Money, Finance & Wealth

The Fear of Failure

baronvonsavings@gmail.com (Baron Von Savings) — Tue, 21 Jul 2009 03:34:00 +0000

Fear is defined by Websters dictionary as, "to feel fear in (oneself), to have a reverential awe of (God), to be afraid of: expect with alarm". I can certainly attest to feeling all of these types of fear. When I first began in business I was fearful of failing. Although confident in myself and my abilities I was afraid of falling flat on my face. I had a young family to support and the fear was that I wouldn't be able to put food on the table and a roof over their heads. And I pretty much lived up to this fear because I did not know how to conquer my fears.

Their was a time early in my business life when I was really struggling. The economy was on the skids and although I had a lot of business I was working on this work did not pay me anything in at the time which I needed to continue to feed and house my family. Things got so bad we had to move out of the house we bought and rent it to save money and move in with my sister in-law and her two kids. This was a difficult thing to do for a married man with two small children, but we did it because we had no other choice. As I mentioned earlier I had a fear of not being able to provide for my family and this became a self propelling prophecy. I thought through fear I might not be able to support my family, and to a certain extent this fear became reality. What kept me going, and kept me from running out and getting a JOB, was the fear of complete failure. This fear was more compelling than the fear of not being able to support my family. I knew I had to change the way I thought about fear.

I spent weeks thinking about all of my fears while laying in bed at my sister in-laws with my wife and kids in the same room. After a while I realized the only thing holding me back was the way I was approaching my business. I was holding back because I was afraid of failing. I also figured out I was not approaching my competitors head on because I was afraid of losing. After this break through I was able to structure a plan to help me conquer my fears. This plan was nothing more than a psychological break through allowing me to reinvent the confidence I knew I always had in me. For me a big part of this plan was harnessing the Fear of God and incorporating this into my daily routine of Fear bashing, or some might call it confidence building. Once I was able to remove my fears I made a lot of great strides on moving on the be successful. By harnessing and conquering my fears I was able to not only move us out of my sister in-laws house but to also put myself in position to earn over a million dollars the very next year.

Fear is a funny thing it can take on a life of its own and have different affects on different people. Fear can be so overwhelming it can cripple someone into barely being able to function. Fear can also be character building and bring strength and courage to others. Fear tends to provide me with courage and strength. When confronted with a fear of failure I often begin my search for courage and strength by first using my fear of God. This fear helps me to take control of my mind and body and allows me to look into the eye of fear.

Maybe you are the same way, but maybe instead of God you look at some other self fulfilling structure in your life that has a calming zen like outcome. If you don't have a way to deal with fear then I suggest you try to find something that works for you the next time you experience a sensation of fear. This might be exercising, surfing, meditating, or praying. There are many things you can do to bring your body and mind into a state of relaxation and whatever it is it can help you calm your fears. {Insert a definition from an author on fear}. In the old television series Kung Fu there is a scene in which Master Poe, the old teacher, says to a young grasshopper "Fear is the is the only darkness" he follows this with "never assume because a man has no eyes, he cannot see". This tv fable is based on the chinese teachings of Shaolin Priests. And through these words Master Poe is trying to tell a young grasshopper that juts because you fear the darkeness of the unknow that is not enough of a reason to allow this fear to keep you from seeing the truth. Andf the truth is if you believe in yourself you can overcome your fears.

The fear of failure is a common fear in society and in fact {insert a quote on high levels of fear} Let's face it everyone wants to be a winner, no one wants to lose, and the fear of failure is so great it can hold us back. Fear has the ability to turn a very intelligent hard working individual into a puny little wussy. Fear can make the brave weak and make the weak brave. The fear we have has the power to transform us. What do you want to be a wuss or brave?

When fear is holding you back you need to do everything in your power to release this fear from your mind. Fear is real, it is a tough competitor. Fear likes to win the battle raging in your mind between weak and strong, between fear and confidence, and it will do everything it can to turn you into a big wuss. Conquer your fears and you will be able to conquer the world {see if their is a famous quote on fear=insert}.

The first business I became an equity owner in was a professional partnership. I essentially bought into a company that had been around since the turn of the 20th century. This business was originally one of the largest service providers in its industry having at several points in time been the largest company of its kind. I would have to say this business partnership was what some would call a "no brainer" and I did not have much fear entering this business. It was an easy in and then an easy out when I wanted to exit the business.

My next business was different. This business was all about me, my efforts and my abilities. When I started this business I encountered a great deal of fear. I was fearful of failure but more importantly I was fearful of losing everything I had worked so hard for for so long. The business ultimately failed after several years but the experience of running this business has been very useful to me and I have been able to draw from this experience many times since.

I used this failure as the basis for learning. There are many lessons one can learn be examining oneself in the face of failure. So in this sense not all failures are failures. I was able to look back and evaluate some of my mistakes and then learn from then for use in future business endeavours. If you have encountered failure, failure in business, failure in marriage, failure in sports or any other type of failure use the experience of failure to make corrections to keep future failures at a minimum. No one gets things right all the time. I like to use the analogy of baseball when thinking about failure. If a baseball player goes to the plate and is successful just three times out of ten he is considered a success. The reality is though that this player had to fail seven times before he was considered successful.

My third business was my largest business. This business involved many people who depended on me for their very own success. And again with this business I experienced a great deal of fear. Fear I would fail and fear I would lose my shirt. I was able to harness my fear and not let fear hold me back. Unfortunately this business also failed with the demise of the economy beginning in 2008. Although I'm not through dealing with the repercussions of this business failure I have not let fear hold me back. I have been able to harness my fears and begin to think about new businesses to start in order to rebuild my financial life.

Conquer your fears and the world can be yours.

The information contained in this site consist of a series of articles which comprise "My Story and I'm Sticking to it". The information contained herein is sole opinion of the Baron Von Savings. The Baron is not a professional money manager, tax expert, accountant, attorney, or stock broker. You should consult with an appropriate professional before making decisions concerning your personal finances.

Frugal to Fabulous

baronvonsavings@gmail.com (Baron Von Savings) — Sun, 19 Jul 2009 09:25:00 +0000

There is much to be said for living a frugal lifestyle, and much more to be had by living a bigger lifestyle. The former can and often will lead to the later. As I begin my quest for a second time of wealth generation I feel a need to reflect on the way my former frugal lifestyle led to a bigger lifestyle.

Considering we are broke with no real current assets we need to get back to living a frugal lifestyle which in time will allow us to grow assets and live a bigger lifestyle. The irony in this is that even though I want to be in a position to live as big a lifestyle as we would feel comfortable living the reality is the first time I built our assets to a substantial level I seemed to lose focus on the things that led us to begin acquiring these assets. This will not happen a second time.

Life for both my wife and I started very simple. We are both the product of parents who lived a typical blue collar lifestyle. Each set of parents provided for us when we were young and each in their own way taught us lessons we would use in our life as we grew into adulthood. Our parents did not give us a mind set to live in any way beyond our means but rather taught us how to live within our means. They provided advise on how to save our money for things we wanted, possessions we wanted. but also provided us with little guidance regarding the accumulation of assets to grow wealth. Neither one of us blame them for this because they themselves did not know how to grow wealth. From their perspective they were happy doing the things they did to earn enough to support their families. There is no wrong in this way of living. Each person needs to make an independent decision on the way they want to live life.

My wife grew up in a small country own in the Northwest. She lived in an area where farms were the norm and she had the fortunate opportunity to have her own horses on a small family farm when she was a girl. She also had grandparents who owned a small farm where they had a tractor, cows, and chickens and plenty of dogs. Through a divorce she and her two siblings were raised by a single Mom. Her Dad was still around and involved in her life but he remarried and had a new family. Her dad was a typical blue collar man working in the lumber industry predominant in the area. After the divorce her mother worked the graveyard shift to make rent on a small apartment and to provide for her girls. There wasn't a lot of extra money left for things other than life's necessities. In her own words they were happy but poor. She had to buy her own school clothes which more often than not meant she would buy fabric to make her own clothes. These early life lessons had an impact on her and taught her how to be a frugal consumer.

In contrast I grew up in a suburban town in Southern California. I was a city boy. Both my parents worked hard everyday to support four kids. They earned enough to buy us kids what we needed including plenty of clothes, and many extras. My parents were hard working and instilled in me a strong work ethic. My Mom worked in the bakery industry as a clerical worker which has a side benefit of many goodies in the cupboards. My Dad worked in the grocery business as a butcher so we always had plenty of meat in our household. My Dad was raised on a dairy form in Arizona and started out as a cowboy. He even lost his two front teeth as a teenager riding broncos in the family corral. As much as he talked about the country life when he was older he couldn't wait for his opportunity to leave the dusty old farm life when he was younger. He finally got his chance by enlisting in the US Air Force as a 17 year old. In the service he was made a butcher and developed a talent as a maser BBQ'er.

My Dad was probably one of the few people to serve in Vietnam for all of a whole weekend. His BBQing skills were so well regarded by his military base commander that this commander wouldn't let him be deployed. However, at the request of an army general who was having a big shin dig in Vietnam he was deployed along with 100's of pounds of meats to BBQ at this party in Vietnam. So he was flown to Vietnam to BBQ for the Generals party. He was then sent back to the states after the weekend party to his base in South Carolina. After leaving the service he came out to California, met my Mom and they married. We lived in a small home they bought where my three brothers and I shared a bedroom while my little sister had her own. As a kid I never really wanted for anything as my parents were able to give us a lot by any standards. We had motocross bikes, motorcycles, skateboards, and plenty of sports.

Most of my days were spent playing football and baseball 24/7. I just couldn't get enough of either one of these sports. I have often told my own kids that one of the best teachers in life is sports. A person can learn many things about success while competing in a sport. I am reminded of one of these lessons in my own childhood. I think on e of the best lesson I've ever learned came at age 7. I remember begging the President of our Little League, who was on of my classmates father, to let me play baseball when I was 6 years old. But the league had a rule that you couldn't play until you were 7 years old. So I waited and signed up to play the next year, and I was placed on the 7 year old Red Sox team. I wanted to play so bad but I wasn't very good. In fact I was the worst player on my team. I was the kid they put out in right field for the minimum amount of time they were required to play me. I was crushed. I wanted to play so bad but I couldn't throw very good and I couldn't catch fly balls. I also had a hard time hitting. I just want very good and I knew it. My coach was a nice enough guy. He wasn't mean or hard on me. I think he knew how much baseball meant to me. So after our last game he did something for me I'll never forget. He pulled me aside and told me what I should work on during the off season. He told me to play catch with someone everyday, and to ask my Dad to throw the ball as high as he could so I could practice catching fly balls. He told me that if you worked hard everyday you could be one of the best baseball players next year.

As I reflect back this was the best advise anyone could have every given me. "If you work hard every day you could be the best". I remember his words. These same words can be applied to anything, at any point in life. I have often thought of this advise. I remember my last day working in the corporate world and thinking back on those words of advise. I used these words to work hard everyday so I could be the best. I have been the best at just about everything I have done, except for the most important thing which is hanging on to money. I have been the best at earning, but as I said keeping it was more difficult for me. I was good at playing offense but I struggled at playing defense. I need to change the way I approach defense so that I can give my offense and opportunity to win.

Back to baseball. I used my coaches words as new found ammunition to play catch every day. My brothers and neighborhood friends got tired of me asking them to play catch. In fact it became a running joke in my neighborhood that I would make the rounds to everyone and ask them if they wanted to play catch after school. Even my own Dad couldn't keep up with me. He lasted about 10-15 minutes and that was about all he could handle a couple of times a week. My work during the off season resulted in considerable arm strength and this didn't escape my new coach the next year. As irony would have it our first game was against my old coaches team and guess who was the starting pitcher. Not only did I pitch several shutout innings, but I think I hit a couple of doubles. He asked my mom after the game what had happened to me. She told him he just followed your advise and played baseball everyday. She also told him I signed up for every baseball training camp I could find. There wasn't much in terms of baseball training for kids back then but I was able to find a couple of good camps put on by the Los Angeles Dodgers near my home. And as luck would have it I also made friends with a major leaguer who played for the Kansas City Royals and home recovering form a bad leg break that summer. He was a great inspiration to me and helped me quite a bit with my hitting technique. I never forgot this and remembered him many times.

You see he ended up being the neighborhood drunk who hung out behind the local tavern and in front of the liquor store next door asking for money. My friends used to laugh at me when I was a teenager because I always went out of my way to give him a little money or took him next door and bought him something to eat at Jack in the Box. He did me a great favor when I was young and I did everything I could to remember that every time I saw him. I ended my second baseball season and many subsequent seasons through high school as on of the best baseball players on the field. If we keep our minds open to learning, and remember those who have taught us, we can all reflect back on situations that enabled us to succeed.

GO in to greater detail about being frugal out of necessity.

When my wife and I were in our early twenties just starting out we painstakingly set money aside to provide for a future we envisioned. The future we saw for ourselves was one of living in a nice big home in a safe neighborhood near the ocean where she could stay home and raise our yet unborn children. For better of worse we thought wanted to to be able to give our kids a chance to experience things we were never able to experience when we were children. A life of abundance filled with luxury.

We lived a simple but fun lifestyle in the early years of our marriage. We went skiing on winter weekends, and spent the spring and summer months living on our sailboat anchored in the harbor during long weekends. This was a time when we could afford these luxuries as we did not have the responsibilities of kids. We both worked full time jobs but we knew we needed to save and invest money if we were going to be able to break away from the corporate world.

So we began to save and invest. Our first investment was a one bedroom condo we bought and lived in. We bough this condo a year before we were married. All of 20 years old and we had a mortgage. I had been reading the Wall Street Journal for several years (my aunt got me started reading the paper when I was a teenager) and my interest in stocks was increasing. Even though our lifestyle and our household expenses didn't leave that much left every month we stayed focused on living frugally so we could save and invest in the stock market.

Living frugal can sometimes be misinterpreted. We lived a frugal not cheap lifestyle. We kept a watchful eye on our debts only paying for things when we had money to but them in cash. We lived well and spent money on having fun but watched what we spent. We didn't take vacations, we didn't buy jewelry, and we didn't buy things on credit cards. We had one credit card which was an American Express green card and that balance had to be paid of at the end of each month. So if we didn't have the money for something we didn't buy it. We did however begin the establish some credit and made our one and only purchase of stuff using a JC Penney's credit card. We had a new house with no furniture and when our families and friends came over to visit us they had no where to sit. The only thing we had was a couch my wife's Dad bought us for $50.00 at a garage sale. So we bought four new living room chairs and a foot stool for $900.00. This was the biggest purchase on credit we made besides our house which cost us $69,500 dollars. This remained in place for many years. We just didn't like the thought of having debt. We knew that if we were frugal with our money we could do the things we wanted but would still have money left to start investing.

I followed the market at the time by looking at stocks in the Wall Street Journal and by reading Business Week and Forbes magazines. When we had saved $2,000 I opened a brokerage account at a discount brokerage house. Although my account was opened sometime in early 1987 I didn't buy any stocks when I first opened the account. Coincidentally I also opened an unsecured credit line with a bank for an additional $5,000 which we originally intended to be use only in case of an emergency. Little did I know the market was about to provide a big opportunity.

On a Monday in October of 1987 the stock market experienced its largest single day decline. This decline sent markets around the world whirling. The very next day I took a check from my emergency credit line and deposited it into my brokerage account. I then bought as much Apple Computer stock as I could. I held this stock for several months following the decline and in a short period of time had doubled the amount of my original investment in my brokerage account. I sold all of the stock and returned my original credit line to my lender. The money I made on this stock investment wasn't a whole lot in the scheme of things but it allowed me to see how you could make money from knowing something about companies and following markets. I only made a couple of thousand of dollars but to me at the time was a lot of money. this also allowed me to make more stock purchases with the monies I now had in my brokerage account. couple of years later this money provide the seed capital allowing me to leave the corporate world for the world of the self employed.

To fast forward, I left a secure job with outstanding health and retirement benefits for the life of a self employed professional. I can tell you when I did this my family and my wife's family thought we had lost our minds. You see we had one child under 2 years of age and while my wife was pregnant with our second child. We also lived in a one bedroom condo which meant that with our family growing we were going to need a larger place to live. My wife continued to work so we would have health insurance for the birth and for the first couple of years while I established my business. We ended up selling our condo for a tidy profit and I took the earnings a put them in a savings account. I then bought us a house on a land purchase contract for $5,000 down from a couple who was being relocated and needed to sell. I sold our condo for $116,500 dollars, taking back a note for $15,000 dollars for three years which left us with a little less than $30,000. The interest rate on the note was 12% interest so we also had a little income coming in from the note.

Business was difficult during the recession of the early 1990's, but I followed my little league coaches advise and I worked hard everyday so I could be the best. And I did become the best at what I did. Within three years I was making a million dollars a year in a very cruddy economic environment. I was fortunate to have learned business in a bad economic environment as I have fallen back on the the skills I learned during this period many times during my career.

Once I started earning money we did what most young people do, we moved up. We bought a big home, in a safe neighborhood near the beach. We bought a mid level new car, on payments, and we started to think about ways to invest some of our money. After making a lot of money for several years and being accustomed to a smaller lifestyle our new bigger lifestyle started to catch up on us. I had a new big lifestyle to support with a new big mortgage, a new car payment, private school tuition for my oldest child, and preschool tuition for the youngest. I also had new business obligations as I took on a partnership interest that I had to cash flow every month. By the end of the first year in our new big home we were about broke.

After the scare of this money shortage I started to refocus on putting our earned money into investments that would pay us cash every month. We made a conscious decision to put every dollar we made that was above our monthly living expenses towards some kind of investment. And we did. We bought stocks, and two investment buildings that next year. And these investments took every dollar we had and paid us almost nothing in cash flow. After the mortgage and all the building expenses we did have any cash flow. We took on some risk in buying these buildings but it was a calculated risk. We bought the buildings because I knew I could turn them around due to the current tenant situation once we closed escrow. The seller I bough the buildings form had a long standing feud with the tenant occupying both buildings. And the tenant and landlord had already sued each other and were not on speaking terms. I also knew the tenant wanted to exit his leases but he knew the landlord wasn't about to release him from the leases.

Armed with some information in just a couple of months I was able negotiate a new long term lease on one of the buildings with a company across the street which alleviated the original tenants rent obligation, and he was very happy about this, and within a couple of more months was able to find another tenant for a longer term lease on the other building. The original tenant was paying $7,000 in total rent for both buildings when I bought the buildings. My two new tenants agreed to pay me $5,000 each in rent for these same buildings. So in just a couple of months I was able to increase my cash flow on these buildings by $3,000 per months and have two new long terms leases on the buildings. Our original investment, cash out of pocket, was less than $100,000 which I borrowed on a credit line. I bought these buildings on a ten year note and the rents were covering the fully amortized ten year mortgage and all the other property expenses. Now I had an investment that was almost paying for my household living expenses and the tenants would be paying of my mortgage in ten years.

Just as things started to seem to get back on track we started to get entrenched in our new life in our new neighborhood with our new friends. We met many new friends through many new activities, swim team. little league, bobby sox, youth football, etc. Many of our new friends invited us to dinners, ballgames, boating trips, ski trips, vacations to foreign countries, and many other fun things. And we wanted to do a lot of new things with these new friends. So we did. And this was the start of our new lifestyle, one based on fabulous instead of frugal. We started living an out sized lifestyle. We sacrificed spending our passive income from investments on extra curricular activities. This also led us to upgrade our life with yet newer more expensive cars, a boat, and many other extras. Upon reflection this was a time when a Y in the road and we chose the lessor of the two roads.

Living a big lifestyle is something that drives people to excel. And it is this desire to excel that drives most entrepreneurs. After several years of living in an affluent community living a bigger lifestyle I could see that I was beginning the lose some passion for what I was doing for a living. I continued to work hard because I had to in order to keep up with my new lifestyle but I just wasn't getting the fulfillment out of it like I used to. I had hit a bump in the road. I had been operating at a break neck pace for so long I had become totally burn out. However, I couldn't diagnose this burnout as I was living through it. It is only now that I can clearly see that maybe a bit of time off would have helped me to rejuvenate myself. But you know the old saying, everything is 20/20 in hindsight.

As I continued to struggle with long hours at the office and being away from my family most of the week I started to think about ways I could start a new business that would allow me to be closer to home more often and would also allow me to earn more than what I was making. After all I wanted to coach my kids in their sports and be there for all of their activities. I had also met a couple of friends who were like me investing regularly in both real estate and other investments. One of these friends approached me with the idea of starting our own real estate develeopment company. At first I was a little reluctant in accepting the idea but the moe we talked about it the more I found the idea intriguing. Both of our backgrounds could compliment each other and we knew the timing would be pretty good as we were just starting to recover from a recession so the market would more than likley be there for new developments.

I need to say, I think the world of this friend, and at the time thought we would work well together. After all we were family friends with each of us having a good relationship with each other and the others spouces. We had spent much time togeher with our families doing things in and out of our community. But, and this is a big but, you need to be careful in the parners you keep.

My new business partner and I started our new real estate development company in ealry 1997. This company was to be focused on building business parks in California. We got of to the races with a slow start. It was much moer difficult to begin as a developer than either one of has envisioned. In hindsight I know know our problem was a lack of capital. Had I know then what I know know I would never had started this company. But at the time we moved forward with litle regard to having capital as we were being told by "exeperts" in finance that if we had the projects the money would be there. We found plenty of project to to work on and spent many months, a couple of years, working on these projects. Only to find that when we got into some deals that my new partner had very little practical expereince in putting developments together. He had always worked for a larger developer as a land improvement attorney and land specialist but the further we got along in looking for development projects the more I noticed he didn't have the experience I thought he had. I will also take my fare share of the blame for our eventual failure as I to didn't have all the experience I thought I had once we got into projects. With two inexperienced guys trying to run a development company we made a lot of mistakes.

The most important mistake we made was listening to the "experts" in finance and taking their word that the money would be there when we needed it. Because it wasn't. Neither one of us had the real capacity to cash flow the various things needed to be done in the early stages of development in order to get the development to the point of getting financed. What we should have done is find investment partners to share in the development who could have put up the the seed capital each development needed in oder to get the construction financing we would need to complete each development.

This was an expensive lesson for me. We ended up spending just short of three years of our life not making a dime on any of these developments. And I was still living this bigger lifestyle and because I wasn't sure how things were going to workout I also kept my old buisness partnership and had that monthly cash flow obligation. By the time we closed the development company I was totally upside down in my personal finances. I had taked on more debt to finance my lifestyle and was was using every bit of my passive income and this new debt to keep on living. This caused a huge cash flow crises for us just prior to us closing the development company. I was asset rich but cash poor. And I had to do something about it quickly.

Around this time one of my tenants in the two buildings I had bought several years earlier approached me to buy his building and the building next door. He was in an expansion mode and said he needed to use the neighboring building once the lease on that building expired. He had asked me to sell him the buildings six months earlier but I had declined. I told him I wanted to keep the buildings as a long term investment. In the interim I had received notice I was going to have a couple of major repairs to the buildings as they were both going to need a new roof soon, and one of the buildings had some foundational issues that neede to be fixed. These were not goint to be inexpensive repairs. We were looking at $150,000 to make these repairs. This was in addition to my current cash flow crises. After talking it over with my wife we decided that maybe we should start to think about selling the buildings to the tenant who had asked to buy them earlier that year.

When I approached the tenant to see what he thought about buying the buldings he immediate said he was interested. He asked me what I thought I would be willing to sell the buildigns to for and would kind of terms. I told him I would need for him to make me an offer, never be the first to make an offer when at all possible, so he did. He offered me about 20% more than I thought the buildings were worth. He also told me he would buy them at this price but that I would need to agree to carry a 2nd Trust Deed for 10% of the purchase price. After discussin this with my wife we agree to his price and terms.

The sale eventually closed and we now no longer had the repairs hanging over our head and could solve our recent cash flow problems. The problem was we now had a lot of cash but a reduced amount of passive income. The note payment was helpful as it paid is $2,000 per months in interest but it was only for five years when the baloon payment would be do. This is were I thik we made our biggest mistake.

We did not re-invest the sale proceeds from our sale into other investment income producing property. Instead we used part of the proceeds to pay off our debts and then used the rest to invest in the stock market. This was early 2001 just months before the tech bubble exploded and we were fully invested in the market. When the market crashed we took a very large loss in our stock portfolio. In fact we lost clsoe to 40% or our invested assets. This loss was huge, and accounted for a good deal of our investable assets. We now had sold our buildings that paid us a very good passive income and had used part of the proceeds to pay off a good amount of debt, and now had lost a major part of our assets. Big, big mistake!

I look back at these losses, the building sale and the stock market losses, and can see the error in our decisions. We would have been better served to have taken the building sale proceeds and bought more investment income producing assets which would have over time increased our income and increased in value. The buildings we sold were rented for $12,000 when we sold them and today would be paying somewhere in the neighborhood of $20,000 a month today. You can see what poor planning can do to your income and assets base when you don't have a plan for the continuation of asset growth. Please use my experience to plan for the growth of your assets. You do not need to learn this the hard way, as I did, if you plan properly.

I also went on to start yet another business and experienced a total loss in this business during the recession of 2008-2009. The business was a very large business and cost us millions of dollars in losses. Half of the losses were capital we invested in the business and the other half in debt. As I'm a person of principals I have not and will not consider bankruptcy. Its just not an option for us. We are now confronted with high six figure debt obligations and a reeduced lifestyle. I can handle the reduced lifestyle just fine. But I still have a mortgage to pay and two kids now in college.

Ok so I've told you little about some of the mistakes we've made which brings me back to the beginning. We are starting to rebuild our financial life and need to start from nothing. We still have our home which has no equity, I'm even with the sale vs debt, but it is somewhere we'd like to remain for our kids and in the coming years grandkids to have as a home base. Plus we're tied into the comminuty now with many friends and church and would prefer to remain here. My wife and I have discussed how to begin again from scratch and we've decided to go back to living a lifestyle we lived when we fist started to invest and acquire assets. We will begin by living frugally, not cheap, but frugally and take every dollar we make a distribute it according to a plan we have mapped out for living expenses, the repayment of debt, and the accumulation of assets. Below is a rough draft of this plan.

Income Distribution

Income Taxes 25% of gross income

Essential Household
Mortgages
College Tuitions

Hard Assets 35% of Net Income
Real Estate
Silver & Gold
Business

Soft Assets 25% of Net Income
Stocks (Soldi High Yielding Dividends)
Dirivatives (Options, ETF;s)

Debts Repayment 35% of Net Income
Personal Loans
Business Loans

Tithe 5% of Net Income

Priorities:
Get out of current immediate mess THEN build 4 to 6 months of living expenses THEN distribution of income as above

Discipline:
The most dificult part of this plan will be to remain disciplined. Grow assets. Assets, and income from assets, only buy more assets

Accountability
Every month we will account for all incoming income. From the gross income we will use what is needed for household and education and THEN taxes. We will then build the cushion of 4 months to six months living expenses to account for the unreliability of our income. Once we reach 4 months cushion we will begin to distribute income in accordance with this schedule. This will allow is to continue to live in our home, repay debts, and to accumulate assets to insure our future.

While not detailed in this post I do plan to aggresively accumulate real estate assets with the assitance of partners. Experience in the field of investment real estate should allow me to access capital and bring on strong partners to accelerate the production of passive income.

To your,

Health, Wealth and Happiness

The information contained in this site consist of a series of articles which comprise "My Story and I'm Sticking to it". The information contained herein is sole opinion of the Baron Von Savings. The Baron is not a professional money manager, tax expert, accountant, attorney, or stock broker. You should consult with an appropriate professional before making decisions concerning your personal finances.

Diagnosis and Recovery of a Financial Problem

baronvonsavings@gmail.com (Baron Von Savings) — Fri, 17 Jul 2009 18:29:00 +0000

Hum, a review of my current financial situation shows that I'm broke today because I spent to much for to many years buying to much stuff to impress to many people, including myself. I need to make some drastic changes in order to correct my current financial situation (being broke) and begin to change my long term financial position. I am literally starting with less than I had when I moved out of my parents home at 20 years of age 25 years ago. Through a thorough dissection of my financial statements I've been able to gain great incite into where I am today, how I got here, and where I need to go in order to begin a financial recovery. In very overly simplistic terms you will find below a rough diagnosis of my financial problems and a rudimentary plan for recovery.

Diagnosis #1 Not Enough Income

Simply straightforward, in present I do not have enough income coming into the household. I've already written much on this issue so I won't belabor the details of a slow economy, bla, bla, bla. I will however comment on how I plan on increasing income.

Diagnosis #2 No Assets

I no longer have any assets left which have any value. The only things of value which can be realized right now are my possessions (piano, limited jewelry as we're not real big on jewelry, a Waverunner, one car) and I estimate the real sale value of all these possessions to be less than five thousand dollars. I do also technically own a sailboat, but I have not paid the slip fee to the private dock owner in over one 1/2 years so I guess I could sell the boat but I am liable to the dock owner for past slip fees which run $550.00 per month. From a net asset value position I think I'm negative on the sailboat by several thousands of dollars. I no longer have any real estate outside of two small postage stamp size land lots which have not sold (300 and 2,000 sq ft commercial lots), no stocks, bonds, or any other type of securities, and no life insurance or annuities. My wife's 401k is empty, and my SEP account was cleaned out trying to save my former business. In essence I'm broke and starting with nothing and need to start accumulating assets again.

Solution to #1

#1 Income

A) I plan on continuing to work in my current industry. Although I have been looking for employment with companies outside of my industry, so far unsuccessfully, I have decided against leaving my current industry and instead re-working my business plan to account for the economy related lack of business activity and alter my business plan to delivery services to a wider business audience and prioritize projects categorize by size and the prospect for an increase in business volume.

B) My wife is starting her own franchise business in the financial sector. She has been studying for and has received the required licenses needed in order to begin this business. While this is in a professional practice business and not a typical entrepreneurial start up we are planning to use her income to help us move forward with our plan for financial recovery.

C) My wife and I together are starting a business we will both work part time in the evenings and on weekends. The business will be the manufacturing of body care products. This business will produce a line of all organic products serving a niche in the body care products market. While technically a mfg company we do not plan on manufacturing the product lines ourselves. As we begin the venture we will produce small hand made batches of products to perfect our "recipe" and then engage a contract mfg company and separately a logistics company to remove the physical handling aspect of the business. We essentially want to capitalize on our strengths in sales and marketing and want the company to be a product development and marketing and sales organization. We will leverage the use of technology as a platform for commercial and consumers sales of our products.

Solution to #2

I need to acquire income producing assets and appreciating assets as quickly as possible. Much of my investment experience and most of my former wealth was a result of owning assets producing a substantial passive income, and subsequently a substantial increase in asset value. A divergence can occur when you are considering which type of assets you want to acquire to meet your investment objectives. You can acquire assets to achieve an increase in their value or you can acquire assets for the income you can earn on the assets. While both are desirable I am going to focus the majority of my efforts on acquiring assets for income. Personal experience has taught me I can't spend appreciated assets when I need to access money. And when I do need to access money and I need to sell illiquid appreciating assets to gain money I usually need to sell them at a discount. My goal is to acquire both assets that produce income and assets that appreciate in value but are of a liquid nature. The investments in appreciating assets will be in liquid assets that can be converted into currency quickly.

The more assets we have earning income the more assets we will be able to acquire. At this juncture we will only use income from assets to buy other assets. No asset income will be used for living expenses or any other personal or business needs. We will live off of our business earnings or we will cease to exist, but one thing we will not do is use asset income to buy anything other than more assets. One of my lesser, but equally important goals, is to be able to have all of my asset income pay for my living expenses. While not yet written in stone, my target date is January 2012. This date is 2 1/2 years away, and plenty achievable providing we follow this rudimentary plan which will be modified before a final financial recovery plan is written and signed by us. My family and I lived off of passive income like this for a decade. I know this can be done again, and relatively quickly.

You might ask why the extreme focus on asset accumulation? Well very simply the more assets I have working for me the more income I'm going to earn. At this point in time I'm not to concerned about increasing net worth but rather in increasing my monthly spendit worth. This helps me to buy more assets which means more income. You see the point. The more assets you have working for you the bigger your income. I like to think about passive income like this, every asset dollar is like 100 hundred little itty bitty worker men working away earning me money. The picture in my head when I think about these itsy bitsy workers is of the little umpa lumpa's in the old movie Charlie and the Chocolate factory. Can you picture those little blue guys happily working away day in and day out. I see my assets having itsy bitsy workers working away earning me more money every single day. They have no brakes, no days off, and no personal time. They work each and every minute of everyday exclusively for me 24/7. And you know what, I don't feel a bit guilty about it. For example, if my investment is $100 earning a 7% return then I have 100 workers working away while training 7 more workers for a year how to work for me. And next year I'll have 107 workers working and training an additional 7.5 more workers how to work for me the next year. Then in this third year I have 114.5 workers working for me. This process just continues for as long as I remain dedicated to keep all of my passive income reinvested.

Considering we are again starting from scratch with no assets we will acquire assets listed below beginning with soft assets and simultaneously acquiring hard income producing assets. Below is the list of asset types in the order in which we will begin to acquire them:

A) Stocks. Acquire stocks paying a high yielding dividend. Each company will be a leader in its industry and have financial statements that are rock solid with prospects for continued reliability of the dividend payment. The stock itself will be a rock solid soft asset in and of itself having the prospects of asset appreciation. The primary driver for the purchase of the stock will be the income from the dividend. In addition, income will be increased through the sale and management of covered options contracts.

B) Commodities. I will buy silver coins, or silver ETF's, for the appreciation I expect to see in silver. Silver is a rare commodity and given its propensity and use as a conductor in electronics is commercially near exhaustion. This will cause a shortage in this commodity. The purchase of this liquid hard asset will allow me to access currency when and if it is needed.

C) Rentals. I plan to invest in multifamily housing. I think there are better opportunities in multifamily real estate right now. First the current capital markets crises has been debilitating to commercial real estate such as office, industrial and retail properties. Although most of my previous real estate holding where in these types of assets as I stated I think there are better acquisition opportunities in multifamily.

The capital markets crises has been less of a factor for multifamily properties. The demand for rental units remains high, and should only continue to increase given the expected increase in the American population. I will buy anything from duplexes to 100 unit apartment houses. There will be a time when more opportunity will come from other commercial real estate but the acquisition of multifamily will provide the capital to capitalize on these opportunities at a later date.

This is a preliminary schedule for the acquisition of multifamily units:

Year 1 - 20 units
Year 2 - 40 units
Year 3 - 60 units
Year 4 - 100 units
Year 5 - 200 units
Year 6 - Industrial, Office & Retail Buildings
Year 7 - Business Parks
Year 8 - Private Equity Co Formation

D) Tax Liens. I will invest in tax liens to achieve the higher out-sized investment returns you can get from these very secure investments. These investments are illiquid for an undetermined period of time but there is a maximum time horizon for each investment which is usually no more than 5 years. They are completely and totally protected by the full value of the under lying property. They stand ahead of any financing on the property and as an investor in tax liens I would have the right to sell the property for the full value of the property and keep the proceeds without obligation to anyone other than closing costs. Underwriting the strength of the underlying assets is important and will be a priority completed prior to investment.

E) Land. I will acquire land that is/can be productive in the growing of fruits or vegetables. This land will either have an existing operation on it or will have the prospect to easily begin the process of increasing and making the land income producing. The land ideally will be in either San Diego county growing avocados or in Santa Barbara county growing wine grapes.

I hope you find my preliminary plan for financial recovery interesting.

To your

Health, Wealth, and Happiness.

The information contained in this site consist of a series of articles which comprise "My Story and I'm Sticking to it". The information contained herein is sole opinion of the Baron Von Savings. The Baron is not a professional money manager, tax expert, accountant, attorney, or stock broker. You should consult with an appropriate professional before making decisions concerning your personal finances.

The clock is ticking, but thankful for being broke

baronvonsavings@gmail.com (Baron Von Savings) — Fri, 17 Jul 2009 06:53:00 +0000

If you've been following "My Story and I'm sticking to it" then you'll now its been 8 or 9 months since I last posted here. Its been a very frustrating period since November 2008. My financial situation hasn't changed much and in fact it's grown worse. Even though my situation is bad, I am thankful for being broke.

I make a distinction between being poor and being broke. Being poor is a lifetime avocation. Being broke is a temporary setback. I am broke today but not poor. Even though my net worth is negative (I owe much more than any assets I have) I do not consider myself poor. Poor to me is a state of being. Poor is someone who gets up in the morning expecting to work for money day in an day out for a lifetime of having just enough to buy life's essential. Never making any alterations to their life to improve their station in life. Poor people accept their station and wave as the train pulls away from the station. Broke is a state of mind. Being broke is only a date, just like the date on a balance sheet. You can only measure broke by the day. You may be broke many consecutive days but you can never be broke forever. A person who is broke is usually broke for a reason, a business failure, a bad investment, a tragedy, a health problem, etc. A broke person possesses a state of mind that will prevent them from ever being poor.

On the income front I've not had much income coming into the household these last 9 months. My industry has gone from a hiatus state in to a free fall. The acceleration of business going from bad to worse in a couple of quarters is frightening. Although business is slow I have had some positive signs appear in several business opportunities but these opportunities have not resulted in any income and may not come to fruition. It is clear that the capital markets are not recovering and this has put a strain on business who need capital to expand their business which indirectly has an impact on what I do in business. I do have a couple of smaller things going which add some light to my tunnel but they are small pieces of business and would only provide a couple of months sustenance, but I'll take whatever I can get right now.

For several months now I have aggressively sought employment in other industries where my skills could be productively used but these industries also have been debilitated by the shut down in the capital markets or affected greatly by the fear in the financial sector. I've even moved my search for employment down stream into less desirable positions, positions I would however accept, but there doesn't seem to be a great deal of hiring for over qualified professionals. I have been told by employers they would love to have a person with my experience and skill set brought on with their company but that I am to over qualified for the positions they have available. Even with assurances that if hired I would not be planning to move on when times get better they still have not been able to offer me employment.

My bills still need to be paid and without much income it has been difficult to pay these bills. Every month its a struggle to make it. Up until April I was able to pay both my 1st mortgage and my HELOC but since April I have not been able to pay these mortgages and I'm in default on one mortgage and my lenders has filed a foreclosure notice on the other. I'm negotiating with both lenders right now to have my mortgages modified but they are so overwhelmed by modification requests I haven't been able to get an answer back from either one. I've been waiting for at least sixty days. My only hope to save my home at this moment in time is to receive a mortgage modification from my 1st mortgage (reducing the payment) and to get my HELOC lender to roll up my back owed mortgage payments and restructure the loan by adding it to the principal and putting me back in an active status with only future payments due. Of course the other hope is to bring in enough income from my business activities so I can cure the default and make payment arrangements with the HELOC should either one or both not be willing to modify their mortgages.

My other financial obligations have been placed on hold. I have credit card debt which I'm still unable to pay and business debt that still remains outstanding. I have made the decision to try and save my home before tackling these obligations. However, I will pay these obligations at the first opportunity I can. The lenders do not like this, and I don't blame them, but I can only tell then I will pay, I just can't tell them when, yet.

As bad as things have been and continue to be I am optimistic their is a bright future just ahead. I am a fairly religious man, and in my current time of crises, I have experienced God's great grace. When things seem so dark I can't see a hand in front of me, God has brought light in and exposed the true majesty of his love. He has brought me what I need when I needed it. No more yet no less than needed. I can only marvel at why my wallet is empty yet my lights remain on, why my phone is cut off but then miraculously turned back on without payment. Yes, I do believe God is touching me in mysterious ways.

Experience has taught me that there is true religion in believing in God, and in yourself. I have been led to see new horizons. In the deepest darkest moments of crises I am being led to create new business opportunities which will allow me to create new wealth.

As I sit here writing this post, in my home which is in foreclosure, I am writing new offers to purchase buildings. These purchases will be just short of miraculous. With very little of my own money, money obtained by actually purchasing the buildings (commissions) I will use partners to buy these buildings during the biggest sale the real estate market has ever put on. No this isn't some form of a nothing down huckster program. This is how I made much of my former millions but instead of using my own money I am using the money of others.

In these purchases I am not taking advantage of anyone. I'm not buying foreclosures (God certainly knows I know how that situation feels) and I'm not seeking pre-foreclosure sales. I'm simply going to buy buildings from sellers who are no longer wanting to own their buildings because of the fear they are experiencing due to a calamitous real estate market. The sellers are motivated to NOT own real estate and will do almost anything to sell their property. I have people who put up the money, people who take out the loan (I can't get a loan right now due to newly developed negative credit history) and I get to participate in the deal. The way these deals are structured I will own 50% of the asset once it closes escrow.

I count my blessings. If I were not in this horrible financial state, I would probably not have had to think long and hard on how to create wealth from nothing. My new partnerships are a new spin on an old strategy made possible by the very thing preventing me from earning income, the frozen credit markets. If I did not have a NEED to create new wealth I would not have been able to creatively structure a purchase vehicle attractive to sellers in this market. My past experience in buying real estate assets as investments certainly adds value to these transactions but on those occasions I used my own money. So yes, I feel blessed to be in this financial mess, and thankful for the light that shines in my life daily.

To your health, wealth, and happiness.

The information contained in this site consist of a series of articles which comprise "My Story and I'm Sticking to it". The information contained herein is sole opinion of the Baron Von Savings. The Baron is not a professional money manager, tax expert, accountant, attorney, or stock broker. You should consult with an appropriate professional before making decisions concerning your personal finances.

I WANT TO BE RICH Part II

baronvonsavings@gmail.com (Baron Von Savings) — Mon, 03 Nov 2008 11:50:00 +0000

I not only knew I wanted to be rich when I was young, but on a peer to peer basis I was rich. Rich is a subjective matter, and at 13 when you have your own money, money you've earned and can buy anything you want, at least anything within reason, then you're pretty much rich. I knew I wanted to be rich at a very young age. I didn't know why, didn't really have a purpose for money, I just knew I wanted to be rich. And rich I became. When my friends in junior high wanted to buy or do something they went to their parents and asked if they could have whatever it was, but when I wanted something I just went to the bank and took out the money and bought it. When everyone wanted that very cool surfboard at the beginning of summer I was usually the only one who had one. When skateboarding first became popular in the United States I was in my early teens and every skateboarding teen wanted Tony Alva everything, boards, wheels, trucks, the whole bit. All my friends begged their parents to buy them the cool skate board stuff. Not me, I just went out and bought my own. In fact I bought extras for my two brothers to go boarding with me.

In high school this peer to peer rich continued. When I turned 16 and could get my drivers license I did and then bought my first car. Paid for my own insurance and never had a problem paying for maintenance, performance upgrades, and gas. I learned how to fix clutches, transmissions, water pumps, and the like but I never had a problem buying the parts for the repairs. I also bought a new cafe racer motorcycle and road it traveling around the southwest. I packed a backpack full of food and supplies, tied a sleeping back to the back of my seat and hit the road. I was sixteen and I knew what I wanted. If I wanted to do something when I was in high school money was not an obstacle. I did almost anything I wanted providing my parents gave me permission to do it, and then sometimes when they wanted otherwise I did it anyways. I'm not to proud of that today but we all run a bit astray when we're young and don't know any better. I went to the Colorado river with older friends and played on speed boats. I went skiing nearly every weekend during the winter at local California mountains. I hated fishing when I was a kid, but my little brother loved to fish so I would take him out to the rivers whenever I could to go fishing. And we bought new fishing poles to make sure our catch didn't get away. I did all of this and paid for it all from money I earned. I was rich in many respects because I had the freedom to choose what I wanted to do and where I wanted to go. After all isn't being rich about choosing how you want to live? Yes, I would say there is some truth to this but the type of rich I was as a teenager is not the wealth I sought as an adult.

After finally making some money through my twenties I had an opportunity to start creating real wealth. What is real wealth? Wealth is something obtained when one can live on ones own terms. You are wealthy when you can support yourself through no other means other than the money you have already earned. As I turned thirty I started to accumulate this type of wealth. I lived in a big house in an affluent neighborhood on the coast, drove nice cars (bought used of course), lived out my passion of sailing on weekends in the ocean on my old but dependable sailboat, and then skiing the very next weekend or sometime the very next day. And I continued to work hard at my business. Not because I had to but because I chose too. This freedom of choice is real wealth. I wasn't wealthy enough to fly around in my own private jet or ditch everything and sail around the world (but would have loved to) but I could go and do as I pleased providing I didn't mind flying commercially. The wealth I enjoyed allowed me personal freedom. No job, no boss, no pressures.

After starting my second business it became apparent that even though I lived well and did as I wanted I did not have the type of wealth I thought I wanted. You know the saying the grass is always greener on the other side of the fence. I wanted the type of wealth many of the people I socialized with had. The type of wealth to buy a Ferrari or a Bentley on a whim, fly to Aspen on a private jet, and bask in the sun on secluded private islands. I found myself wide eyed once again just like when I was a kid. I didn't just want to be rich I wanted to be wealthy. I had finally arrived to the stepping stone of wealth but had some serious dues to pay in order to start my assent up those pearly steps. And in order to attain this type of rich I thought I also need to look and play a certain part to gain acceptance into this new world of wealth. So I started upgrading my life. New cars, new cloths, new friends, new everything. I had a Jones to feel like the Joneses. As this new me started to peek its head out of the proverbial coattails my current business was starting to struggle. With the expenses of this business, the expenses from my old business, and the expenses from my new lifestyle the entire cost started to pile up and started to stretch my finances. At first it was relatively easy to adjust to the increase in expenses. I started buying things on credit. When I bought new luxury cars I took out car loans to buy the cars, after all I could afford the "payments". Then I started to make purchases of fine clothes like suits that cost $1,000 and tailored shirts by the dozens. This also led to an upgrade of my old used boat by buying all new gear, new sails, new hardware, new ropes, and all of the other expensive marine equipment boats require. Our kids were also just reaching school age and we had to make a decision concerning their education. A product of the public education system which I feel failed me we decided to enroll our kids in an expensive private school. Within a short period of time I was living a larger than life lifestyle and the cost was starting to take its toll.

In baseball you are given multiple tries to hit a ball. In one of these tries when life throws you a curve you have three choices to make. You can step up to the plate and swing away, you can adjust to the pitch and swing, or you can simply wait for the next pitch. I chose the first when I should have chosen the last. Instead of taking a step back and realigning my business plans, cutting back my lifestyle, and preserving assets I stepped up my business efforts and took on way to much risk and swung for the fences instead of waiting for a better pitch which would have eventually come in its own time. In my humble opinion it is not only important to remember how you make money, but it is more important to remember how you lost money. And believe me when I say I was feeling the pain from losing money at this time.

Anytime I invest in the stock market I remember every big winner. I vividly remember making my first big trade earning $2k on apple computer in the days following the stock market crash in 1987. I bought one company stock (that's all I could afford to buy) and I made money. I remember this because I held on to this money and reinvested it and then used some of it to break away from a job and enter life of the self employed. However, I can tell you I've also had some really bad stock buys. And of these bad buys six really stand out. Enron, Cisco, Sun Micro systems, XOXO Communications, and of all things apple computer. I bought these darlings in the pre tech bubble. And I watched them go higher, get even, and then fall, and fall, and fall. I rode these suckers down to levels you would never had thought these stocks could go. I not only rode them down but I kept buying them as they were falling thinking I was buying these darlings at a discount. And then the bubble burst. Oh my, did that hurt. In a matter of months I saw my portfolio almost evaporate. And the timing couldn't have been worse. My savings was dwindling due to my lifestyle and my businesses, and my investment portfolio took an incredible hit. I was a financial mess and I hadn't yet realized it.

After liquidating my investment portfolio and licking my wounds I focused on trying to correct my business losses. The writing was on the wall, I needed to make some drastic business decisions or I was toast. Within just a couple of weeks I decided I needed to close down my second business to stop the bleeding. Fortunately my business partner was also feeling some pain and we decided it was time to hang it up. I still had my partnership to fall back on but because there were a lot of personal issues associated with the return to this business I knew it wasn't the best option. However, it was an option open to me and at that point in time I needed to take advantage of all opportunities. So I returned to the partnership and gave it another run but my heart just wasn't in it. After the tragic events that unfolded in New York on 9/11 I knew it was time. I gave notice I would be leaving the company at the end of the year. I was getting low on available funds and didn't quite know what my next move was going to be. Fate sometimes deals you a good hand when you aren't expecting it and I was about to learn a valuable lesson. After taking a couple of months to look at various opportunities I settled on starting my third business. I would renter the same business as the business of my partnership but would do it on my own. With hard work I was able to start this third business in a relatively quick amount of time and before I knew it I was right back to were I was before I left my partnership. I was making less money but I was at least now starting to make money again. In just a couple of years time I was able to claw my way back to creating some wealth. There is something to be said about hard work and this great country of ours. America is the great land of opportunity. Its the best place to live on the planet.

As I mentioned I was now operating this new company on my own. I had few employees and just me as the primary producer. The business model in this industry evolved from the time that I enter it. It went from primarily working with wealthy entrepreneurs to institutions dominating the marketplace. And these changes forced my industry to convert from a local service provider to one of national companies designed to service the institutions who now dominated the industry. So I looked at ways to put myself on an equal playing field with my competitors who now worked for some of these national companies. My search brought me to the conclusion that I either had to join one of my competitors or align myself with an organization that offered me the opportunity to continue to own and operate my own business but also brought a national presence and the infrastructure that would allow me to compete for the new institutional business. After considerable search I decided my best option would be to join an organization that was part of a franchise structure, and I joined them in early 2005.

Now because I was joining a very large organization, and they were granting my company a franchise as one of few franchises sold to an individual in a major metropolitan area, I was expected to grow my company. Upon officially opening the franchise office I had quite a bit of growing pains. I had to relocate the business from its current location into space which was 20 times the present size which meant leasing a large block of office space in a core metropolitan marketplace, build out the office. buy office furniture, phones, and build out the technology infrastructure. I also had to quickly add a considerable amount of sales staff, support staff, and integrate each into the structure of the franchise system. It was a busy six months before we were fully up and running, and it cost us a small fortune. The first year was ho-hum so to speak. We earned some money but it was all absorbed by the business and I had to cash flow a good deal of our operating expenses from personal funds. Our second year was better but we also added more people, moved into yet larger office space, and we were still not able to pull any money out of the company, and I had to continue to cash flow some of our operating expenses from our personal funds. Our third year started out very good and it looked like we had started to turn the corner, but then we had some personnel which we had spent considerable amount of time training leave to go and work for some of our larger competitors. Then it happened. The credit squeeze started in April 2007. Businesses started having difficulty borrowing money. And as time moved on they continued to have problem borrowing money. The business that just a couple of months earlier looked like it might turn the corner and start to earn some money started to turn another corner and it started a downward tailspin. The first two years of operating this business had consumed my savings, and I had to tap a personal credit line to live on while the business was getting its sea legs. During the early part of this third year the credit freeze all but froze our business. There was very little business activity and my office had no sales through the rest of the year, zero, zilch, Nada. With business all but non existent we started having financial problems. The overhead to run a 30 person office is HUGE and we started to really feel the pain. I used my personal credit line to carry us through the end of the year but I was also using it to support my household. After waiting several months to see if the credit freeze was going to correct itself it became apparent the credit squeeze and the economy both spelled trouble for our industry. With this new found wisdom I started to cut back by negotiating yet another move to a much smaller suite with our landlord. We cutting back on technology services, phone lines, and just about anywhere we could save money. By years end 2007 I had arranged for us to move to a smaller suite with fewer desks and reduced overhead.

Just after the Thanksgiving holiday in 2007 my wife and I determined our already reduced lifestyle had to get leaner. We started to cut out any and all non essential purchases. We stopped going out, eating out, and commuted to the office together to save. We also instituted a spending freeze on our kids. We told them the situation in our business and they gladly stopped doing and buying things which were very normal to them. With my oldest away at college it was hard to say what he did differently but he didn't ask us for any money. And our youngest responded by asking permission to get a job as we had discouraged both from working while in high school do to studies and involvement with division I sports (very competitive and 40-50 hour per week practice and game commitments). In the office we announced the relocation to the new suit at the end of the year and immediately six people left. After several more weeks we had another half dozen go. By the time we got through the holidays we had two employees left. After all the time, energy and money spent on hiring these employees, training them and then supporting them they left us at the drop of a hat. There is a testament to loyalty, there is none in business if you are an employee. If you can't guarantee someone an income then they are going elsewhere. The irony here is that they went to other places but because these other business where in similar financial chaos they couldn't take in new relatively inexperienced salespeople. It costs money to house employees even if they are working in an all commission environment. By June 2008 we had no choice but to close our doors.

So that leads me to the present. I'm broke, with no assets, and no income. I've got loads of personal and business debt and in the present no way to pay it. I am a believer in America though, the America my family has fought for in wars from the Civil War to Vietnam, an America open to prosperity and justice, freedom and capitalism, an America to be proud of and cherish. This great country of ours has opened her arms to me and let me see here true beauty and she will be there arms open wide when the time is right and I will embrace her with all the love and gratitude she deserves. Its now time to get back to basics. Regardless of my current personal circumstances I can affirm to you today November 3, 2008 I will pay all of these debts, will rebuild savings, will invest, and I will create new wealth. Not only will I create new wealth but I will create the type of wealth I sought at the beginning of the millennium. The type of wealth few people enjoy, the wealth that brings freedom, freedom of choice, freedom to go and do what I'd like to do. The type of freedom I had when I was a teenager and I WANTED TO BE RICH!

To your Health, Wealth and Happiness

The information contained in this site consist of a series of articles and are the sole opinion of the Baron Von Savings. The Baron is not a professional money manager, tax expert, accountant, attorney, or stock broker. You should consult with an appropriate professional before making decisions concerning your finances.

I WANT TO BE RICH Part I

baronvonsavings@gmail.com (Baron Von Savings) — Sat, 01 Nov 2008 23:35:00 +0000

I knew I wanted to be rich at a very young age. I didn't know why, didn't really have a purpose for money, I just knew I wanted to be rich. I wanted to live in one of'em big ole' houses on the other side of town. You know the ones with the big driveway, the big ole' house with pillars in front, and the fancy cars in the driveway. I knew from the time I entered the 7th grade I wanted more than an average life. Even though I lived an average life, I never thought too much of myself but I never thought of my self as average. Oh, I have insecurities, but not then I didn't. I was young wide eyed and full of energy. During my teenage years and early in my twenties I worked a variety of jobs and each one had an impact on shaping how I manage work and money.

Wanting to be rich is what possessed me to get up everyday at 3:30 AM while I was in the 7th grade to shovel ice and load catering trucks. I started this job during the 2nd week of the school year and I earned more during my 3 hours of morning work in the the first week on this job than I did the entire time I had a paper route for the previous two years. But I also had a weakness, baseball. So to accommodate my desire to play baseball I quit this job during the spring. I tried to do both but the early hours didn't leave me with much energy at the end of the day and I also started falling asleep in between loading trucks while waiting for the grocery shopper to retrieve things from the commissary. I bumped around from part time job to part time job when I was 13 and 14. If I wasn't working at a job it was because it was baseball season and I was on the field playing.

My best teenage job came when I was 15. I was hired to work in a gas station and unfortunately the owner of this station had some habitual problems and the other teenage employees were robbing her blind through cash shortages. After working here for a couple of months and seeing this I tried to talk with her but she was in a bad place and just couldn't focus on her business. Then one early summer Saturday afternoon she called into the station while I was working a shift and told me she would be taking a vacation and wouldn't be back to the station for two weeks, and I should tell everyone they would be working the same shifts they worked last week for the next two weeks. After I got off the phone I started the register closing procedure for the day as we were closing and sure enough just like any other day the till was short by several hundreds of dollars. This caused me to make my first executive decision, it was a bit risky since i didn't own the business and I most certainly wasn't a manager but in my view it was absolutely a necessary executive decision. I called everyone who worked at the station and told them to come in the next day and pick up their last paycheck which I would pay in cash. I told my coworkers the owner made me manager of the station and I was firing them for stealing. There was not a one of them that denied my accusation and each one came in the next day and picked up their last paycheck. The owner ended up being gone for 5 or 6 weeks and I worked the station 15 hours per day during this period. This was obviously good for my pocket book and the owner was understanding after I pointed out I had saved her approx $2k per week in thefts. I used the money I earned from this summer to buy and fix up my first car, a 1954 ford pick up, still the best car I ever owned.

I truly believe you are a product of your environment. Now I need to stop here and point out that just because the dog has been taught only certain tricks doesn't mean he can't be taught new ones. If you weren't raised in an environment which was conducive to good money management then that should sound off alarms correcting any deficiencies should be one of the most important tasks you ever do. My parents were good people, good parents, and good providers. They managed their money well considering there were six in our household, mom dad and four kids, and both worked union jobs. They instilled in me a work ethic and a commitment to character which lives in me today. They worked hard to provide for us kids and to give us everything within reason we wanted. My siblings and I never wanted for nothing. Both of my parents had a strong work ethic. My dad was a meat cutter who would rise at 4:00 AM and go to work. He worked for 30 plus years in the grocery business. My mom worked as a clerical worker in the bakery business driving 40 miles everyday into the City from our suburban home. These examples of working hard and taking on responsibilities shaped how I look at work and responsibilities. I have a work ethic which is strong, stronger than most, and my character drives me to live up to my responsibilities. Now before we go much further, you might be saying to yourself, you know you're telling us you don't have money to make good on your responsibilities but then say you have a strong desire to live up to responsibility, what gives. Well you would be right in wondering why I could claim I have that type of character. I claim and own it because prior to my business failure I did live up to all my responsibilities. If I bought on credit I made the payments. If I paid for something with a credit card I either paid of the balance in full at the end of the month (something I often did) or I made the payments. My current situation is more a result of a business failure, not the direct and sole result of consumer behavior. However, my consumer behavior certainly exacerbated the business losses. Think of throwing gasoline onto an open flame. This wouldn't start the fire but it certainly would create some additional heat. I will work my way out of my current business and personal debt mess and will come through it a stronger, and more prosperous person. There is no doubt in my mind this opportunity to struggle is a vehicle for learning and just masquerading as a nightmare.

When I was a kid my family wasn't anywhere near being rich but my family lived a good life. We lived in a house my parents owned (with the bank of course) in a suburban middle class neighborhood. You know, one of those neighborhoods where the neighbor kids next door were your best friends and played out front from daylight till midnight with safety almost an after thought. We always had an abundance of food, durable (not fashionable) clothing, and of course ample entertainment. Movies once a week, bicycles, roller skates, lots of baseball and football, motorcycles, and plenty of play time. I can truly say I had a great childhood. But as I matured I still wanted more.

In my early twenties just before my wife and I married we made a decision to sacrifice to reach our financial goals. Rather than pay rent we scrimped and saved, lived with our folks, and with some help from family bought our first house. We had just barley turned twenty. In fact, the first 15 years of our marriage we never really spent much money other than for investments, businesses, our houses (we moved up twice), and our kids education. Any other potential purchase was put on the back burner and or just not purchased. We did well in the stock market, good in real estate starting in the 1980's (remember the early 80's 18% interest rates), and started businesses. My first self employed gig was as an all commission salesman. I made this transition from a salaried governmental job during the recession (some would say depression) in the early 1990's. This lead to much success as a commissioned salesman. Within three years I was making seven figures and making more money myself personally than the entire company. I quickly outgrew the company which prompted me to look for other opportunities. I found one in a slightly larger firm in which I accepted a partnership. Big mistake.

As I settled into my new partnership roll I got to know the partners better, and I can say today I think I was getting taken advantage of on many different levels. In addition to being the new kid on the block I also happened to be the one person reeling in the majority of new larger business. I was so busy producing I didn't have the time to pay attention to the details of the financial accounting within the company. I also didn't have the entrepreneurial experience to setup and review company finances. But after bringing in large deals and still not receiving the kind of net profits I was looking for and expected I started to look more closely at the reasons why I wasn't receiving the returns I thought I should be receiving, and this turned out to be our company expenses. Holy cow did I get an eye opening view of runaway expenses. For a company our size to spend as much as we were spending on any given line item was just ridiculous. Towards the end of my first year I was forced to deliver an ultimatum to my partners either make the hard decisions to reduce expenses or I would be forced to leave. They reluctantly agreed to make the necessary changes, some of them personnel changes to long term employees, to get our expenses to a level that allowed us to operate within industry norms. But the biggest disappointment in taking this partnership was that the company growth we had talked about when I joined the firm was just an illusion to get me to make the move. My partners were 20 plus years my senior and they were comfortable with the present size and scope of the company. I knew not long after my ultimatum my time was limited here, I just didn't know it would take me another 4 years to execute on my exit plan.

After five (5) years in my new company I was ready to make another business move. The five years had been good to me. I was able to earn millions of dollars and buy several large real estate investments. My retirement account had fattened up with maximum annual SEP contributions. My savings increased substantially and my monthly income from the real estate investments was healthy. With all of this I was ready to now make my move. However, because I had worked so hard to create the business activity I had enjoyed at this company I didn't want to just resign my partnership. So I reach an agreement with my partners. They agreed to allow me to continue to work on projects with my current and former clients as part of the company in exchange for the continuation of me paying our monthly partnership expenses which totaled approx $3-4K per month. Good news, so I thought. With this new agreement in hand I moved forward to open a new business with my new business partner.

My new business partner and I decided to open this business from our individual home offices. We each operated from our own office but met regularly each day to go over strategy and business execution. This arrangement worked out extremely well and helped us to start our business with a minimal of expense. I would highly encourage anyone to open a business you could operate from home. Don't listen to those media pundits cautioning you about a home office, if you can't make the decision to work hard from a home office because of the distractions or lack of camaraderie then you shouldn't be opening up a business. If you need friends at work then go get another job or keep your current job. As a business owner you need to be able to do business from anywhere, coach, couch, dinner table, hotel room, office, cleaners, ball field, etc. Our business timing was good. We did some business early on and parlayed this into other business activities which resulted in a good level of business activity. The only bad part was this business activity didn't translate into income. These business activities actually were costing us thousands of dollars plus lost wages. We had gotten ourselves into so many different projects we couldn't afford to support them while not having any income coming in. And remember I also had to support another business which was proving to be a losing proposition for me. While we sacrificed and supported the business after two years we had no choice but to call it quits. My losses from this period were fairly substantial but the real killer is I had to sell some really lucrative real estate assets to meet my business obligations. This one element of this business failure still hurts but it was what was needed at the time. If I could reverse just this one element the equity in this one asset I had to sell would be worth somewhere around $5MM in today's values. To pour more salt onto that open wound I almost had this investment paid off when I sold it. I owed 2 more years worth of payment on a ten year note when it was sold.

As I said in the beginning I always new I wanted to be rich. I have been, and I will be again. This gets us through to about the Y2K period. Keep an eye out for the 2nd part to this two part article. The challenge now is to stick to my new personal financial plan and create new wealth. Follow me on my journey to sacrifice whatever it takes to create wealth again.

To your Health, Wealth and Happiness

The information contained in this site consist of a series of articles and are the sole opinion of the Baron Von Savings. The Baron is not a professional money manager, tax expert, accountant, attorney, or stock broker. You should consult with an appropriate professional before making decisions concerning your finances.

Proliferate Sacrifice

baronvonsavings@gmail.com (Baron Von Savings) — Sat, 01 Nov 2008 07:43:00 +0000

Proliferate Sacrifice

Sacrifice should be the first thing you think of when you wake up in the morning. I mean it. I don't mean one of the first things, I mean THE very first thing you think of when you wake up each morning. The first thought when you open your eyes should be how am I going to sacrifice today. What? I know you think I'm nuts, but the truth is you should ask yourself this question if you want to be successful in anything you do. What am I going to sacrifice today in order to be successful? If you want to accumulate wealth, run a business, make money, run marathons, win spelling bee's, whatever it is you want to accomplish you will first need to know what IT will take, what sacrifice you need to make, in order to reach your goals. Why sacrifice? Well because you need to give something else up first in order to make time to do whatever it is you need to do to accomplish your goals. If you don't sacrifice something in exchange for doing what you need to do each day to accomplish your goals then you won't accomplish anything or you will never get anything done. Sacrifice and succeed or don't and you'll remain broke, stupid, and spoiled its your choice.

When it boils right down to it you will see that I am right, its rather simple. Unless you know what you are going to sacrifice each day to do the things you must do to accomplish your goals then you risk not moving in the direction you must move in order to accomplish these goals. It is critical in achieving success that you commit to sacrifice or you will remain broke, stupid, and spoiled. You see once you commit to sacrifice you will be ready to fiscally, physically and psychologically handle any kind of sacrifice. And creating real wealth my friends takes lots and lots of sacrifice. If you need to go to work then you are going to sacrifice time, time you could be doing something else. Self employed people don't sacrifice time, in fact, they choose to go to work. This fact is never talked about by financial guru's or media types. If you hear about self employed peoples work hours its usually that they HAVE TO work more than anyone else because of their work load, but the reality is these business folks haven't learned the skills to delegate or contract out some of their work load. Trust me when I tell you you can find someone to do anything you need to do, outside of making critically business decisions or creative type of work, on a contract hire basis. It takes time and effort to find the right people but once you do they can elevate your work load. Besides the economic benefits of owning a business, one of the biggest advantages of being self employed is owning the right to choose to work more, or less, to meet your goals. There is much talk about in the media about the privilege of working less if you are self employed but not much attention is given to the fact that you can choose to work more. I didn't pay much attention to this fact until a friend made me aware of this privilege.

A couple of years ago my friend Dave his wife, my wife and I were all sitting around watching our boys play a baseball game on their travel baseball team. This game was on a Sunday morning (yes we missed church that day) and after the game I invited his family to go to lunch with our family. His wife gave me a funny look, but said she would love to go to lunch with us and then looked at her husband, and this friend said something that made me realize something I hadn't paid much attention to before, he said "I really appreciate your offer, I think that would be fun, but I don't think we can make it today, I GET to go to work today". This guy is a very wealthy guy, he is a centi-millionaire he doesn't need to work on Sunday afternoon but he GET's to go into the office on Sunday and he is excited about it. Man, now that's sacrifice, but the irony here is that its not sacrifice to him. He would rather GET to go to the office than go to lunch on a Sunday afternoon. Now to be fare this guy is pretty intense and may be wound up a little tighter than most but I personally GET what he means about having the choice to sacrifice the way he needs to in order to accomplish his goals. So you don't want to work on Sunday? No problem, but don't complain about not being able to create wealth. This is a perfect example of making the right choice, the choice of sacrifice, in order to reach your goals. After this encounter I committed myself to working on Sundays. I didn't go into the office as my friend did mainly because my office is 40 miles from home and his is 2 miles from his home but I did start reading voraciously on Sundays and bringing home more work so I could get it done on a down business day.

When I first began my trek towards wealth my wife and I made a commitment day in and day out to do the right thing and sacrifice so we could start to save money. And as we saved and made more these monies were invested. First in a savings account followed by stock market investments, and then in real estate. These investments did well and we saved more money and used some of this money to start a business, expand the business, and then start other businesses. I was able to earn my way to multi millionaire status by drawing a line in the sand and sacrificing things for financial gain. These sacrifices were lifestyle choices. I chose to work on Saturdays rather than relax at home. I chose to send my money to my etrade account as apposed to spending it on fun. I chose to drive my cars for 10 years rather than drive a new model car. I chose to read magazines, books and financial statements of potential investment companies on Sundays and any other free time I had during the week. So why am I presently broke and spoiled, because of business failures. And to my mind just as important because of lifestyle choices I made after I had made money. Lifestyle choices which helped me to squander my money.

I know some of the choices I made after I was wealthy caused some of my present pain, but the majority of this pain was a result of a business failure. I made very good decisions for many years in order to get wealthy. My current personal financial plan is to go back to the basics and walk my talk by making the sacrifices needed to achieve my goals. If you too are looking to create wealth I suggest you look seriously at making THE sacrifice on a daily basis to do the right things and choose to sacrifice whatever it is which is holding you back from becoming wealthy.

To your health, wealth and happiness

The information contained in this site consist of a series of articles and are the sole opinion of the Baron Von Savings. The Baron is not a professional money manager, tax expert, accountant, attorney, or stock broker. You should consult with an appropriate professional before making decisions concerning your finances.

God's Good Humor

baronvonsavings@gmail.com (Baron Von Savings) — Wed, 22 Oct 2008 18:07:00 +0000

Borrowing a line from the epic film Titanic, I am officially operating on "God's Good Humor". I've finally reached the end of my rope, there is no more savings, no more money in the retirement account, no more access to credit, and no where else to turn. Like Leonardo DiCaprio's character I'm on "God's Good Humor to be her with you fine folks". The sheer thought of being broke is almost incomprehensible. To go from multi millionaire to negative net worth is, well, its humbling. If you've been following "My Story and I'm sticking to it" then you know I've been struggling to rebuild our financial lives and focus on creating new wealth. Each is a formidable task in and of itself but becomes more challenging with the fear of not being able to provide life's basic essentials for your family. For an everyday guy who worked so hard for so long and sacrificed to build up a considerable net worth its just hard to accept I can't even pay basic utilities.

Case in point, as I write this article there is a concern in the back of my mind the lights at my home might get shut off, today. As bad as that might sound it dwarfs in comparison to another concern and that is whether I will be able to feed my family next week. I'm overdrawn in my checking account by $3,300.00 as of this morning and the check I wrote to pay the electric bill last week might get returned resulting in a disconnection of service. Thank goodness the twenty year relationship with my business banker has pretty much resulted in her approving any payments we make to our mortgage companies. But there is only so much she can do and I can't expect every check I write to get paid when I have no money in the account, duh! I thank god daily for sending me small blessings.

The whole process of our spiraling economic situation has brought on a new perspective. To say the experience has been humbling would be a travesty, rather I imagine a correlation to the pain a man would feel if he were burning while eating his own flesh to eliminate the pain. My mother, a very loving and devoted mom, told me recently I pushed it too far because I have to much pride. And she is right, my pride has driven me into this situation. Unfortunately my pride cannot help me pay my bills. Pride was not able to explain to my innocent daughter we could no longer afford teenage auto insurance for her car. Since we had to cancelled her insurance we now drive her to and from the private high school she attends. We live in an affluent area on the coast in California and her high school is located relatively close but a bit inland in an area considered to be "rough" by many in my neighborhood. The reality is the area is a typical lower to middle, middle class blue collar area. An area very similar to the one I grew up in. And while driving through this area you need to take extra precaustion for the numerous pedestrians. Most of the residents use public transportation, walk to work, or ride bikes to get around. And then there's the beggars. You've seen the signs "will work for food" "please help my kids are hungry" "Vietnam vet please help".

Now if you're like me you look away when you see these signs. We may choose not to acknowledge there is a person who is behind the signs. They are there asking for food, an essential life support. No I really never looked in their direction and never paid much attention. Prideful nature or not my faith has allowed me to possess a decent level of humility. This humility has allowed me to see their situation in a different light, there situation is not much different than my own. Oh sure, their geography maybe different but at the end of the day we both need the same thing, food, and we both don't know how we are going to get it. I've developed a new appreciation for their plight. Their plight, hum, that's sounds a tad contrite. As I try to relate my own situation to these very real people my indifference shows through my selection of words. I'm sitting here hungry and I can't even put myself on the same level of the guy standing on the street asking for help. Pride!

The fear of not being able to pay my light bill is not the only fear I am presently experiencing. I'm afraid I might not be able to feed my kids next week. If you want to talk about pressure, that my friends is pressure. My kids are the most important thing to me right behind the big guy up there, god. So I would/will do anything earthly to make sure they have a roof over their head, and food to eat. And I've been so fearful of not having either of these two for them that I've made decisions in the recent past to get us to this point, a bearish point of no return. In an attempt to keep the roof over head I've continued to pay very large mortgage payments, and some larger than needed lifestyle commitments eg; Porsche payment, steak and cheese, instead of bus pass and wieners. And these decisions have taken me to the point of "all in", using Texas Hold'em parlance. In hindsight I should have recognized the potential of our current reality and made a decision to sell our house and replace it for a smaller one, and significantly reduce our lifestyle. You've heard it before hindsight is 20/20 and you can't go back in time and decisions. The living reality now is we're broke with no food in the frig and cupboards are about bare. Next week should prove interesting as there is a real fear I will not be able to provide food for my family.

Its human nature to take much for granted when things are good. I could never have envisioned a time when I would be concerned about food. Growing up my family was in the dairy business, They owned farms, cows, pigs, chickens, etc. And while I grew up in a metropolitan suburb my family always had plenty of food as my dad ended up in the food business. Food has never been an issue in my household we've always had the ability to buy what we need and probably much more than was needed. This is in stark contrast to today. Today I'm am sitting here writing this and my stomach is growling. I'm so fearful our dwindling food supply is going to run out I've cut my eating back to once a day, and even then its been minimal. This began two weeks ago, and I noticed my wife has done the same. Neither one of us talks about it but we both know. For example we had one meal last night, a two egg omelet and home made hash browns. Hash browns have become a favorite as it doesn't take to much to make a meal out of potatoes. I wonder if there is some Irish in us both.

There is some irony to our situation, and perhaps a good lesson to be learned. As I've said I'm darn near starving but less concerned about this and so much more concerned I won't be able feed my kids in a couple of days. The lights are still on so I'll be able to finish this story but they might not be on for very much longer so you will forgive me if I don't respond to your comments for a couple of days. And here's the irony, we are living through this hell, but we are living through it in our $2MM house, driving our state of the art Porsche while contemplating the future of our next meal. The majority of my net worth was lost through business failures (http:moneyfinanceswealth.blogspot.com "My Story and I'm Sticking to it") but our lifestyle choices added fuel to the asset loss fire. The lesson? Watch your lifestyle choices. You might take for granted what is gone tomorrow.

Guess Whats in Vogue? Savings

baronvonsavings@gmail.com (Baron Von Savings) — Tue, 21 Oct 2008 09:05:00 +0000

Whether you are just starting on your first serious savings or are an old hat in the art of increasing your cha ching you might be surprises at what the experts are saying about saving money. In a recent article in bloomberg it was reiterated on several occasions the expected savings rate in the United States is expected to grow, and this increase in Americans savings will, are you ready for this, be bad for the economy.

So how bad can it be how can saving more money hurt the economy. It is estimated the American savings rate is currently 3.5% which is considerably behind most Asian and European nations. For example households in Germany on average save as much as 10% of their after tax income. With such a large contrast in the style of savings between nations it is no wonder Americans are feeling so much anxiety over the current economic conditions prevalent in the economy. During the Asian banking crisis of the late 1990's many Japanese households survived the drastic deleveraging downturn by living off of their savings. How much did they save, the average Japanese households saved in excess of 12% of after tax income. For many their savings supplemented their reduced earnings.

The logic on decreased spending exerted by some economists is that if consumers stop spending and start saving then the after effects of this will impact the retailers and their reductions will pass on down the chain through the supplier on down to the manufacture. Before you get on your made in China rant, not all products are made in China. And even for those that are it is often over looked there are many steps in the process to get these products to market. Dock workers, freight companies, truck haulers, distribution centers, retail warehouses, and then ultimately the retail floor. While it is understood this slow down turn can impact retail sales I don't necessarily agree with the subliminal message that increasing your spending is what we should all go out and do.

There is a flip side to the effects of a slow down in retail sales and this is already starting the show in the economic levels here in the United States. We need to accept the fact that a slow down in economic activities in one sector of the economy is going to impact many others. If we own stock in our 401k accounts are we going to be understanding when the companies impacted by the after affects of this slowdown report lower earnings. Are we going to accept a lower rate of return on our investment because we understand why these companies are not able to earn any more than what they report. I would venture to guess you will be on the first bus to pull out of the station, and you will vote with your feet and will sell this stock.

With the American savings rate already at an all time low American households, on a whole, need to find a balance between saving and spending. While many hyper consumers (I was once one of these addicts) will certainly always flourish in our society there is evidence American households may actually make saving money a high priority. Many households may find themselves needing to fall back on their savings. With all the uncertainty surrounding our economy they may need to do this just to get a good nights sleep. The loss of a job, unexpected health expenses, and everyday living expenses will increasingly take their toll on the American household.

As a new era agent provocateur I have made it my mission to educate Americans across this great land or ours that money is to be saved and then invested. There are many ways to increase your savings. If you are new to saving, need a way to reduce your debt, or just need a review of your savings method then read our guide to a weekend drill to increase your savings.

To your health, wealth, and happiness

The information contained in this site is the sole opinion of the Baron Von Savings. The Baron is not a professional money manager, tax expert, accountant, attorney, or stock broker. You should consult with an appropriate professional before making decisions concerning your finances.

A weekend drill to jump start your savings

baronvonsavings@gmail.com (Baron Von Savings) — Mon, 20 Oct 2008 02:21:00 +0000

Have you ever attempted to start saving money? Where did you begin? It's very common for people who are searching for ways to save to begin in the area of everyday consumption. You might start cutting back on everyday purchases such as coffee house drinks, lunches, beverages, leading up to maybe less shopping trips to the local mall. Since all things must begin somewhere these changes are a start but unless you have a solid plan to seriously start saving money then your savings goal is likely to be sub-par. There are three things you could do in a weekend to jump start your savings. Below is our quick guide to saving, one for each day of the weekend. Each step should only take 15 minutes each day.

Day 1 A plan is only as good as its goals.

OK babe, this is the easiest part of the program. Take out a sheet of paper. In one paragraph write down what your goals are for your savings. Are you saving to help stretch your monthly budget to pay bills or are you starting to save money for your future. Is this money to start an emergency fund or do you want this fund to be your go to hell fund. Is this a car, vacation, or school savings fund. Whatever the reason for your savings determine why you want to save and where you will keep the savings.

Day 2 You need to understand how you spend money.

Pull together all of your bills, bank statements, credit card statements, cash receipts, and any other statements for the last two months. Go over every item you've spent money on during these two months. Now take out another piece of paper and write these items down (don't use a computer as the writing will help to reinforce the information in your mind) for each month list the largest expenditure at the top of the list and then each spending item from largest to smallest. You should be able to account for every dollar you spent in each of the previous two months. This will allow you to see where you are spending your money. Then use this information to compare how you are currently spending to how you might save your money. Look over the list to determine how you might save money on each and every item. Not just coffee or gum purchases, yes these too, but every item. The largest might be your mortgage or rent payments. Can you save here. If you rent can you find a more affordable apartment or could you consider renting a room. If you own a home does it make sense to look at the interest rates you are paying on your mortgage. Have things in the economy changed, are interest rates much lower than when you originally took out the mortgage? If so then consider refinancing your home to lower the payment. You will then take the difference between what you were paying and the new payments and put that in a savings account. In addition to the increase in savings you could save a bundle on the interest you will pay over the life of the mortgage. There are other considerations when refinancing a mortgage such as the payment of points and closing costs, in addition to perhaps extending the loan term, so be sure to research the entire refinance before you move forward. Is your car payment, if you have one, a larger expense. Can you perhaps refinance this loan or better yet call the lender and ask if they will reduce your interest to help you better afford the payments. Same thing goes for each of your credit cards. Many of your creditors will consider decreasing the interest they charge if they feel there are compelling reasons to believe the borrower will not be able to continue to make their regular payments. You won't know if you can reduce your interest expenses until you ask.

Day 3 Determine the amount you are going to start saving

After you have identified the areas you can save in then you need to determine how much you can start saving. Commit to saving this money from each paycheck or at the end of each month. The best strategy is to arrange the amount you are planning to save automatically transferred into a savings account directly from your employer through their payroll services if available. An alternative is to set up an automatic transfer from your personal checking account into your savings account. This way saving becomes automatic and you are not tempted to put it off. If you can't make saving automatic for some reason then I recommend you get your bank to send you a dozen extra deposit slips and envelopes and place one deposit slip in each of twelve envelopes. Then each month when you are paying bills you write a check and send the savings off just like you would any other bill you pay.
One of the things you will want to look for in starting or increasing your savings is to see if you can take some of the dollars you are already spending and reroute them into a savings account. This is where you want to start looking for savings opportunities. After you've determined whether you can or cannot squeeze savings from these areas of your spending then you can move onto the next phase of looking at paring back spending. Look for way to limit or eliminating spending in other areas of your budget.
We recommendation you have a separate account for your savings goal. If you have more than one goal then consider opening more than one account if you are not disciplined enough the commingle your different saving accounts. There are many no cost/low cost saving account options. Be leery of free account offers as many of these accounts are not insured by the FDIC or any other insurance or financial institutions.

By starting with a goal and taking a good hard look at where you currently spend money you can jump start a savings plan to meet almost any goal.

The information contained in this site is the sole opinion of the Baron Von Savings. The Baron is not a professional money manager, tax expert, accountant, attorney, or stock broker. You should consult with an appropriate professional before making decisions concerning your finances.

Making good financial choices. Doing things right

baronvonsavings@gmail.com (Baron Von Savings) — Sun, 19 Oct 2008 22:42:00 +0000

When you are young and starting out in your financial life you can probably afford to make some mistakes when managing your money (not advisable) but as you start to earn more and get older the decisions you make are critical to your long term financial well being. Whether you are just starting out or are recovering from a recent financial crisis reviewing the decisions you made on how you spend money will highlight mistakes and equally important assist in allowing you to make adjustments to meet your short and long term financial goals.

If you've been following my story you know I'm presently up a financial creek without a paddle. As I look back on how I got into my financial predicament of being broke with no assets and no present income I am forced to look back to a time when I did things right. After all you dont accumulate a multi millionaire net worth by accident.

When I first left my city government job to join the self employed at 26 I had developed and used the right personal finance traits to allow me to make this move. After all I had bought my first home at the age of 20 while a full time student, gotten married and started investing any excess money we had (we both worked full time and went to school full time until we were 22) in the stock market. And these traits continued for a while as we started making money but after a while things changed as we move up the money food chain.

When we first entered the six figure income catagory back in the early 1990's I can remember being excited at the thaught of having more money to invest in the market. And because my business is commercial real estate I started thinking about all of the real estate investment opportunities the market was throwing off at the time. And I started deploying these excess resources towards investments.

I started by adding to my brokerage account at Kidder Peabody (anyone remember them) and by buying my first building. The stock portfolio continued to do well as I activley traded towards profits and the industrial building was adding to our net worth as I had bought this first property with owner financing on a ten year note amortized over 10 years. Because real estate was ugly then (believe it or not it was worse then than it is now) and sellers couldn't give away many properties I was able to buy a fully leased 60,000 square foot building leased two two tenants with a 10 year loan and it still paid a 4% return after expenses.

Within a couple of months of buying this first building the tenant who was leasing half the building approached me to allow him to cancel the lease as his business was tanking. Ironically I knew the people across the street were looking for somethig to lease close to them so I was able to lease the building to the business across the street for 2 1/2 times what the current exiting tenant was paying on a long term lease. This turned a good situation in to a great situation as the income generated from this passive investment was now in the six figures alone. Witin a year this income would double as my new tenant took thier company public and bought out my other tenants lease and started paying me more for both spaces. The good old days of funny money. Thats when our consumer and money management habits started to change.

While I was investing all our excess monies we moved our family from a typical blue collar neighborhood to an affluent beach community. And because our new neighborhood was affluent and had all the trappings of affluent people, luxury cars, fine furniture, fine dining, expensive vacations and expensive hobbies, we felt compelled to become part of the "community". We bought our first luxary car (300 SE mercedes) which had a car payment equivalent to the payment of our first mortgage $725 per month. To make matters worse we leased this car knowing I would be driving 25-30k mile a year. And we bought furniure and big screen tv's, and all the other stuff to fill our new bigger home. We took our fist trip to a tropical location and then started taking trips with new friends to ski and play. Flying first class, staying firsts class, and eating first class. Life seemed grand. Here is the most telling part of this conversion from fiscal conservative to hyper consumer. I started buying a lot of our stuff and taking these trips using credit even though I did have the cash to pay for anything we did. I justified this by telling myself I would only finance 50% of any product purchased and would pay off the balance of the credit cards I used while traveling. But after a while these purchases started to add up to tens of thousands of dollars and my full payments turned into triple the minimum, then double leading to minimum payments.

This change in our consumer psychology was slow and gradual but its important for me (and you if you'd rather learn from my mistakes) to recognize the progression. Buying the things you need when you can afford to buy them is not a bad thing. Buying more than you need just to have the best, biggest and brightest is obvioulsy not a good consumer habit. Buying stuff or doing things just to fit in or to fill out your house or life using credit is definately not doing things right.

When you buy something or want to do somehting ask yourself some simple questions.

1. Is this an essential purchase? Do I really need this product/service OR do I just want it.

2. Can I afford to pay cash for this product/service? What if the car breaks down or the drains get clogged? Can I still handle this purchase?

3. Is this purchase something that is going to add value to my life or net worth? Will it increase in value or will it be worth less soon. If technology related will it be obsolete soon.

4. If I didn't buy this product/service could I get by with out it?

If you answered yes to the first three questions then you'll know your purchases are not wasteful.

Regardless of the size of a purchase anything from a cup of coffee to a new car, if you questions the reasons for the purchase you will discover whether you really need to make a purchase. Do the right thing and make good financial choices.

The information contained in this site is the sole opinion of the Baron Von Savings. The Baron is not a professional money manager, tax expert, accountant, attorney, or stock broker. You should consult with an appropriate professional before making decisions concerning your finances.

My Story and I’m Sticking to it Part II

baronvonsavings@gmail.com (Baron Von Savings) — Fri, 17 Oct 2008 09:36:00 +0000

What a Winer

I'm broke, have no cash, no assets, and no paying job. Whey, whey, whey you say. Well I don’t blame you. I can’t believe I’ve been so stupid, let me repeat that STUPID, STUPID, STUPID. I am and should be ashamed to be in this situation. I’m not sorry about losing money in business because owning a business is one of the best ways to create wealth. However, I am sorry how money was squandered away in the business which we will discuss in a later article. I took my eye off the ball when it came to the managment of money and assets. And it disgusts me to admit my family and I have lived a hyper consumer lifestyle. I know better, I’ve been an inveterate student of money management, investments, markets, and finance for all of my adult life. The message of conserving assets along with the prudent management of money has been delivered repeatedly to me through classes, seminars, books, magazines, and articles, but these messages fell on deaf ears. Why, arrogance, ego, and………drum roll please, an inferiority complex. Yes that’s right, a fear of being inferior to those around me. The fear of not feeling superior, of not having more, better, bigger than the next door neighbor or the guy standing next to me at the airport, little league game, etc. Psychology in achieving long term success weighs heavily on whether one succeeds or fails and we will discuss this in future articles. I know how I got into this mess now its time to adjust and correct the situation. This adjustment will blossom into a new lifestyle, one of frugality, comfort, security, new investments, and new wealth.

Some would say that for a Latin kid born in east LA to a single mother during the tumultuous early 1960’s forwarding to the present where my family lives in a home in an exclusive beach community in sunny southern California, having owned multiple businesses, purchasing several investment properties, and buying things associated with success such as boats, luxury cars, carribean vacations, five star hotel stays, flying first class and getting caught up in a hyper consumer lifestyle, well they might say my life has progressed for the better. I might be inclined to agree if I were looking at my life from an outsider’s perspective while someone else picked up the tab. The problem with this picture though is that my lifestyle has left me flat broke and drowning in debt. At this point bankruptcy is not an option. I abhor the thought of having to subject my name and reputation to a “Bankruptcy” but this may be a viable and appropriate option for others struggling with their finances (look for an article on Bankruptcy soon).

Why is bankruptcy not an option for me? Family history is the short answer. My grandfather was an old cowboy from Arizona, and on the farm he taught my dad honor and character is more important than life itself, and they both passed this on to me, so no, bankruptcy is not an option. They believed a man's name (today it would probably include credit score) was how others would judge you whether directly or indirectly. This is whay I have always maintaned as good a credit record as possible and dealt honestly with anyone I've associated with in business and in my personal life. How can you go against family tradition, a tradition handed down from a man who borrowed money at the bank on a handshake. Merle Haggard wrote a song about a man like my grandpa “who borrowed money on his name”. Now with both my dad and grandpa gone I feel a strong obligation to honor them both by working my way out of this financial mess without disparaging my family name.

Debts

Back to my debts. They are a combination of business debts from the failed business and personal debts from living expenses while the business was failing. While the business incurred operating losses of $750,000.00 (the accounting amount on the books) it did not include still outstanding debts for the corporation as of the close of business on June 16, 2008. Let’s look at the outstanding debts for the business.

The corporation had credit card debt of $59,000 which many of you may know has a personal guarantee attached as it is a requirement by card issuers for small corporation credit cards. In addition, the business has past due rents to a landlord of $23,545.00 and furniture obligation lease payments of $23,900.00 and phone lease obligations of $15,000.00. As the business was part of a national franchise the corporation also owes $20,000.00 in back royalties and an additional $125,000.00 in what the franchisor termed “lost profits” for the loss of future royalty revenues. The current outstanding debts for the business total $266,445.00, not including the operating losses.

On the personal side our credit card debt is $25,900 between seven cards. This does not include $19,000.00 in debt on three BofA credit cards which I reached a settlement on for 0.13 cents on the dollar and paid off earlier this year. I have not been paying any of the other credit cards since January 2008. We have car debt of $26,500.00 with Porsche finance for three more years with monthly payments of $685.00 per month. Fortunately we qualified for Tier I financing when we financed the car so the interest rate on this debt is 4.5% fixed. Our first mortgage is $698,000.00 at an annually adjustable 6.35% interest with 25 years remaining with a current payment of $5,975.00 which includes taxes and homeowners insurance impounds. We also took out a home equity line of credit of $565,500.00 which helped support us and the business with 8 years remaining on the term at an adjustable rate tied to the federal funds rate plus 2.5% currently at an imputed interest rate of 4% with a current monthly payment of $2,950.00. Total consumer debt is $52,400.00 and total mortgage debt is $1,263,500.00

Monthly Expenses

My mortgage(s) payments total $8,925.00, car payment is $685.00, tuition payments for private high school are $1,050.00, utilities are $530.00, college tuition and expenses are approximately $500.00, and misc expenses including food and gasoline are approximately $1,100.00. This totals $12,790.00 per month.

Income

I work in an investment business on an all commission basis. My work is tied directly to the availability of financing through the capital markets. With an impending recession and credit markets currently frozen my industry has seen a dramatic reduction is sales activity. Past annual earnings range between the lower six figures to the lower seven figures. Although it is safe to say competition in my business has elevated to the point where an independent operator such as myself is at a competitive disadvantage and would have a hard time consistently earning seven figures, in good economic times. In calendar year 2008 I have not earned enough to meet my monthly living expenses. My wife worked with me in our business and is currently not employed although she is presently seeking employment. We have earned what amounts to 1 ½ months of living expenses in income in the last five months with very little income coming in between now and the end of the year. We have cleared out our retirement accounts and do not have any savings left to fall back on. Our situation is obviously dire.

My Financial Recovery Plan

Stay tuned for more on my plan to pull us out of our current financial crisis, and articles on how you can reach your financial goals using the tools and resources some of which I will use to workout of this financial crises. There are many resources and financial products that exist today which were created to assist the average American to save money, invest, start businesses, and create wealth.

I welcome your comments. To your health, wealth, and happiness.

The information contained in this site is the sole opinion of the Baron Von Savings. The Baron is not a professional money manager, tax expert, accountant, attorney, or stock broker. You should consult with an appropriate professional before making decisions concerning your finances.

My story and I’m sticking to it!

baronvonsavings@gmail.com (Baron Von Savings) — Fri, 17 Oct 2008 04:43:00 +0000

As stated in my bio (link on the home page) I’ve enjoyed enough success to have previously earned the moniker multi millionaire. Many would be impressed by this achievement but the fact is I’m dead broke with no cash, no assets, and worse no current income. I’ve got creditors breathing down my neck, two mortgages flirting with foreclosure, a car payment I can’t afford (it’s a Porsche), one senior in private high school, and one in college. Oh, did I mention I just closed down my business in June 2008 and lost about $1,000,000 in the process.

So how does someone recover from overwhelming financial obstacles? There is not an easy answer but by praying, planning, organizing, analyzing, and then executing on a personal financial recovery program (PFR) I will share with you how I recover from this personal financial crisis. A PFR program consisting of debt elimination, credit rebuilding, increased savings, and wealth creation can be achieved by anyone one step at a time. It’s a daunting task sometimes but it’s doable. Through this process my hope is to help others find the tools and resources enabling them to work towards a solid financial future.

When it comes to personal finance everyone’s situation is unique. What works for one might not work for all, but regardless of your circumstances if you are dedicated to finding a way to live a life of abundance enjoying financial freedom then you will want to join us regularly. We will bring you troves of information on personal saving techniques, money saving ideas, financial comparison analysis, debt reduction methods, financial shopping workshops, and investment ideas for both the seasoned pro to beginning investor.

So please join me on this special journey towards financial freedom. If you would like to receive immediate articles on the subjects of Money, Finance and Wealth Creation when they are written then please subscribe for free updates in the subscription area of our home page.

I welcome your comments. To your health, wealth and happiness.

The information contained in this site is the sole opinion of the Baron Von Savings. The Baron is not a professional money manager, tax expert, accountant, attorney, or stock broker. You should consult with an appropriate professional before making decisions concerning your finances.

Money, Finance & Wealth

baronvonsavings@gmail.com (Baron Von Savings) — Fri, 17 Oct 2008 04:22:00 +0000

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