The reason I invest in silver coins

I have already written a bit about my affinity in my post, What I Blow Money On, but today as a follow up to my article on investing in gold it seems like a good time to talk a bit more about precious metals before we move on. In addition I am going to provide you some of my own rules on buying silver coins.

First let me lay out my case for why silver is a good investment. Simply put all metal commodities are doing very well right now and will continue to do so. Heck even copper is getting rather expensive. Back in the 80s I remember copper going for about 70 cents a pound. Today it is hovering in the range of 2.80-3.00!

Many people see silver as a “poor man’s gold” and I think that is rather short sighted. First I don’t care if silver is ounce for ounce far cheaper then gold if you have 1000 dollars worth of gold or 1000 dollars worth of silver you are holding the same value. Now silver and gold are true brothers in my opinion and the price of one is indeed tied to the price of the other. While they are not completely pinned to one another and the Hunt Brothers debacle will skew numbers from the 80s and early 90s there is a strong correlation (precentage wise) to movements between the two. To get an idea of the correlation look at the two graphs below which cover 1997-2007…

As you can see again while not lock step with each other the two metals perform very closely to each other on the open market.

So why not just buy gold? Understand I am not saying to not buy gold it is just that I truly “invest in gold” I buy through my broker and I buy both actual gold, gold funds and stock in gold companies. I have nothing against doing the same with silver but I prefer to actually buy, hold, touch and own my silver mostly in the form of coins.

Why? Two answers….

First, because I love silver coins, they are history, they are beautiful and they are something material to me that I can look at and appreciate. In this way Silver Coins offer me something that 95% of my other investments can’t. Sure I can look at my stock certificates but there isn’t much fun in that. Most of my other investments are just numbers on paper then don’t have the feel, look and glitter of my coins.

Second, because investing in many different things and in many different methods creates diversity. The beauty of silver coins (at least of the type I purchase) have most of their value in the silver basis price. I can “cash in” anytime I want and do so with no paper work or government red tape. I can literally walk into a shop, sell my coins and walk out. Holding silver coins is like holding cash money with out the cancer of inflation upon it.

So what rules to I have for investing in silver? Here they are but understand these are no ones rules but my own. A few you really should follow but others are more about your risk tolerance and your personal view about numismatic values.

1. I do not belong to nor do I buy my silver in any kind of “club” or any highly advertised coin supplier. In particular Littleton Coins is among the worse places of all to buy coins. Their prices are generally 40-90% higher then local coin shops in my area. I buy from local merchants or only via mail order if the price is as good or better then local pricing.

2. Directly related to the above, I am not on any type of auto shipping or monthly arranged purchases. I buy what I want as I find it and as I want it. My silver investments are truely incremental investments outside of my conventional portfolio.

3. I never buy “junk silver coins” which are large unknown lots of mostly 1960s and older dimes and quarters. Most are worn so badly you can scarcely read the dates.

4. While I don’t buy junk coins I also don’t buy highly numismatic valued coins. In other words I never buy a coin where the bulk of the coins value is based on how “collectible” or “rare” it is. Such values are highly subjective and only represent a “real value” if you can find a buyer. Try buying a 200 dollar silver dollar this week and see what the same shop will pay you for it (with out a big jump in price) the following week. This is the one rule that I understand when others break, this is my personal preference but I have my reasons.

5. What I do buy are Silver American eagles as they are priced right about bullion prices. I also buy high quality but common Franklin, Kennedy and Walking Liberty Half dollars which are still quite affordable and made of 90% pure silver. My other big favorites are the more common Morgan and Peace dollars. These coins to me represent a nice mix and all are very affordable and most importantly highly tied in value to the silver basis.

So what is my advice? Well I think it makes a lot of sense to buy some silver over the years and just have it as a hedge against inflation not to mention an investment that remain liquid in both the best and worst of times. The beauty is you can buy say a 10-20 dollar coin just once or twice a month if you don’t have a lot of extra money to invest. Even that over the years can build a nice collection and a lot of real value. I personally buy between 20-150 dollars a month of silver and have been doing so since 1995. As you can see by the graphs in this article that has been a very good move.

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Why Ron Paul and low taxes are good for the economy

You hear liberals all the time discuss how the tax cuts by Bush were reckless. Now look I am not exactly pleased with Bush myself right now and I think his spending (and that of our both the Democrats and Republicans in Congress) is absolutely reckless and disgraceful. Yet cutting taxes makes a lot of sense, further I think we should keep cutting lower and lower.

In fact if I had my way Ron Paul would become our next President and completely cut the income tax to zero. Think that is unreasonable? Well if we cut spending to where it was just 7 years ago we could eliminate the income tax. Yea your read that right, just cut spending to 2000 levels and we do not need an income tax. That should make you really understand just how many other taxes we already pay.

I digress though, lets just talk about an easy way to understand why lower taxes are good for our economy. Now I could go into Economic theory and formulas and such but that is not necessary. I can instead explain this in a very simple and easy to understand way, think of it simply like having a “sales”. If you ran a store and wanted to sell more products would you do it by raising prices or by having a sale?

Now that is about a stupid question isn’t it? Anybody knows when stores have sales they sell more and when they jack up pricing they sell less.

The important thing to understand is that employment, investing and spending is what drives our economy. So to understand why lower taxes drive better economies from here is really easy. Let’s look at how taxes going up or down effect each of these three factors.

Employment - When taxes are lower businesses keep more of their profits rather then giving them over to the government. When a company has more money in profit they grow. As they grow they have more needs for personal and of course they hire more people. In short a lower tax is like a sale on hiring talented people. When you tax a business higher of course we have the exact opposite effect. Companies keep less profit, there is less funding available and they grow slower and hire new people at a slower rate.

Investing - This is simple to understand. If you invest money that inherently comes with risk. So if I put 50,000 dollars into an investment I could loose much of it. On the other hand if the investment does well I end up with a profit but I only keep the part I don’t pay as taxes. For me to take a risk the upside has to be attractive so of course the lower the tax on investment profits the more attractive investments are. Now if you want me to do something incredibility risky like fund a new business I better get to keep the lion’s share of my profit or there is no good reason to take the risk.

You see when taxes are low on capital gains it is like a sale on investments. Effectively I am paying less money to make more money. Did you know that at one time tax rates were as high as 90% for some income brackets. 90%! Don’t believe me look at some historical tax rates here. Now let me ask you why would anyone risk say 100,000 dollars to fund a start up business as a part owner. End up making 200,000 dollars for the investment and then have to pay all but 10,000 of it as taxes? Why in the hell would anyone take such a risk for so small of a true return? Again when this tax goes up it is like when a store raises its’ pricing and when taxes go down money flows in a “sale like” environment. Simply put when investments go on sale more investors buy more investments.

Spending - Now I am all for saving money but if no one spends any money the economy grinds to a halt. This one is the easiest of the three to understand. Tax Joe and Jane America at a lower tax rate and they keep more of their money, when people have more they spend more. In short for the average consumer lower taxes are a “sale” on everything. You just have to do a bit of inverse thinking to understand this. Joe works 10 hours a day and makes 250 dollars for his day of work. Each day he pays 100 back in tax so he profits an actual 150 dollars.

So Joe values money according to that formula. Hence he “pays” 10 hours of his effort for a 150 dollar item. Now tax Joe only 50 dollars and he now profits at 200 dollars for the day. Now a 150 dollar item only “costs” him 7.5 hours! In short by taking less taxes Joe is now buying everything at a 25% discount.

The combined effect

The reality is the economy is like an ecosystem composed of these three factors of spending, investing and employment. None can sustain themselves with out the other two. There is far more complexity then this but a basic understanding is simple.

• When more money is available to business from profit and from investors they hire more people.
• When more people are employed they have more money to spend, hence they spend it.
• When people spend more money it drives business and results in more profits
• When people can find jobs and get paid well and are taxed lower they also invest more
• Investments then feed business

It is really a circle of economic life. In this circle low taxes are like good fertilizer that makes everything healthy and grow faster. Higher taxes are like salting the earth, they lay waste to the ecosystem and stall growth. Now democrat or republican should not matter this is mathematical science and math does not lie.

Debate the role of government if you like, support a guy with an R or a D after his name or if you are smart perhaps an I. Yet don’t ever be fooled by how there is any good to come from higher taxes. Don’t let the government pitch class warfare on you saying only the “rich” are going to see higher taxes. Right now most American’s work till April 30th to pay all taxes, that is enough, more is not the answer.

Oh and yea I really meant it that we could totally eliminate the income tax, watch this video on Ron Paul for more about that.

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Pay the right price for you home

This post is not about setting your budget for a mortgage, taxes, insurance, etc. That is a number you need to come up with before you start even looking for a home. You need to determine what you can afford then follow this golden rule, SPEND LESS then you can afford.

What this post will do is help you find the right home for the right price with in your means. So let’s begin.

First, write down what you want this includes,

• What area you want to live in
• Your price range
• Bedrooms, Bathrooms, Garage, etc

The typical things you are looking for in a home.

Second, start to form your own idea of what is available in your area. Cruise over to Realtor.com and search properties. Drive the neighborhoods you are interested in and get prices on the houses with signs in their yards. Do your home work before you speak to a realtor. Visit new model homes, get pricing on everything. Learn what homes are like just above and below your target budget. If you are going to spend about 150K, then look at homes in the 90-250K range. Learn your market before you even think about spending a penny. Take as long as you need to do this well. Write down homes you could see yourself buying and see how long they take to sell at their price point.

Third, call a few different real estate agents (get referrals if you can). Talk to at least three, tell them exactly what type of home you want to buy, the neighborhoods you want to look it and the schools you want, etc. Be very specific. Tell the agent that you know about the phrase, “buyers are liars” and find it offensive! (I will explain buyers are liars at the end of this article). Then ask the agent what price range you should expect to have to pay to get that type of home.

In other words DO NOT let your agent start the whole interview by asking you what you can afford, you tell an agent you have a 125-150K budget and odds are you will find yourself in a 160K home! Remember you now know your market and you should get a number back from your agent that matches what you already know. Many times the number is much higher and this tells you that your agent is NOT LISTENING TO YOU, they are not understanding you. In many instances they are therefore not right for you.

Never let your agent call the shots control the relationship from the get go. They are experts, they are supposed to know more then you your preshopping will tell you if that is the case. Just because they know more then you does not mean they know what you want. Never let an agent say crap to you like, “you don’t what this” or “you really need to consider paying a bit more”. My accountant knows more then me, my financial advisors do to. Yet they work for me and are employed at my pleasure, I do not let them forget it.

Your agent may want you to sign a buyers agent contract. Never sign one that forces you to buy a home via them, one that protects you from going direct to the seller is fine. So is one that requires that if you buy a house they show you that your work with them on it but stay away from those that want a 180 day exclusive agreements. Explain you will be fair, that you want the right place for the right place and will give them the time they need to get the job done. Yet be clear they work for you and reserve the right to fire them at any time.

Fourth, choose the agent you get along with best that was at least close to the price range you expected to hear when you answered the question. Now take your maximum budget (lets call it 150K but it could be anything based on where you live and your income level, etc) and cut it by 10%! So that would in our example mean down to 135K and now your mission is to find a home that compares well with others selling at 150K. You can ALMOST always do this. Not in every market and not all the time but in most instances you can always find a deal like this.

Fifth, when you find the home you want to buy make your offer at least 10% below the asking price. So on this 135K home you now offer about 123K! All the seller can do is say no, you can always offer more, what do you think is going to happen? Do you think they might be so offended as to raise the price to 180? The only risk is someone else will buy the home. So what you must be willing to walk away from any deal. Most times when you low ball at precisely 10% the agent on the other end “gets it”, they generaly counter offer in the middle some where, you just might get that home worth 150 that is listed at 135 for 130.

There are always deals

Such deals are possible and in fact anyone can get one! I have done it on the last three homes I purchased. I bought one for just 84K and sold it for 109K just two years later with no improvements other then a deck. I bought another for 135 that was appraised at 159 and sold in three years later for a few pennies under 200K.

My latest find was a house easily worth 170 that was listed for 139 and I paid get this 120! How come, the listing agent was an idiot! The home had a second living area, a huge yard (1/3rd of an acre average lots are 1/10th), and a home office. The listing agent listed the house as a 3 bedroom, 2 bath, 2 car garage home, brick and vinyl. Nothing more! The guy should have been shot but it was my gain, we offered 115 they countered at 120 and I jumped on it.

The owners were days from having to start paying a second mortgage and I got the place for a song. Honestly there wasn’t another house with all of this going for it under 200K with in 10 miles of it but the buyer had to sell. The house was on a culdesac so it got no drive by traffic and the agent clearly blew the marketing.

So there you go a blueprint for finding the best deal on a home. Will it work in those white hot markets where houses sell in 24 hours? Not usually but generally just outside of those areas there are deals just waiting to be had. Be flexible, consider your options and spend LESS then you can afford. With a little work you can really get a great deal and build a solid investment from day one. Just remember real estate is not a game, you are not in it to be nice or make friends or even help people. You have to be tough, stand your ground and walk away if you need to.

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What I Blow Money On

Part of the benefit of having extra money is the ability to spend some of it. I believe in cutting costs, investing wisely and building wealth and security. Yet I also believe in enjoying life along the way, if not then what is the point? Any of us could die tomorrow so the key is to balance living for today with planning for tomorrow. So what are some of the things I spend more money on then I should or some of the stuff I just buy when I am bored? Here are a few,

• Starbucks Coffee - I will admit it, I am a caffeine fiend. When I made a lot less money Starbucks was a luxuary that I enjoyed once in a while, now I don’t go a day without a Vente Cappuccino or two. This is extravagance, a waste, a senseless spending that I end up with nothing to show for. Still it makes me happy and I have no real debt to worry about any more, I don’t stop investing to fund it and I only pay in cash so I have the money in my pocket each week to cover the expense.

• My Animals - I have dogs, cats and a lot of reptiles. As a child I wanted to be a herpetologist (a biologist who studies reptiles) but the lure of business was too powerful and I never went to college to pursue the biology degree. When I didn’t have much money and was in debt heavily I kept no pets, today I have an abundance of animals around me. I do breed the reptiles and one day they may pay for themselves but for now all the animals are an expense that never returns any money. Yet the dogs and cats bring joy to me and the family and the reptiles allow me to fufil my childhood dream of being a researcher working with snakes.

• Gadgets - I have all kinds of electronic do dads and I buy something new at least every month. Cameras, software, media players, etc. I just love technology, I like seeing what you can do with it, what you can create and what the latest craze is before it hits. Some of the stuff like my Blackberry has a real purpose for work and organization but most is just for fun. I didn’t need a Sony Alpha DSLR but I bought one because I wanted it. I always pay cash for these gadgets but I must admit I blow money on them. Most are never used to turn a profit I just enjoy having them.

Now let’s say I am bored and just want to go out bumping around with my wife to shops and what not. Doing so will almost always result in spending money! We are all human though and just sitting at home counting money can get old and you don’t always want to really plan an activity so “shopping” (our parents window shopped but we seem to have failed to inherit that ability) has become an American past time. Here are some things I have done to allow me the activity with out totally blowing it.

• Silver Coins - I am a huge fan of American Eagle Coins and often during a jaunt out I stop by one of several local coin shops and buy one or three of them. I keep them in plastic tubes and have been doing this past time for about 10 years now. I occasionally buy more numismaticly valuable coins, mostly older silver dollar and silver half dollar coins. The Eagles have a fixed value against the silver market price (at least newer ones do) so they are decent investments. The other coins have a bit of “subjective value” based on both the silver and collector markets combined. Still even they have a basis based on the price of silver. I will never make a mint on this but there is a value to these coins that will grow. So I get to browse, spend money and not just throw it away.

• Houses - I shop for houses all the time and the beauty of this is multiple. There are always countless new model homes to take a look at, walk around in etc. You never impulse buy a home so that is nice, I shop a lot and buy very seldom. The biggest value is I know my real estate market cold, I know exactly what different types of homes in different areas sell for. So I do know a deal when it pops up. This is the best rule I can give you if you want to invest in real estate some day, window shop houses for a year or so first. Record how long those “great deals” take to sell and keep your whits about you. In time you find gems and when you do you will know it.

• Books - I love knowledge and I love to shop for books, both audio and print. To help with my addiction I shop mostly at Half Price Books so I pay less per book then buying new. A used book is no big handicap to reading it so I just can’t see paying full price unless I want a new book. Then here is the best part, some of these go into my home library but others I read, am done with and sell them back to half price books. They generally pay about 20% or what I bought them for.

So there you go some ways I admit to just blowing money and other ways I stave off boredom with shopping that doesn’t just reduce my net worth dollar per dollar.

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Your job is not secure

Let me be clear I don’t think you have a safe, secure job today if you work even say for the Post Office or even a State Government agency. I believe firmly with the toxicity of debt in both the consumer credit card market and the sub prime lending market a major recession is coming. We won’t die off, no one will jump from tall buildings on Wall Street and the dust bowel is not comming back but there also may no longer be “two chickens in ever pot”. Todays “chickens” are Plasma TVs and other do dads.

Right now there is over 1 Tillion Dollars in toxic debt in the consumer credit market, that is money that will NEVER get paid back. The American tax payer has had enough, we won’t bleed money any more. Social Security is getting to where you as a working member of society have you “own old person” to provide for, it will change and that will be good but short term it will hurt.

The dollar weakens almost daily now! Canada now has a stronger dollar then the US that has never happened. The weak dollar is supposed to help fix the multi trillion dollar trade deficit we have with the world, it does nothing of the sort. The biggest potential export markets for us are China and Japan and both artificially tie their currency to the dollar. When the dollar drops so does the Yen by an equal amount. All a weak dollar does is make your money worth less and less in the global market.

My point is this can’t all just stand as the house of cards it is today and there will come a time soon when some of the bills will have to be paid. When that happens there will not be enough money to pay it. At that point employers are going to feel it hard and tough decisions will have to be made. Your boss might love you but if it comes down to the company surviving and your employment he will have that hard talk with you about some measly severance package. Odds are in many instances he will then get to have the same talk with his boss and so on.

How bad will it be? I do not pretend to know but it will be worse then it is today, that I am sure of. My real point though is it doesn’t really matter does it how many people loose jobs? All that matters to you is if and when you loose yours! It can happen to the best of us, it happened to me and because I live by the things I teach and write about it just wasn’t that big of an issue.

My point is you need to live as though you are currently in the hight of summer. You must buget and make spending choices with the view that you are right now at the peak of your earnings, you must plan for a big decline that can come at any time. This does not mean that you live in fear only that you live free from illusions.

If right now this second you or your spouse lost a job and were unable to replace it quickly how long would your last before you started to go negative on paying your bills. How long till you lost your house or got evicted from your apartment? The average American could scarcely make it 30-60 days! Many are but one or two paychecks from bankruptcy!

How do people get in this position? The belief that a paycheck is an entitlement that’s how. It amazes me how entitled employees tend to be in relation to their employers. Just look at the auto and airline unions, they keep getting more and more from their employers but the problem is the airlines and the car makers no longer can pay the bills. They are putting their very security in jeopardy by always wanting more, more, more.

So what is the solution? - Here are ten things you should be doing starting yesterday.

First - Never see yourself as secure in your job, have a plan B. Always know which competitor or similar company would be best for you to go work for. Cultivate relationships within said company, don’t act like you are ready to switch if you are not but be on the radar.

Second - Build a big network of contacts in your line of work, I don’t care if it is packing boxes or running companies as a CEO. Build network of people around you that can help you if you ever need a new job.

Third - Live below your means! Nothing is more important, make sure you buy less house then you can afford. Buy a cheaper to own and maintain and fuel car that you really have to settle for. In short never buy what you can afford today, buy what you should still be able to afford with far less then you have.

Fourth - If you deep in debt get out now! If have home equity and large credit card debt refinance your house and pay off the cards, then cut them to pieces.

Five - Buy and own a home! Renting has a place but as soon as you can afford to own a home the right way do it. Buy smart, pay less then the house is worth, find a deal, there are always deals. Know this variable rate mortgages are the devil, if you can’t afford the home with a fixed loan, you can’t afford the home!

Six - Build a second income, in other words own your own small business. You know how to do, make or advise on something better then most people. Find a way, anyway to make money with it. Do private consulting, build online income (this is what I do) hell just by blogging you can make 500-1000 dollars a month, (I will show you how in the future). Someway, somehow develop a second and even a third stream of income.

Seven - Save money outside of just your 401K, IRA, etc. The golden rule is get to where you save 10% of your income in an IRA or other tax deffered acocunt. That money is locked away until you retire though. I am all for 10% going to retirement as long as you can save say 15%. If today all you can afford to save is 10% put 5 into a long term locked away account and 5% where you can get to it with out penalty if you need it. Build an emergency fund of at least 90 days of your current income before you lower your savings contributions to liquid accounts.

Eight - Plan on being fired, your company being bought, your job being downsized, etc. It may never happen but plan on it. The very act of viewing such things as a possibility will make you smarter in your decisions every day. It will also make you more level headed and able to stand the hardship if it comes. Again do not live in fear, just follow the boy scout wisdom of “be prepared”.

Nine - Educate yourself in and outside of your current employment niche. When I lost a job about 8 years ago it became an opportunity! I went from Sales Management into online marketing and became very successful. The reason was simple in my sales career I educated myself on how to sell all the time. At the same time I taught myself how to market on and off line. I took my sales knowledge and put it to use online with my new skills. This was my “secondary income” a tiny small business that was making me about 500 dollars a month. I turned it into a new career because I had become a learning sponge. Today I own companies because of this education I gave myself. Be it online, via books, classes, seminars, I don’t care what invest both time and money in educating yourself.

Ten - Be the supreme commander of your own life and destiny. Every day think about how you can do better for yourself, your family and your employer. Your job IS NOT a right, you salary IS NOT an entitlement. Get that into your head right now this second. Would you take a raise if it was enough to damage your companies future? If you can answer that with a yes you should be fired! See yourself as an independent contractor, self employed no matter what your job is about. You should get paid as much as you can with in reason, many are underpaid but many people are also over paid. Work hard enough to be able to demand and expect more.

The key here all goes back to one thing though, no job is secure today. That false belief has put many people into massive debt and financial ruin along with a retirement in poverty. Sure this post was an ass kicking but most of America needs one from time to time.

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Spend Cash

Now this may sound a bit odd for a blog that is about saving money and building wealth but I mean what I say, spend cash. The key is spend cash rather then spending your money by writing checks or using debit/check cards.Each week plan your spending on everything, meals, groceries, etc. Then with draw the cash you need for the week and pay in cash at all times. Now this does not mean you can’t use your debit card if you need to or write a check when it is called for. It simply means to do the bulk of your spending with cold hard cash.

Why?

Simple you will spend less money!

How?

Easy you will do it yourself. It gets so easy to spend money with checks and cards. The money just doesn’t “feel” real to you. Due to this you spend more and I mean everyone (including me) does it. When you put cash in your pocket it becomes material to you and hence each expenditure becomes more personal, more real and you judge it a bit harder. You start to realize there is an “end” in a very real sense to your spending power.

Long term you will benefit as well, it will be much harder for that sales guy to sell you on how easy financing the car, vacation, etc is going to be. You mind will tune in on “real money” and such antics will cease to be effective. You will insist on control simply because money will always be a real and finite thing in your mind.

Always remember how you view, understand and think about money is more important then any other aspect of your financial success.

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My Heros in Business and Investing

If you really want to be successful financially you have to follow the intuitive wisdom of the 12 year old that plays Pop Warner Football. That 12 year old sees himself as Bret Farve or Randy Moss or whoever his favorite player is when he takes the field. In his head he hears the crowd and when he makes the catch, tackle or completes a pass for a second he is that superstar.

When you want to build wealth and success you need to do the same thing. You need your own heroes to follow and model yourself after. Here are some of mine and why I follow their lead.

Donald Trump - I admire Donald Trump for a large number of reasons. His success as an entrepreneur and real estate investor of course speaks for itself. On the personal side, Trump often comes across as a real jerk but that is just who he is. Believe it or not I admire that as well, despite being in the public eye he does not try to make the public happy. He is who he is and if you don’t like it, tough! I respect that a great deal.

Trump is also completely honest with people (this is a big part of why he is considered a jerk) about the way he sees things. I never have felt that Trump is someone with a hidden political agenda, he is a patriot, a success and a tough business person with a world class team around him. Trump has also put great deal of effort into establishing educational programs for real estate investing and other financial education programs.

Richard Branson - Branson is a real entrepreneur and has a life envied by many but experienced by very few. Despite being amoung the richest people in the world though he is remarkably down to earth and even reasonably accessible. When you hear him interviewed you think he could just be a bit of an eccentric British guy that lived next door to you.

He owns Necker Island where he maintains his primary residence which was recently featured as the number one celebrity home ahead of Hugh Hefner and Bill Gates! Yet if you met him in a bar tomorrow he would sit down and have a beer or three with you. He has failed more times then he has succeeded in building companies yet he keeps doing it because he loves being a true entrepreneur.

Warren Buffett - Warren began working in his fathers broakrage firm at the age of 11 and never looked back. Known as “America’s most successful investor” I can’t help but admire him. Buffett employed a three pronged approach

• Generals: undervalued securities that possess margin of safety and meet expected return-to-risk characteristics
• Arbitrages: company events that are not related to broader market changes, such as mergers and acquisitions, liquidation, etc.
• Controls: build sizable holdings, ally with other shareholders or employ proxies to effect changes in companies

This approach has made him one of the richest men in the world but was actually a very “safe approach” to investing.

Jimmy Buffett - No not Warren’s brother and that is no typo either. I am talking about party hardy, parrot head, Margaritaville singing Jimmy Buffett from Mobile Alabama. Jimmy speaks to my fun side, the part of me that takes 15 days off, lays on a beach and just lets everyone else deal with my businesses two times a year. He is my “someday” archetype. The old man I want to be when all my battles have been fought and I fish on the beach and drink rum from a coconut.

There is more to Jimmy though, Mr Jim is rich my friends, very, very rich! He has worked branding magic around the “Margaritaville” theme and now owns bars, merchandising and a premium Tequila label. At the same time he has only done what he loved doing. When he first went to Nashville he was rejected by 18 consecutive record label executives, so he kept playing bars and clubs and being who he was.

The rest is history and now despite not having a top ten record in two decades he still sells out just about every show he does and his fans still want more. There are Buffett fans (Parrot Heads) from 8 - 80 and their numbers continue to grow. Why, Jimmy created an image, a brand and did so by being himself. To me that makes him a very successful business person.

Henry Ford - Henry could never have gotten into college even with a bribe, he did not have the grades, the desire or the “book smarts” for it. Yet he is more associated with the automobile then any of the people that actually invented it. Henry took automation to the extreme and made the assembly line a reality and brought the car to the average American. That one achievement may have had more influence on the wealth and growth of the United States then any other person from his era.

Not content to just make cars though, Henry was a master of efficiency. When suppliers bid on supplying him with engines he required the crates they came in to be made to specific specifications. Wanting his business his suppliers agreed, the crates were then disassembled by his workers and formed the floor boards of the Model T. Despite that he had massive amounts of scrap wood from all the shipping crates so he teamed up with E. G. Kingsford, who was a local real-estate agent, to buy land for a massive wood production and charcoal processing plant. With all the waste in government and business today we could use some guys like Ford around.

So those are my heroes in business! I have others but those are my big ones when it comes to money, building businesses and investing. I suggest you assemble your own heroes list. Be inspired by them, know their stories and utilize that creative visualization children do so well in back yards and school stadiums to reach further then you can on your own.

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Why you should never buy whole life insurance

This is going to be a brief and short post, I am going to put this simply DO NOT EVER purchase whole life, universal life or any other name they ever come up with to try to sell it to you. This has been written on a lot so if you want to know more then I give you here, do a bit of research online and you will find a lot more information to back my suggestion.

Let me be blunt, Life Insurance is for when you die, nothing more and combining it with anything is a mistake. Your life insurance should be about 10 times your annual income if you are supporting a family. The reason for that is simple, 10% returns are quite doable with solid investments so your survivors can invest the proceeds, draw 10% a year and not deplete the money for a very long time. This effectively replaces your income for longer then your working life.

Now to carry that much whole life insurance would be extremely expensive, beyond the budget of most working Americans. An insurance agent will try to show you how whole life builds “cash value” but this is nothing but an illusion.

Remember life insurance pays out when you die! When you live a long time (most of us do) it is good for the Insurance company, you pay and they do not. So when you buy term insurance you pay the amount that very smart economists and math PhD’s have determined will be profitable for the insurance company based on average life expectancy. In other words a fair market price that covers you if you die during the term.

Now look at whole life, you pay a LOT MORE for the same amount of insurance (the risk incurred by the insurer) but the insurance company has the same level of risk. Now if you are a good stooge and pay way to much for way to long, they will then give you some of your money back some day. In the interim they invest your money at market rates of 10-15% returns. So they make that interest, they hold your money and they tell you how great it is that they will give some back.

If you like that how about this. Go get 100,000 dollars, send it to me and I will hold it for you, I will even pay out 2% interest on it. Twenty years from now you can have your 100K back, plus 2% interest per year or you can just let me keep holding it until you die. When you die, I will give the money to who ever you tell me do. Sound like a good deal to you? Of course not! Oh and yea if you ever need the money I will loan your own money to you and you can just pay it back with a bit of interest. Sound like a scam? It’s not you just pay in your 100K in installments and they call it whole life!

So here is what you do, buy the insurance you need on 20 year level term and invest the rest of the money in good solid investments. You make the 7, 10, 12 or 15% depending on your risk tolerance and ability, you retain the ownership and control of your money. If you die in the interim your loved ones are covered, if you live till the end of the term and have invested well then you should not need as much insurance. Perhaps you might buy a bit less for say 10 years and by then if you still need insurance you have done something very wrong.

Don’t let the insurance guy tell you how hard it is for a 70 year old to get insurance! At 70 you don’t need life insurance if you have done a good job of saving and investing. You are not leaving behind a young wife and 3 kids, you just need to be buried. If you can’t save enough money to get yourself put in an box and under six feet of dirt in 70 odd years something is drastically wrong.

I won’t be writing on this subject very often as it is pretty well known and accepted by most good financial professionals today. I just wanted to get it out right away because it is a huge mistake often made by young people who end up in front of a well trained but undereducated insurance agent.

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