The Great Depression Ahead?

I’ve spent a lot of time researching the economy and future trends. In that research, I stumbled upon a book by Harry S. Dent Jr. called “The Great Depression Ahead.” It’s a great read that goes through the many cycles (decentential business cycles, consumer spending cycles, innovation cycles) related to the current economy. Quick summary: we’re heading into a depression and real estate bust.

This video is an update to the forecasts in the book and it’s also a great information piece for people who haven’t (or won’t) read the book.

Which direction are we heading?

The markets have come up from their March lows but there is still a wild ride ahead. Depending on who you believe, we’ve either moved through this recession and have “turned the corner” into a new bull market run or we’ve just experienced a larger than expected bear market rally that should crash down by the end of 2009.

Personally, I’m a little bit on the fence. On one side, I figure that the economy must turn around at some point but this recent rally has gone up so quickly that I see a lot of down side. We still have job losses each month in both Canada and the United States. GM is on the verge of bankruptcy, Chrysler is already there and regardless of the actual declaration, there are going to be thousands of fewer dealerships across North America.

What does that mean?

Think about each town that is made up of about 1000 people, a corner/video store, a grocery store, pet store, clothing shop and a GM auto dealership. I would bet that the dealership makes up a large portion of the corporate tax base for the town. How many jobs are lost? How much income is moved to larger centres followed by residents and their famillies? Can rural North America handle the loss of these businesses?

I’m not sure we’re out of the woods yet on this one. Call me naive but don’t economies and markets recove when people actually have money to invest and spend?

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Elliot Wave Theory

The Elliot Wave Theory was discovered by Ralph Nelson Elliott back in the 1920s. The theory is based on identifiable and reptitive market movement in the stock market (“waves”) similar to the ranges identified by Fibonacci Retracements.

Elliot Wave Theory

In this example, the first 5 waves take stocks in a bullish direction; however, this pattern also works in a bear market just in reverse. The first Wave (#1) is then followed by a pullback (#2). The next (and longest stage) is a sustained rally up (#3). The correction comes as markets pull back (#4), finally followed by another big rally (#5).

Elliot Wave Theory Bull Market trend

Following wave 5 comes a series of bear market moves. The “5-3 wave pattern” now beings parts A, B and C which indicates a correction in price due to the run up of the market during the previous cycle.


The A, B, C above demonstrates the last 3 waves of the Elliot Wave Theory (again this will be positive in a bear market).

Elliot Wave Theory ABC Correction

Grand supercycle: multi-century
Supercycle: multi-decade (about 40-70 years)
Cycle: one year to several years or even several decades
Primary: a few months to a couple of years
Intermediate: weeks to months
Minor: weeks
Minute: days
Minuette: hours
Subminuette: minutes

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Starting Your Empire With Little or No Money

I had a great response from Jackbravo regarding an earlier post called Automate Your Multiple Streams of Income.

In the post, I talk about creating multiple streams of income to both add income and create security in your cash flow. A comment I received made me decide to write this post because it’s exactly the question I get from a lot of people (both online and offline.)

Jackbravo asked how to implement this practically and said that showing a way would make the advice a success. What I like about the comment is that it didn’t come out as negative; rather, it was an honest question about how to manage it.

It’s About Finishing Rich, Not Racing To The Finish

The problem with most financial books that I read is that the author usually gives the false impression that success can happen without failure and in little or no time. As you can imagine, creating a large stream of automated income takes time. The real success comes when you’ve structured it properly and the business is on Auto-pilot.

If you’ve read my post, Use The Rule of 72 To Your Advantage, you’ll understand that multiple streams of cash flow does not need to be multiple hugely successful businesses. Multiple streams means that you are getting some income from numerous places.

In my Rule of 72 article, I show how simply doubling a daily deposit (starting at a penny) will create over $8,000,000 in 30 days. The same thing is true for automated cash flow. If you set your goals on having $10,000 in monthly cash flow (as I did in The 4-Hour Work Week Just Cost Me $100,000) you need to step back and create the wealth this way:

First, set an easy goal of creating one online business within 3 months. This may be an e-commerce site, product or service business or one of many other options. Aim to generate continuous and growing levels of cash flow each month. I like an easy number like $50 because with minimal effort, you should be able to create a niche marketing or some other site with that income quite easily. Next, grow the cash flow over the year and start working on the next one.

What about the Start-Up capital?

This is the basis for Jackbravo’s question and a great one at that.

The type of business you will be able to start is completely based on your current cash flow, current financial resources and ability to raise investor money. Make sure you know where you are and what resources are available to you. There’s no point in starting a exploration oil and gas business if you’ve got a few grand and nothing else. Work within your resource level.

If you have a high cash flow or a large cash reserve to draw from, you can basically choose any business within your competence area. If, on the other hand, you have little or no money at all you have limited mediums but almost limitless options.

Without the ability to generate investment dollars from your personal and business network, you’re pretty much limited as to your options. Since I am not an expert on network marketing, I will not even discuss that here. If this is something that you are considering, please look into the systems very carefully. Know what you’re getting into and what all the costs/expectations are.

I think that the easiest way to generate income in today’s economy is to start an e-commerce site. It doesn’t take a lot of money for hosting (Check out the $10 deal from Netfirms) so buy a domain and do some experimenting. Within a few months you should be able to bring in a hundred dollars or more per month. At best, you can do like the YouTube guys and sell out for a couple billion in 18 months.

Do What You Love

I know, I know, you’ve all heard this before, but let me tell you - it’s the truth. If you’re miserable, I don’t care if you’re making $200K per year. You need to move on.

For me, I love real estate (hence my choice in investment areas) and I love building websites. That’s where my interests are so I have no trouble learning as much as I can and spending time working with people in these industries. My advice for everyone is to take a look at what you love doing and move your life in that direction.

I hope this all helps. Let me know if you have any questions.

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How To Retire Young - part 1

It’s time to drop the gloves and kick retirement in the butt. I hear you all saying it, “why would I need to think about retirement? I’ve got years ahead of me before I need to worry about that.” If that’s what you think, then this is the exact post you need to read. Notice how it goes from thinking to worrying?

The idea of retiring young is not as far-fetched as you may think. It does take careful planning and execution; however, taking the first step towards a wealthy retirement is crucial. In fact, taking the first two steps is important because, as I learned at a Power Within seminar earlier in the week:

Taking the first step just get’s you ready. You’re not actually moving until the second.

Here is a list of steps you must take to achieve retirement in the given time-lines; however, I am going to put one caveat on this method. To achieve your desired level of wealth you must understand the following three things:

1. If you decide to stop educating yourself at any time during your life, you’ll soon find that the world has passed you by - leaving your investments in limbo. Read books, attend seminars and talk to people about your area of interest. Keep educated!
2. Stop spending on credit and start paying for material possessions with cash. If you can’t afford it in cash, do you really need it? Get your spending under control and get your finances into the black.
3. Life happens. If your investments drop in value or if you make a poor decision -tough luck! Move on to the next stage in your life and don’t make the same mistake again.

With these three rules agreed to, here is a model of wealth building that is working for me.

How To Retire in 77 years

Saving. This is probably the worst possible way you can even consider thinking about retirement. This method has been known in the past as the “cash in the mattress” system, the “Under-Pace Inflation” method or the “Negative Return” technique.

Using saving as an investment technique is like storing fresh fruit in your garage “just in case”. Guess what? While the world moves you by, your money (and fruit) are losing value and freshness every moment. Think of it this way, if you are able to save $300 per month and you choose the mattress system after one year you will have accumulated $3600.

• Save $300 per month
• Increase deposit by 3% per year
• Inflation set at 2% per year

Barring a fire in the house, after 100 years you would have $1,018,115 with zero market risk. Congrats! You’re a millionaire! So what’s the down side? Other than death, at a 2% average inflation rate, the money you have in the back in 2084 will be worth the equivalent of $214,884 in today’s dollars (78.9% eaten by inflation). Can you retire on that?

Realistically, you can probably only save for the next 40 years at most. At this time you would have $263,263 worth $117,505 in today’s dollars.

How To Retire in 38 Years

The easiest and most hassle-free way to accumulate your desired level of wealth is ‘ol faithful: index fund investment. In this case, we assume the following:

• Save $300 per month
• Increase deposit by 3% per year
• Inflation set at 2% per year
• Set fund growth at an average 8% per year

You would officially break the $1,000,000 mark sometime in the middle of your 38th year; allowing you to retire at the end of the year with $1,088,833 (worth $505,303) in today’s dollars. This still isn’t the greatest prospect; however, you can adjust your final numbers based on raises greater than 3% or investment returns higher than 8%

In fact, if we go with a 23% return (for the Warren Buffetts in the crowd) you’d hit your million in only 31 years.

How To Retire in 20 Years

If you want a nice, slow and easy way to create your $1,000,000, the 20 year method is Real Estate and Re-Invest. With this method, you aim to purchase one small property each year and create a $100 monthly cash flow from each. Using staggered amortization periods, your net worth would reach the million dollar mark in the 20th year.
Assumptions:

• Purchase one property valued at $100,000 each year for 5 years
• Create a monthly positive cash flow of $100
• Increase rents by 2.25% each year
• Home values appreciate at 2.25% each year
• Reinvest the cash flow at 8% annual return

With this method, after 20 years you would have $733,855 worth of real estate and a portfolio worth $263,642 for a net of $997,840 (so we almost hit the mark…wait a week and you’re there.)

The important thing to remember in this method is that real estate takes time, patience and includes some risk. Make sure you speak to a professional in all areas. As I am not a realtor or a stock/investment advisor, this is a plan that I am using only.

Coming tomorrow

How To Retire in 10 years, 5 years and tomorrow (actually it would be the next day due to tomorrow’s release!)

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How Do You Make Your $89,000 Each Year?

I read an article online in a Canadian newspaper today that had the headline:

$89,000 puts Canadians in top 5% of tax filers

Of course, I had to stop and read this article because it interested me so much.

The information comes from the latest Canadian statistics data (Census 2004) showing the percentage of tax filers at different income levels. For comparison, the Median United States household income in 2006 was $48,201 (from Wikipedia)

Where’s the Money?
When I read this article the first thing that jumped out at me was that there was no mention of exactly how these top 5% made their income. Did they pull it in from real estate investment income or was it pure salary from one job or another?

Depending on the method of declaring this money two different people who each have a total income of $89,000 could lead very different lives.

The Salary
Consider that a salaried employee who receives $89,000 (including bonus) per year will pay approximately $25,000 in taxes which leaves a staggering $64,000 to play with ($5,333 per month). Depending on their lifestyle choices, this may result in a small positive or negative saving each month. After a number of years of 40+ hour weeks, they are able to retire with a nice investment account, reduce their monthly expenditures by half and live their remaining 30 years slowly reducing their life savings.

The Cash Flow
Canadian #2 has made some great investments in positive cash flow properties and businesses. Although his annual income is $89,000 he then includes a significant number of deductions each year. Here is a short list of his annual expenses that are claimed before he pays taxes on income:

• Travel to and from his rental properties on the Texas, California and Florida coasts: $5,000
• 15% of his household expenses are declared for home office use: $1,000
• Pens, paper, printers and computers are all declared: $1,400
• Vehicle expenses repaid: $500
• Property depreciation: $6000

All in, the investor pays approximately $21,000 in taxes and has approximately $4,000 more due to the business deductions. That’s over 6% of the total that Canadian #1 has coming in. The best part is that each of the items on the list are things that the investor wanted to do anyways. Travel, have a home office and supply it. All paid by legal government deductions.

Retiring young
The definition of retirement that I promote is that once your passive income is greater than your monthly expenses, you officially don’t ever have to go to a job again. After reading the above examples you may say that $4000 isn’t enough. Consider this: Canadian #2 doesn’t go to an office each day. She probably puts in 4 hours per week in maintaining her properties or businesses and spends the rest of the time playing, volunteering or doing whatever else she loves.

Also, upon ‘retirement’ the investor will actually have more income than they did before because of appreciation and the ability to refinance and remove thousands of dollars from their equity - tax free.

Canadian #1 spends 2 hours commuting on a dirty train each day and gets a solid 2 hours of quality time with his kids each work day. Do you know anyone who spends more time with fellow commuters than their own family?

Now which one is more attractive?

I wrote an article recently called Automate Your Multiple Steams of Income that looks at creating a lifetime stream of income that will allow you to fulfill your financial goals. Have a read and really think about where you are dedicating your energy. Is it to creating wealth for yourself, or for someone else?

* Given the recent explosion in value of the Canadian dollar $89,000 CDN is almost exactly $89,000 USD. Back in 2004 it was more like $65,000 USD but let’s not dwell on the US dollar…

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8 Steps To Successfully Budget Your Money

I’ve had a lot of questions about how I budget my money from family and friends. As you may have read in Changing My Belief System I didn’t always want or care to budget. Since 2001, I have made a system that works for my family and allows us to spend without worry that we are going to go over our annual budget numbers.

Annual budget? I have trouble with a daily budget!

Is this your concern? I thought this way in the past but have found a way to create a budget that allows you to live without counting every penny (as you spend).

Before I show you my method, I need to tell you that it’s not a miracle cure if you’ve got major debt problems. If this is your situation, your future depends on getting your spending and debt in order! Get the help you need. Don’t be afraid to ask questions and start working towards wealth.

Here is the Lewis Empire budgeting method:

1. Know all your incoming cash flow
You work hard for your money so let’s start with the fun part. Go through your year and know all the income that you are expecting. This is your starting point.

2. Know what you spend.
I now use Quicken software to help me track my expenses but I started with a simple spreadsheet. Set one up and break your expenses down into categories that will help you know where your money is going. Although I now am much more detailed, my original categories were: Entertainment (Books, Movies, Tickets), Claimable (Benefits), Business (AdWords, Domain Names), Home (Furniture, Appliances), Automotive (Repairs), Fuel, Eating Out (Restaurants), Eating In (Take-out), Grocery (Food, Toiletries), Clothing, Travel, Gifts, Cash Withdrawals.

3. Track Your Cash Withdrawals
This is the main budget killer. How often do you withdraw $60 then discover that it is all gone after a few hours on the weekend?

When I started tracking this I realized that I was taking out an average of $156 a month could not be attributed to anything substancial! That means that I had $1872 ($2600 before taxes) that was being used on small items (probably coffee) - my own personal Latte Factor! Looking at this another way, if I took that $1872 per year and invested it at 8% for 20 years, I’d have about $95,000 in the account. That changed my opinion of small cash withdrawals.

4. Know what’s coming up
If you’ve got some large expenses coming up then put them into the budget numbers today. Don’t wait until the day arrives to do this, you need to know about it now. If there is a computer in the future or you’re dying for a new ipod then work it in. The further ahead you can budget, the better off you are going to be.

5. Break everything down into monthly expenses
That $1000 car repair is $83.33 per month in your budget. Your heating bill is not $300 in the winter and $50 in the summer it’s $175 per month. The Domain name for your business is $0.42 per month.

The reason I choose monthly is because that’s the traditional pattern for most of your home expenses and how most people are paid. If you find that something works better then do it.

6. Calculate your “Investable Income”
Now that everything is broken into monthly numbers, take your monthly income and subtract the monthly expenses. That’s your “Investable Income.”

Here’s where the rubber hits the road. Is your Investable Income a negative number? That’s a problem because it means that you are living above your means. At this stage, you need to go back through all of your expenses and start to cut items until you at least reach zero. Ideally, you should be able to get to the point that there is a positive number - this is where you can start to grow your wealth.

7. Don’t spend your excess income
Excess income is not your Investable Income. Excess income is the extra account balance that will result in the months that are traditionally less expensive. For example, if your heating bill is budgeted at $175 per month but your summer bill is only $50, you should have about $125 extra in your account - remember, this is going to be used by January’s bill! Don’t spend this money.

There are two ways to safely keep your excess income. The first is to have the will power to have a lot of extra money in your account without spending it. The second (and more reasonable) is to set up an account with an online bank and deposit this money during low months and withdraw during high months.

8. Build up a buffer
This is the final secret to a successful budget. For the first few months, use your Investable Income to build a buffer within your account. This will be used to cover the months that are more expensive so there is no risk of over-draft.

Why this works
Once I had all of my numbers in place and realized that I was in a positive monthly position I knew that I would never need to worry about daily expenditures again. Budgeting is a process that needs to be continually updated or monitored. If you get a raise, make more money online or have a cash windfall then build it in. I’ve had all three happen and I didn’t just see it as a way to justify more spending. Set it in your budget.

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Living Life On Your Own Terms

A few days ago, I was discussing the real estate market, investing and opportunities in the market with some friends. One of the interesting points that came up in the discussion surrounded the ability for some to make money in these areas and the inability for others to do the same.

As we talked about some examples I realized that what we were actually doing was comparing our outcomes to others without knowing the whole story. What I mean by this is that I sometimes compare my success (and failures) to others who may have different skills, resources, goals and abilities than I do.

Keeping up with the Joneses
The old line, Keeping up with the Joneses, has begun to mean very little to me over the last few years because I’ve learned that you need to live life by your own terms. Doing this involves setting your goals based on your abilities and financial resources. This also means that you spend your money with you and your family in mind; not with the interests of your friends, neighbors or colleagues as a focus.

My Future
One of my goals is to create multiple streams of income from real estate, investing and businesses (on and offline) that will generate enough income to cover all of my monthly expenses. Once this is accomplished, I will consider myself retired. To achieve this goal, I’ve decided to set aside money for advertising, website development, sales expenses and other marketing efforts.

Once I set these goals, I set my focus on accomplishing them. Does it make any sense to spend time worrying about how someone else can afford a new car, cabin or boat? Maybe, but it depends on how they got them. If you know that they created a successful business from scratch or made money investing in the market (and that fits your goals) get all the information you can from them. Integrate their approach into your business and push it forward.

To Spend or Not To Spend?
As you can see from the recent credit crunch throughout the United States, most people as spending much more than they make. The ratio of expenses to disposable income went negative for the first time about 2 years ago and we’re feeling the hit today. This means that for every dollar in disposable income a person makes, they are spending about $1.02 – not a good situation. If this is the case, how does it help you to model your life after someone who may be spending all their income on depreciating assets?

If I had been living according to other people’s goals, I may have taken that additional income each month and put it into something important like a larger television, unnecessary computer upgrades and other material things. This is not to say that I do not spend money on things I enjoy; it’s simply that I set aside money within my budget to generate passive income. If I was concerned about fulfilling other people’s goals – impressing neighbors, creating jealousy with colleagues and pronouncing my ‘wealth’ – I wouldn’t be in the position I am today.

Please don’t get me wrong. I am not trying to determine your goals for you. Setting goals will only work if they fit your lifestyle and direct your vision of your own future. My advice is simply that you plan your financial future and don’t let marketing or peer pressures divert you from your path.

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Use The Rule Of 72 To Your Advantage

The Rule of 72 is a quick way to approximate the amount of time an initial investment will take to double in value. In simple terms, how quickly can a recently graduated, first-time worker turn their life savings ($35 and a soccer ball) into $70 and a soccer ball at differing rates of interest?

My first response would be guess. After that, I’d use the following calculation to figure it out:

Take an investment of $1,000 at an annual interest rate of 8%. Using the Rule of 72, the total time for this investment to double would be calculated as
72 / 8 = 9. In this case it would take 9 years for the $1,000 to become $2,000. This is a very close estimate, since the actual time equals 9.006468 years. That’s the whole rule - nothing short of magic!

How Precise Do You Need It?
For the best results, this rule should be used with percentage return rates between about 5 and 12% Once you begin to go above or below these rates, the delta starts to grow. For example, on a return of 2% the rule calculated doubling time is 36 years; however, the actual time is just over 35. The same goes for a rate of 25% with 2.88 years versus 3.11 actual. I’m willing to let this one go if you know of a lot of 25% return investments in the market!

Compounding and Getting Rich Quicker
Does this make a difference to your everyday life? Probably not, but knowing why it works is a crucial piece of your investment future. The real secret behind the Rule of 72 is not in the ability to figure out your doubling time; rather, it is understanding how compound interest can work in your favor.

Albert Einstein once said:

The most powerful force in the universe is compound interest

Since it’s Einstein mentioning it, let’s take a minute and see how it can work for us.

A Story Of A Rich Guy Giving Away Money

Did anyone ever tell you the story about the person who offers you two choices:

1. Accept a one-time payment of $1,000,000
2. Receive one penny today, then receive double the previous day, each day for thirty days (ex. $0.01 today, $0.02 tomorrow, $0.04 next etc.)

Which option would you choose?

Since the first choice is a cool $1,000,000, most people choose it. Easy money…right?

Assuming you can trust the person to continue to pay you everyday, your bank account would look something like this:
(new payment + start balance = end balance)
Day 1 $0.01
Day 2: $0.02 + $0.01 = $0.03
Day 3: $0.04 + $0.03 = $0.06
Day 4: $0.08 + $0.06 = $0.12
Day 5: $0.16 + $0.12 = $0.24
Day 6: $0.32 + $0.24 = $0.48
Day 7: $0.64 + $0.48 = $0.96
Day 8: $1.28 + $0.96 = $1.92
Day 9: $2.56 + $1.92 = $3.84
Day 10: $5.12 + $3.84 = $7.68
Day 11: $10.24 + $7.68 = $15.36
Day 12: $20.48 + $15.36 = $30.72
Day 13: $40.96 + $30.72 = $61.44
Day 14: $81.92 + $61.44 = $122.88
Day 15: $163.84 + $122.88 = $245.76
Day 16: $327.68 + $245.76 = $491.52
Day 17: $655.36 + $491.52 = $983.04
Day 18: $1310.72 + $983.04 = $1966.08
Day 19: $2621.44 + $1966.08 = $3932.16
Day 20: $5242.88 + $3932.16 = $7864.32
Day 21: $10485.76 + $7864.32 = $15728.64
Day 22: $20971.52 + $15728.64 = $31457.28
Day 23: $41943.04 + $31457.28 = $62914.56
Day 24: $83886.08 + $62914.56 = $125829.12
Day 25: $167772.16 + $125829.12 = $251658.24
Day 26: $335544.32 + $251658.24 = $503316.48
Day 27: $671088.64 + $503316.48 = $1006632.96
Day 28: $1342177.28 + $1006632.96 = $2013265.92
Day 29: $2684354.56 + $2013265.92 = $4026531.84
Day 30: $5368709.12 + $4026531.84 = $8053063.68

Did I read this correctly? After 30 days you would have over $8,000,000!

After 26 days you still have less than half the original million dollar offer but four days later, you’re shopping for a new Ferrari.

While the ability to achieve a return of 100% per day is next to impossible, the same thing happens at much lower interest rates. Warren Buffett was able to create his multi-billion dollar fortune by starting with only $100,000 of investor money and finding investments that would give him returns of over 20% per year. Using the rule of 72, Buffett was doubling his investment every 3.60 years and enjoying every minute of it.

A Wake-Up Call
Most people have this idea that they will somehow be able to retire young without actually investing any time or money. If nothing else, let this be a wake-up call for you! The more time you are able to dedicate to your investments, the easier it will be to achieve your retirement goals.

Use the rule to your advantage. Think of it this way, a 20 year old who invests $100 per month until the age of 65 will have approximately $465,000 with an annual return of 8% upon retirement (please don’t think I want you to retire that late or with that little!) If the same person waited until they were 40 to start investing, they would need to invest $529 per month to achieve the same result! If that person only decided to invest the same $100 per month, they would end up with a paltry $87,750. Now who’s happy they spent $3 less per day?

Will this happen to you? I don’t want it to happen to anyone. Use the rule. Retire Rich.

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Tags: investing, compound interest, money, money management, Albert Einstein

Thanks For The Bad Advice Fools

I just read an article by the guys over at The Motley Fool on investing in stocks versus investing in Real Estate. The article is called What Happens When The Boom Goes Bust?

They give a great example on how a person who bought a house in 1980 for $76,400 would have a current value of $295,100 - resulting in $218,700 in equity (apparently the mortgage was interest only). The positives end there. They correctly point out that the annualized return on the price of the home was 5.6% over the period. Now let’s move on to the stock market…

The Fools (this is what they call themselves) point out that the stock market (S&P 500) average over the same period ends up at about 10.3% You’re probably saying to yourself, “Wow, thanks for pointing this out, maybe it’s time to sell my house and dump it all in the market!”

This article fails to point out two MAJOR real estate investing rules:

• Use Leverage (Other People’s Money) to move your investment further than your own cash could ever get you
• Have other people pay off your expenses by renting the property

Using the example by the Motley Fools, a person who invested $10,000 in 1980 would have approximately $115,981 over a 25 year period - an amazing return. Now look at the 25 year value of a $76,400 property purchased in 1980 - that’s right $295,100! After the renter pays off the mortgage and interest, the real estate investment would be worth $295,100 or a sweet $179,119 more than the stock market investment. Even with zero cash flow, you still have twice the money.

The next best part about the Motley Fool article is their fictional character Sal. Sal has flipped properties and made a million dollars. The Fools then say

And even if Sal did make a million in 2003, is he set for life? Certainly not. In order to make that nest egg last, Sal can only withdraw about $40,000 a year. Our guess is that Sal wants to live better than that.

I’d agree that Sal is probably going to want to live better than $40K per year. I’m also guessing that if Sal is smart enough to flip real estate and make $1,000,000 dollars that he’s also smart enough to diversify his accounts. Does a stock investor just pull out all their money when they hit the $1,000,000 mark? Earlier in their article the Fools say that the S&P 500 averages 10.3% per year. Doesn’t that mean that Sal could just throw it all in the market and live off the $103,000 in yearly growth?

Oh, I forgot, for the purpose of this article, people are not allowed to do crazy things like invest in real estate AND the stock market. I understand where the Fools are going with their article…they sell investment advice and want to continue to sell investment advice.

Until today I had actually enjoyed the Motley Fool website and their stock investing advice. Their book The Motley Fool: You Have More Than You Think was one of the first personal finance books I read. It helped me see a different side of controlling your costs and investing for the long term. After reading this article, I’m off their mailing-list.