CHAPTER I

LIFE

Surprise! Surprise! You’re probably going to live well over 65 years. There’s a saying, “If I had known I was going to live so long, I’d have taken better care of myself.” Now you know you’re going to live that long. You can’t claim you didn’t know it, and you certainly don’t want to make your children support you. So take heed and take better care of yourself. Not only must you take better care of your health, you should take better care of your money. You must save and invest money so that you can live as well in your Golden years as you are in your younger years. Unfortunately, too many Americans don’t invest for their future. The purpose of this book is to show you how to have fun in your life, and that takes money. Here’s our definition of wealth: Having enough income to live as one wishes without needing to work. My goal is to help you become “healthy, wealthy, and wise.” Oh yes, you will have to go to the bank to cash checks, but your residual income will be enough to allow you, and those who depend upon you, to happily do as all of you wish without financial worries. If you also have good health, you will be wealthy. It is fair to say that everyone wishes to fit that description of being healthy, wealthy, and wise. At least, no one I know denies it. The purpose of this book is to help you be wise enough to be wealthy. An intelligent lifestyle as regards diet and exercise is essential to good health and longevity; beyond that, good health depends on being able to afford the best doctors. In other words, it’s easier to be healthy if you have money. And a wealthy person is far more likely to be considered wise than is a poor person. With that agreed, let’s talk money. This book is being written about the United States of America. Though I have lived in other countries, I know little about them. The past 22 years I have been a real estate broker specializing in the sale of California land. Fortunes have been made using California land as the investment medium and I wish to help you do the same. You must know, however, that California land sometimes goes down in value. This doesn’t happen often, but it does happen. Let’s start from the beginning. For openers, you must learn to read, write and figure. It’s easier to get wealthy when you have a college education. This is not to say you must have a degree in college to be wealthy. However, there are more college educated wealthy persons than there are wealthy people without a degree. Further, business is changing as a result of the opportunities presented us by the personal computer. If you are one of those who have been refusing to learn how to use a computer, stop it! Our world is being altered by the computer in as pervasive a way as Gutenberg altered it with the printing press. In our newly computerized world, those who are computer literate are far more likely to become wealthy than those who aren’t. Today only a few wealth-producing fields remain where you can compete successfully without computer knowledge; tomorrow most of those will have vanished. After you get your education, you must get a good job. This job will not make you wealthy by itself, but you need it to get started. By a “good job,” I mean honest work you can enjoy every day; a job that pays a fair salary or wage for a good day’s work. We now have you situated as millions of others are placed. The difference is that you are going to use my system and become wealthy. Yes, millions of Americans have educations and jobs but only thousands of them become wealthy. Why you? Because you will work at it! How do you become wealthy? It is easy to say: Invest your money wisely and then invest the proceeds from your investments until the proceeds bring you enough money to live without having to work. The obvious questions are, “Invest what money?” and “How do you invest it?” You don’t have to wait until you win the lottery or inherit the family jewels to have money to invest. In fact, if you wait until you win the lottery, you’ll be too old to enjoy the fruits of your investment. You obtain your investment funds by saving them. The best and surest way to obtain wealth is to start by saving 10% of each paycheck. Surely, a person living on $100 is able to live on $90. Believe me, you can. If your salary will allow you to buy a car, buy one for 10% less and save the rest. At first, it will not be easy. Shortly, however, it will become second nature. When you start this, do not, repeat, do not allow yourself to tap your investment money. That will kill all your dreams. When you look for a spouse, discuss this with him or her. Make sure that your spouse is ready to live on 90% of what you both earn until you can live off your profits. You and your spouse must work together on this. One way you can save this 10% is to commit yourself to a contract to pay yourself before you pay the rest of the world. Most people I know write checks each month to pay their bills. They pay the doctor, the baker, the candlestick maker before they pay themselves. They live off what is left over. In effect, they pay themselves after they pay the rest. If you do that, change your system. Write the first check for 10% of your salary to your savings account in effect, to yourself. The question then arrives, “What savings account?” The answer is the bank. As soon as you have your education, get a job, and decide to become wealthy. The next step, find a bank that appeals to you, and get to know your banker. Look for a bank, savings and loan, credit union, or other financial institution where your savings account will be protected by the Federal Deposit Insurance Corporation (FDIC). This is a federal savings account insurance policy to protect your accounts up to $100,000. There are other ways to insure your savings account but this is the most convenient. Eventually, you may well have a savings account larger than $100,000. Your friend, the banker, will explain that the FDIC limit is for $100,000 per account. You can have more than one account. Next (after you start saving ten percent of your earnings) get to know the Manager or Assistant Manager of your bank on a personal basis. Walk over to his or her desk as soon as you can and introduce yourself. Get to know them. Unless you’ve picked the wrong bank, they’ll be eager to get to know you. You want them to know you on a first name basis. You want to be able to call them and ask for a loan. Their answer should be, “I can’t think of anyone I’d rather lend money to.” As you start your savings, you need to realize that this is long-term money. The hard part is keeping your hands off the money you’re saving. You must keep yourself from using this long- term money for short-term purposes. It’s very easy to reach into your account to make your Christmas merrier or to have a happier vacation. Saving money is “paying yourself.” Personally, I’ve found it best to make payments on land. This puts your long- term money into a “soil bank.” You can even do a little dreaming and write on the bottom of the check where this check will take you or what it will buy for your life when your investment orchard grows into full production. You have your job, your savings and your banker. Now you must enlist the rest of your team. We live in a very complicated world that isn’t getting any simpler. The Federal Income taxes have been changing every other year, and you don’t have time to keep track of all the details unless that’s your chief occupation. The key point is that income isn’t really yours until the taxes on it are paid. You must consider the tax consequences of all investments. In order to become wealthy, you need a tax advisor. There are many tax advisors around. The top of the list are the Certified Public Accountants (CPAs). Companies such as H. & R. Block do taxes for thousands of people, and there are many accountants and financial advisors who will take care of you. You pay tax on the amount of money you make after deducting legitimate expenses. The question, “What is a legitimate deduction from my income?” will come up. Some practitioners will tell you, “When in doubt, deduct. If there is no doubt, create some.” . __ This aggressive approach to your taxes is loaded with danger. You might not like to live dangerously. The IRS may audit your taxes and find you guilty of not paying your taxes properly. If this happens, you will be punished. On the other hand, you can deduct anything if you aren’t audited. You can even deduct your spouse. Personally, I prefer sleeping like a baby with a pure heart. The IRS has audited me. To my mind, it’s better to let others take a chance and deduct their spouse. It’s better to let others pay the penalties or go to jail. Find a tax advisor with whom you can be at ease. Get to know him or her. The United States is the most litigious country in the world. Most people with money are sued. Yes, I know that you’re honest. You’re also smart and have a team of advisors around you. You’re also going to have deep pockets (a lot of money), and money attracts law suits. Even frivolous lawsuits can cost thousands of dollars to defend. It’s better to have an attorney on your team to prevent lawsuits if possible, and to win them if necessary. Yes, attorneys have a lousy reputation and some of it they’ve earned; but most of them are smart and honest. They can be your friend. Your attorney and tax advisor have the job of keeping you safe from trouble. Listen to their advice, but remember that they will be excessively careful. Make the decisions yourself. You cannot possibly know all about investments. You must add to your team a pair of investment experts. A real estate broker and a stockbroker. The top of the line designation for an investment real estate salesperson is a Certified Commercial Investment Member of the NATIONAL ASSOCIATION OF REALTORS® (CCIM). There are less than three thousand active CCIM’s in the world and some of these don’t know much about land. Those REALTORS® designated as Accredited Land Consultants (ALC) have also received special training in land. The Society of Industrial and Office REALTORS® (SIOR) specialize in industrial and office land. If you can’t find a CCIM, SIOR or ALC you like, look for a real estate broker who is a member of the NATIONAL ASSOCIATION OF REALTORS® .They are the most professional. As a general rule, a real estate salesperson works for a broker. The broker has more experience and training. For our purposes your real estate advisor will be called, the REALTOR® . To make sure the person you’re considering as a Wealth REALTOR® knows a little about land, ask him or her some questions.
Q: How many square feet are there in an acre?
A: 43,560
Q: How many sections in a Township?
A: 36
Q: How many acres in a Section?
A: 640
Ask him or her to furnish you with a property profile for the house that you live in, and to explain what an Assessor’s Parcel Number (APN) means. Your REALTOR® needs an APN to obtain the property profile. He can get the APN from the tax records with any of these three items of information: 1. The address of the house. 2. The property’s legal description. This is usually the Lot and Tract Number. 3. The owner’s name. (If you own your own house, this should be easy.) You should also have access to the stock markets. “Buy rocks (land), not stocks,” has been my motto for years. Your stock advisor should have the good grace to chuckle, however thinly, at my advice. The stocks and bonds are the most popular investment media in this country at this time. Certainly profits can be gained in the stock market. I once made a killing on a stock recommended by my uncle, a retired cab driver in Washington, D.C. But I lost my shirt with a stock recommended by a broker. The stock market is a huge roulette game. However, as its enthusiasts point out, in gambling the risks are contrived in favor of the house, whereas in the stock market the risks are real. The only question is who will take them. The speed with which money can be made or lost appeals to some people, who overlook the fact that the odds of making money are better in real estate. Congratulations. You’ve finished Phase I of becoming wealthy, and are well on your way to being financially independent in your old age. No one should ever consider themselves finished with his or her education, but you have finished the formal part of it. You have a job; you have started your savings account in a financial institution; you and your spouse are accoustomed to living on 90% of your income. You know the first name of the manager of your bank and you are looking for the next stage of becoming wealthy. The friendly manager might well have talked you into putting your money into one of the bank’s Certificates of Deposit. You are looking for a better return. With that in mind let’s turn to real estate.