MONEY Master the Game: 7 Simple Steps to Financial Freedom (38 page)

IF IT LOOKS TOO GOOD TO BE TRUE . . . IT MIGHT ACTUALLY BE TRUE

Then there’s our second category of people: those who take a look at their plan and think something must be wrong. Their calculator is not working! They see that Financial Vitality or Independence is popping up far too quickly.
“There’s no way I can get there that fast,” they think. “I can’t achieve Financial Independence in five, seven, or eight years. That’s crazy!” In their
minds, they’ve got a good 20 or 30 years of hard work and nose-to-the-grindstone days ahead of them.

Where’s the disconnect? How is that possible?

It’s possible because the number they had in their head—that $10 million or $20 million or $30 million price tag—was totally off base. It had nothing to do with reality.
It was simply a pie-in-the-sky number representing what they
thought
they needed to be financially independent, not what they actually needed.

Katherine, a woman who attended one of my Wealth Mastery seminars, is a great example. She was a savvy businesswoman who needed $100,000 a year to be financially secure—a large number by many people’s standards, but not by her own. To achieve Financial Independence, she’d need $175,000 to maintain her current lifestyle without working.
Katherine assumed it was going to take more than 20 years to get there.

Want to know what happened when she ran her numbers with my team? The first thing they uncovered was that her current business was earning more than $300,000 a year in net profits and growing at nearly 20% per year. With my team’s help and a little bit of research, she found that she could sell her business today for six times her current profits, or a total of $1.8 million. What does this mean?

Well, if she sold her business for $1.8 million and then received a 5% return, her annual investment income would be $90,000 per year. She had other investments already that were providing more than $10,000 per year,
so with a $100,000 annual income, guess what:
Katherine is financially secure right now!

Katherine was blown away—but also confused. She said, “But Tony, I don’t want to sell my business right now!” I told her that I wasn’t encouraging her to, nor did she have to. But she should declare victory and realize that she is financially secure today. Why? Because she has the assets to produce the income she needs right now. Even more exciting, at her business’s current growth rate of 20% per year, she would double her business in the next three and a half years. And even if her current growth rate was cut in half to only 10% per year, in seven years her business would be worth $3.6 million. If she sells at that point ($3.6 million × 5% = $180,000 per year in income without working), in three and a half to seven years, Katherine will
be financially independent. Not 20 years! And this was without making any other investments whatsoever!

By the way, one of the things I show business owners in my Business Mastery program is a little-known set of strategies that allows you to sell a portion (or even a significant majority) of your business and yet still run, control, direct, and profit from it. This allows you to get a large cash-flow bump to secure your Financial Freedom today, while still having the enjoyment and fulfillment of growing the business you love.

YOU CAN BE LATE TO THE PARTY AND STILL WIN

Let’s go back to my friend Angela’s story. Angela is anything but average, but from a financial perspective, she represents the average American. Angela is 48 years old. Having lived a free-spirited life, traveling and sailing around the world, she had never saved or invested in her entire life. After finishing section 1, she’s now committed to saving 10%, but she’s still got a major challenge: she’s beginning late in the game. (As she said, “I’m almost fifty!”) She has less time to tap into the power of compounding.

When Angela first calculated the amount of income she’d need for Financial Security,
her number came to $34,000 a year. For Financial Independence, she’d need $50,000.
At first glance, her numbers excited her. They didn’t have seven zeros, and they were numbers she could get her arms around. However, the timing of those numbers brought her back down to earth.
Starting late in life and saving only 10% of her income was a plan that would take Angela 24 years to get to Financial Security
—if she was 41 years old, that would be a great win. She would achieve it by 65, but since she was starting later, Angela would be 72 years old when she achieved Financial Security. It was certainly a more compelling future than if she hadn’t run the plan, and she was glad to know she
could
get there. But she wasn’t terribly excited by the long, slow road ahead.

So what could we do to speed up that goal? How could Angela get to Financial Security faster?
One way would be to increase her savings and invest it. She was saving 10% already. Never having saved before, 10% seemed like a huge number, but by committing to the Save More Tomorrow plan, she could painlessly save more when she received raises and accelerate her plan.
Another way to speed things up was to take a little more risk and increase her rate of return to 7% or more. Of course, that heightened risk could bring about more losses too. But it turned out there was an even simpler insight we had overlooked.

Lucky for Angela, she still had one more round in her arsenal.
She had left out a huge piece of future earnings, one that many people neglect to include in their financial planning: Social Security.

Angela, already 48, was only 14 years away from taking Social Security at a reduced rate and 17 years away from capturing her full benefit. She stood to take home $1,250 per month once she turned 62, or about $15,000 a year. So that $34,000 a year in income she needed for Financial Security suddenly dropped down to $19,000. Now when we reviewed the numbers in the app, she shaved a full decade off her timeline.
Instead of getting to Financial Security at 72, she was going to get there at 62!
Angela was going to be financially secure in 14 years, and she was thrilled. She now would have enough income never to have to work again to pay for her mortgage, her utilities, her food, her transportation, and her basic health insurance—a real sense of freedom for Angela.

The impossible became possible. And guess what else happened? Once Angela realized financial security was in view, she took that emotion, that excitement, that momentum, and she said, “Hey, let’s kick it up a notch. If I can get to Financial Security by sixty-two, let’s take a look at Financial Independence. I’m going to figure out a way to become financially independent, not in my seventies or eighties but in my sixties!” And her number to reach Financial Independence? It was $50,000—only $16,000 more a year in income than she’d need for Financial Security.

Angela took one more step. After reading chapter 3.6, “Get Better Returns and Speed Your Way to Victory,” she found yet another way to accelerate her plan. Angela was always extremely interested in owning income-producing real estate, and she learned some simple ways to invest in senior housing (or assisted living facilities) that are available through public and private real estate investment trusts. (These are covered in section 4.) We will highlight more details later in the book, but in short, senior housing facilities are a way to own income-producing real estate that is also tied to what I call a “demographic inevitability”: a wave of 76 million baby boomers
who are aging and will require the use of these facilities. By investing $438 per month (or $5,265 per year) for the next 20 years, and assuming that she reinvests the income for compound growth, she will have accumulated $228,572. (Note: this assumes a 7% income/dividend payment, which is the current rate on multiple senior housing real estate investment trusts.)

The amount she accumulates will generate $16,000 of income (assuming a 7% income payment), and she won’t have to tap into her principal unless she wants to! One last huge benefit? Angela doesn’t have to pay income tax on the entire income payment due to the tax deductions for depreciation.

Marco, Katherine, and Angela are real people just like you and me. Your plan is within reach too, and just like them, you might be able to get there sooner than you think. Don’t let the first plan you’ve run on the app be the end-all. Think of it as your starting point to make your dreams happen. In the next chapters, we’re going to show you five ways to speed it up and get there even faster.

Kites rise highest against the wind, not with it.

—WINSTON CHURCHILL

Whether you’re excited about the numbers your plan threw back at you or you’re disappointed about the long haul ahead, take heart—disappointment isn’t always bad. It often serves as a great kick in the pants that pushes you to create massive change.
Remember, it’s not conditions but
decisions
that determine our lives. Disappointment can drive us, or it can defeat us. I choose to be driven by it—and I’m hoping you take the same view. Most people don’t even get to this point in their planning, because they don’t want the letdown they’re afraid they’ll experience once they run their numbers.
But you’ve taken on the challenge and the promise of this book, so you’re not like most people.
You’ve chosen to be one of the few, not the many.

I vividly remember a Fourth of July trip I took more than 20 years ago with my dear friend Peter Guber and a group of top movie executives through Nantucket and Martha’s Vineyard. We were on Peter’s private yacht, and a couple of these moguls were throwing around how they had earned $20 million and $25 million on a single film that year. My jaw dropped—that number simply astonished me. Here at 30 years old,
I thought I was doing pretty well—that is, until I hung out on deck with a bunch of movie tycoons. These guys had an insane lifestyle, and it didn’t take long for me to get seduced by the idea of it all.

This experience jolted me, but it also made me ask a different question: What
did
I really want to create in my life? And could I possibly ever get there? At that time, I didn’t see any way I could add enough value to other human beings through my core skill of coaching to ever create that level of Financial Freedom.

Of course, I was being totally unfair, comparing myself and my level of accomplishment to these men. I was 30 years old; Peter and his movie-producing friends were all in their early to late 50s. Peter was in the prime of his career; I was just beginning mine. He had 52 Academy Award nominations and a slew of Hollywood hits to his name. Sure, I was making a name for myself and running a successful business—and changing lives—but financial success for Peter and his friends and financial success for me were light-years apart. And so, as I compared myself to those guys on the boat, I did what so many people do unfairly: I beat myself up for not being at the same level of accomplishment.

But the beauty of that moment, that day, was that it put me in a new and strange environment, and something inside me shifted. I was so far outside of my comfort zone. I felt like I didn’t belong—like I didn’t deserve to be there. Have you ever felt like this? It’s amazing what our minds will do to us if we don’t consciously direct them.

And yet contrast is a beautiful thing. When you get around people who are playing the game of life at a higher level, you either get depressed, pissed off, or inspired.
That day, I realized I didn’t want a yacht, but I was inspired to sharpen my game. I realized there was so much more I could do, give, and be. The best was yet to come. I also realized how incredibly valuable it was for me to get uncomfortable at that point in my life; to put myself in an environment where I didn’t feel on top or superior.

Of course, Peter had none of these thoughts. He was just bringing dear friends on a Fourth of July trip as a gift of love! But what he had really done was show me a world of unlimited possibilities. That experience helped awaken the truth in me. It became clear that I did have the capability to create anything I could envision. Maybe I didn’t want to have those same
grown-up toys, but I sure as hell wanted to have the same types of choices for my family. Today, in my early 50s, those impossible visions have become a simple reflection of the reality I now live. And I
still
don’t want a yacht!

Let’s be clear. It isn’t about the money. It’s about choice; about freedom. It’s about being able to live life on your terms, not anybody else’s.

Don’t complain.

Don’t say you can’t.

Don’t make up a story.

Instead, make a decision
now!

Find your gift and deliver it to as many people as possible.

If you become stronger, smarter, more compassionate, or more skilled, then your goal is a worthwhile one.

One of my earliest mentors, Jim Rohn, always taught me, “What you get will never make you happy; who you become will make you very happy or very sad.” If each day you make just a little progress, you will feel the joy that comes with personal growth. And that leads to perhaps one of the most important lessons I have learned about big goals and achievement.

Most people overestimate what they can do in a year, and they massively underestimate what they can accomplish in a decade or two.

The fact is: you are not a manager of circumstance, you’re the architect of your life’s experience.
Just because something isn’t in the foreground or isn’t within striking distance, don’t underestimate the power of the right actions taken relentlessly.

With the power of compounding, what seems impossible becomes possible. Right now, whether you love your financial plan or hate it, or whether you’re excited or afraid, let’s make it stronger together. Let’s accelerate it by looking at the five elements that can speed it up.

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. At this time of this writing, interest rates have been repressed for an extended period of time. However, the app will be updated if and when interest rates rise. You are also welcome at any time to put in any rate of return that best suits your circumstances and realistic investment return objectives.