Hi Brian - are you using a self-directed IRA for your real estate investments? Also, what sort of retirement account are you using for your business. SEP-IRA vs 401K.
Thanks,
Chris

Hi Chris,

This is a great question, and it might surprise you to hear that I don’t use any IRA’s or 401K’s whatsoever.

The reason is simply that I’m working toward building financial freedom which is quite a bit different than working toward retirement. Let me explain…

What most people do (working toward retirement) is to save a bunch of money so that one day when you are 60 or whatever you can finally stop trading 8 hours of every day for a paycheck. Then in your old age you live off your savings, pinching pennies and hoping that you die before your money runs out.

Working toward financial freedom is a little different. The way I define financial freedom is that your passive income exceeds your expenses. So if all your expenses, including everything from rent to movie tickets, is about $3,000 per month (just as an example) and your passive income is $4,000 per month, when do you have to go back to work?

The answer is of course, never. So why have a retirement account? That same passive income will be there whether you are retired or not. It will be there whether you are 20 years old or 80 years old. It will be there whether you are bed ridden or in good health.

In fact it will continue to grow as you reinvest (plus real estate income automatically adjusts for inflation, etc).

Anyway, businesses that you own or invest in, real estate, book royalties, etc. These are all good passive income models.

Kiyosaki has some great stuff on this topic by the way.

I had a Roth IRA for years before I started getting more into this stuff but I decided to stop using it because of the above reasons. Basically I wanted to be financially free in something like 5 years, and waiting to take advantage of it until I was 65 made no sense to me.

The penalty for liquidating it was miniscule too, since all contributions to it are untouched and they made up 95% of the value. Only got taxes and penalized on the 5% that was gains.

Before I finish up I just wanted to make a few other points.

1. Many people do these types of retirement accounts for the tax advantages. Real estate has huge tax advantages and I get the benefit now instead of waiting till I’m 65, so I prefer real estate.

2. Rich people don’t use these types of retirement accounts. Do you think Bill Gates or Donald Trump have 401K’s and IRA’s? They own businesses and real estate which pay them whether they work or not.

3. I realize that what I’ve said here goes totally against conventional wisdom that 90% of people follow. And any financial planner reading this probably thinks its ridiculous. But most financial planners aren’t rich (otherwise, why would they still be working) and I get advice from rich people.

Anyway, this post can sound somewhat arrogant and it will probably challenge many people’s closely held beliefs about financial planning that they have followed for years.

So I will just end by saying that I don’t claim to know everything here. I am very much a student of this as well. This was simply the conclusion I came to after doing the research and talking to rich people, so thats what I decided to do.

Take it for what its worth, and keep breaking free!
Brian Armstrong

These will be rapid fire responses.

HelpYourSelfGetLucky.com asks:
I was wondering if you can shed some light or give some advice on how to break free when you have a family to support. I have a wife and 2 kids.

I don’t have direct experience with this myself, but I can tell you that many entrepreneurs have still done it.

The only difference is that you can take a little less risk if you are the sole breadwinner. As a bachelor you can quit and live off ramen noodles for a while if you are really dedicated, but as a father/husband you don’t want to mess things up at home. That will just make it even harder to get a business started.

My suggestion is to stay at your current job while getting your business started on the side. Wait to quit until you can match (or at least get close) to your current salary. Set yourself a goal of how much you need each month coming in from your business before you can quit. That will make it a real number to work toward.

This will not be easy, and you’ll be exhausted. Stick with it, its worth it!

Would you suggest using a straight forward domain name such as collegestudenttutors.com as you used for your recent business or would you suggest using something a little more on the humorous side to get people’s attention and them to remember the name such as yahoo.com?

For small sites I like using domains that contain your primary keywords. This helps it rank in search engines and is a good trick. For example this site ranked #1 in Google for my primary keyword phrase “houston finance tutor” or “finance tutor houston” within 30 days just because of the domain name (did no other SEO). Granted, its not a very competitive keyword.

But if you’re going to stick with a site for a long time and are willing to invest in making a real “brand” out of it then go for a more memorable name, even if it doesn’t directly suggest the product.

Quick tip on picking a brand name: the human brain likes names that have repetitive sounds (this is called alliteration). Think about how memorable these phrases are, how they’ve spread, and how if you hear it once its impossible to forget: Coca Cola, Marilyn Monroe, Dunkin Donuts, Rolls Royce, King Kong, Bed Bath and Beyond. Even pop culture phrases like “player hater” or “junk in the trunk” (note it doesn’t have to be the first letter that repeats, just the sound). Anyway, if you can use alliteration it helps an idea spread.

Caroline of Lotto Lifestyle asks:

When working for yourself, what can you do that really works and what we should stay away from?

First of all nice use of alliteration in your domain name! To build financial freedom I like real estate, I like new websites or pieces of software that solve everyday problems, I like subscription products or services, I like advice/information products a lot, I like blogging.

Stay away from any kind of network marketing or mlm type stuff (sorry I know some people on this site do that but I think they are generally a huge waste of time and have nothing to do with starting a real business), stay away from day trading or any stock stuff in general, stay away from trading time for money or labor intensive stuff (like opening a restaurant/franchise, etc), stay away from selling instant weight loss pills or anything you don’t genuinely believe in.

I heard Eben Pagen say one time that poor people have the mentality that “if I can just get a million people to give me one dollar each I’ll be rich”. They have the mentality of getting.

Rich people have the mentality that “if I can GIVE AWAY $100 dollars of value to a million people, maybe some of them will give back $10 in return”. They have the mentality of contributing a MASSIVE amount of value to a MASSIVE amount of people.

All those things I just mentioned to stay away from are (in my mind) more about getting something than contributing value.

Got a question for Brian? Send it to me, or post a comment below.

In your opinion, when does it make sense to follow the plentyoffish model (ad supported) vs. the provide a service and charge a subscription model.

Taking that approach for example, someone could start a tutor site, make it ad supported, and potentially disrupt your site.

Thanks,
Aaron

This is a great question and I had to spend some time thinking about it.

What I came up with is that if you have the best site you can go with a subscription model, and if you don’t then a free ad supported version is a good alternative. Here’s what I mean:

Usually its not too difficult to look at what’s already out there and do it just a little bit better. This was the case with the tutoring website I put together. What’s out there currently is really not very good, so I was able to make a better site, and hopefully people will pay a small premium for that trust or convenience or whatever else they are getting from it.

On the other hand, if you are making a new site and you don’t think you can be beat the incumbent (like for example if you are trying to compete with match.com which already has a ton of users and fairly decent site), then making your site “free” could be your best competitive advantage.

In summary, you have to offer SOMETHING better to get people to use it. If you can’t offer a better service, then offer a better price (free). Or do both.

Hi Brian,
Any suggestions on how I would go about getting a mentor with a similar specialization that would be willing to help future competition? Any suggestions would be greatly appreciated.
-Michele

Hi Michele,

Just think about who is doing what you want to do already SUCCESSFULLY. Then try to get their email or just show up if you have to and ask for 5 minutes of their time. Tell them you’d like to get started and would appreciate any advice they could give. Ask them how they got started when they were in your place. Play to their vanity and desire to teach others.

If they are already successful they won’t care about creating competition because they’ll know competition is good for them and helping others is even more to their advantage. If they do care about this then they are small time and you don’t want their advice anyway, trust me (you should run out the door).

They’ll probably give you some task (book to read, or put some plan together, etc). Do it (this will prove to them you’re serious) and now you can check in with them later to show it to them. Ask for the next step and do it. Repeat, and you have a mentor.

Brian

This is a guest post by Manuel Zeh, a friend of mine who has been travelling the world for 7 years and has come to some interesting perspectives on life. Manuel has travelled 40 countries on all continents and lived in 10 of them. He speaks 9 languages and is a professional pianist who has performed on Indonesian TV, at the Sydney Opera House and on the cruise ship “Sun Princess”, among others. He currently lives in Tokyo, Japan. Take a minute to check out his website at: www.manuelzeh.de

1. Retirement is NOT the goal of the game.

I used to think I want to work *really* hard so I could retire *really* early… when I suddenly realized that I wasn’t living life to the fullest now, while I’m still young. In a way, “working” means putting a price tag on your time, and selling it - and I believe my young years are priceless… they never come back. Yes, plan for later… but live in the present. The “now” is the only time we really have, and life is not a race, in which “whoever dies first, wins”. Statistics show that many people die soon after retirement, because they don’t have a purpose to live for anymore… other studies show that people who never HAVE to work again at an early age usually start to work HARDER then before, because that’s when they start doing what they love. Do these things you love NOW… they are likely your true calling.


2. Salary is NOT a good criteria to choose a job

Many people choose a job based on how much money they will make. Consider this… you spend MOST of your waking hours in your job - and life is made up of time, not money. Make your jobs something you love doing and you’ll never have to work a single day of your life! I believe the best three criteria to choose a career path are:
- something you love doing and are passionate about
- something that contributes / is useful
- something you have a talent for
If you fulfill these three criteria and learn how to market yourself, the money will follow… and you’ll be loving every minute of it.

3. A fun life full of experiences and achievement are NOT mutually exclusive

When I started travelling the world 7 years ago, I used to think that you have a choice to either ACHIEVE a lot or to EXPERIENCE a lot… and I consciously chose the latter. I’ve since found that if you follow your heart and your passions, things just fall into place and you’ll end up achieving a lot as a by product. Sometimes I’m surprised when I look at my CV and how impressed many people are by it, even though (or maybe because!) I’ve spent the better part of a decade travelling and having the most amazing life I could have dreamt up for myself.


4. Your parents do NOT always know what is best for you

Once I was dating a girl who, when she was 19, had wanted to travel. But she succumbed to family and society pressure and went with the responsible, financially secure choice instead. She went to uni, postponing her travels and became a dentist. When I met her, she was 26 and almost done studying… and she realized that she doesn’t even want to be a dentist, but it was too late. She also realized that she couldn’t really travel anymore because at 26 you’re not as free as at 19… she was already tied up with career, family duties, bills, a relationship, and so forth. I firmly believe that, if she had travelled at 19, she would have found herself. She would have discovered her true identity and what she really wants in life, instead of taking on a profession that she’d end up resenting. She would probably also have been a lot more motivated during university… studying with the serenity of knowing that she has already lived out her dreams, and that she’s pursuing a career she loves.


5.You do NOT need to be rich to travel the world

If a week in Florida can easily cost a few thousand dollars… how much is it to travel the whole WORLD for many YEARS? People sometimes ask me whether I’m a millionaire. Far from it… the formula is, I work in first world countries and save up. Travel in 3rd world countries. Latin America, Africa and Asia are ridiculously cheap… whereas in Europe, North America, Australia, Singapore, Japan and South Korea, you can make very good money. But there are many different ways to travel… most recently I worked on a cruise ship. Good salary, no tax, free food and accommodation, access to all the pools, gyms etc on board, lots of free time, travel in the South Sea on a pay check, and free excursions to all the islands.

Don’t come to the end of your life regretting the things you did NOT do… don’t dream your life, live your dream!
My best to you all,

Manuel Zeh.

Take minute to check out Manny’s website at: www.manuelzeh.de

Hey Folks,

This is going to be my first video blog. I’m trying out a new format. Please let me know which one you like better (written or video) in the comments!

A couple things I noticed on the video that I think could be improved: I’d like to keep it shorter and denser with information. Also I realized that I never sound very EXCITING when I talk. I think doing more video blogs over time I’ll get better. Probably a combination of video and some written outline or graphs could be a good combination. Let me know what you think!

Here is the written equivalent…

I’ve practiced this for a long time myself, but it just occurred to me again the other day and I thought I’d post about it: in general the mainstream news (television, radio, and print) is an utter waste of your time. And worse than that, it’s probably preventing you from becoming successful.

There are a few reasons why…

1. The News Is Full of Negative Stuff

The old saying in media is true that “if it bleeds it leads”. The news tends to overreport negative events like murders and crashes because it gets ratings. You can’t help but have these things affect you over time, and it slowly but surely starts to make you think the city is dangerous, or that the world is hostile, or that opportunity isn’t out there. All of course are incorrect, but whatever you spend time watching and reading becomes your reality.

2. The News Is Designed To Scare You As Entertainment

The story of the little girl who was kidnapped is addictive to watch. It robs you of your time. The story is designed just like an entertainment show, to keep you hooked waiting for what will happen next.

Some people would say its important to watch this because it gives you valuable safety information. We can prove to ourselves that this isn’t true by looking at the statistics.

Statistically, you are very unlikely to get kidnapped, die in a plane crash, or to choke on a small plastic toy. Yet this is what gets the media attention. I wrote about this a while back, how humans are bad at estimating risk. After 9/11 many people were scared to fly, and this perception caused about 1.4 million people to drive instead of fly to their holiday destination, effectively killing about 1000 people in additional auto fatalities (you’re much more likely to be killed in a car crash than a plane crash).

The news isn’t giving you valuable safety information on things that are likely to kill you (it’s boring to report on heart disease), its designed to scare and keep you watching.

3. It’s Biased

I couldn’t believe it the other day when I accidentally spent a few minutes on Fox News and then on CNN as I flipped through the channels. Fox news was essentially crucifying Obama while CNN was vigorously defending him. Of course not directly, but by the guests and hosts on the show.

I couldn’t believe how blatant it was. In theory the news should just report the facts and let us make up our own minds, but they (mainstream media) can’t even do that today it seems.

4. It’s For The Most Part, Irrelevant

99% of the stories you see on the news can never, and will never affect your life, period.

The reason is that its tailored to a wide audience. So you will have to wade through all sorts of junk you don’t care about that wastes you time to get 1 or 2 nuggets of useful information.

The Solution

So if mainstream news is a colossal waste of time that is polluting your brain with negative thoughts, what is the solution?

The first step is to spend as little time on it as possible. Reading a book on marketing could make you an extra $100,000 this year whereas watching a show on a tornado 1000 miles away will never affect your life one bit.

So, I spend about 20 seconds (literally) per day reading the news. This is no joke.

I do it with a new aggregator service that delivers articles to my inbox (I use Yahoo News, but Google News is great too). I just scan the first 5 headlines or so (they are ordered by importance) and delete. If I see something that is interesting or could really affect me (which is rare), I read deeper. This is better for a few reasons…

Its fast. With about 20 seconds per day of scanning headlines, you can know enough to know what’s happening in the world. At least as much as any reasonable, intelligent person needs to know.

Its unbiased. News aggregator services send out news based on what is being said in hundreds or thousands of news sources. You get the most important based on collective thought, not one person’s agenda.

Its more targeted. You can get email updates on specific areas like business, sports, or whatever is important to you.

Try it out. And with all your extra free time you should start reading and watching material that is WAY better than the news. You should be watching speeches by important innovative leaders in your field, blogs in areas that interest you, and listening to audio books in your car instead of the radio.

In fact, every morning while I’m eating breakfast I don’t read the newspaper. I read blogs (in Google Reader) like Signal vs. Noise, Seth Godin’s Blog, and The Four Hour Work Week to fill my mind with relevant, though provoking, educational, motivating material. And then I go take on the day. Because of this I’m much more effective during the day than if I’d started it by watching a story on Britney’s trip to rehab. Blogs in many ways are the new unbiased, educational, positive newspapers for successful people I think.

Derek Sivers discusses the exact point I made a few weeks ago (with a much better example than mine)

If you sell pens for a living and someone orders a million pens, no problem! You just place an order with your manufacturer for a million pens, get them to the customer, and celebrate.

But if you do hands-on massage for a living and a recent spot on Oprah gets you a waiting list of 10,000 people, “you’ll wish you were in the pen business.”

This is Why MLM and Network Marketing Don’t Work - ask yourself these before getting too far into a new business idea

Why are we doing this?
What problem are we solving?
Is this actually useful?
Are we adding value?

Don’t Listen To Negative People

I’m sure that the moment man discovered fire, there was some guy nearby saying, “Too smoky. Can burn you. Lame.”

Scott Adams at the Dilbert Blog Forgets the Best Option: Self Employment and Passive Income Streams

Sleep: 8 hours
Exercise: 1 hour
Work: 8 hours
Eating: 2 hours (leisurely)
Hygiene: 1 hour
Travel: 1 (Commute, errands)

That leaves you three hours for family time, sex, shopping, food preparation, chores, household repair, volunteering in the school, and so on. If you have a dentist appointment, or your talkative relative calls, or American Idol has a two-hour special, you’re tapped out.

37 Signals Celebrates People Who Quit Their Jobs

Five little companies were featured to showcase the owner’s decision to leave their daily rat dace of a life behind and dive into the uncertainty of following their dreams. Here’s the kicker: These 5 companies are some of the most mundane, normal, average little companies out there.

These companies aren’t going to beat Google, they aren’t building a better iPod or bread slicer. There’s no “the next Facebook” and not a mention of angel funding. These entrepreneurs are doing simple things they love and making a pretty decent living from it.

Oprah discusses: What should I do with my life?

Most of the time when we try something new we try to hide it.

We try not to make all the mistakes that we assume new people make. Once in a while (1 in 100) it works and we stumble upon something that we are a total natural at.

But for almost everything else in life, its pretty obvious that we are no expert the first time we try something. In fact, most of the time we downright suck at it for at least a year.

When I started doing brazilian jujitsu I was terrible at it. Every week for about 3 months I would go in and just get tapped out over and over again. It was pretty discouraging at times. I remember the first day I actually submitted an opponent (won) after about 3 months. He had just started and was even more inexperienced than me, and he promptly beat me again in the next round, but still…I had actually seen a little progress.

This is true for learning marketing, how to start a business, how to play the guitar, go on a date, throw a pitch, or dance salsa. Pretty much anything worth learning in life is like this.

A lot of people live their entire lives in a perpetual state of mediocrity at everything they want to learn just because they don’t want to admit to other people that they aren’t an expert. They aren’t ok being bad at something for a while.

They even get defensive if someone gives them advice. “Why would you even say what? I KNOW how to do that.”

I have the utmost respect a for totally clueless person who at least knows it and is eager to learn. I’ve been that person a bunch of times in my life.

But there is nothing more challenging to work with than a totally clueless person who argues with every suggestion.

I heard a cool parable one time about a man who wanted to learn from this old guru who lived on top of a mountain. He hiked up there, found the man, and told him his desire to learn. The old man said “very well, before our first lesson let us sit and have a cup of tea”. The old man began to pour the tea into the cup of his visitor. He kept pouring till it reached the top. He kept pouring and pouring until the tea had run over and was getting everywhere. The man leapt up from his chair and cried “stop! the cup is full!” And the guru said, “your first lesson is to know that I cannot add any more to a cup that is full. For me to teach you new ideas, you must clear your mind of what you already know”.

Do yourself a favor and admit when you’re clueless. If you’re not getting the results you want, let whatever ideas you have go and be willing to try anything that someone who IS getting the results suggests. You’re not fooling anyone anyway, they’ll admire the honesty, and you’re learning curve will go up drastically.

“Anything worth doing is worth doing badly at first.”
-Unknown

About a year ago I walked into the local SCORE office in Houston and was very impressed. I waited only a few minutes for my appointment (which I’d made on their website) and was soon sitting across from an elderly retired gentleman in full suit & tie who was once the CEO of his own large successful company with over 100 employees (before he sold it and retired). We talked for several hours, he listened to my good ideas and my bad, was respectful and asked lots of questions, and occasionally offered sage like advice.

After this we kept in touch by email, I can go back for more meetings whenever I wanted (he volunteered about one day per week) and it was all free.

SCORE is an outstanding and under utilized resource for would be entrepreneurs. The volunteers are all former entrepreneurs themselves - which you know if you’ve been reading this blog for a while is very important to me. You should only get advice from people who have actually accomplished what you’re trying to do!

Whether you have an existing business, or have no idea where to start, SCORE is highly recommended. If you are lucky enough to live in a city where they have an office, do yourself a favor and go make an appointment right now: http://www.score.org

Also worth reading: Maverick’s At Work

Old version: work hard (for a very long time), achieve success, earn freedom (to retire and do all the things you missed out on while you were working)

New version: find work that affords you freedom = success

Have you ever seen someone complain about a parking ticket as if it’s the end of the world?

Have you been cut off in traffic and let it ruin your whole day?

How many times have you let your experience at the airport (crying baby, delayed flight, missing luggage) be the first thing you bring up in conversations with friends?

I want you to repeat after me: “these things happen”.

We all have these types of events come up in life, but successful people just go on as if nothing has happened, and unsuccessful people let it derail them.

The next time you feel a surge of anger coming on over an insignificant event in your life, go over these points in your head:

1. You look like an idiot
   There is no polite way to put this. When others around you see you COMPLETELY lose it over the dent in your car door, they aren’t feeling sorry for you and wondering how they can help. They are subconsciously judging you and coming to one inescapable conclusion: you aren’t in control of your life.

   If something this small throws you off, imagine how you’d react to a REAL problem in life. Overreacting tells the people around you that you can’t be trusted to deal with important issues. You’re not the goto guy (or gal) when they’re in need, because you can’t even take care of yourself.

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