How To Start Investing For Financial Independence, Part 1

Today, I am going to start a multi-part series about how to go from being a beginning investor to being "financially independent" in a steady and predictable way. At our website, we get tons of e-mails about how do I start, how do I start with little $'s, etc., etc., etc. If you are asking this question, congratulations because you are ahead of most. All of us have been there at some point.

I must warn you?. What I am about to share here for free is what "gurus" across the nation charge thousands of dollars for in weekend seminars. The "secrets" revealed are going to seem pretty simple because quite frankly, there are no secrets. The methods used here have been done for centuries and there is no real reason to complicate them. Let's apply these principles to see how fast someone might become financially independent without betting the farm.

Realize that everybody has wildly different starting points and different financial goals. For this series of articles, we assume that an individual has access to at least $15,000 liquid capital (or home equity) to start, is at least breaking even with their current income versus expenses, and has decent credit to obtain financing. Note there yet?.... See the footnote below.

To start, what you need is to make your money grow while keeping your current income stream, and current expense level in place. I can't say this more plainly?..To change your current financial path, you have to us your money and your time to grow additional income streams that increase wealth. There is many ways to do this but we are going to use investing in real estate as an example.

Now for beginners, here is the really bad news?? As an investor, you reap rewards by putting your money in HARMS WAY. You do everything in your power to minimize your risk but bottom line is that real investors make money by taking CONTROLLED risks. As investors get better, they learn how to make fantastic investment returns doing things that all their friends and relatives thing is crazy?.. However, they know exactly what risks they are taking are why those risks are small in comparison to the potential rewards.

One reason people really like real estate investing is leverage; i.e, you can purchase an expensive property using 0-20% of your own money while financing the rest. So if you put 10% down for example, and then the property goes up by 20%, you have made a 200% return (ignoring expenses, taxes, etc. for simplicity). Of course this works in reverse? If the property drops by 20%, you have lost not only your original investment but have to come up with another 10% as well?.. Ouch!

For someone beginning, here is what I would suggest: 1) Look for an opportunity that will return at least 150% in 2 yrs or less;

2) Be mentally and financially prepared if the investment does not work out;

3) Have VERY good reasons why you don't think you will lose money?? You may not make as much as expected but you would rather not lose money at this stage.

4) Be patient. This single result should not either make or break you but it is crucial to a longer term plan.

In our Mastermind Group, we are bringing out a land project (see related article Land Investing that appears to meet these criterion (each investor has to decide for themselves). So let's say the purchase price is $150,000, with 10% down and another $3,500 in closing costs. With good credit, then the financing obtained would make the land payments for 2 years while waiting for growth.

Now let's say after you did your analysis, looked at what had happened in the past, looked at why you thought more and more people would want this property, etc., you decide that you think this property will average 20%/Yr escalation over the next 2 years. MORE IMPORTANTLY, you decide that barring a major meltdown in the market, you think there is little chance that you can't at least break even after 2 years.

So if you end up being right about the growth, then you might net a tidy $43,000 (before taxes) or so after everything is considered. After long term capital gains at 15% let's say, then you just picked up about $36,000 of the "market's money". That is money that if you take a loss on the next investment will not be nearly as painful as if you lost your original money. When you combine this with your original investment amount, you now have around $55,000 of operating capital for step 2.

Realistically, you cannot predict how much you will make from the investment. When I invest, I try to establish in my mind what is reasonable. Frequently, I have been surprised to the positive and made much more than expected. Sometimes I have made less. The key being to put yourself in a low risk situation where you have a strong reason to believe the market will go in your favor.

To accomplish this first step, let's look at what you really had to do:

1) Had to be willing to put $$ in harm's way;

2) Had to educate yourself enough to evaluate the risk and the opportunity;

3) Had to find the opportunity or be in a position to have the opportunity presented to them;

4) Had to act.

I would like to comment on the education side. As a former professor, I have seen very smart people spend 1,000's of hours and 10,000's of thousands of dollars educating themselves to "earn a living"; this is a great move in many cases. On the other side, I have seen very smart people who want investing to be a major source of income but will not spend any time or any money educating themselves.

To me, this is a recipe for disaster. By the time we finish this series, you will see that with a few simple steps, implemented over time, many people can easily produce more money than from their regular job. Furthermore, many people will put 100's of thousands of dollars at risk but know almost nothing about what they are doing. If you chose the path of making your investment dollars grow steadily with time, I hope this does not end up describing you.

** Footnote: If you are not yet at that level, here is what I suggest. First, read Michael Masterson's book called "Automatic Wealth". This is an excellent book on how to rapidly change your financial position while staying employed. Next, I would read Van Tharp's new book called "Safe Paths To Financial Freedom". Van uses a very different thought process from many and so adds a great deal of rounding. Like anything else, you will not agree with everything written in these books but they provide some great thought processes. When you have some capital and are cash flow positive, them come back and revisit this article.

Chris Anderson is a leading authority on preconstruction real estate investing and has been referenced in many venues including the New York Times and USA Today. Free sign up at GetPreconstructionDeals.com to get continuing education and articles or visit his Investing Mastermind Group to get access to world class investing projects.

---

Google News Updated : Wed, 08 Oct 2008 08:50:27 GMT British government unveils massive financial rescue plan - Los Angeles Times ITV.com British government unveils massive financial rescue plan Los Angeles Times - 48 minutes ago LONDON - The British government Wednesday unveiled a massive rescue plan for its ailing banking system after days of unrelenting bad news for the financial industry here. British government to partially nationalize banks International Herald Tribune Rescue plan for UK banks unveiled BBC News guardian.co.uk - Washington Post - BusinessWeek - AFP all 1,454 news articles Publ.Date : Wed, 08 Oct 2008 08:01:33 GMT Australian jet plunge probe opens - BBC News TVNZ Australian jet plunge probe opens BBC News - 1 hour ago A computer glitch may have caused a Qantas jet to plunge suddenly mid-flight, an Australian air safety investigator has said. The incident injured 40 passengers, in a terrifying airborne drama. Qantas plane had glitch before altitude plunge International Herald Tribune Computer glitch may have caused Qantas plunge: investigator AFP Bloomberg - Reuters - Aljazeera.net - ABC Online all 734 news articles Publ.Date : Wed, 08 Oct 2008 07:39:47 GMT In Florida, Palin keeps up attacks on Obama - Dallas Morning News BBC News In Florida, Palin keeps up attacks on Obama Dallas Morning News - 1 hour ago JACKSONVILLE, Fla. - Sarah Palin portrayed Barack Obama as a dishonest politician and a risky choice for president Tuesday as she wrapped up a two-day campaign swing through Florida. Sarah Palin, Freed? Washington Post McCain, Obama and a 'friendly' town hall Los Angeles Times Reuters - San Francisco Chronicle - Boston Globe - USA Today all 4,475 news articles Publ.Date : Wed, 08 Oct 2008 07:39:26 GMT Harford County Council tries for leaner budget - Baltimore Sun Pittsburgh Post Gazette Harford County Council tries for leaner budget Baltimore Sun - 1 hour ago By Mary Gail Hare Harford County Executive David R. Craig met with the County Council last night and painted a bleak revenue outlook that will dominate the remainder of the fiscal year and continue well into the next. Sims wants pay freeze to balance King County budget Seattle Times Sims announces layoffs, wage freezes for county employees Seattle Post Intelligencer Pittsburgh Post Gazette - KOMO News - Pittsburgh Tribune-Review - Bizjournals.com all 10 news articles Publ.Date : Wed, 08 Oct 2008 07:27:45 GMT Nepal Plane Crashes, Killing Mostly German Tourists (Update1) - Bloomberg Spiegel Online Nepal Plane Crashes, Killing Mostly German Tourists (Update1) Bloomberg - 27 minutes ago By Jay Shankar Oct. 8 (Bloomberg) -- A passenger plane belonging to Yeti Airlines, a private carrier, crashed near Mount Everest in Nepal killing 18 people, including 12 German tourists, an aviation official said. Everest plane crash kills 18 in Nepal, mostly German AFP Official: Plane crash in Nepal kills 18 USA Today The Associated Press - The Sun Daily - Spiegel Online - Swissinfo all 284 news articles Publ.Date : Wed, 08 Oct 2008 08:23:22 GMT Obama connected with audience - Baltimore Sun Boston Globe Obama connected with audience Baltimore Sun - 1 hour ago By David Zurawik z on tv david.zurawik@baltsun.com The format of the second presidential debate was described as that of a town hall meeting, but it was pure TV from the "citizens" seated on risers on a brightly lit stage, to the candidates moving ... Candidates arguments are as familiar as their mistakes The Miami Herald Cool Hand Barack Wall Street Journal The Weekly Standard - Los Angeles Times - Dallas Morning News - Boston Globe all 464 news articles Publ.Date : Wed, 08 Oct 2008 07:28:41 GMT Absentee balloting began Tuesday - Las Cruces Sun-News San Diego Union Tribune Absentee balloting began Tuesday Las Cruces Sun-News - 33 minutes ago By SUE MAJOR HOLMES AP Writer ALBUQUERQUE, NM—It was only mid-morning on the first day of absentee voting, but 200 people had already shown up to cast their ballots at the clerk's office in Bernalillo County, New Mexico's most populous. Muncie takes advantage of early voting Ball State Daily News Voter numbers growing as deadline nears Corvallis Gazette Times Gloucester County Times - NJ.com - Salisbury Post - Aspen Times - Daily Vidette all 619 news articles Publ.Date : Wed, 08 Oct 2008 08:16:38 GMT Data Feed Content for Web Pages Amazon RSS Feed Generator

PARLOT::Ebooks, Scripts, Websites, and more...

Adsense websites

Planning Starts with the Basics

When developing a plan for your finances, the toughest question... Read More

Guru Focused: Robert Olstein?s Short Sells

While it is rather rare that value gurus sell stocks... Read More

Short Term Savings Products

When you invest, it simply means that you are putting... Read More

Why You Need To Buy and Sell Gold Coins (Part 6)

Pre-1933 Gold Outperforms Today's Gold Bullion...Since 1970, an investment strategy... Read More

How To Create Wealth In The Stock Market

First and foremost, an opportunistic strategy for creating wealth in... Read More

Just Say NO to Your Stock Broker

We have all heard that slogan that started back when... Read More

Use this Simple Trick its to Buy $100 Bills Direct from your Bank for only $97

Most People just don't understand the power of using their... Read More

Holy Grail Investments

Every year I go to the Money Show in Orlando,... Read More

How to Choose the Right Share Class

You'll want to opt for the no-load or institutional share... Read More

An Economical Retirement Investment Plan

The practice of economy, directed toward a retirement investment plan... Read More

Profitability And Stock Turn Rate

The inventory of the typical store represents the largest single... Read More

Going Against the Conventional Investment Wisdom

First of all, I want to give everyone the disclaimer... Read More

Investigate Before You Invest

"Through wisdom is a house built. And by understanding it... Read More

Stock Market Money Management Skills

Let's start by saying: You can't be afraid to take... Read More

Seven Investment Terms Everyone Should Know

For those who have never given their financial future a... Read More

Keeping It Interesting

Some lines from a movie never leave your mind; I... Read More

How to Calculate the Value of Your U.S. Savings Bonds

If you're like many Americans over the age of 55,... Read More

The Conflict of Interest Game

Disgruntled investors are going after Wall Street once again, this... Read More

The Cost of Green Eggs and Ham

Young readers know that March 4th is the birthday of... Read More

A Secret Revealed: Why Most (Day) Traders Fail

The following perspective on (day) trading comes from my many... Read More

Wit and Wisdom on Money, Wall Street and Success - Part #1

I love to collect quotes as they concisely promote a... Read More

Creating Wealth by Gearing Up

Gearing is where you borrow money to invest. As already... Read More

Options Education : Opinion versus Fact!

The most basic aspect of trading is learning to differentiate... Read More

It?s Never too Early to Start Investing!

Remember the old saying, "never too late to start"? Well,... Read More

Penny Stock Investing

The Nature of Penny StocksFor anyone new to investing in... Read More