Wednesday, May 26, 2010

Who needs a million anyhow?

Before I got started on my personal journey to my first million, I had never really considered the idea of systematically trying to build wealth. I don’t mean that I had never saved money, or that I had never really invested – quite the contrary. Ever since I was ten or so, I had to save money to buy my “toys” – a bicycle, camera, surf board, or anything else my parents claimed to be no necessity for my life. And believe me, their definition for necessities was pretty narrow! Anyhow, my idea always was that I would save in order to spend, for a specific purpose, and for a definite – and usually the shortest possible – period. So instead of really saving money, I would just temporarily not spend money over a period of time in order to definitely spend it a bit later.

Similar to my idea of savings, my idea of investments was… well, let’s just call it “intuitive”. I would invest only if I had something to spare – which was in any case seldom – and I would then just buy whatever stocks that happened seem good at the time. My criteria for selecting my few investments varied, and I sure had no method of any kind for selecting stocks, except my intuition and gut feeling. With the benefit of hindsight, it seems my intuition could have used some improvement and my guts never had much of a proper feeling either. My investment outcomes varied from OK to disastrous - mostly depending on the market performance - and in any case remained below-the-market most of the time.

Finally, in 2002, a change-triggering event took place, and it came from a totally unexpected direction. I went through an experience that really shocked me to the core. I had been a well-rewarded fast-moving top-achiever in a successful company and had never had reasons to worry about my finances, as they had been getting better year by year. Suddenly, however, my employer was taken over by another company, and I almost lost my job in the reorganization process that followed. Eventually, I managed to stay and felt relieved, but I also realized how suddenly my financial prospects could change due to reasons that were completely outside of my control. This made me really think, and the more I thought about it, the more I felt my finances really shouldn’t depend much on anyone but me. I suddenly realized that being heavily dependent on an employer was not something I wanted anymore. Instead I started to wonder what I would need to do in order to decrease – or maybe even do away with - this dependency.

Within the next year or so, I went through all kinds of ideas around this topic. I was trying to figure out a business I could set up and manage on limited part-time basis while still keeping my job. Most of my ideas were bad and some of them really bad, and luckily my wife mercilessly shot down every single one of them. I kept on searching for something that would fit me, but it seemed hard to come up with anything that wouldn’t be either unexciting or unrealistic.

Luckily, my “save in order to spend” habit turned out to provide the seed for the money tree I was trying to plant. I happened to have some money saved up, as I wanted to buy a holiday house in Tuscany and had started saving for that. I was not much, but anyhow I was wondering whether I could do something more profitable with these savings. Then, when browsing books in a book store (yes, this is what us old people used to do before bankrupted most bricks-and-mortart book businesses!), I bought a book called “Rich Dad’s Guide to Investing”, by Robert Kiyosaki. I read the book, and while it was quite different from what I had expected, it turned out to be just what I needed. For me it was really not a guide to investing, despite the name. Instead of ideas for managing my investments, I got from it something much more valuable.

First, I got a sense that this really could work for me. For the first time ever I really felt that I actually could decouple my finances from my work, or better, I could probably become financially independent over a bit longer period of time – maybe or decade or so. All it would take would be just a decision and then some hard work – but hardly much harder that what I had been doing at my job until then. I would just need to reallocate my time and make sure I focus on the things that most affect the achievement of my goals. It really felt like a revelation.

Second, the book also helped me understand how this whole thing should work. I had somehow always thought that you should just save a lot of money, and then eventually after many decades you would have a million or so. What I hadn’t realized is that actually my money could start working for me just as hard or harder than I work for that money. With this I would have a real turbo booster that would propel me to my million much quicker than I had ever thought to be possible. Of course I could just put my savings to a bank account or maybe buy some stocks, but instead owning a business of some kind could probably really get me the sort of returns that I was looking for here.

Third, the book had many references to real estate investments, by chance. The more I read about them, the more I started to feel this could actually be it - the thing that I was looking for! While reading along, I grew more and more sure that real estate could be “my thing” and my ticket to financial freedom. So I started to find out more about real estate markets near where I lived, bought more books on the topic, and also started to do some calculations regarding who the whole thing could work financially. The more I learned, the more it seemed like the right thing for me. I only had one little problem: my savings were nowhere near what I would have needed in order to get into real estate.

So, having the motivation, the basic understanding, and the essences of the method. I now had to start saving in a serious way. Boy did I wish I had done that before, as I was so anxious to get going with my plans. Yet, there was just no way around it: had to start saving now as I hadn’t really done it before.

But man was I also motivated to do it! I suddenly felt that every penny I could save today would pay back so handsomely in future. I would have had to be crazy not to save all I could! The payback would first come in the form of being able to do what I really wanted: continue to work for my employer while growing my money tree, or simply quit and play golf, or maybe do something totally different like build my businesses or travel the world. Up to me to decide! Then, the payback would also come in the form of not having to worry about my finances any more, ever. Wow, did that feel liberating! Finally, I also thought about the possibilities I would eventually have in helping others and sharing part of my wealth, and this alone felt worthy enough to pursue this new plan.

So, there you go, that’s how I got s motivation to start the journey to my first million. Given that you’ve read this far, it seems you too have wishes or fears that make you wonder whether this trip would be worth your while. My advice to you is this:

  1. Yes it really is worth it! Just consider yourself what you would feel like if you knew you had enough money to take care of all your needs and plenty more coming as long as you just keep sticking to your plan.
  2. Yes the trip from here to there is totally realistic. While the start may feel slow and uneventful, soon you will start gathering speed and quicker than you know become amazed how fast you are flying!
  3. Yes you too will find your method to get there. It will require serious effort from your side, and your method may end up being different from mine or anyone else, but you will sure find it.

So now that we know whether – and why – we want to make this journey, back to the grinding. I still needed to save for the money I didn’t have, so that I could really get started – a bit boring, huh? Actually, it wasn’t that bad at all, really! I’ll tell you all about it in my next posting in June.

Thursday, May 6, 2010

Day 1 of the journey - Welcome onboard!

Hi, and welcome onboard to my "Next Stop: Million" blog!

The purpose with this blog is to help you too to reach your financial freedom, nothing less. My intention is first to get you started, support you in ramping up to full speed, and eventually help you find your way to the first destination - a cool one million! We will do this with simple, straightforward, practical methods and advice that just about anyone is able to apply in order to get there.

Hard to believe, huh? Sounds way too good and simple to be true, right? Any proof that this might actually work? Well, if I can do it - and I already did - anyone can do it!

My methods are be based on my own experiences and on all the things I learnt from many others during my own journey over the past 5 years. And yes, that's exactly how long it took in my case to get to the same first destination are we are now heading to.

When I started in 2004, I figured it would take me nearly 10 years to reach that one million milestone. I felt my estimate was conservative but realistic - a lot of things could and probably would go wrong in ten years. And man, how some things really did go wrong!

Just to mention the main catastrophe that hit me: the financial meltdown in the fall of 2008. It happened just when I was first time getting close – so close! – to the first stop milestone. The feeling was a bit like in a board game: “You were caught and fined for speeding - go back ten steps!” – or rather go back a hundred thousand, in my case.

The worst was that the signs had been there for some while already, but I had done nothing to get prepared for what had seemed probably. I – like many others – had simply gotten too greedy and was blindsided by the nice speed I had gathered. I should have noticed that the road was leading towards a cliff with no bridge, but of course I noticed nothing. I was just so busy trying to figure how to further get even more speed out of my machine!

So, I sure got a real learning experience, like we all did. The nice thing was, though, that I fared pretty OK, given the circumstances. I soon noticed that most of what had happened – I mean the financial meltdown itself – was just bad luck for me, the sort of stuff I had expected to happen even if I had hoped it wouldn’t. It still really hurt, I must say, but also appeared like a temporary set-back rather than the apocalypse now. My fundaments were still mostly correct and working, so with some adjustments to my machine and this sure-hard-to-forget learning experience in my pocket, I figured I should just solder on. And so I did.

Fast forward a year and a few months later, I was suddenly there! I could hardly believe it when I actually got to my one million milestone. I sure had seen it coming for some months already, given the way things had been going. Yet, having had my real learning experience just a year earlier, I though the world might well collapse again, like it had just done. I did think it now seemed less probably, though: the economy was already near rock-bottom, so it could hardly get much worse. And it didn’t.

Since I passed my first stop milestone last fall, I had gathered really great speed, and I sure didn’t feel it was time to stop now. Actually I still don’t! Instead, I have set my sights on new destinations, both financial and non-financial.

One of these destinations is the one I intend to reach through this blog. I felt I really want to help others to do the same that I had done, because it’s not as hard as most thing, and because the reward really is worth pursuing. Based on my own experience, the first step and the very key to the success on this journey is to get the motivation. Once you really decide you want to make this journey, everything else will follow in very natural way and much easier that most expect.

So let's get cracking! My next posting will be all about the motivation: the real rewards, as well as the initially-luring-but-eventually-not-so-important ones, and – most importantly – my personal testimony for why this journey really is worth making.

So, once more welcome onboard, and on to my next posting next week!