Since I’ve started this blog, I’ve been reading about investing and entrepreneurship. My quest in figuring out where to invest has led me to about 3 different places. Many people tell me that I should take advantage of my 401k plan at work. However every investment vehicle I have to choose from other than the money market that pays 3.0% is at -15% percent for the year. My boss told me, “Hey, you’re thinking about it the wrong way. That’s a 15% discount!” I have the feeling though that the US economy is just hitting it’s stride in the downward trend we’ve been seeing.

I completely disagree with every move I’ve seen the Federal Reserve make. Cutting interest rates to such ridiculous lows, lending to big Wall Street Firms, directly lending to non depository banking institutions, bailing out Fannie and Freddy… I read a report on the amount of money the government has tossed into the economy in the past 2 years of the housing crisis. The estimate was a whopping 1.43 trillion, yes with a T, dollars.

Here is the danger with paper currency. The urge to print more is always there. The problem is though that the more that is printed, or created electronically, the less value it has. To make it very simple…imagine that I control all of the ice cream sundaes in the world. There is only one place to get them and I produce 10 per year. They then become very valuable, especially if it was a crime for anyone else to create ice cream sundaes. Imagine then that I then begin producing 100 per year. The value of my ice cream sundaes would drop. The demand would lower. The more dollars we create, the less it buys. Inflation reduces the total value of our debt. The government essentially controls through the creation of inflation how much debt they have.

Peter Schiff points out that people assume inflation is rising costs, but rising costs are actually a symptom of inflation. For me to believe that our economy was a good place to put my money I would want to see the fed doing the right things. In my opinion this would be letting the market set the price of money, rather than keeping it artificially more. I would want to see this country taking steps to again become a manufacturing power house among the nations of the world, I would want to see the fed also reducing the limits on fractional reserve banking. Currently it’s set at 10 to 1. I would want to see attitudes begin to change. People in this country are reckless consumers. We produce nearly nothing in this country. What ever happened to Made in America? The way to a sound economy is through producing goods and services and selling them internationally, and saving.

The answer of my questions of what to invest in, has become, Real Estate, which is at or near bottom. The thing I strive to remember in investing in Real Estate is that one should never buy a property that will not cash-flow. Economically depressed areas are safe bets as the cost of buying and maintaining the property is beyond most renters. Places like Michigan and Ohio. The more units, the better. That way my investment is spread across multiple renters. Another place I would invest my money is into my own business. Kate and I are working on our own once we finish up our wedding and move into our own place. As far as storing wealth, my answer is precious metals. Gold, Silver, Platinum and Palladium.

One thing I’ve stumbled upon while investigating precious metals investment, is that among this subculture is a firm believe that fiat currency, or paper money that isn’t backed by anything, is that it will be printed by it’s government until it’s worthless. Examples of this include Germany, Bolivia, Argentina, Peru, Brazil, and the Ukraine. Some “dooms-day” economists believe that the US is heading towards this glum economic future.

I do read a couple of blogs, and most people won’t even talk about a coming financial apocalypse. My opinion is that it’s dangerous not to talk about it. The Government is trying to do another “economic stimulus. Can anybody tell me how printing more money and asking us to buy more stuff will fix our economy? Estimates on the rate of inflation range from 3%-12%. I am starting to think that we’re more towards the 12%.

Please leave me comments on what you guys think.

How would you fix the economy?

I too once got myself into a credit card mess. And while I at first didn’t want to fess up to the fact that I was the one who got greedy and misused my cards, once I did I felt like a weight had been lifted off of me. Since I recognized that I got myself into that mess I knew that I could get myself out of it.

Credit is a tool, and if properly used can help you to leverage the bank’s money and appreciate the return. There’s good debt and bad debt. It would be ideal if we could all exist in a world without any debt, unfortunately things that are valuable such as housing and transportation are expensive. They usually must be financed. We should all avoid financing things that we can buy with cash. Things like food, gas, clothing, flashy electronics, such as iphones and the like. If you’re in debt and rewarding yourself with such a self indulgent gift as an iphone, I think you need to take a better look at who you are and what you’re doing. Where are your goals? How close are you to your goals?

Too many times people justify buying something with the words, “Oh well, you only live once.” Putting a 500 dollar Coach bag on your card when you are so worried about making your rent or your house or car payment is retarded. Sometimes we get ourselves into situations, but once we realize we’re in one we need to turn around from those actions. People tell me, “Hey, what’s the big deal if I buy myself something nice once in a while?” And I think, Nothing, I love people like you, because it’s people like you who make the wealthy, wealthier. Charge more! I’m going to put 500 dollars into my trading account, and buy shares of Visa so I can get my cut of your stupid purchases and all of the millions of people who shop the same way you do.

If you want to escape you have to think like the 20% of people who are going against what the 80% of people are doing.

There are things you can do though. For one start paying off your smallest balances first. If your credit is in decent shape, go down to Bank of America and apply for their Visa Signature card. It gives you 1 year at 0% APR on balance transfers. Put as much of your debt onto it as you can. That money is now costing you nothing. Make the minimum payments on it and on every other card you have. Starting with the smallest card, put as much extra as you can on it and work your way up the line of credit cards in the order from smallest to largest increasing the amount of payments you’re making to each card by combining the total of payments you were making to cards that are now paid off. Once you finish paying off all balances costing you money, depending on how much time is left, go back to Bank of America and apply for the World Points Visa, this card gives you 0% for 6 months. Do a balance transfer into your checking as Bank of America won’t let you transfer balances between cards, but will let you transfer funds into your personal checking account, at any bank you use. Once you do that, take the funds out of your checking and pay off your balance on the Bank of America Signature Visa that the 0% has expired on and start paying it off as you go. Once you finish paying off your debt, take the amount you were putting to your debt into your savings account.

If your credit stinks and you’re in collections just make payment arrangements and pay the cards off from smallest to largest and keep increasing those payments.

Credit is a tool that you can use, but it’s a tool you can misuse as well. Just like a rifle can be used to provide for your family or kill your family. In the end, it’s you who is responsible for how it is used, not the bank, not the card company.

Money makes the world go round. Yet in the end it’s just a piece of paper, backed up by a bunch of hot air. It’s only value is found because we are forced by law to use it. You cannot print your own and most places around here don’t accept foreign currency. It is the only thing approved by the United States Government for use and you will be arrested if you start issuing your own notes.

I am not an insider at the US Federal Reserve, however I do know that they have been holding auctions for hundreds of billions of dollars. These auctions are so that Banks can stay liquid and keep lending money. Last time I checked it was 75 billion. They’ve had 13 of these auctions. (Herald Tribune Article, June 3rd 2008). Where is this money coming from? Depositors at banks? I think not. I don’t think the fed usually keeps 75 billion on hand, wouldn’t it be better to have it invested? Are they not just printing this money up, or actually just creating it out of thin air? Does anybody know the answer to this question? As I was typing, I got curious and looked it up. I did know already that we are on a Fractional Reserve Banking system in the United states. I learned that this allows the Fed a lot more freedom in where it comes up with money. For more information on Fractional Reserve Banking, compare these sources, (lewrockwell.com article), (Wikipedia entry), (Encarta entry) The Encarta article points out that money is created when a bank makes a loan and it is destroyed when the loan is repaid. I don’t agree. Once money can be created from nothing, what separates real money from created money? It’s all real enough. A 10 dollar deposit, turned into a 100 dollar loan, which is used to buy a house, (we’re keeping things simple) puts 100 dollars that wasn’t there before into the economy. The economy has grown by 100 dollars, which the seller of the house now uses to deposit into a bank account. The 100 dollars is then used to make a loan for 1000.00 dollars by his bank, and so on. While the loans are repaid, the banks keep the interest. So money is earned on created money, causing inflation, and while some of it is reversed as the loans are repaid, there is still inflation.

The same encarta article brings out, and I quote directly from their entry:

The real value of the dollar today depends only on the amount of goods and services a dollar can purchase. That purchasing power depends primarily on the relationship between the number of dollars people are holding as currency and in their checking and savings accounts, and the quantity of goods and services that are produced in the economy each year. If the number of dollars increases much more rapidly than the quantity of goods and services produced each year, or if people start spending the dollars they hold more rapidly, the result is likely to be inflation. Inflation is an increase in the average price of all goods and services. In other words, it is a decrease in the value of what each dollar can buy. see Inflation and Deflation.

So if production of dollars has increased rapidly, perhaps by auctions of hundreds of billions of dollars, or by people using their inflated equity in their houses to purchases collective billions of dollars worth of consumer goods, the amount dollars buys decreases? Could that explain why gas prices have more than doubled since this housing crisis started in 2006? Opec won’t increase production, until the market calls for it. Demand has not increased enough to warrant this type of price increase. Food prices are up as well. Some blame ethanol. I tried to hunt down some statistics that support my theory that food exports from the US are up, but I couldn’t find any in the few minutes I searched. However it would make sense that if you’re selling grain to europe, and getting paid in Euros after the drop in the dollars value, now means you’re earning a lot more dollars for the same amount of grain.

After reading all of this, money now seems like a little bit less of a priority for me. People kill for this stuff and yet people don’t understand how it works or where it comes from. Everybody wants to be rich but figuring out how to become rich to most people means working more hours or climbing the corporate ladder. I think what people really need to do is figure out what rich really means to them. Lots of money is trivial. The value of it changes daily, perhaps not by huge amounts but over time it does. My dad told me his first real job paid 12,000 dollars a year and he felt like he was making huge amounts of money. In 1995 my dad was earning 40k and supporting 5 people on it. Today I earn 40k and I can barely support myself. So piling up a huge nest egg, means nothing in the long run. 300,000 dollars won’t buy you anything in 70 years. Who remembers when 1,000,000 dollars was a lot of money? Today if you had a million dollars in the bank you’d keep working. It’d be nice, you’d be comfortable, but it’s not enough to retire on is it?

The only way to be comfortable is to be able to generate passive income. My family realized this about 2 years ago. We bought some houses in Michigan, the first one we paid 3,000 dollars for, with a total cost after clean up and rehab of 8,000.00. We sold it for 32,000.00. The person who bought it pays monthly less than she was to rent an apartment that was literally falling apart. She will keep paying us for the next 15 years, or until she refinances. The total of her payments will be over 54,000.00 dollars from an initial investment of 8k. We invented 24 thousand additional dollars out of thin air. Just like the banks do…riches are earned in time and freedom, not dollars. That 46k we created, out of thin air spread out over 15 years is a little over 3k a year. Not enough to retire on either, but it’s just the start. We have to do nothing to make sure we keep getting paid. If she stops, we foreclose and resell a property that the owner has spent time fixing up and resell it again. This time it cost maybe a few hundred dollars to take back through legal fees and resold for 62k the next time. Who knows? It’s about generating capital, not earning a salary anymore.

If you’re reading my blog, I want feedback. I want your ideas, I want your opinions. What have you done to better understand the monetary system? What parts of my post do you agree with, disagree with?

What does going to school have to do with managing money? This is like me telling people, If you want to climb mount everest, become a doctor! Why? Are people with degrees smarter with money? Are people who are doctors more physically fit for mountain climbing? The answer to both questions is NO!

Learning how to manage money is an art and a science. It’s not something you can be taught, it’s something that you have to set out to learn with intent and purpose. There are accountants and economists with less knowledge about managing money than many investors out there with only high school diplomas.

Ahhhh ridiculous!

But what I’m talking about though is, what happens before that. I want to live comfortable, but not excessive. I want to live on my own terms, not on someone else’s.

How am I going to do that?

Well basically the over consumption of American consumers does sicken me. I can’t spend my life buying things I don’t need to impress people I don’t like. I simply can’t do it. I haven’t paid for a cellphone in over 2 years. My car is from 1997 and still works. It gets 25 miles a gallon which isn’t great, but isn’t enough to justify buying a new car. It needs new valve covers and it needs a new serpentine belt. It has holes in the seats but it has driven with me for over 180k miles and I can’t let the ol’ girl down by getting rid of her.

I also learned when I was young that your house is a liability. I’m making an offer on my second home, the first one was condemned…and I bought it for 1 dollar. I got rid of it in 4 months. But this house is one I plan to live in. It’s one of the few on the market right now being sold by a real person. They’re asking 134k but I’m offering 105. I expect to buy it for 117. However even if I don’t houses are getting cheaper every day and I can wait. Patience is a key to being comfortably well off, but so is knowing when to pull the trigger. I plan on living in that place for a year and then renting it out for another 29 years. If my rate is good, I will never refinance unless it makes sense to.

So I’ve started at the end, I’m working backwards now. I need my business to take off. I don’t know how to get it to start. I am just writing and putting it out there on the internet. So far I don’t have any ads. I plan on writing a book about how I went from 15k in debt with canceled credit cards to buying a house, married with a steady job and many of my personal problems resolved. I have more ideas but I don’t know…I’ve never ran a business before. I’ll figure it out. I always do. I’m Richard Spicer and my name is a brand.

If what you’re doing isn’t working, do the opposite. This is a trick I have used and have greatly succeeded at. For instance, when I was trying to find a girlfriend I couldn’t. I stopped trying and instead focused on being a better person. So instead of focusing on someone else, I focused on fixing myself. Found a girlfriend. When I was trying to originate loans I tried waiting for the phone to ring. Then I tried going out and getting them. Then I gave up and sat in my office watching movies in the dark. Then I did the opposite which was wasting time and went to work looking for a new job. I went from 7k in 2006 to 40k in 2007.

If you look at the average American, they eat bad, spend more money than they have, divorce each other, and many collect STDs. (No offense if you do happen to have one) The majority die of heart disease or of cancer, most work until they die. I decided to do the opposite of this back in Sept. I took a leap of faith and bought a house in Cleveland for $1.00, started eating right and exercising, started learning about nutrition and my health and I also took time to learn how to manage my money. I invested in a bunch of books about how to live better and although some of them were pretty stupid a lot of them had some good ideas and some great concepts in them that I hadn’t considered before.

One of my sayings is that LIFE compounds INTEREST daily. The effort you put into making yourself smarter, faster, stronger, wealthier is like putting money into a bank. Only at this bank, you choose your interest rate. If you improve just 1% every day you will be over 365% better at life in just one year. It is difficult to measure but I have personally watched my life go from tormenting hell hole to tolerable, to pretty decent. I’m ready to kick it into next gear.

But how do you get started?

1: buy some books
2: find role models
3: start self-coaching
4: develop action plan
5: start tracking progress
6: make corrections
7: repeat steps 4,5,6.

Realize that your thoughts are things, actually they become things. For instance the light bulb was a thought before it became a thing just as a car was a thought before it was a thing. Thoughts are real and they can be limiting or encouraging. You will generally preform just as you expect yourself to perform. If you do not know what to expect of yourself, I’ve found that people generally perform as well as people around them expect them to perform. Especially if they have put those people in a position of authority over them. For instance, as children we perform as well as our parents expect.

I have read and actually developed “mantras” that have helped me. It sounds hokey but just telling yourself you’re invincible or doing a great job, or good looking can really help develop your personality and self esteem.

Do yourself some good and tell yourself that you’re good at the things you wish to be good at, and tell yourself that you always try to be better. If you have any advice or experience going from a walking disaster to moderately successful please comment and let me know.

My mom is visiting from MI for the next 3 weeks. We’ve talked about my plan which is to quit my day job, travel the countryside, and live off of a stream of income from property that we own and from my website. The plan has several parts.

1: Buy a house in Sacramento
Price tag: 70,000 giving me an estimated mortgage payment w/ taxes and insurance of 650.00
2: Clean up the house, make necessary improvements and rent the property out for 950.00
3: Sell all unnecessary earthly possessions.
4: Pack my wife and few remaining things into our Scion and drive off to MI where we have a loft waiting for us. Cost = 2000.00 to paint/furnish. Rent = 0.00
5: Find employment in MI that provides income to finance investing in more property and website. To survive I’ll need a bare minimum of about 600 dollars for food gas and entertainment. -300 from rental property means that I will need to generate a minimum of 300 dollars through employment, the rest will be added to investment pool.

6: Step 6 is start band with wife, play shows in local town, just for kicks and grins. Start a boutique and clothing line, build a race car.

It’s 12:30 and I’m sitting at my computer wondering what the point of it all is. I haven’t written in a few days and I know that my problem is that I am afraid to get out of my comfort zone and try something new. Nobody reads this blog on a regular basis, and I’m afraid to write how I feel! I’m afraid to try to launch a business, because I’ve never been in business for myself. It’s scary to think that I could potentially become financially independent of a JOB and have whatever my heart desires.

It appears to me that I am afraid of success. I’m afraid not of failing as I have failed so many times in my life and learned so much from it. I am afraid of succeeding. I’m afraid of one of my hair brained ideas actually putting money into my bank account. I’m afraid.

What I’m not afraid of is struggling. For the past year I have had ZERO extra money while I paid off 15,000.00 in credit card debt. This year, from January to now I have been putting every spare penny into savings, actually essential pennies. I cut myself short every month and get down to my last 10 dollars, but I do put over 800 a month in the bank. I’m not afraid of struggling, it’s alright, I’ve been doing it. I’m inconvenienced, I’m stressed out, I’m unhappy but I’m ok with it. Just saying those words, or writing them I should say, makes me sick.

I am NOT ok with waking up at 7am, throwing on some clothes, fighting the morning commute to sit at a desk and make some large multi-national, faceless/souless mega-conglomerate tons of money while I drive around in a 1997 beat up blue chevy with torn seats dreaming about my next new car, which will happen precisely never. The deck has been stacked against the middle class. In fact, the middle class is the new poor. Living in the middle class now means living at the poverty line instead of right below it. It used to be that the middle class still had nice cars and sent their kids to college. Now it means carrying tons of consumer debt and getting a reverse mortgage. It means your kids pay for their own college, which means that your kids enter life 60k in debt and when you die, your house has been mortgaged to the hilt and they won’t get a penny for it, so not only do they start life in debt, YOU WON’T PASS ANYTHING ON TO THEM WHEN YOU’RE GONE. Except some nice pieces of crappy costume jewelry. It means that your grandkids will suffer the same fate. The rich get richer and the poor get poor, do you know why? Because the rich live off of the backs of the poor masses. The middle class are now getting it stuck to them, or maybe they always have been and I’m just realizing it.

Gas is at 4 dollars a gallon, food prices are increasing dramatically, the credit crunch is worsening, and most people are completely out of touch with reality. I cannot in good conscience, know this and not take advantage of it.

My plan is to finish my ebook and get it online in the next week. I need to set goals. I want to build race cars, I want to sleep in hammocks with my wonderful wife. I want to live on an island in the south pacific, I want to escape.

I have been brainstorming on a few other business ideas. I have a contact named Doug, who is interested in Spanish language translation of websites. If you’re interested in this please email Richard@iwillescape.com. The deal is Doug fronts the cash and I find the talent, we split ownership in the company between himself (the lions share) and 10% to each of the others. (You and Me). We are located in the Sacramento, CA area and do not necessarily need anyone local. We mostly need web experienced people or someone who could make a translation app that would translate all content on a page into spanish. I’m not even sure if this is feasible. I do have this guy offering to front the cash though so it’s hard to pass up this opportunity.

I am also working on a sales training site and a foreclosure blog. What I have found exciting about internet businesses is that you can have 10+ all working for you at once without having to constantly create new content.

Are there any readers out there who have experience in online entrepreneurship? I would LOVE to interview you. Seeing how as currently this blog is scoring about 7 hits a day, I doubt it. Readership is growing though. Spread the word! iwillescape.com is a place to learn about and discuss freedom from the 9-5.

-Spicer

debit/credit card activity: Debit posts immediately (pin code transactions) while using your bank card as a credit card ( Visa or Mastercard) can take up to 3 days to post.
ACH: Read automatic deductions. This would include insurance, mortgage payments, gym memberships, utilities etc.
Checks: OLD SCHOOL paper checks that you occasionally write, and then forget to write down in your check book register.

Think back to the last person you remember using a check book register. It was probably an old lady buying cat food at the grocery store. The transaction probably took 15 minutes and were thinking about making her eat the cat food for being such a jerk about making you wait for 25 minutes on your lunch break! It could have also been your grandma, or a skeleton at a museum. Basically nobody but Civil War re-inactors use checkbook registers anymore. Most people write checks once a month or so, cross their fingers and hope the check comes out when they think it should. Heckof not gangster.

What you need to do is seperate your payments so that you avoid confusion, costly NSF fees, and look like 100% gangsta when you whip out 3 check books in front of attractive women. If you have an online business, (ebay, craigslist, blogging) you can separate expenditures so that you know what you spent where. As an example, I recently sent a check to the City of Cleveland. The short version is about 6 months ago, I decided to purchase a condemned house for $1. I’m not kidding, and I don’t recommend ever doing this ( Do NOT ever do this). However part of my responsibilities were to pay some fees associated with it. So I mail off 2 checks several weeks ago and have not seen them go through my account yet. Now I keep low balances because I like to maximize my cash stash over at another bank. So I’m sitting here biting my fingernails over 78 dollars when I should have just written the check out of my other account, transfered the money there and forgotten about it.

Another example: I bought this fantastic domain name, www.iwillescape.com, to document my escape plan from corporate America. Yahoo charges an absurdly low price of 35.00 for 3 months of webhosting. They took it out, but because the authorization (banking term meaning, Yahoo wanted to see if that money was in my account before letting me register the domain) fell off before the purchase order (banking term meaning: money left my account) went through. What this looks like to most people is that 35 dollars left, and then came back. Most people would have not checked to see if it came back because merchants rarely put money back, and you wouldn’t notice it because it is not a deposit or a credit back to your account but simply a hold on those funds that fell off. I Digress, back to Yahoo. I Learned from the Cleveland incident to separate, I saw the temporary hold on my funds release and knew that the money would be coming out, and 3 days later it did. Now if this had gone into my regular checking, like most people mentioned before, I would have not noticed it returning to my account, saw my balance the next day and assumed that my balance was 35 dollars higher, spent it and overdrew my account. The typical fee for this at a national bank ranges between 35 and 42 dollars. Which would have more than DOUBLED the cost of hosting my domain with Yahoo!

The ideal setup is as follows:

Joint account/ACH: If you have a spouse or another type of long-term live in relationship. This is used to pay all household bills such as rent/mortgage and utilities, etc. Sit down and set up a budget with the other person and discuss including grocery money in this account as well, as you might be splitting it. I don’t recommend this however because the cost of food and other supplies for the home varies from month to month. If you’re single you can use this as an ACH account. Most ACH transactions are for things you have for a long time such as a mortgage or life insurance premiums. Let all automatic payments come out of this account. Transfer the set amount of money you know you will have to pay into this account each pay period.

Primary spending account: This is the account linked to your Primary debit/check card from your bank. This is the account you use for your daily spending. Use this card for gas, lunch, clothing, incidentals, etc. Set your accounts up at 1 large bank such as Bank of America, that offers free online banking and the ability to receive a daily text message with your account balance.

Check/Electronic account: Paying for your insurance, traffic tickets, fines, fees, anything that involves mailing an actual paper check should come out of this account. As well as any online purchases. Get a seperate debit card for this account, and when it arrives mark upon it with a thick black sharpie, 2ND CHECKING, or something else that will tell you not to use this card except online. This protects your primary spending account and your joint/ACH account from being improperly raped by crooks. Keep a low balance in this account and transfer money in only as needed. If an online retailer is charging you a subscription every month, give them the debit card number rather than the checking account number as it is much easier to change a debit card over changing a checking account number.

Every pay period set aside your bill money from your spending money, and then set aside any other funds such as web hosting or magazine subscriptions linked to your debit card, into each corrosponding account. Now it’s time for the Bonus Round:

Go to the bank across the street from your normal bank and open another checking account! What? Why? This is your stash account. Make sure this bank offers free online banking and that it has a national footprint. Wells Fargo would do nicely. Have your direct deposit split between your primary checking account and between your stash account. Only take the BARE minimum for feeding, clothing, and sheltering youself and your family, enough to live comfortably, and take all excess money and deposit into the stash account. As an example, I live off of roughly 600 dollars a pay check. This is food, gas, rent, clothes, nights out on the town, books, magazines, everything. Then I have another 400 per check deposited across the street over at another bank and have watched it grow into the thousands. Destroy your debit card for your stash account or hide it from yourself if you have temptations to spend. This account is what you will use to finance other things, such as starting a business, preparing to be married, buying a house, car or other major purchases.

Now you don’t crap where you eat do you? No! You separate those transactions into two different places! The bathroom and the kitchen. Do the same with your checking accounts and you will find yourself mastering the art of personal finance.

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