I recently opened the morning paper and staring me in the face was a half-page ad by one of the local banks. The caption, in large bold letters read: The Perfect Cure
Below that in two-inch letters was “5.35% 22-month CD.” It went on to say, “Get a great return. Take the 5.35% cure and get a good night’s sleep.” Then, in fine print, it says penalty for early withdrawal.
The biggest penalty I can see is placing your money in a bank in the first place. But how many people do you suppose do just that? I wouldn’t attempt to even try to guess how much money is lying in banks, CD’s, etc. making no more than 5% or 6%. And the people that have it invested are happy. They think they’re getting a good rate of return.
The “Perfect Nightmare”
I think the caption should read “The perfect nightmare: How to stay awake.” If 5.35% will cure your problems and give you a good nights sleep, you don’t have a problem. You’re having hallucinations! Why do so many people put their money in banks, or something paying such pitiful returns?
It’s very obvious. They never took the time or made the effort to learn how to do better. They have been brain-trained and brain-washed by banks and savings companies to the point they think they are getting a great return on their money when, in fact, it’s hardly enough to cover the cost of inflation.
Back during the years before I studied money and learned about financing, notes, and the time value of money, there was an ad from a local company promising to double your money in eight years. I thought, “Wow, what a deal.” And I wanted to get all the money I could into their pockets before they changed the rules.
I didn’t know then that it only took 9% to double your money in eight years. I also didn’t know how simple it was to make 15% to 18% and much more with just a little knowledge. I was paying for my ignorance and didn’t even know it. But when I finally realized what my ignorance was costing me, I decided to pay for an education instead.
The 10-10-10 rule
Let me give an example of how simple and easy it is to create a note paying 21%. I call this my “10-10-10 Rule.” The object is to buy “something” that someone wants for 10% under fair market value, sell at fair market value with 10% down and finance that something at 10% for your buyer.
Here is an actual scenario played out at a recent seminar talk I did. The players were Herb, Jim, and Lonnie, and this is how it went: Lonnie asked Herb to name something that he would like to buy costing $5,000. Herb didn’t have $5,000, but he did have $500 and said he could pay about $200 per month. The “something” that Herb wanted was a top-of-the-line computer.
Jim happened to have this exact computer that Herb wanted and his asking price was $5,000, which was fair market value. Lonnie negotiated with Jim and asked the question, “Jim, if I could pay you cash right now, would you take $4,500 for your $5,000 computer?” Jim said he would.
So Lonnie bought Jim’s computer for $4,500 and immediately sold it to Herb for $5,000, $500 down and a note payable $200 monthly for 25 months at 10%. Now, what have we done? Let’s run some numbers and see. Herb owes Lonnie $4,500 and will pay it $200 per month for 25 months at 10% interest.
Lonnie has $4,000 of his money left in that note. If we collect $200 each month for 25 months, and we have $4,000 in that note, that’s a 21.6% return. And your money doubles in less than four years. (Note: My mobile home deals start at 50% return and go up from there.)
But suppose instead of a computer, Herb wanted a $5,000 mobile home. Would the concept work the same way? Of course it would. This concept works on anything you are willing to structure a note on and accept as collateral.
Anytime you hear someone say they would like to buy something, but they don’t have the money, you have a chance to create a note on what ever it is they want. And that something could be most anything. For instance, if you’re selling mobile homes, you can increase your profits by financing many other things that your buyer might need or want.
It could be decks, sheds, skirting, move/reset, fence, air conditioner, washer, dryer, paint job, new carpet, and the list goes on and on. All you need to do is find the item that person wants, negotiate to buy for at least 10% less than fair market value, and structure a note like we just did on Herb’s computer.
So if you have a good paying tenant/buyer who wants to buy something, find that something and create another monthly income stream. Your tenant/buyer will bless you for it, and you’ve just obligated somebody to send you another check.
The “perfect cure” is knowledge
With a little specialized knowledge, you won’t ever have to settle for “the perfect cure.” In my opinion, the perfect cure comes from investing in yourself, not banks or investments that pay very little. So be willing to pay for your education and avoid the terrible penalty for ignorance.
The saying, “The more you learn, the more you earn” has never been more true as it is today. With a million people each year being “down-sized” (fired), you can’t afford to let other people dictate how you earn your living and how much they will pay you.
Your financial future is determined by the choices you make today. Be sure your choices are the right ones, because you are the one who has to live with them.