What is S.A.F.E. investing?

S.A.F.E. is an acronym I created that stands for simple, affordable, fun and effective. As oppose to H.E.L.L., hard, expensive, long and less.

Back in 2003 when I decided to become a full-time professional entrepreneur and investor I wish I knew what I know now. I didn’t have the knowledge and experience I do now.

What drove me back then more than anything was my desire to escape the drudgery of working for a paycheck. Nothing wrong with working for a paycheck if that works for someone, but it didn’t work for me. Once I knew employees paid more in taxes than anyone else, and that, that was the main reason why the rich don’t work for money, I wanted out!

My first investment I made was a real estate deal, that netted me and Michelle $80,000. That was three times as much money I was making in a year as a state employee. That’s pretty much when I knew I no longer needed to be a slave to money.

So the plan was set. I was going to make the transition from an employee to an investor/entrepreneur and ride off into the financial freedom sunset. We’ll it turned out, not to be that simple.

At the time I was working as a state employee at a local psychiatric hospital. I had been doing that for about five years. I worked in what was considered the toughest ward in the hospital. Because it was people coming in off the streets who had committed crimes, anywhere from murder, rap and everything in between. It was an evaluation temporary holding tank to determine whether these people were sane enough to stand trial and be sentenced to prison, or needed to be transferred to the main part of the hospital to receive proper psychiatric treatment.

Plus, we would often receive hardened psychiatric patients who were transitioning from prison life, being processed for re-entrance into mainstream society. So obviously my daily work environment was a cross between stress and hell. But I have to admit, there was a part of me that loved it, or wouldn’t have lasted the five years. And truthfully, the work wasn’t what caused most of the stress and hell. It was the administrative policies that often put us in harms way with many of the patients on a daily basis. Like lack of appropriate staffing and training.

We’ll while plotting my rat race escape, working on my new life and planning my marriage to Michelle, something unexpected happened. I couldn’t believe it at the time or understand it. I ended up suffering a bad anxiety attack one day while coming in to work. It was a hard thing for me to have to accept. Because I’ve always been pretty good when it came to handling stress. But the fact of the matter was, the stress of my work environment had finally caught up with me.

At first, I thought I was having a heart attack because my heart was pounding out of my chest, and my blood pressure was through the roof. I left the job in an ambulance. That forced me to make the tough decision of whether to continue as an employee at the further destruction of my health, or prematurely quit to start my new life as an entrepreneur/investor.

Well if you know anything about me by now, I’m not one to jeopardize my health when comes to money. So I quit. Which turned out to be the best and worst decision I ever made. Because on one hand for the first time in my life I felt I was finally pursuing the lifestyle and career I  wanted. Then on the other side I had no safety net from the security of a paycheck. Hence my first lesson on SAFE and HELL, were about to begin.

If you are aware of the Rich Dad CASHFLOW Quadrant, you understand it’s sort of a GPS for showing you the ideal path to transition from being an E, employee, to becoming an S as self-employed, to becoming a B, business owner, to finally becoming an I, investor.

CASHFLOWQUADRANT

So at the time, without fully understanding, I was trying to go from being an E, employee to becoming a B, business owner and I, investor, without gaining the experience of being an S, self-employed first. Not a very safe way to transition. It wasn’t simple, affordable, fun or very effective.

In fact, it made things what I call HELL, hard, expensive, long and less productive. Not saying it was all bad. Because as they say, “what doesn’t kill you, makes you stronger.” And I’m definitely stronger and wiser for it.

The main problem was that I had plenty of cash, but I lacked enough knowledge or resources to create cash flow in order to sustain my ability to survive and thrive without a paycheck. And being an official Rich Dad CASHFLOW Club leader I knew that was a very risky position to be in.

Especially when you lack experience. Regardless, I carried on and trusted that my Rich Dad and Robert Kiyosaki teachings would be my ultimate safety net. Cause money can be taken away from you, but financial knowledge never can. And financial freedom education is the gift that keeps on giving like cash flow.

So as fate would have it, because I was was new to the science and art of creating cash flow, I ran out of cash before I could create cash flow with it. Which eventually led to me going through a real estate foreclosure.

Which absolutely sucked. So my lesson on SAFE is to use it as a measuring stick for determining whether not a particular investment strategy makes sense, according to the level of your risk tolerance. For example: The A in SAFE, which stands for affordable relates to my 20/80 investment rule I recently wrote a post about.

The investment needs to ideally be only twenty-cents for every dollar I invest. Which provides me an eighty-percent margin of safety against any unforeseen problems that could cause me unaffordable financial harm. Like my own ignorance.  There are times I may invest up to fifty-cents on a dollar, but the deal has to be red hot and still simple, affordable, fun and effective.

Right now with my Amazon FBA strategy, I’m transitioning from RA, retail arbitraging in thrift stores to going direct to manufacturers, which will allow me to still work within the principle of SAFE. It’s not an easy process, which is why most can’t stick to producing the eighty to fifty percent profit margins I teach people to do, by using this SAFE strategy. Most believe it’s impossible to sustain. Why? Because in order to do it, you have to be willing to make sense before you make dollars.

I’ve learned that you can have the greatest plans laid, but the one thing you can’t control is life. So you have to avoid over exposing yourself to risk. Pro’s know, it’s not about how many sales you generate. it’s about how much profit you can create and keep, without over exposing yourself to risk.

Trust. There are many who are in the eCommerce game of online store building, using large amounts of debt to purchase inventory, like I did when I first started investing in real estate, that caused my foreclosure. When the market crashed, banks tightened up their lending, so I could no longer borrow to make more money.

So I assure you, many of these so called eCommerce experts who are making major profits right now that are using large amounts of debt to purchase inventory, are in a very high risk position. If the retail market tightens from the economy slowing, which is currently showing signs of. Many of these people are going to be in trouble.

Because many of them are using the majority of their profits to buy bigger homes, expensive cars and for taking fancy vacations. Instead of reinvesting that money in other investment vehicles outside of eCommerce, like in real estate, that would diversify their income and protect them from an economic slow down.

So SAFE is an investment model that can be used for helping with making a decision on any investment vehicle. It’s not bullet proof, but it works.

 

 

 

How To Win When You Lose

 

No one likes making a mistake that causes them to lose. But that’s life. So it shouldn’t stop you from being a winner. Hell, major league baseball hitter’s can strike out seven out of ten times and still get into The Hall of Fame.

The key is learning from your mistakes. Recently I bought these spinners from an online wholesaler by mistake. I lost $100. I was none to happy about it. I thought I was purchasing fifty-three minnie drones, rather than spinners.

spinners

But I remembered a lesson I learned from Warren Buffett. He explained that many stock market investors hold on to losing stocks. Because in their minds, until they sell and officially take the loss, they don’t have to deal with the pain of losing money. It’s the same idea like when people stay in a bad  marriage or relationship. They won’t cut their losses and move on, even though the love in the relationship has died.

That lesson helped me get past my loss by just deciding to donate the spinners, which turned me back into a winner. How? We’ll first of all. Just the mere feeling of letting go and accepting the loss put me back in a winning state of mind. Then within an hour of the donation, I was sourcing inventory for my online store and found $200 worth of profits, while only investing about $25 and some change.

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I used my pain from losing to power past my loss to get back in the winning circle. If I kept my losing attitude by acting like a victim, I don’t think I would have found these $200 worth of items for $25.00. It’s that simple…

In fact, we all know the popular saying, “give and you shall receive.” We’ll I gave which turned me into a winner by receiving even more, even though I initially lost. So I’m glad I kept playing the eCommerce game.

Cause Rich Dad say’s, “playing not to lose means you will never gain financial freedom.” So continuing to find a way to play the money game, is how to win when you lose.