businesses I’ve started in Nicaragua can all be started for that kind of money or less. If you stick around and trust us, you’ll learn how you can do it too.
The other thing I want to address is your suggestion that I am raking in a ton of money with The Palm Beach Letter. The implication, in fact, is that I am only in it for the money. While I don’t deny that I am generally in business to make money, you are wrong about this also.
I am going to say something now that I haven’t said before because I didn’t think it was necessary. But apparently it is.
So here goes…
Personally, I am not making any money from my work for The Palm Beach Letter. And I never will. Every cent of the compensation I am paid as a contributor goes directly into my charity in Nicaragua.
I’m not Mother Theresa. I’m a rich man who can afford to put hundreds of thousands of dollars into charity. But my motivation in writing these messages and in developing all the programs for the Palm Beach letter is not about personal financial gain. I’m in this to see if I can help thousands of individuals like you—people who are not yet wealthy—become wealthy by doing exactly what I’ve done to achieve the wealth I have.
If I were in this for the money, I might be tempted to tell you what you want to hear so that we could sell more subscriptions. I could tell you, for example, that you can invest $25,000 in certain stocks and end up a millionaire in just a few years. But we are hoping that we can be successful publishers of good and useful information without making such promises. We want to help you by telling you the truth.
You are only 47, not 87. You have plenty more years to increase your income and grow your net worth. Don’t assume that all is lost when you have a wonderful life ahead of you, a life that can be rich in so many ways.
Everybody in your situation has the same choice: You can complain about it or you can dedicate yourself to changing it. We can show you how.
For the equivalent of a tank of gas or a dinner out, you are getting a whole year of realistic investment and wealth-building advice from The Palm Beach Letter.
You have what you need to get your gravy train moving. But you are the engineer. Nobody can do it but you.