“How much money do you make?”
That was the question a complete stranger asked me this weekend. I was shocked. I stumbled over my words, mumbling something along the lines of “enough to get by,” and I politely changed the subject.
My wife and I were at a party with some friends this weekend when I was asked this very personal question. As I was recounting the story to my friends later, they laughed and said that I had nothing to worry about, the stranger asks the same question to everyone he meets. Here is why . . . .
That stranger, who asked me the probing personal question, is a millionaire. Money, however, is not the most important thing in life to him — by far! To him, asking about someone's salary is as ordinary as asking them what they had for lunch — it's conversation starter (a run-of-the-mill get-to-know-you question). He simply does not measure worth by how much money you have, and feels very free to be incredibly transparent about it. He will answer any question you ask about his finances, and how he has earned so much money.
The man and his wife have six kids, are in the process of adopting five more, homeschool all of these kids, live in a house big enough to comfortably house the Dallas Cowboys (which they never lock or clean), are raising 16 chickens in a unoccupied wing of their home, and can financially do whatever they want.
I had to find out more.
How He Earned His Millions
He began earning a significant amount of money as a financial advisor. He manages investment portfolios for a percentage commission of the amount invested. Not a fee-based financial planner as I would generally suggest, but in his case, a much more profitable model.
He began by targeting high-net-worth investors. His business plan was to cultivate a small number of large portfolios thereby reducing his work load by avoiding the minutia of dealing with hundreds of smaller investors.
Over the past 15 years he has acquired a small number of investment portfolios that are all worth millions. His investing philosophy is to “buy and hold,” so he does not do much (any) active trading. Many of his clients are large churches which are chiefly concerned with investing in stable securities. He deals largely in the stable bond market. He also works out of his house and does not own a computer. His entire business is powered through his smartphone. He handles all of his transactions via phone.
Seven years ago he began to diversify his business dealings to include rental real estate. He used the proceeds from his investment business to pay cash for a rental property in a bustling college town. He rents this house out to college students — or to faculty and staff — and has not had a vacant month in seven years.
Since the house was paid for in cash, he decided to take the monthly rent from that first house and save up enough money to place a down payment on a second rental home in the same area. He was essentially doubling the mortgage payment on that second property and, with a significant extra payment from his investment business, was able to pay that mortgage off in three years.
He then continued this process in using the rent from the homes that he had paid off to pay down the mortgage on a new property that he would buy. Fast-forward to today and he has 22 rental properties, and he is buying more homes at a rate of four per year. All of his rental properties don't have a mortgage.
He also recently expanded his business dealings even more and bought a self-contained storage unit business. He paid cash for this business, and with over 200 spaces at a minimum of $50 per month in rent, he has added another significant revenue stream to his business holdings.
The Importance of Money
It is an interesting study in psychology to see how someone is affected by what they hold most precious to them. This strange man I met had more money than I will likely ever see in my lifetime, yet drove a 15-year-old vehicle, homeschooled his children, did not clean his house, and shopped at thrift stores for his clothes and possessions.
I don't know what he does with all of his money. I assume he is very generous with it and may give a large portion of it away, but by my reckoning he could easily have over $30,000 per month in net profit that he does not need to support his current lifestyle!
He does not place a premium on money and worldly possessions and is therefore not controlled by it. This allows him to focus on the things in life he does care about, and being financially free gives him the time to pursue the things in life he values most.
I think he is also oblivious to the financial risk of a business venture because he has such a large buffer. He can afford to take risks where I would venture very cautiously. Having his large cash reserves frees him up to invest and grow his business empire, all while not caring about the extra profit he is making.
Money is a funny thing. Those who do not have it want more of it, and some who have plenty do not care about it at all.
What is your take on money and wealth? Does it control you? Is it what you value most in life? Why would someone create a multimillion-dollar business empire if they did not want/need the money?