Tom's Blog

Wendy from our Financial Freedom Now teleseminar (link to sales page) asks the following questions:

What is the best way to get started when you don't have a lot of income to work with/invest??

Should I borrow/get a loan to be able to invest and get started?

This is another question that ultimately needs to be handled by your own personal wealth coach. However, I may be able to provide a few insights.

First, remember that financial capital is only one form of capital. There is also time capital and intellectual capital. I find when I am coaching, that people who are successful in accumulating great amounts of wealth have employed all three of these types of capital. But what if you don't have much money and you are working full time so you don't have much time capital either?

That's where you really need to take advantage of your intellectual capital. In my article on WSU on Financial, Time and Intellectual Capital (link), I use the example of Bill Marriott, chairman of the Marriott Corporation of hotel and hospitality fame. When I lived in Washington, D.C., it was my great privilege to meet Mr. Marriott on several occasions and even to work with him on some church-related matters. At the time, Mr. Marriott, besides being chairman of one of the largest corporations in the world, was also responsible for the spiritual well-being of a few thousand members of the LDS Church.

I often wondered how he found time to do both of these seemingly monumental tasks. I learned that Bill was a master of leveraging time and intellectual capital. He was not only using his own time and considerable intellect, but solicited help from hundreds and thousands of others. He had mastered the ability to leverage other people's intellectual capital to help him build his wealth. What I also learned was that he had a passion for helping others achieve their financial success. At one time, he went so far as to tell all of the LDS bishops in the area that he would be willing to employ any member who was without a job. He would find a place for them in one of his companies. I have always remembered this and believe this desire to help others as one of the reasons for his considerable business success.

By employing others, he helped them, but he also received the benefit of leveraging their time and their intellectual capital. Now, I do not believe that is the reason he made the offer to employ any unemployed member. I firmly believe he made this offer for completely unselfish reasons. But we can learn from this great example. We help others when we employ their intellectual and time capital and at the same time help ourselves.

So, whether or not you should borrow to get started is a matter to discuss with your wealth coach, as that answer is different for every individual. But don't forget your other capital - time and intellect. And don't forget the capital of your team members. Many people have built fortunes with little or no financial capital, through their own and others' intellectual and time capital.

Warmest regards,

Tom

I am frequently asked about specific investments. For example, recently, I received the following questions from one of our teleseminar participants.

I have $200,000 coming as soon as my investment property sells, what would be the best way to reeinvest? If I do a 1031 exchange, should I try and buy several properties or just a single property?

I have $300,000 which is currently invested in Dodge&Cox funds; $60000 in an international fund and $240,000 in a balanced fund. Is there a better strategy to invest without more risk?

The answer to these and all other investment questions is the same - It depends. It depends on your personal wealth strategy. What investment characteristics are most important to you? Is a high rate of return more important than the level of risk? And what are your investment criteria? Do you have a particular loan to value that you are trying to maintain in your real estate investing? Do you have a price range you are trying to meet? What cash flow level is important to you?

The magic of creating a personal wealth strategy is that you can answer all of your own investment questions simply by referring to your strategy. You have determined what types of assets you will invest in. You have determined the investment characteristics that are important to you. Most of all, you have set specific criteria to meet in order to make an investment.

Most investment mistakes come from not following a well thought out wealth strategy. I know several people right now who are struggling with their financial situation. Why? When I look at what they have done, it is clear that they did their investing without a clear strategy. Or, they had a strategy and deviated from it.

So be sure to create and follow your personal wealth strategy. If you need help, take a look at the ProVision teleseminar, Proven Strategies for Financial Freedom Now (http://ProVisionWealth.com/seminars), where we show you how to create your own personal wealth strategy. Then, get a wealth coach to help you implement your strategy. For more on strategic wealth coaching, go to http://www.provisionwealth.com/strategic_wealth_coaching.asp or email us at cs@provisionwealth.com.

Warmest regards,

Tom

I get a lot of questions from seminar participants about building a wealth team. For example, Anita from our Financial Freedom Now teleseminar recently asked the following:

Is there a particular on-line brokerage firm that you recommend?

Do you recommend using any particular stock advisory newsletter?

These seem like simple enough questions. But without knowing Anita's personal wealth strategy, I would be remiss in making a recommendation. Why? Because it will depend on how Anita wants to invest. Assuming she wants to invest in the stock market, how does she want to invest? Does she want to invest in mutual funds or other funds or does she intend to trade in options? These questions should be answered as part of a well-conceived wealth strategy.

I would submit that these are the perfect questions for a strategic wealth coach. Your coach knows and hopefully even helped devise your wealth strategy. They should be able to either give you a specific recommendation or help you find the best answer for you. For more on building a wealth team, see my article at WSU on wealth teams. (link to article)

Warmest regards,

Tom

Janet, one of our participants in our Financial Freedom Now teleseminar, asks the following excellent question:

How does your philosophy of spending 20% of
your time planning before taking action mesh with
Harv's mantra of "ready, fire, aim" (ie, take action
then adjust as necessary).

I'm sure Janet is referring to T. Harv Eker, one of my favorite authors and speakers. On our part, I frequently suggest that you should have your wealth strategy in place before you begin investing. While these seem to be conflicting points of view, I think they work very well together. It's all a matter of timing.

When Harv suggests that you need to take action and then adjust as necessary, he is likely referring to making an actual investment. But remember that making the actual investment should still come after we have our wealth strategy in place. Let's take an example of someone who has chosen single family home rentals as her asset category.

Suppose that her real estate finder discovers an opportunity to acquire a property that may or may not fit within her investment criteria. She wants to check out the investment before committing herself to it to make sure it really does fit her criteria. The simple way to do this is to go ahead and put a contract on the property. Just make sure that there is a window of opportunity to get out of the contract. Typically, any real estate deal has a due diligence period. This is the time to find out if the property fits within your investment criteria. If it doesn't you have the opportunity of making a counter offer or withdrawing from the deal.

In this case, you have fired before aiming. You have tied up the property (taken action) and still have time to make sure it fits within your strategy. Of course, this is just one example. But the key is to still be sure as you can that any investment fits your criteria before closing on the deal.

I totally agree with Harv's mantra of ready, fire, aim. Far to many people spend all of their time researching deals and never act. With the right contract, you can tie up a deal and then do the research.

Warmest regards,

Tom

Many of you have now completed the Financial Freedom Now teleseminar and are wondering what to do next. I have emphasized throughout the teleseminar that you need a good coach. While ProVision would love to be your coach, we recognize that we are not for everyone. So, let me give you some next steps.

1. Continue to educate yourself. Remember that financial freedom has nothing to do with money, but has everything to do with knowledge and thought process (paradigm). Here are a few recommendations for education:

a. ProVision website. There are many articles in the Wealth Strategy U (WSU) portion of the website and this resource is free. We will be coming out with additional educational materials, teleseminars and seminars - so look for what's new each time you log in.

b. T. Harv Eker. Harv is one of the best at changing the way you think about yourself and about money.

c. Robert Kiyosaki/Rich Dad. Robert is one of my personal mentors and is a tremendous educator.

d. The Jackrabbit Factor by Leslie Householder is a wonderful parable about how to think about money.

There are many other good books and educators. Get educated!!!

2. Find a wealth coach. Of course, I believe that having a creative CPA for your wealth coach, such as we have at ProVision, is the ultimate source of coaching. I have searched for other coaching providers and have never found anyone who provides the value, integrity and professionalism of ProVision.

3. Find other team members. Some of you have mentioned how difficult it is to find good team members. I couldn't agree with you more. It takes time and effort. Of course, a good coach will help you find your team members. Absent a coach, I suggest talking to friends and colleagues about who they use for their investment team. Also, when you go to a seminar, ask the other participants for ideas. Remember that a team member does not need to live in your town. ProVision works with most of our clients this way via phone, fax and email and it has never caused a problem.

4. Find investments. Once again, a good coach will help you. Absent a coach, educate yourself. Again, remember that there is no reason you have to invest in your own community. If you are investing in real estate, for example, there are many communities throughout the U.S. and Canada that have good investment opportunities.

5. Education, education, education. I know, this was also my first suggestion. But it is also my last. Until you have changed your context (paradigm) to one of wealth and abundance, YOU CANNOT BECOME WEALTHY!

Thanks again for all of your efforts and positive comments about our Financial Freedom Now teleseminar. As a wealth education company, your success is what matters to us. Please feel free to continue to contact us and send us your questions. Look in this blog and throughout our webiste at www.ProVisionWealth.com for answers to many of your wealth, tax and business questions.

Warmest regards,

Tom

Recently, I received the following question about the tax benefits of investing in real estate:

Hello, I had a question for you guys. I just want to make sure I understand. It is about tax benefits. I have a business right now and I have to pay full taxes! If I had real estate like family home, commercial etc...i could take the depreciation of this properties and apply it towards my business income is that right? Can i do that even if I make money on it every month? Could I really reduce or even eliminate my tax payment?? thanks HARRY.

There are actually several subtexts within this question. The first is concerning taxes on business earnings. I'm always concerned when I hear a business owner complain about their high taxes. This tells me that they are not getting good tax advice. The best tax benefits in the Internal Revenue Code belong to businesses and business owners. But many business owners are just like Harry - they don't know how to structure there business to obtain the greatest tax benefits. So number one is to work with a CPA who can help you take full advantage of business tax benefits.

The second question is whether real estate can really give you deductions against other income even when the real estate in question provides positive cash flow. The answer to this is a resounding "YES." As remarkable as it may seem, the IRS actually allows you to take a loss on appreciating real estate even when you have positive cash flow from the property. This is the magic of depreciation. Depreciation is a non-cash deduction that can easily be more than the cash flow from your rental property. The result is a loss that you may be able to use to offset income from your business or salary. There are several limitations, of course, most or all of which can be overcome with the proper planning. Be sure to talk to your Tax Coach about this amazing benefit and how it can apply to you.

The final question of Harry's is whether real estate tax benefits can actually be great enough to reduce a person's income tax to zero? Hard to believe? It's true, though. We have several clients who have substantial positive cash flow but pay no income tax due to the tax benefits from their rental real estate.

Thanks for asking such a great question, Harry.

Warmest regards,

Tom