Monday, November 22, 2010

A Simple Life

As a man thinketh in his heart, so is he … Proverbs 23:7

A wise man once told me that if I would categorize all of the activities of my life, they would easily fit under one of the following three headings: Becoming, Relating, and Achieving. This idea was insightful to me because when I developed these three lists, I couldn’t find any of my activities that did not fit on one or the other of the lists. I have concluded that most people have never been given much formal training in how to excel in any of these three areas. When we look at where most Americans have ended up, it is clear that what you are about to read is not often taught in universities. Since the vast majority of us fail miserably at one of our main goals: ending up with a measure of financial security, I would like to talk here about: achieving … financially. Most of us are allowing our lives to be guided with faulty knowledge, no vision and no plan.

Where there is no vision, the people perish: but he that keeps the law, happy is he. Proverbs 29:19

The rich rules over the poor, And the borrower becomes the lender's slave. Proverbs 22:7

First, let's take a quick peak at a simple life. I don’t know about you, but as a child, I was not given much training in what to do, or how to think financially. Our family lived month to month on what my father earned. Certainly there was no training of depth in managing financially, intellectually, or spiritually taught to me. But the values I was given served me well. I can sum up most of what I learned in my childhood in this one paragraph. I was to show respect to all adults regardless of whether they were right or wrong … especially my mother and father. I loved my family and friends and was taught the value of loyalty. I was taught to tell the truth, and to always do the right thing. Love of, and respect for my country was an absolute. I believed in God, and said my prayers but could not really explain what that meant. I enjoyed the outdoors, camping, hunting, and fishing. And baseball was the number one priority of my life. I was absolutely certain I would be a baseball player when I grew up.

And then suddenly … when I was at age of thirteen, I heard my mother’s screams and when I ran into her room, I watched as my father unexpectedly died of a heart attack. For me, my childhood ended that day, and my dreams of baseball died with my father also.

My mother was not left with money or other financial assets. She had no training in any career field beyond being a stay at home mom. She housed a blind student to help meet our living expenses. Also, she took a sales job at a local clothing store. I have no idea how she made it, but beyond our home, she surely had no credit debt. The four years that followed were the most fun years of my life. To say that I ran wild is putting it mildly. But to bring that into context, wild back then was nothing like the reality that wild has become today. And then I turned eighteen, and ran head on into reality: the Viet Nam war. Priorities were quickly established for me as I soon learned that I only thought I was in control of my life. I want to stay on point here so I will just say that I knew how to get people to like me and trust me, but beyond that I had learned nothing in my schooling that trained me in the areas of how to consciously go about Becoming, Relating, and Achieving in the affairs of life. Adult life was in front of me and I was not prepared to do anything profitable or productive. Children allowed to drift aimlessly are not likely to decide to follow a righteous path by accident. The bad habits, desires, temptations, and lusts of life have dug many pits that we can all easily fall into.

I settled on a career in real estate sales and rode my people skills and a belief in following the golden rule to enormous success at a young age. There was no training or direction here either. One day I walked into an open house and met a lady who explained to me her ten year investment, retirement, and tax savings plan. It was quite simple. Buy one home a year for ten years, and rent them out for equity growth … borrowing as values increased to help with down payments for future purchases. In the tenth year, sell the home you purchased in year one, and use a portion of the proceeds to buy a replacement rental. The depreciation benefits and expenses on the rentals would offset all rental income and provide tax shelter to shield my ordinary income. The remaining proceeds would pay my annual living expenses. Sell one rental with ten years equity each year, and buy a replacement rental for the remainder of my life. I had no idea that the results would be so dramatic.

Sounds easy, don’t you think? Well, to make a very long story short, within five years I had accumulated thirty five rental homes located mainly in Lakewood and Cerritos CA. My annual income back then would equal a million or more tax free today. I only wish I had been wise enough to follow the rest of that wise lady’s plan. I was convinced to leverage my assets on what became a very successful but under capitalized business ... a critical mistake on my part. I could have retired at age thirty-five a rich man for life. Unfortunately, “as a man thinketh … so is he” brought me down ... lack of knowing vital information combined with the manipulations of the economy by our government came into play and destroyed my simple financial plan. This story is thirty years old and it is still painful for me to tell, but the fact is that my thinking was based on my limited and narrow experience, and I was not prepared to handle the challenges of the economic cycle that has actually been ongoing for hundreds of years. But that is all ancient history. The questions we need to consider here are what factors helped me to win; and what wrong thinking caused me to lose; and what have I learned that can help you achieve financial independence?

The first thing I want to make clear is that although the real estate crash of 80-82 was a horrible time for me and America, I have only myself to blame for the consequences I suffered. Circumstances developed that put my fate out of my control, but I had taken risks to get to the top, and I took my good fortune for granted and put it at risk. Looking back, I had actually come to believe that I was the reason I had succeeded financially. The fact is the plan was sound, and the timing to a point was perfect. I was actually only along for the ride ... an observer. I can remember before I had the wealth making the statement; how could anyone fortunate enough to obtain millions be ignorant enough to lose it? Well everyone’s circumstances are different and some are smarter than others, but we are all human and humans make mistakes. My mistakes were many and in a number of ways, my thinking was doomed. To start with, every mistake I made can be traced to the violation of one or more Biblical principles. My natural man’s excuse would be that I was not a Christian and had never read the Bible. I didn’t understand. Sorry Bob, God does not buy that excuse. In 1980 when I first read the Bible, I found hundreds of verses where I had been doing the exact opposite of the God's best. Let’s look at one of my major mistakes that hinders many people their entire life. I am sure many of you are struggling with this problem daily, as you read this post. There is hope and a plan for your prosperity. NEVER GIVE UP!

To be continued

God Bless you my friends, Bob

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