Imagine we were sitting together by the side of the pool in Maui and you asked me, “David, if you started out over again from scratch, knowing what you know now, what would you do to build your wealth the second time around?”
First, I would know how possible it is. The first time around I thought, hoped, and dreamed I could build my wealth. But now I know I can do it.
In fact, I would know I could build my wealth not just because I had done it before, but because all the other people I’ve seen start with fewer advantages and resources that created amazing fortunes for themselves. I didn’t have all these powerful and positive references the first time around.
I’ve literally seen school teachers build multi-million dollar international businesses; mechanics go from fixing machinery at less than $10 per hour to owning businesses that made them multi-millionaires; and highly paid but totally overworked professionals quit the rat race and go on to create the Maui Millionaire™ lifestyle.
By knowing that it’s possible, I would not be afraid the second time around. I slowed myself down immensely the first few years because I was afraid to play full out.
For example, when I started a real estate investment business in 1997, that first year I could have easily picked up 20 additional investment properties. People were willing to almost give me their houses because the market had been bad in San Diego for so long. Considering those 20 properties would have doubled in value over the next 4 years, that fear cost me several million dollars.
A similar thing happened with my other early businesses when I was afraid to call on big clients or speak at major conferences. I stayed in my comfort zone far too long, which was simply a matter of fear including the fear of failure, fear of success, and fear of the unknown. Yet battling those demons of fear and uncertainty is part of being human. Yet the second time around I’d recognize, like I do now, that it’s how I act in the presence of my fears that determines my results, not the absence or presence of those fears.
Things I’ve learned to address now is, what has my fear cost this time around and, most importantly, what am I going to do about it?
Next, I would step up my thinking and playing in order to do larger business deals earlier. I stayed too long in my small niche of investing in residential real estate and being satisfied with small businesses.
After having done large multi-million dollar commercial real estate deals and having built multi-million dollar companies, I’ve seen that they are actually easier. This is because large scale deals allow you to hire better advisors, team members, and vendors. Playing small takes too much energy.
For example, it was a big stretch for me when I first hired a great operations manager to run the entire operations for one of my past businesses. It stretched me to let go of all that control and it stretched me to pay someone that much money to work for me. Yet after the first year of hiring our new operations manager, we increased sales from $1 million to $3 million and our profitability climbed to more than 25 percent. I would hire great people much faster the second time around.
Third, I would more effectively and strategically planned, monitored, and directed my financial progress. I was like a lot of successful business owners in that I knew how to make my businesses work and pump out cash flow, but I didn’t have a clue how to intelligently invest money to build wealth independent of my businesses.
Doing it again I wouldn’t have done things “investment by investment”, but rather I would have created an integrated plan from the start. Plus, I would not fall in love with the active income my businesses generated, but invested for passive and passive, residual income along the way. I would do this by setting aside 10 to 15 percent of my time once my business reached a certain level to manage, invest, and grow my wealth independently of my business.
I would also be more aware of controlling my spending, especially on taxes and lifestyle expenses, so that I got myself financially free as quickly as possible. Once I achieved financial freedom I would grow my lifestyle out of my passive and passive, residual income as opposed to growing my lifestyle out of the active income that my businesses generated.
Another painful lesson I learned the hard way was at a certain point when I had accumulated a significant net worth, I needed to shift my investing focus from creating passive income (one time paydays like a capital gain you receive when you sell an asset that you own for a healthy profit) to passive, residual income (recurring money that flows to you each month or quarter without you having to work more than 10 hours per month to secure it).
It’s only been in the last several years that I finally “got” that last lesson after I sold one of my businesses. I got a BIG wire transfer for the business, but I lost the monthly six-figure income that went with the business. I was on the other side of “cashing out”, only to discover that building wealth and transforming net worth into passive, residual income were two distinct skills.
A final key lesson that is common sense for me now but was NOT when I started out in business 12 years ago is this: It can happen faster than you could ever imagine, but will probably take longer than you dream.
It may seem like a strange thing to say, but in my experience it’s totally accurate. You will be amazed with how you can literally go from zero to millions in as little as 36 months, but you’ve got to hold true to your dreams when you find that it takes longer than you dream it might take.
The average person dreams of having wealth this year but it usually doesn’t happen so quickly. Most people get started, don’t see immediate results, give up, and settle.
After starting, if you can hold on longer than you think you can, learning as you go, it’s amazing what you can accomplish financially.
My first year in business I made about $35,000. But within 7 years I was earning well over a million per year. My net worth had grown at the same pace (faster actually). What if I had done what the average person had done after a similar dismal first year?
I would have quit after the first year believing that it wasn’t working. In fact, I could have made more money (income and net worth) working for someone else in year one, two, and maybe year three. But by year four there was no way I could earn the kind of income and wealth I had created for myself by working for someone else.
These same lessons can and will work for you.
David Finkel is the best-selling author of over 40 books and courses, including The Maui Millionaires for Business. He is a successful business owner who has bought, built, and sold several multimillion companies over the past 10 years. To learn more about his tools for business owners, visit him on the Web at www.MauiMillionaires.com.