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.

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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.

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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.

Why is Financial Freedom Education Important

 

Most of us are familiar with the saying, “knowledge is power.” But we also know this is not true. Because we know, in order to create the power we have to apply the knowledge in real life for the power to be generated.

This is why Robert Kiyosaki wrote the book Rich Dad Poor Dad and created the board-game, CASHFLOW 101. The book was the knowledge, and the game was a way to apply that knowledge through simulation, to eventually doing the real thing in life.

This is also the idea behind these blog posts. To provide you with financial freedom education, and then work with you to apply the knowledge to building a cash flowing eCommerce network of businesses.

But back to the importance of financial freedom education. Tell me. Have you ever changed the oil filter on your car? If you have, you know it’s important to have one, because if you don’t dirt and grime can get into the engine and damage it beyond repair. Not good.

Financial freedom education acts as a filter as well. It filters, good financial advice, from the bad financial advice. Without out it, just like needing an oil filter on your car, it can cause financial damage if you don’t have one when driving any type of an investment vehicle.

There have been many times when I was managing or driving an investment vehicle. And if I didn’t have the filter of financial freedom education to help me filter out the bad financial  information or advice, I would have been in big trouble.

In fact. It causes people to lose out on great investments as well. Cause they don’t have the filter of financial freedom education to understand what a great investment looks like.

So investing in our financial freedom education is critical if we want to create a brighter financial future. Something money alone can’t do for us.  Plus, having money without having the filter of financial freedom education is dangerous. You see examples of it all the time, with professional athletes who suddenly became rich. Then when they retire, they tragically became broke over some bad investment decision. Cause they invested without the filter of financial freedom education.

You wouldn’t dare build a house without building the foundation first, cause you know the house would eventually collapse after one or two bad storms. So we should never build our financial houses without first building our foundation of financial freedom education. Even though unfortunately, most have.

 

My Secret 20/80 Investment Rule

Rich Dad teaches us that without rules in our lives, chaos results. Just imagine if there were no speed limits on our highways, more deaths would result. We teach our children to be polite and respectful. To treat others they way they would want to be treated. All because we know that’ll make this often chaotic life a little easier for them.

Well when it comes to investing, it’s no different. We must have rules. I’m not a very religious person, but I consider myself very spiritual. And one of the famous sets of rules most of us are familiar with are The Ten Commandments. Starting with, “thou sha’ll not kill.”

In the case of investing money, the idea rule is when you invest it, do your best not to kill it. Truthfully, like The Ten Commandments, it’s more to be used as a guideline as oppose to steadfast rule, to keep us and your money safe.

There is a rule called the “Pareto principle,” known as the 80/20 rule. Which says that “eighty percent of what happens comes from only twenty-percent of one’s efforts. For example. If I invested in one hundred units of eCommerce inventory, only about twenty-percent of that inventory will create profits.

That being the case. I want to share with you my 20/80 secret rule when it comes to successfully investing in eCommerce inventory, or in any other type of investment. Always do your best to make sure you are only exposed to twenty-percent of the risk.

I mentioned in my last post, that my eCommerce advisor invests a whopping $400, 000 in inventory on credit, each and every month, but only makes a profit of about twenty-percent. Eighty-thousand to be exact. His investment strategy violates Pareto’s rule, exposing him to too much risk. Because only twenty-percent of the $400,00 is his profit. If he followed the rule. He would only be investing $80,000 which is twenty-percent of $400,000, and would be generating $320,000 per month in profits, which is eighty percent of the $400,000.

In my opinion that’s a very risky strategy to use. Here’s the main reason why. There’s little room left for error. Most businesses that rely heavily on debt like this get wiped out when the economy begins to slow. Because the economy only thrives when people feel optimistic and confident, cause that’s when we spend the most. So when we have no confidence, our spending tightens. Banks react to this by tightening their lending.

Therefore, it becomes hard for small businesses to borrow money via credit to purchase inventory to sell. So there profits begin to shrink,  adding the insult of conservative consumer spending to the injury of there poor profits from being unable to purchase enough inventory. Supply becomes more than the demand.

Now granted, to get while the getting’s good by making eighty grand per month can be a beautiful thing. But as you know, Rich Dad or myself are not about teaching you how to think like an average entrepreneur or investor. We teach you to think sophisticated.

So here’s my 20/80 secret rule. Turn the investment inventory odds in your favor. How much better would it be for my advisor, if he followed my 20/80 rule? By only investing $80,000 per month, to profit $320,000 per month? Obviously, a whole lot better.

Practicing my 20/80 rule would do three important things for you:

  1. Accelerate your profits
  2. Provide you with maximum reinvestment capital
  3. Most importantly, expose you to as little risk as possible, so that you would survive and thrive in a good or bad economy.

Mind you, you would also be flush with cash to acquire great assets that come to the surface in a bad economy. I know, as the saying goes, “easier said than done.” I couldn’t agree more. So use this 20/80 rule as more of a guideline, as oppose to a hard-lined rule.

But it’s possible. Because in my eCommerce business, for every $200 I invest in inventory, it produces about $1,000 in net profits. Giving me great profit margins that protect me against unforeseen costs, which Amazon, eBay and others are infamous for.

Well there you have it, my 20/80 investment rule. If you have a dollar to purchase inventory. Only invest .20 of it to make a minimum of 80% profit and watch your profits soar. My average pure cash net profits are currently at $35 per item sold and climbing. That’s how a sophisticated investor approaches investing. Which requires a lot of research, study, discipline and patience.

This is why, Warren Buffett say’s, “if you can’t control your emotions, you can’t control your money.” Average investors live for the money. Sophisticated investors live for creating great investments.

But, I won’t lie to you. It takes a lot of creative thinking. Something I teach the people I work with to do. Work on doing more and more, with less and less. Not to be fooled and distracted by hearing big numbers. Because it’s never about how much money you make, it’s about how much of the money you keep.

My 20/80 rule is an elephant you have to eat, one bite at a time.

 

Your Thoughts Are The Most Powerful Force On Earth

Our thoughts are the driver of our lives. What we think and believe at a deep subconscious emotional level will always determine our destinations.
So if you want to improve an area in your life, be it relationships with other people or becoming healthier, it all begins with how your thinking. Because our thoughts, create actions, and actions create results.

The purpose of my new Academy of CASHFLOW official Rich Dad Blog is not to tell you what to do with your money. I’m not an investment advisor. Even though I do sell and recommend certain investments that I feel can be helpful to my readers. Academy of CASHFLOW is a financial freedom education blog. So our main focus is financial freedom education.

The purpose of my CASHFLOW Coaching 3-Legged Stool Multiple Income Stream program is to expand your skills and thoughts about how to make money. If you expand your mental capacity to “work smarter, not harder” for money, you’ll have more control over your financial future.

As you know, our thoughts are the most powerful force we have. The purpose of my CASHFLOW Coaching 3-Legged Stool Multiple Income Stream program is to have your thoughts working for you, rather than working against you.

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You Can’t Do a Good Deal… With Bad Partners

One of the most important lessons that Rich Dad teaches is the importance of partners. It’s a lesson I often think of. Simply put, if you have good partners, gaining financial freedom is easier. If you have bad partners, gaining financial freedom is harder… sometimes painful… often very costly.

When I coach someone who is struggling financially, it’s often because they too have bad partners they are involved with. For example, the person who is struggling could be married to someone who is lazy, does not study, spends too much money on food, alcohol, sports, hobbies, or clothes. Or the person could be surrounded by friends who’ve got bad habits, or a negative attitude about money, even to the point of criticizing the person’s desire to improve themselves or their financial position. So a bad partner does not necessarily have to be a business partner.

One of the reasons I’ve achieved financial freedom – successfully – is simply because I’ve developed the ability to identify a bad partner.  When I’ve had good partners, the deals appear and things go well. We may have problems, but I don’t have to know all the answers if I have good and smart partners.

I’ve also experienced bad partners. They were not bad people, just bad partners for me. And truthfully some thought I would have been a bad partner… and in those cases I may have been. Whenever my partners or team members are not on the same page, play by the same set of rules, same ethics or morals, the business or investment will be weak and profits diminish, expenses go up, and stupid mistakes are made.