Welcome to the Eventual Millionaire. I’m Jaime Tardy and today we have Adrian Cartwood on the show. I’m super excited. We had him back, he was the third interview I ever did and I told him just as we were coming on that hopefully I’m a much better interviewer now than I was then. I’m super excited to have him back on. He runs a website called 7Million7Years.com. He talks all about personal finance from a millionaire’s point of view, which is really interesting. You guys should definitely check it out. Thank you so much for coming on the show today, Adrian.

ADRIAN CARTWOOD: Well I certainly hope I’m a better interviewee than I was three years ago.

JAIME TARDY: We’ve both progressed.

AC: But it’s great to be back.

JT: That’s great. I know it’s been almost two years. It’s kind of crazy. Hopefully we’ve both grown as people and are much better at what we’re doing. The first thing that I really want to get into, what I really want to do is figure out and talk really about the personal finance side because you’re the expert on this both because you’re a millionaire and because you talk about this. You blog about this, you write about this. You sort of know both sides of the things. My burning question for you, which is kind of funny, is do you budget? As a millionaire, right, is budget a four-letter word for you? Do you actually do it and did you do it in order to save the wealth that you have now?

AC: First of all, let me just go back and really just say thank you for calling me an expert in money. Yes, I did make some money. I made money in a number of ways, but the first money that I made was by investing and that’s why I talk about personal finance because I felt that there was very little information out there about personal finance, about how to become a millionaire, from people who are actually millionaires already. Usually they write about it, make a book, get published, become rich and then talk about it some more. I tried to do it the other way around.

To answer your second question about budgeting, actually I never budgeted. I don’t generally. It’s a yes or no question. I’ll give you the one budget I did do. In both my personal life, actually my personal life, my business life and my investing life, I pretty much don’t budget at all because to me budgets are forecasts and usually guesses. However, there’s a very, very important exercise that I do tell people to do and we did this and I even put up on my blog the actual notes – I found them. We kept track of every single expense that we made in our house for one month. My wife and I, I think we didn’t have kids at that stage or if they were they were very young. I think it was pre-kids but my wife and I walked around with a pencil and paper, little notepad in our pockets, and we tracked every single expense that month right down to the pennies in the parking meters.

We did one month only. That was a very, very instructive exercise. Once we did that, we knew what our expenses roughly were because we could look at that and take out the regular expenses and we could identify the one-off expenses and we could see things like coffees and things and we managed to extract like that so live within a budget. We did that once. I call it one-time budget.

JT: That’s awesome. Did you learn everything that you needed to know in that month and just sort of took it from there?

AC: From a budgeting perspective, absolutely. It told us what we were spending. I knew we needed 1,000 odd dollars. I remember roughly the number what it was and we said we could manage and we knew what we were budgeting for.

JT: This was a long time ago but did you have any huge realizations like oh my gosh I had no idea we were spending that much on food or something like that?

AC: No, because you know, look I believe that you should live within your means to a point. There’s no point cutting out coffee and things that you like but you should also practice delayed gratification and that usually takes care of your bigger expenses and I think that’s the most important thing. We were already delaying gratification. I think it’s a common sense thing to do. If you can’t really afford something you just wait awhile and we’ve practiced that pretty much all the way through even now that we’re wealthy. We will not spend money on major purchases unless it doesn’t make sense not to.

If you look at your wealth and you say I’ve got this much money and I want to buy something that’s worth a small amount in comparison, at some point, it doesn’t make sense not to spend it and you’re being frugal for no reason, then we’ll spend the money. We’ve always done that. To answer your question, there were no great surprises. It was eye opening that we knew what we were spending money on, we knew exactly how much we were spending but there was nothing like oh my God we got to get rid of that.

JT: Like those lattes. My goodness, we’re spending way too much money on them.

AC: We’ve got to stop doing the chai tea ones and we’ll just do the basic plain old tea now. None of that.

JT: You did that way back then which is really interesting. Is that sort of the same thing that you’re doing now and if you could highlight, like how much money are we talking about then? Then you weren’t rich, when you first started doing that.

AC: We were living from my wife’s salary and my salary, which was about $110,000 Australian which is about $100,000 U.S. between the two of us. We were still living in Australia at that stage. Now we live in Australia and the USA but at that stage we were here and it was probably a 1,000 odd dollars a month of expenses. I mean we are talking a very small amount of money. We probably had $12,000 to $15,000 a year expenses.

JT: So you’re making that much money but I know you were in $30,000 in debt when you sort of started off. So where did that come from?

AC: That came from a failed business, it was a family business that failed and my part of it was a $30,000 debt, which I used that and basically took the family out of the business and I restarted but I started with $30,000 in debt. The business wasn’t making any money at all. At that stage, it made maybe $5,000 a month, after I paid myself a $50,000 a year wage and from that $5,000 I had to grow the business. We were really just struggling along at that stage like most other people. The business was no better than a bad job at that stage.

JT: In the previous interview, we talked a little bit about that too so if you want to learn more about that sort of thing, definitely go back and I’ll definitely link to that. What I really want to know is sort of that debt. I know you talk about good debt and bad debt, especially because that sort of seems like in order to get out you had to spend that or you lost that I should say. You didn’t have to spend it. So you ended up losing that. Do you call that good debt? Bad debt? What’s your take? I know a lot of personal finance people are like no debt at all. No mortgage, no nothing, especially for business and a lot of business people are listening to this podcast going I shouldn’t be taking any loans. I should be bootstrapping the best I can. So give me your advice on that.

AC: I think there’s not two types of debt. There’s actually four types of debt. I’ll explain to you why. Before you decide to go into debt and for me that $30,000 was no choice. It was a business that we broke and that was the debt that the bank said okay that’s your part of it. We’ll let you walk away with $30,000 but that’s it. No choice. That’s neither good nor bad that’s terrible debt. You have no choice. There’s a gun against your head, you deal with it. But in normal situation, when you’re going out to make a purchase and you can’t afford to pay cash, you’ve got to make a decision.

You’ve got three decisions to make. Do I wait and save the cash? Do I go into debt now and purchase that item or do I just walk away completely? That’s basically your three choices when going into new debt. At that stage, there is a concept called good and bad debt. For example, people who say that you shouldn’t go into debt at all I ask them how are you going to buy a house?

JT: Save for a really long time.

AC: If you’re going to go to college and you don’t have a family to help you out and you want to go to some college that’s not going to give you a free scholarship are you going to walk away from your education or are you going to take a student loan out and do college? Clearly those two things are what I would call good debt because they help you get ahead in your life. To me, any debt that helps you get ahead in life is good debt. There’s no such thing as an investment that people make in the real estate world or the business world where there’s not some debt involved because you’re always borrowing money. That’s clearly good debt because you’re trying to get ahead.

The plan is that those investments will be worth a lot more later and therefore the debt is worth it. It’s called leverage. So there is good debt. Bad debt is obviously anything that you buy that’s a throwaway. We call it depreciable items. For example, a car might be good debt because you may need the car to get to work. It may be that you cannot get to work without a car so a car might even be good debt but you’d buy the cheapest possible care with the least amount of debt possible just so you can do your job, if you can’t bum a ride with somebody every day. But in the normal circumstances, buying a car just to drive around in and putting it on your credit card is clearly bad debt because that car will be worth less the minute you take it off the lot and worth less in a year’s time and worth even less in two years and in three years time.

In fact, read a post somewhere called The Half Life of a Car. Every car has a half life. You can Google it and find it. It’s actually on my blog. I found some studies. It’s awesome. If you think about that, you realize why am I going into debt where the amount of money I owe is constantly that amount I pay plus interest compounding to pay off something that’s going to be worth half as much in three years time. It doesn’t make sense. That’s a long answer to clearly that’s a bad debt.

So it’s very clear there is good and bad debt. However, and that should govern your decision making on whether to go into debt or not. But here’s my point – now you’re asking me to look back historically and say look at the debts I already have. I don’t have any debts now but let’s say I had a car loan at one stage, let’s say I had a mortgage on my house, let’s say I had a student loan. Let’s say I had some credit card debt. I made all those mistakes. There’s no longer any good or bad debt. You look at the debt you have. Now you’ve got it. It’s not good or bad, it’s just debt.

My only point is it a cheap debt or it is an expensive debt and what I’d say is once you look at the debts you have, just put them in order of the most expensive debts first and pay those off. Some people call that the debt avalanche but what I say is don’t stop and don’t pay them all off until you got no debts left. Start paying them off with the most expensive debt you have less is less than the return you can make on investing that money elsewhere. Let me give you two very clear examples. Let’s say you purchased a flat screen TV on your credit card. That’s costing you 19 percent per year or maybe more. That’s going to cost you, if it’s a $1,000 TV, that’s $200 a year. Get rid of that. Pay it off as quickly as possible.

That’s clear and easy to understand. Next it will be your auto loan. So you’re auto costs you 13 percent, maybe 11 percent, maybe 10 percent but it’s costing you probably a reasonable on your auto loan. Get rid of it, that’s expensive. You’re not going to get a 10 percent return on your investments anywhere else. It’s a great investment but pay off that auto loan. But now let’s go look at your student loans. You’re sitting on a student loan of 1 percent of 2 percent. Why pay that off when putting your money into an index fund will give you 8 percent? Why pay it off when buying an investment property might give you 10 or 15 or 20 percent of 5, 10 or 20 years? Why pay off a 1 percent loan just so when you’re clear you can go start taking new loans so you invest in something else? It doesn’t make sense, does it?

JT: No. When I hear you talking about that, I totally paid off my $25,000 student loan that was at 3 percent interest because I was in the mindset of gosh I don’t want to have any debt. First I have to admit I was switching careers completely and I just wanted to get rid of that because I didn’t want to have that from before. You’re right. Like $25,000 what could I have done to invest to make more?

AC: You allowed your emotional desire not to have debt rule your debt. Let me ask you, that $25,000 student loan was paid off, what have you done since then?

JT: With my student loan?

AC: No, it’s paid off. Now you got spare cash, right? You don’t have to pay the student loan anymore. What did you do with your next $25,000 that you were into the next 1, 2 or 3 years?

JT: Invest it and put it in business.

AC: And what return do you think you’re going to get from that?

JT: Much better, oh my gosh, better than 3 percent.

AC: By paying off the student loan and delaying the start of an investing cycle, how far back do you think you’ve grown your life? You probably went back 10 years because the compounding effect.

JT: Jeez, I don’t like this conversation anymore, Adrian. This is really interesting.

AC: This is something everyone needs to know. We are ruled by our emotions and it’s not a negative. That’s the way the human mind works. You are, I am and you can go back and look at decisions that are made emotionally and then you probably justify them financially later. You probably said I’d really like to get rid of, I’m not trying to do your voice, sorry. Then you think that and then you’ll come with all the good reason why. You’ll find some blog post, oh yes it’s a really great thing to do because this guy said that.

Every financial decision you make in your life will be made emotionally first and then you’ll look for rational reasons to justify it later. I try and flip that around and what I try and say is find the biggest emotional reason in your life why you want to make money. It’s not because you want to pay off a loan now. It’s because you want to retire in 5 or 10 or 15 years and do something amazing with your life that you’ve got pictured. I’ve got this emotional dream that I keep in my head that I got in 1998, a vision for what I wanted my life to be and because that’s such a big emotional desire to make this, not utopian world, but a very big picture world, every financial decision I made from that point on was irrationally made to drive me to that emotion.

I took away that short-term emotional decisions like should I pay $25 today, no? I am the bigger picture. Use your emotions to get a big picture for how you want your future to look like and then go back and put in place irrational steps to get there.

JT: I like that a lot. So you really have that end goal and you just base your decisions based on that end goal, what’s going to bring me to there better and faster.

AC: Yes, it’s the emotional thing. It’s what I call my life’s purpose. I know and I’ve known since 1998 my life’s purpose and that was an epiphany. For me, I managed to turn that life’s purpose of what I wanted to do, which mine is it doesn’t make any sense. Mine is to be always traveling mentally, physically and spiritually. In that I said a lot of very practical things. If you want to travel physically, you have to time and money because travel takes, you can’t work while you’re traveling – very hard for most people – or I could find a job in the travel industry. For my skill set, unlikely so you need a lot time and a lot of money to travel.

Travel means leave. For me, that’s doing things like what I am doing with the blogging. I’m not doing a moneymaking exercise. I am not talking to you to make money. I’m doing this because this is part of my mental what I like to talk about. It’s part of my passion – finance. It’s other things part of my passion. I do a lot of work with the startup community in Australia. I do a lot of angel and venture investing around the world not to make the money but because I love that environment. Spiritually it doesn’t cost any money. I can just sit back and meditate. That’s the one that doesn’t cost money.

For everybody their life’s purpose will have a different monetary cost. My monetary cost is a passive income of $250,000 a year so I can travel and have all the time I want to do this.

JT: How did you find your life’s purpose though? A lot of people struggle with that.

AC: That’s a very, very difficult thing to do. Just fortunately I found an amazing book that tells you exactly how to do that written by a really handsome guy named Adrian John Cartwood, The Baby Dragon, and that’s available on Kindle or the Amazon site. But seriously, this was the exercise I did in 1998 and what you do is you look at sort of, it’s something you ask yourself some simple questions like what do you want in your life? What don’t you want in your life? But the most important thing is that you write what I call the reinspect stage. It’s basically imaging yourself when you’re 80 years old sitting on the rear deck of your house.

We call them a porch in Australia. I don’t know if you call them porches in America. But you’re sitting on your rear deck and your grandchildren are sitting on your lap and say, “Granddaddy what did you do with your life?” Well I am not going to tell my kids well when I was 20 I bought a Porsche and when I was 50 I had a BMW M3 and a $6 million house with a swimming pool and tennis court. They’re not interested in that. That’s not important. They want to know what you did with your life and I want to be able to say well I traveled the world and I helped a lot of other people get their businesses off the ground and I did a lot of stuff helping people with their money and financials. I wrote a couple books about it and I meditated a lot. I found God in my way and all these things. The lessons you want to give them.

If you write that out, you’ll find your life’s purpose will kind of come out of that and that’s what I am trying to say. It takes all the what I did well I was CEO in a big company. Who cares? The grandkids don’t care. I drove a fancy car. They don’t care. It brings it back to what’s really important in life. If you do that, that’s how you find your life’s purpose.

JT: And yours never changed? I mean yours is a broad so it was able to, okay.

AC: A life’s purpose ends up usually what they call epiphany. It’s good to get an epiphany statement, which is a short statement like mine, like to always be traveling constantly. It doesn’t mean anything to anybody. The important thing is that when you realize what your life’s purpose is the hairs on the back of your neck will stand up and they still do when I tell you, believe it or not, and if they stop standing up you know your life’s purpose is not the right one. For many people you, you come up with what you think is the right one and I did.

My first one was like something like to experience everything. I realized after six months or a year that wasn’t it at all. It was this one. So it can take some time but you’ll get there. It doesn’t matter.

JT: That’s really good advice.

AC: It’s big picture.

JT: It definitely does and I think that’s what I love about your…

AC: I’ll explain it what I mean big picture. You’re not on your blog and people aren’t listening to your blog and listening to my interview to learn how to make a thousand dollars in ten years’ time. They’re probably not learning how to get a million dollars in 40 years time. If they are, I’ve got a rude awakening. That’s worth about $17,000 income today. That’s what you’ll get for a million dollars in 40 years’ time. If that’s your aim, stop you’re wasting your time listening to Jaime and me.

You are probably somebody who wants to make a large number in a fairly short space of time. My number, my original number was $5 million in five years. I’ll tell you what, when I came up with that number, I fell off the back of my chair. That was like from where I was sitting that was like unbelievable and the reason why to get to a large number like that you have to do ridiculously hard things because otherwise everybody would have $5 million in five years. It’s not easy. It’s going to be very hard. I had to make real life changing things.

For example, I picked my entire family up and moved my family and my business to the USA, because I knew Australia was too small for my business to ever make $5 million for me. That’s a lot of money in five years. Not many people actually shift country. We did that as a direct result of that exercise. If I never did that exercise and found my life’s purpose and had that passion for what you had to have and my wife bought into it believe it or not.

JT: Thank goodness.

AC: My family moved countries and it would have never happened. We actually made $7 million in seven years, not $5 million in five, so we missed slightly but we gained. My point is you need a lot of passion to go on that sort of journey.

JT: Huge, okay, let’s talk about that. What you mentioned earlier that I really wanted to talk about too is that when you’re starting a business you can go into debt and that’s okay. Tell me about sort of that. How do you decide, especially as a business owner and talking about finances, even if it’s someone in what feels like a job, maybe it’s their business, but it feels like a job just like you were, how do you make those really hard decisions like looking at the thing and going okay I am going to root up my family. I’m going to take and create $50,000 in debt on this business that I don’t know if it’s going to work or not. Those are risky things.

AC: First thing let me just tell you why businesses are one of the best ways to make large numbers in soon dates, what I call like $5 million five years or even $3 million in ten years. Those are all, when you look at the compound lifeline to get to those sorts of numbers, that’s very, very large compound growth rate and businesses are probably the best way to get there because they’ll give you a 50 percent plus compound growth rate. By the same token, you’re very likely to fail – 9 out of 10 businesses will fail. So that’s the two sides of it.

I’m just saying why a business is good is it gives you two things. One is it gives you cash flow, if a business is profitable, and you can grow the business because you just get more sales. There’s lots and lots of things you can do in business to increase sales. You can control your costs and you have good processes and the good thing is that the tax offers, you know the IRS is very, very good to business owners. There is a lot of stuff you can deduct so you pay a lot less tax. So that’s should free up income that you use for two purposes.

You don’t spend that income. That’s what I didn’t do. I left a job at IBM where I was earning $60,000 a year back in 1990, which is probably worth $150,000 today and paid myself $50,000 a year. I didn’t increase that until we moved to the USA so probably 15 years because I recognized that profit the business was making wasn’t for me to spend on myself. It was to reinvest to grow the business and to invest in other things outside the business. A business lets you do investment. For example, I bought my own building that the business was in. One of the best investment decisions I ever made. Rather than paying rent to somebody, I paid rent to myself.

When I saw that building five years later, I made a million dollars profit. So a building that cost $1.3 million dollars to purchase but I doubled my money and not only did I double my money, that was most 80 percent the bank’s money. So I only put in $300,000, which was a lot of money in my business, at the time, but we did it. I actually made four times my money in five years. Businesses give you the opportunity without even selling the business. So I made close to $7 million without even selling the business. When I sold the business, I made more, but I don’t talk about that much because I talk about how people can use their personal business income to invest. That’s the key thing.

JT: I think what’s really interesting and I know we don’t want to talk too much about business but I really want to find out how people can make that decision. I like talking about debt because this is sort of a hang up that I always had too. In getting into debt with your business, especially if you don’t necessarily trust yourself as a business owner, a lot of the people are newer business owners and you sort of were too when you were going and making all these huge changes. How do you trust in yourself enough to know that you’re not going to be one of those 9 out of 10 businesses that actually failed? I mean the odds aren’t in your favor.

AC: I found my life’s purpose in 1998. I think my business by then was probably making $100,000 to $200,000 a year profit, which I wasn’t spending and was on track, we’d made some major changes. Actually not then actually so it wasn’t then, it was making maybe $100,000 a year profit. It wasn’t until the year 2000, two years later, that we made some amazing change and made the business very profitable but I reinvested all that in the business.

I’ll tell you why because I work backwards. So I knew my life’s purpose and when I wanted to have it and I knew how much income I would need passively to support that. That was for me and an unfortunate number of $250,000. If my life’s purpose was just to be spiritual then my life’s purpose number would be $10,000 a year passive income. I wouldn’t need any many but unfortunately for me, I needed $250,000 a year.

JT: Unfortunately for you.

AC: How much money would I need in the bank, well not only the bank, but how much would I need in my investments to generate a passive return? About 20 times as a reasonable rule of thumb. So it equates to a 5 percent return. I realized I needed about $5 million in five year’s time to generate $250,000 a year. Now where would that $5 million come from? The most likely place, if you own a business, would come from selling the business in five years time. That’s not the way it happened, but start investing, but that was my thinking. So if I sold a business for $5 million it would probably needs to direct one to one and a half million dollars profit a year, because you are going to sell for three to five times its annual profit.

My business was generating $100,000 a year and I wanted to get to a million or a million and a half dollars a year. I just knew it just could not do it. Then I was stuck with a choice. Either make those hard decisions and do what I am going to do or fail on my life’s purpose. I am facing failure either way. Prior to doing that and coming up with a goal, I was content if my business was making a profit. I would have gone on like that for the rest of my life making a living and eating and like any other job basically. My business would have been no more than a job. But by putting it on paper, in front of my face, I was forced to make that life changing decision, at that point and it happened, we did it.

JT: That’s awesome and amazing. Did you work? What I have a question about is you found your life purpose. You’re like okay I am ready to go, I know exactly what it is and yet you had to make all these crazy life changes that at least somewhat went with your life’s purpose but did you have to work like 60, 70 hours a week to get the business up and going to bring cash in so that way you could fulfill your life’s purpose 5, 10 years down the road or you trying to fulfill your life’s purpose now while you’re doing everything else?

AC: So the first thing that I thought about is, okay what if I don’t sell the business? Who can rely on selling a business? I realized I should be trying to build up as many assets as possible just from a cash flow. Rather than spending money as the business was growing, I realized I needed to start investing and that’s what kept me being frugal, if you like, or delaying gratification. Remember I didn’t sell the business to make that $5 million in the end, even though I calculated I could. I’d actually done investing so that was a really big change. The first thing I did was kept myself being frugal.

Rather than most people who start to make a little bit of money in a business start to spend more, I reinvested everything, as we already spoke about. That was really, really critical. Did that cost me anything, no? It just delayed gratification. Was I working 60, 70 hours in the business? I probably already was working 60 or 70 hours in the business. I submit to you that every business owner is probably working 60 or 70 hours a week. The difference is they probably don’t have a strategy. They probably don’t have a plan. They are probably happy to just go along. You’ve got to get smart and do a smarter 60 or 70 hours.

I did travel a lot more I must admit. I went to the USA looking for these global opportunities. I guess aside from being frugal, the other sacrifice I made and my family made was I was probably traveling at least once a month for two to three weeks away. That was a sacrifice.

JT: It’s kind of funny because that does kind of line up with your purpose because you were talking about how much you wanted to travel more so it’s sort of worked out well for you.

AC: Not for business purposes. There’s a four letter word that’s called sucks with an s on the end, five letter word. Traveling for business you may like it the first time. I promise you once you go on your second business trip to the same place you will hate it.

JT: I understand that completely. I used to travel for work and be like this is so not fun. Why did I think this was glamorous? This is horrible. Tell me a little bit about mindset with money then because if you’re doing personal finance, especially like you said, you almost fell out of your chair when you saw $5 million. That’s absolutely amazing but yet you did it. A lot must have had to change in your own mindset in order to make that happen. What sort of changes happened and what have you seen because I know you talk to people and help people through stuff?

AC: Passion. Having that life’s purpose, having that end goal, which is so big that you just know you have to get there whatever it is because your life’s purpose is your life’s purpose. You want to be able to do it. It’s just passion. Passion drives massive action. The mind typically is you just have to get there. There’s no way you’re not going to get there. The interesting thing is that you got major roadblocks that come in your way and I had a major roadblock in my plan as soon as I got out of the gate. It was planned to do what I needed to do with my business and no reason for me to go overseas.

I was planning to add some extra products and services to my business that would allow me to grow into this massive new area but then when I came up with that plan and worked out all my numbers and saw it was absolutely achievable and did everything and was going all the way, the government changed some regulations and actually made these amazingly high roadblocks to do what I wanted to do. I could just not get out of those roadblocks, it was impossible. It was just government regulation so there was a big roadblock, but I am not going to let a roadblock stop me from reaching my life’s purpose. You go around it, under it, over it, through however you do it and that’s where I come with a different plan that saw me going overseas.

It wasn’t my first choice believe me, but it was a plan that came up next and it made sense and we did it. The mindset is there is no roadblock that will stop you from getting to where you’re going. Interestingly enough, everybody thinks that, you know, you are often presented with two goals. You’ve got a decision to make and either you do that or you do that. It might be do I pay off a debt or do I invest or do I take on a second job or do I open up a business? There’s lots and lots of decisions in life that we’re all faced with and you think if I make the wrong choice that’s going to be it.

But that’s not what happens. As soon as you go through either door no matter what door it is, you are always presented with two more doors sooner or later that you’ve got another decision. The interesting thing is if you’ve got no direction, no purpose, each of those doors will take you a random direction. But when you have a purpose way down a track, you’re going to go through 20 or 30 sets of doors, but you’re going to keep making sometimes a wrong, sometimes a right, but you’re going to eventually go through the right doors that get you to your end goal.

You may not always see it neatly up front, but you’re always going to have it in mind driving you to your decision making and you’ll make the right choices. So if somebody said to me you’ve got an opportunity to go do this overseas, I’d say you got rocks in here and I’m not doing that. Take my family, put my business here at risk and do it, no way. But with an end goal in sight, I chose Door B. That’s the mindset that you’ll have that you’ll always make those choices.

JT: I hear you talk a lot about figuring out the numbers. Like you’ll go through and you’ll figure out the numbers, I mean they tell you so much, as we know. So tell me about do you normally set goals or projections and that sort of thing or do you really just have the life’s purpose and that’s pretty much the only thing that guides you?

AC: What I have is I work backwards. So I have a life’s purpose; I then have a passive amount of income to drive that life’s purpose and I know when I need it by. I multiple that by 20, which gave me a number, what I call “the” number. For me it was $5 million. I then have a look at where I am starting at which was negative $30,000. I need to get to $5 million. That’s very hard to put into a calculator so I put in $10,000 let’s say. Put zero or $10,000, just some small number. Play games with online compound growth rate calculator.

If you Google those words online – compound growth rate calculator – you just plug in three numbers; the end number you want, the starting number which is zero or 1,000 or whatever and how many periods or years you want, which is 5. It told me my compound growth rate was about 250 percent. There is no investment that will give you that but that’s my plan. I now then know that I need to look for investments that will give me that type of return. So if your compound growth rate required to get you a number is 8 percent, it’s very simple. That’s index funds. You don’t need any more strategy than that. Save as much money as possible and stick to index funds. For me, I put up a business and make it grow big. I don’t need much more of a plan than that.

JT: I love that. That seems way too simple though. I think that’s the hard thing, especially the people listening. We’ve got a lot of people that are in day jobs and really have huge goals, but feel like it’s a mountain, a huge mountain, where they have to get to the top and they are so far at the bottom that it just seems like a huge leap. What I love you say is I look at the top of the mountain and then go start climbing and then you can get there, but it sounds so simplistic. Give me some more.

AC: Let’s look at the very other end now. Let’s look at what you can start to do. You are probably going to ask me this question what can you do today but I’ll tell you one of the things you do right now. You should decide if you’re actually saving any money or not outside of your 401k. Unless you are retiring in 5 or 6 years or 10 years, forget about your 401k. It’s like a safety net. It’s going to be there if all else fails and you should treat it like an insurance policy. From what you’re saving you can’t touch it and do anything with it. So are you saving money outside your 401k?

If not, start paying yourself first. Start by paying yourself 1 percent of your take home pay. Then build it up to 2 percent, 3 percent. Try and get yourself to another 10 percent that you’re actually saving outside of your 401k or get to 15 percent, if you can. I believe most people can’t do much more than that in realistic terms. Start saving that money and then look at what you’re going to do with that money. When you’ve got that money, don’t start wasting your money on emergency funds and CDs. Start looking how you’re going to invest that money according to your strategy of where you need to go. For example, start a little online business part time. That will help you increase your income. If it doesn’t increase your income then teach a lot like what you’re doing with a blog. Anybody can start an online business.

I’ve got an online business. I do little bits and pieces for fun as well. My son has got an online business. My son is in high school. He started his first online business when he was 12 years old. It was his own idea. He started trading on eBay making $50 a week. He now makes $100,000 a year and he hasn’t finished high school yet. I just took him to buy a car. I just got back. We paid half his car but he always knew he had to pay for half his own car. From the time he was 12 years old he knew that. He had a plan in place and he achieved it and he still has plenty of cash leftover. He has got an online part-time business; anybody can do it.

JT: That’s extremely impressive that your high school son is making $100,000 online. How long did that take him to do that?

AC: As I said, that took him, he started when he was 12 a little eBay business and three years ago when we moved back to Australia he had another eBay business but he had issues getting supply and stock and all, the typical things that eBay has and learning a lot of lessons and probably the last two and a half years he came up with a different idea which he implemented. He’s not a programmer;
he’s not an IT geek or anything.

He got some guy in India to write a little bit of code for him and he just got going and he built up and built up and he spends about half an hour a day on his business. That’s all he spends. He has got a couple of guys in the Philippines who do all his customer service calls for $6 an hour. Anybody can start a part-time business from home. If not a part-time business start investing, buy investment property, do something.

JT: Do you highly recommend business first then real estate then stocks and stuff? Which way do you usually go?

AC: It depends on two things. The first thing it depends on are the required compound growth rates. Somewhere there’s a post on my blog it’s 7 million in 7 years called the Gradients of the Curve and there’s a little table I put in there about telling you that when you know your compound growth rate that you need, it will tell you what types of investments will get you there. For example, the stocks might make you 15 percent compound growth rate, Index funds 8 percent. In those days, it was CDs at 4.5 down to 1 percent. Have a look at your compound growth rate in that table and there will be some there that will get you there and some that just clearly won’t. That’s the first thing.

The second thing is apply your personality with the choices you have left. Which of the ones do you have the most affinity with? I will just say if you’re looking to increase your income so you can start investing, business is always the best because you are going to generate the most cash flow and grow the biggest the quickest and using the business income you can start to invest in real estate. If that doesn’t work for you, you’ve learned a lot. Do something else. The good thing about businesses, especially part time ones, they only take a little bit of time. They usually don’t take much money and you don’t have to quit your job to do them and you can see if you have an affinity for it.

JT: That’s a really key point – you learn a lot. I think that’s the thing that’s really interesting. A lot of people, I’ve heard stories, from listeners, who said they’ve been trying this online business or this whatever part-time business and they’ve been having a hard time and I’m going look back and see how much you’ve learned in the past year. It’s not as though you need to be a millionaire in a year but look at how much growth you’ve had and how much better you can be if you start a new business now with the information that you have.

AC: Let’s say you want to invest in stocks and you don’t want to go into business, that’s great, but don’t go putting your money in the index fund, which will give you an 8 percent return. Go and invest in some blue chip stocks and go and get yourself a book called Rule Number One Investing by Phil Town and use that methodology and if that doesn’t work for you or you don’t like it, go find another one. My point is by learning a methodology and actually applying it yourself and trading an individual stock, you’re going to learn so much more rather than just putting your money passively somewhere else where clearly you can’t make more money than the average person.

JT: That’s the thing; a lot of your strategies are all about taking action. About taking action and then if it doesn’t work try something else and then take more action and then try something else and you’re sort of fishtailing it through but that’s how you actually make progress on stuff. The other thing that I really want to know about…

AC: Hopefully eventually.

JT: It’s funny; I remember there has been this thing on Facebook where it says the path to success is never, you know, I guess it’s this way because it’s the other way. It’s more like bunch of scribbles and then you get there and that’s sort of what it is. It’s sort of all over the place, as we go and that’s okay, that’s normal. I really want to ask you about what you use. What tools do you use to manage your finance? Are you kind of one of those guys that use mint or do you do it all yourself or what sort of financial tools do you use?

AC: Number one, I obviously have accountants and bookkeepers that do most of my financial management now, because I have so many different entities and money flowing around doing different things. Obviously I leave that to the professionals but my personal bank accounts, let me tell you, I’m the only person who has access to those and every dollar that goes in and out comes through me and I just use a single online banking tool provided by each of my banks. I’ve got three or four different banks I deal with. They’ve all got web interface and I use those.

I let my wife deal with all the household expense and the credit cards. You might want to ask her but she does most of it manually. My tools are very unsophisticated other than that. I don’t think you need sophisticated tools in order to manage your finances well. You just need to know where the money is coming in and where it’s going out. Make sure you know this.

JT: That’s awesome. How many times a week do you check your bank account? Do you check it a lot? There’s some people who check all the time and other people that just don’t. I’m just curious.

AC: I’m going to be blasé about it. I look when I have a transaction.

JT: Tell me, the other thing I’m sort of interested in, because it’s sort of the holiday season, how do you deal with finances at the holidays and how did you do it before? Especially because you were really trying to keep your expenses really low.

AC: Since my wife doesn’t like to spend money and that’s the first thing I’ll say. If you want to control your finances in your life, get a spouse who actually likes spending money less than you do and then don’t tell her how rich you really are. That’s always good control. Now I say go buy whatever you want whenever you want and I know she’s just not going to spend unnecessarily. It’s great. Before, as I said, we didn’t really budget. We paid cash. We never went into debt for anything. We wouldn’t buy a car on a loan. We had a mortgage obviously on the house but we paid it off fairly quickly even though I don’t say that’s a good strategy to do, for investing purposes, but at that time, we didn’t know any better and we paid off that mortgage quite early.

I’ve been fortunate not to have a mortgage since so I own a very expensive house. In fact I have a house here and a house in Chicago worth $8 million between the two of them but I paid cash. I don’t have any loans or any mortgages and my wife won’t let me touch them. She says, “That’s mine.” Our finances have always been very, very simple.

JT: That’s really good to hear because we assume you have to know everything with all the latest and greatest everything. It’s really good to hear that you don’t. I know we need to wrap up and I always ask this and you already prepped, so hopefully you have a really good answer for us, but what’s one action that listeners can take this week to help move them forward towards their goal of a million?

AC: You mean besides buying my book?

JT: Which we will totally link to underneath.

AC: Seriously though that’s the action I would say is that the first thing I would do is just simply take that long-term view, take a couple days off from worrying about money, worrying about anything, just go away somewhere if you have to with leave your significant other and just think about where you want your life to go, in the future. Just think about I know I am working 90 hours a week on my business or in my job. I know my bills are piling up and believe me I had those issues as well.

No matter how much money you have, there will always be cash flow problems because you never have enough cash to deal with major emergencies so you are always going to have short-term issues to deal with. Take yourself away from that and just put your feet up for a few minutes and think what do I want my life to look like and when do I want it? What goal and what life afterward today and sit down and think about well how much money will that cost me in today’s dollars? How much equal would I need and the rest will take care of itself, because you need a very stiff drink once you come up with that number.

JT: I love that. Thank you so much. Tell us where we can find more, like I said, I’ll definitely link to the book and we’ll link to your site 7Million7Years.com, right? Are you on Facebook or Twitter? Is there any way that we can reach out, especially if anyone has questions for you?

AC: I’m on three places – 7Million7Years.com, the blog is probably the best way because I write about everything. I hang it out there. I tell you how much money I’ve got. I tell you I got financial problems and how things are going well. I tell you all those sorts of things in the blog and I give you a lot of strategies on the best way to invest. The other place you will find me on is a question and answer site called Quora.com as Adrian J. Cartwood. There are topics on money. You can ask any question you like and lots of people answer. I also ask and answer questions there. The third place you will find me is I’ve got a little Facebook group called 7Million7Years. It’s a Facebook group so you can join that.

JT: Nice. Thank you so much for coming back on the show. It’s so awesome to actually see you because I know we were audio last time. I feel like I can actually meet you and recognize you, if I saw you somewhere. Thank you so much for coming. If anyone has any questions, definitely let Adrian know or let me know because I think you’re such a great resource for a lot of personal finance stuff. I really appreciate you coming on. Thanks so much.

AC: Thank you very much, Jaime.

JT: Awesome. Take care. Bye-bye.

AC: Bye.

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