Paying yourself first

Discussion in 'Investor Psychology' started by Xenia IM, 14th Mar, 2015.

  1. Mr. Fabulous

    Mr. Fabulous Thought Criminal

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    Investors can get in on this action by investing in listed Venture Capital firms. I don't feel bad about it or feel that anyone has done anything wrong. Making money in shares is easy - do your research, identify companies with a strong competitive advantage, gain as broad an understanding of the business as possible, figure out what the business is worth and buy shares in the business when they present a significant margin of safety. It's not rocket science.

    This requires patience and discipline. Sometimes it can take years for an opportunity to present itself. But patience has its rewards. I was watching Blackmores for 4 or 5 years, then bought when the shares fell to $27. They kept falling to $20, but I couldn't buy more due to restrictions from the super admin (I was spewin'!). This has now become my star holding.

    Could've bought Flight Centre for 32 bucks after the Air Asia crash. What does Flight Centre have to do with the crash? Nothin'! But it's in the business of selling flights. I missed out on this golden opportunity, because I was waiting for it to go down *just a little bit more*. As of today, it's trading at nearly 41 dollaridoos.
     
    Last edited: 23rd Mar, 2015
  2. MIW

    MIW Member

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    Because we are only human, perhaps what we thought we wanted to do wasn't in our heart? I for one have left the profession I qualified for, so I am sure there are many others that change what they do in life, right?
    The illustration was just general in nature it can apply to any profession, being a lawyer, accountant, etc....
    Let's say the doctor wished to be taxed differently, as business generates income first than pays tax, different rules right? Employees' tax is deducted upfront, they don't see that money.
    So why, I do not know, but most search for more or where their passion is?
     
  3. MIW

    MIW Member

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    I agree with his concept of what he said, I do not know him nor his experience, I am often open-minded, so I try not to judge that. We may have similar mindsets that's all.
    I do not understand why a discussion suddenly becomes someone's personal experience? When we read a book we can take things away and apply it without really knowing if the concepts or ideas have been really practiced by the author, or if they will work for us, right?

    I agree with you that most business owners, most people yes, cannot just 'not turn up', especially if you are growing your business, eventually their business becomes there passion and they do not for see it as their job, rather they love what they do.

    You are limited though by your belief, I personally know of friends who travel the world 8 months of the year, each year and have done so for the last 12 years. YET, their income and wealth keeps increasing....Their son runs part of the business now with the so called "managers", I never intended to go into the details of how things are run but people in true business leverage not just money but time by levering people too.
    Another option is to sell the business and my other successful friend sold his. So it really depends what one's needs and desires are...

    As I reiterate, I am open minded, I will read and listen to all, even you, what I do with that information is then up to me or you, right? I am not enhancing others more or less, I have read many authors, I am just presenting my point of view, that's all. We are all different and as I say we like our tea or coffee differently, right? SO yes we agree with some and disagree with some....
    Your point above was presented to me by another dear friend, about 15 years ago, who suggested I fill in authors' pockets by buying their books or seminars, or whatever!
    AND, my answer to this was and still is..."If I take one thing out, from that useless crap as you put it, and apply it and make my life better, I do not care how much they make!".
    Since that time I have learned few dear lessons and gained some too, so you see it's up to our mindset, to see whether it is of any benefit to us!
    The concept I tried to illustrate unfortunately applies only to few, only few are on the top if we look at a pyramid scheme of things. However, I have seen people with nothing making huge leaps ahead... Perhaps sharing this on this forum is not such a great thing, you tell me?:confused:
     
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  4. MIW

    MIW Member

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    So how would you classify John McGrath in Real-estate, is he a business owner or investor? Basically, you can be in both categories, I do not understand why people just wish to place in one or the other? The whole discussion is puzzling me?:confused: In fact most that made huge money created the businesses which in turn permit them to invest, right?
    He owns his real estates business, investments, publishes books, attends the block as a judge, I think he maybe on the new program "The Sharks" where the aim is to invest his money into other people's ideas or businesses or services, writes in Magazines, etc...
    He is just one man, yet look what he created? That's the kind of business I am talking about, how he alone could manage it all, he has processes and managers in place, and he couldn't possibly manage all this himself. Yes he created it all, yes he is involved, but if he chose he could sell it and do nothing at all, but why would he, when he create his vision, he really must love what he does and where he lacks the skills he will outsource them, like most successful do! I also think he has a family so I am sure he may time off....
    Yes, there will be disappointments along the way, but all I am saying it is possible, that's all! People have genuinely created businesses whereas most unfortunately are self-employed! I feel for them as they try to do it all on their own....and that's very hard!
    Anyway, I think I spent enough time on this thread......
     
  5. Blacky

    Blacky Member

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    Are we not getting a bit to carried away with where the income comes from?

    To me, no income is completely passive. It all requires some level of effort to generate. If its watching the stock market, dealing with property managers, or even talking to your accountant once/twice a year to sort out how much tax you need to pay - and plan for coming years. It requires some level of time commitment.

    If you make NET $100,000 from business, or $100,000 in salary - there are only a few differences.
    1) The opportunity cost (what could you do with your time if you weren't making the money)
    2) the real risk
    3) the opportunity/possibility to increase the income
    4) the enjoyment you get from doing what you are doing

    If you spend 40hrs a week working for 'the (wo)man' or 40hrs a week 'being the (wo)man' - and everything else being equal - what difference does it make?

    There comes a time when the risk/reward and opportunity cost of working another year becomes too great. The revenue generated at work doesn't create the marginal benefit required in order to make it worth while coming back tomorrow, and one would be better off walking away, earning nothing and starting their own business with the intent of generating incomes far in excess of what you can earn working for someone else. This will probably require greater time/effort and risk initially - with the opportunity for future benefits.

    This pendulum swing will depend on 1,000 different factors and there is no one right answer (till you can see it in hindsight - at which point its too late anyway).

    Blacky
     
  6. Mr. Fabulous

    Mr. Fabulous Thought Criminal

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    Not sure where this came from. I pointed out that RDPD was good. The rest of it is crap.

    I read extensively. As of the start of this year, I've read 27 books and have 4 on the go right now (not all business books). I read lots of biographies as I enjoy learning from people who have gone before.

    RK makes his money from selling books and seminars. Nothing wrong with that, but he isn't selling anything useful. His target market is people who want the easy sell and seminar junkies.

    I remember having a discussion with someone who went to see him speak who traded options for a living. She told me during our chat that he (RK) clearly had no idea how options worked, which made me wonder what else he sells that he has no idea about and made a decision at the time to focus on studying people who actually do know what they're talking about.
     
  7. Deltaberry

    Deltaberry Member

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    So it's a low maintenance business no?
     
  8. Deltaberry

    Deltaberry Member

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    Precisely. No point getting hung up on how much effort or time is expended, we are all after the same end result.
     
  9. Mr. Fabulous

    Mr. Fabulous Thought Criminal

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    No I'm not and I'll tell you why. Top tier managers (like the ones that run your friends' business) are a very rare breed. I would estimate they are about 5% of the management pool. Maybe that's being too generous, I dunno. Anyway...

    So out of 100 businesses, only 5 of those businesses are going to be able to have management in place that gives the owners the ability to down tools and walk away for any given length of time. That's just reality. Keep in mind that some of those 5 managers are going to end up working in a substandard business where their talents are wasted, so that shrinks the pool even further.

    You could say 'Well, put systems and processes in place' and I would agree - I'm all about systems and processes. I love systems and processes. Heck, I even love saying 'systems and processes'. However, systems and processes aren't fool proof. In the majority of cases, you still need someone supervising to make sure the systems and processes are adhered to. Why? Because people are idiots.

    I mean, even with systems and processes in place, where the minimal amount of thinking is required, even then 95% of managers still need to be managed. Think about that.

    So your friends are either lucky or smart. Either they just happened to pick the right manager, in which case they got lucky or they made a conscious choice to find someone who fit their business model perfectly and they spent a great deal of time making sure that person was capable of handling business if/when they disappeared for months on end.

    So I guess you may be right - maybe my thinking is limited. Limited to finding one of the 5% of people who are capable of managing my business properly, when it gets to that stage.
     
  10. Mr. Fabulous

    Mr. Fabulous Thought Criminal

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    Just read this and thought I would post it up.

    The "Save Big Rule": Don't save small. Save big. Big is a worthless college degree. Big is a house. Saving 10 cents on a cup of coffee is a poor mans way to get rich. There is a myth that 'saving a dollar is the same as making a dollar'. This simply is not true. It ignores the fact that you start off with money. If you start off with $100 you can ONLY save $100 but you can MAKE a gazillion dollars.
     
  11. Ace in the Hole

    Ace in the Hole Don't compete, Dominate !

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    Always agreed with this.

    There's been past posts on this forum about frugal living and how to save a dollar here and there, usually by inconvenient, time consuming and going without means.

    It's great to start off with that mindset when starting out, but it should not be a long term plan.
    I believe the plan should always be to focus on increasing income rather than reduce spending.
    Once you get on a roll, increasing income is much easier than cutting costs.
    Why go without if you don't have to?
     
  12. pinkboy

    pinkboy SS Lookerafterer

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    I've said it a few times before. Quite simply;

    Saving is finite, earning income is infinite.


    pinkboy
     
  13. cimbom

    cimbom Member

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    Funny story - a few years back, I was running a website doing paid tarot card readings. I paid Google to get placed higher on search results and was getting customers almost every day. I had a bit of a guilt trip one day and ended up shutting the site down. Sort of regret it as I could have built it up significantly by now :eek:
     
  14. Biz

    Biz $17 DOLLAS YO!

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    lol I can't believe people fall for that stuff but they do. We have a friend who broke up with her bf and went on one of those sites where you can buy spells (I didn't know they existed either before this! :eek::eek:) They had 3x different spell strengths to get her boyfriend to regret giving her the flick so she opted for the full strength $150 dollar deal.

    Now....THAT is passive income people.
     
  15. cimbom

    cimbom Member

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    Haha, that's hilarious. I might steal that idea :p
     
  16. Xenia IM

    Xenia IM Property Manager

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    Biz - that is gold!

    I have a friend who sold a ghost in a bottle so that people can add it to a house and decrease the sale value because it will then become haunted!

    Who says there are no creative ways to make money!
     
  17. Blacky

    Blacky Member

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    I find most cost saving measures inconvenient. However, it is also a matter of aligning your lifestyle to be 'low cost'.
    Focus on the big items and let the small items take care of themselves. skimping on a coffee? no thanks (cost $1800/pa)
    Not owing a car - works for me (saves $1,500/month)

    For me personally I targeted doubling my income every 5years - without 'upgrading' my lifestyle. So far its one of the few life goals I have actually achieved/exceeded.
    My lifestyle HAS increased - but not proportionately. I can save more now than what I used to earn.

    Blacky
     
  18. cimbom

    cimbom Member

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    Yep, me too. Huge saving :)
     
  19. S.T

    S.T Member

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    Reminds me of all those millionaires clubs, people sign up thinking they'll get rich and the people teaching them are not even millionaires!
     
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  20. MIW

    MIW Member

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    I read somewhere the true wealthy concentrate on increasing their assets not income. But I suppose again it is up to us to decide what we want in life?