Welcome to the Eventual Millionaire Podcast. I’m Jaime Tardy and today we have Todd Tresidder on the show. Todd’s a financial coach and runs Financialmentor.com and at the age of 23 his net worth was zero. Twelve years later, he was a self-made millionaire. So at 35 he was financially independent through investing. Thank you so much, Todd, for coming on the show today.
TODD TRESIDDER: Thanks for having me, Jaime.
JAIME TARDY: Excellent. So what I loved is I found on your blog that you said, “I have more than a dollar to show for every dollar I’ve earned in my lifetime.” That is an amazing statement. If you could tell me a little bit how you did that? I know it’s probably a very long conversation but what were the keys to doing that?
TT: Yes, it’s actually not that long of a conversation. The only way you can do that is if, well let me back up. I have a post on my site called How to Retire in 10 Years or Less and in there it talks about the math of saving your way to retirement and the way it works is if you save 70 to 80 percent of your income you can retire in ten years or less. The math is unequivocally clear. Now a lot of people think oh my God I could never do that. Well the key was when I came out of college I developed computerized training systems in the very early days. Now they’ve got MIT Ph.D.’s doing this stuff but back then I was working on a brand new IBM personal computer and developing these things and I made a lot of income.
So what happened was I had a very large income and I spent very little of it but I still lived a great life because I had just come out of college and didn’t need big lifestyles. You’re still leading a college student lifestyle. So I saved the bulk of my income and then on top of that I developed statistical training systems for the financial markets and was able to compound it very well. So it’s a combination of if you save a high proportion of your income and you’re a very skilled investor, it’s fairly easy to make the math work.
JT: So I loved what you said. We’re sort of going to get into the business side of things then soon because you need to make money in order to actually save that much money, right. So if you make $30,000 a year, saving 70 or 80 percent is going to be near impossible and if you can do it, it’s not even going to amount to all that much in the end.
TT: Well, before you do that, I don’t want to leave that as a truth. That’s actually not really true. If you, are you through a Jacob Over Early Retirement Extreme?
JT: Yes, I do know Jacob.
JT: Good point. Good point.
TT: Jacob lives on $67,000 a year which would fit that formula even at a $30,000 income and so he’s leading a group of people who want to live that way. That’s not my choice but I don’t have any problem with it either. It’s a value system and so it’s right for some people. It’s not right for others. It’s a choice you can make. But it is absolutely possible even at that level of income, it’s a statement of your values and your choice as to what’s important to you.
For the people in that forum that are walking that talk, they really want out of their work. They want to move on in their lives and that is their key to getting there and so it is possible at that level of income.
JT: That’s a really good point. I mean it’s a choice. You can do anything you want to do. It’s just a choice on what you’re willing to make for choices. Okay.
TT: Yes and the key to having that translate into happiness is it has to be congruent with your values. So, for example, for me it would never work. I was able to pull it off because I had a very large income and so my values are such I’m environmentally conscious, I don’t require a tremendous amount of spending. I lead probably an upper middle class lifestyle and I’m very happy at that. Consuming any more would feel very wasteful to me. So I think you’ve got to get really clear on what your values are and what level you want to live at and then figure out how to make the math and the strategies work for you.
JT: Excellent. So let’s talk a little bit about personal finance before we get into the business side of things. So when you were going through, what does it take to save 70 or 80 percent of your income? What sort of things do you do? What sort of basics do you have to know in order to do that?
TT: Well I think again it comes back to values. You just have to not have an interest in buying lots of stuff. I mean I can still remember what I was doing because here I was, I was a single young man, not too far out of college and my mom would get on me. She’d say like, “Todd, you’re making all this money why don’t you go buy yourself a Corvette? Go get yourself of flashy car.” But I lived in Lake Tahoe. I’m an outdoor recreation buff. I would ski in the afternoons. In the summer I’d play volleyball down on the beach. Mountain bike in the hills. I run.
That was my joy. It wasn’t stuff and so I had a four-wheel drive Toyota truck and I was absolutely happy with that. It’s kind of classic millionaire next door stuff. You need to pay, I think if there was a, there’s two real big principles here. One is to be a value conscious spender. In other words, you want to always get great value for your money so that would be one principle everybody could take from this call. That’s a hallmark of people that do well financially and then the other one is you have to structure your life so that you make more than you spend so that you’re constantly building your savings. If you do, if you can get those two pieces together you’ll do well financially.
JT: You say on your blog that you value experience over stuff and that’s exactly what you’re saying right now. How do you help somebody that values stuff over experience though right now?
TT: I would work with them on where that’s really coming from. My experience is that somebody who is valuing stuff over experience is trying to fill a hole in their lives and so you have to identify that hole and you have to understand it because it’s not really a natural human trait. I think anybody that’s walked that path knows that stuff does not buy happiness. What it does is it creates a momentary satisfaction when you get the new shiny object and then all of a sudden now your needs grow to the next thing and the next thing and the reason for that is because you’re trying to fill a vacuum in your life or a hole in your life with things and it’s a lose-lose situation.
The easy way to understand it is that happiness is an internal experience and anytime you try to satisfy an internal experience with an external thing you’re doomed to failure.
JT: So it’s more about mindset and it’s more about learning more about you as a person. Isn’t that funny how money has way more meaning than just numbers in your bank account? Excellent. So let’s talk a little bit about your business because you talked about.
TT: Well, can we play off that one that you just made?
JT: Oh sure, sure.
TT: One point you just made is really valuable. I’ve been coaching people for what, 12 years now, on how to build wealth and I’ve actually reduced it down to a seven-step process – Seven Steps to Seven Figures which will be a group coaching program later in this year. It’s not available now. But what’s interesting is the first several steps have absolutely nothing to do with finance and it was that was the piece that I was missing to create consistent results with people.
When I started as a coach, I was already a financial expert and I was making the same mistake everybody else makes out there which is they sell how to information on finance and guess what? That’s not what people need. It wasn’t until I learned the personal side of the business and how to help people create breakthrough results in their lives that I got consistent results with clients. Prior to that, it was kind of intermittent. Some clients succeeded if they were just in the right spot for that message. Other clients didn’t resonate with the message, it didn’t work out.
In order to get consistent results across the board with clients, I had to get that personal component which has turned out as the most important. It’s the make or break component.
JT: Excellent. So tell us more about Seven Steps to Seven Figures. I’m really intrigued by this. Do you have at least a little basis that you can tell us of what those steps are and a little bit more about how to do that?
TT: Sure. The first step is you have to build a plan for your wealth. If you don’t have a plan, you’re not going anywhere. So you have to have a structured plan. The second step is the plan has to be based on sound principles that will lead to wealth. It’s kind of like if you are trying to build your Internet business if you will and you’re building it based on a strategy that was totally incorrect and flawed and would never generate traffic and had no capability of conversion. So you have to get the principles correct. That’s step two. So step one and step two work together. So it’s the plan and the principles that the plan must be based on and that plan has to work with your unique resources, values, interests, skills and abilities and that’s the mistake you see almost universally out there is people work with generic plans.
Like when I say you have to have a wealth plan they think of going to a broker and the stockbroker lays out a whole stock purchase plan or something, right. You know where you do your 401k or anything. It’s nothing like that at all. It’s a completely strategic way of structuring your life so it results in wealth and so it has to be built on who you are as a person, your values, what resources you’re bringing to the equation. Where you are now, where you want to go and then we build a whole plan around that to create wealth so that it results in wealth.
JT: I’m going to stop you for a second. Do you have any examples of that? Like what sort of things do you do in that step with people that they’ve learned coming out of that?
TT: Well, as an example, let’s say somebody comes to me and they’ve got one house and they love, you know one rental house, and they love real estate and they’ve got a certain income. Actually, I’ll take a client right now I’m working with. The client right now I’m working with, they thought they wanted to do it in real estate. They have this dream business that they wanted to build as well and they were both very large income earners, one of which just got laid off. So we completely restructured their plan to where they’re living off of one spouse’s income and the two spouses together are building the dream business and they put the real estate piece on hold for now because they’re focusing their energy on the entrepreneur piece.
So, in other words, there are three paths to wealth. There’s paper assets, there’s entrepreneurship business own your own business and there’s income produce real estate. So those are the three paths and so you blend your plan off of those three paths. So in this case, what we did was we built what we call the kind of escape clause in their plan which is how they’re saving off their current income will basically assure that they will have financial independence within a normal timeframe of retirement so that they’re not taking any major risk.
And then we’re taking what remains and we’re pursuing their entrepreneurship because that’s going to give them the best leverage and the best use of their personal resources and then what we’ve done is we have taken real estate and we put it on kind of two-year hold for now to allow them to get the entrepreneurship dreams launched and to focus the resources and time there without distractions because focus is another principle of building wealth.
JT: Excellent. So that was step three. It’s skills, abilities and values pretty much is what you said, right?
TT: Well no, no. Step one and step two work together. It’s build the plan, how to build the plan and then knowing what principles, wealth building principles and success principles must be included in your plan in order for it to work.
TT: Okay. Because if you don’t have the principles underlying the plan correct, you can build a plan, you can do everything wrong but it’s like you’re leaning the ladder of success against the wrong wall and you go climb it, you end up nowhere.
JT: That’s a great analogy. Excellent. Okay.
TT: So anyway, it’s those two pieces work together so step one and step two together and then do you want to do step three and four?
JT: I would love to hear step three and four.
TT: Step three and step four happens. Now you’ve got your plan. What’s going to happen naturally and again, this resulted from my coaching so it’s a natural flow to how it occurs. So step three and step four is that now you’ve got your plan you get into action, right. You start taking the action. So as soon as you get into action, what’s going to happen is you’re going to run up against all your personal garbage that’s going to keep you from succeeding and so step three is what I call commitment. It’s almost a four letter word in our culture but you have to really commit to your wealth plan because what’s going to happen is there’s going to be all kinds of distractions, all kinds of life interruptions, all kinds of emergencies. Everything is going to come up that’s going to say I’m more important that your success.
And it’s going to try to pull you away from it and so there’s a whole process I take people through to help them get clear on what their personal level of commitment is. There’s not a right/wrong answer here. For some people, they want to do it with balance and they’re happy to take 20, 30 years to get there. For other people, they want it now and they’re willing to commit now and as long as they’re clear on the price that they’re paying for it, there’s no wrong answer on that.
JT: That’s excellent.
TT: So there’s a whole process of commitment that I take people through. That’s step three. Step four is once you’re committed, you’re in action, you’re making regular success, you’re going through things, now there’s a concept that I’ve borrowed if you will from the War of Art by Steven Pressfield, it’s a remarkable book. I recommend it to everyone and he talks about the concept of resistance and going pro and I’ve taken that a whole other level. I’ve combined that with the concept of environments. For example, there’s the idea of the mastermind.
A mastermind is an example of going pro where what you do is you build a structure that literally pulls your business forward. Step four is critical because what it does is it creates the most efficient path to your wealth. It keeps you from getting sidelined. It keeps you from getting distracted. It keeps you from making mistakes because you’re building the support systems, you’re building the environment and you’re overcoming all the resistance you will experience as you hit up against your comfort zone levels. You know how as we grow we run into comfort zone thresholds?
JT: Yes I do.
TT: We’ve all had that experience. It’s a natural human thing. You have a comfort zone of what success you’re accustomed to and as you break through those thresholds, you need mechanisms to pull you through and you need structures that literally pull you through it. And so that’s step four.
JT: Excellent. Do you mind continuing?
TT: Oh sure, sure.
JT: I’m really interested in this information so I’d love to hear the rest of the steps. This is great.
TT: Step five is passive investing and what I do is a I teach a specific approach. See investing is my background so now step five and step six you’re finally into the financial stuff, right. Remember I said earlier in the interview one through four you don’t even touch financial. I mean you’re building a plan, you’re developing a plan, you’re working through your personal stuff. You’re building mechanisms in your life, structures in your life, all the things that nobody does and it’s the reason so few people succeed.
So then we get into step five. Now we hit the financial stuff and so step five is passive investing done right. There’s a specific approach that has proven scientific works. You don’t need a broker to do it. It’s cookie cutter clean. I provide multiple formulas. You can pick and choose from it. It’s black and white.
JT: Tell me more about investing because that makes it sound really easy and usually things that sound easy aren’t. So tell me why you think this is so easy to implement and does it produce good returns and that sort of thing.
TT: Well, passive investing is the classifying hold everybody teaches but there’s a correct way to do it. Okay. Now I don’t do passive investing. So let me explain that there’s really three proven, there’s three proven, if you will, art types of investing or strategies for investing although passive investing is really lack of a strategy once you really understand it because it’s just, you know, you just acquire the stuff and sit on it. So it’s really the absence of a strategy.
So passive investing actually works and there’s reasons why it works. It’s built into the growth of the economy. As long as the economy continues to expand and continues to be the predominant feature of the economy over the long term, not intermediate periods of deflations which we’ve always had, but as long as you got certain assumptions that are valid, passive investing should continue to work over the timeframe it’s designed to which is 20 plus years.
So you have to have a 20 plus year time horizon. Now that time horizon can even expand a bit if markets are overvalued at the time. There’s something that a lot of people don’t understand which is you expect a return, I’m going to be talking a little technical here, there’s not a way to get around it. There’s a thing called mathematical expectancy or what your money should compound at, how fast your money should grow. That is determined by the valuation at the time you begin the investment program. There’s a mathematical relationship to it. Again it’s black and white.
And so when markets are overvalued your risk rewards is extremely unfavorable on a passive investment strategy and it extends what’s called the duration of the strategy or the time horizon you need to realize the gains expected from the strategy and so on a passive investment strategy you’re looking at a 20, 30 year time horizon, right. Now the next one down from there is a little bit more active and now you’re getting into the kind of the Warren Buffet world and that’s the valuation approach.
And that’s no different and intuitive understanding of that is you walk into a supermarket and you can buy shoes at half off or you could by shoes at twice what they’re worth, right?
TT: I didn’t say it right, not supermarket obviously a mall. You’re going to have your discount.
JT: I didn’t even notice.
TT: You’re going to have in a mall you’re going to have a store that sells them at a discount and you’re going to have some stores that sell them for twice what they’re worth, right?
JT: Nowadays though supermarkets do have shoes though so you wouldn’t be wrong in that.
TT: Anyway, and so a valuation approach is merely understanding what things are worth and buying intrinsic value and it’s the first step in what I teach on a concept called risk management. Smart investors apply risk management and so you can get, that will lower your time horizon if you become a value investor and apply value investor principles. You can get your time horizon down into like the 7 to 15 year time horizon before you can realize the gains expected from such a strategy.
So what we’re doing is we’re adding more active participation and we’re lowering the duration or risk. The risk profile and the time expected to realize the gain from the strategy. The final one is the big taboo which a lot of people have dubbed market timing which got a big negative connotation back in the days of Elliot Spitzer and we know what happened to him, right.
JT: Yes we do.
TT: We know what a great moral authority he was so thank you for dubbing us market timers a bad word. What I teach is what I call risk management. It’s not really market timing because you never have any idea where the markets are going. Nobody does. Nobody can predict the future. What this does is this applies a mathematic principle to the market to where it limits the risk exposure and there’s some really simple, dumb approaches as well as there is some passive approaches now that are built into ETFs that you can employ with this and the research is unequivocal that the risk reward ratios are quite favorable.
What it allows you do is you get market like returns with bond like risks. You substantially lower your risk profile. You get much more consistent returns. Almost every year becomes profitable historically and that’s looking back like 1970 and it’s very straightforward stuff. I did it when I ran the hedge fund that was the basis of our entire approach. It worked when we ran the hedge fund. We had consistent gains every year except for one and it has worked ever since then in my own personal investing. So that’s the shorter time period that works on a one to seven year timeframe.
So anyway, now that has transitioned into step six which is active investment strategies. So we kind of segued by talking about that we segued the entire gamut of step five and step six which is passive investing done right and then it bridges to active investment strategies that the average guy can actually implement and I explain them and teach them in a way that a person can actually implement.
JT: So is the passive strategy just sort of like a contingency plan to the active strategy? Is that how it works or?
TT: Actually, no. It goes back to your wealth plan. It goes back to step one. You’ve got to pick the investment strategy that matches your plan. So for example, if you’re building your wealth through paper assets, you can’t really do it as a passive investment strategy because it’s just not reliable enough in my opinion. These are just my opinions, okay. Most of it’s founded in math so I don’t even really consider it my opinion because it’s all supported in math. I’m kind of engineering bent but with an intuitive twist if you will.
JT: Great way to put it. That’s excellent.
TT: An unusual combination.
TT: But anyway, let’s take that client that I was sharing with you earlier, okay. Their entire wealth building strategy is focused on the entrepreneurship dream and how they’re building that business. They have background in this. There’s every reason to believe they should be successful however life has ways of throwing wrinkles at us. Not everybody will succeed even though they should and so what we’ve done is we’ve built an investment strategy underneath that’s primarily passive. It’s not 100 percent passive because they don’t want to be distracted with active investing. They’ve got a career to lead. They’ve got a business to build.
They’ve got plenty going on. They can’t put their time into tons of market effort. That’s why we put the real estate on hold. We’re just being realistic about how much time somebody can devote to building wealth and still lead a healthy balanced life.
JT: Yes, you can’t do everything.
TT: Yes, you can’t do everything and so you’ve got to match the investment strategy back to the plan. It’s all go to fit together otherwise it won’t work and that’s why so few people succeed is because they haven’t put all the pieces together and each one of these pieces, I like to save it like a three-legged stool. Imagine a three-legged stool in front of you and if you yank one of those legs out, what happens?
JT: You fall on your butt, yes.
TT: Well and that’s what’s happening to everybody is they don’t have. You know, they’re smart people. They’re trying hard. Everybody is working hard, right? And it’s like they’re missing this leg or they’re missing that leg and so then, they take two steps forward and somebody yanks that leg out from underneath them or they run into that new wrinkle. So this is a way to kind of put it all together.
JT: So that was six, right? That was active was six. What’s the seventh one then?
TT: Seventh I’m a little reticent to give it up front.
JT: Oh I’m sorry, you don’t have to.
TT: No, no, no, it’s kind of fun. It’s fun. Now that you’re a millionaire so what.
JT: Everybody that’s an eventual millionaire is going to love that. That’s great.
TT: Right, right. It’s basically, it’s built on my story. I’m personally living step seven right now. So I’ve lived through step one through six not only in my own life but with many, many clients and so that’s like totally proven out. Step seven is still in the drawer in development because guess what, I’m sort of the crash test dummy for all this stuff. My life is like the test case for all this stuff and so what it is is it’s about the concept of true wealth and how to find happiness.
So as an example of my personal story, once I became a millionaire it was this big so what. I mean it led to one of the most unhappy periods in my life and I couldn’t really understand why. I had just so many false assumptions in my brain about what it was to be financially independent and what was the basis of happiness and what really leads to happiness and so it really sent me back kind of to ground zero and really reworking this stuff and that’s part of what Financial Mentor is about is building a community, having goal-oriented activities, giving back to the world my unique gift.
All these things connect back into a cohesive whole and so as you can tell, I’m a little more nebulous on this one. Like the other ones I could bottom line them in a sentence or two. This one here is still in development. It’s about how do you build a life that is so satisfying, so happy that you never want to retire from it but yet it’s balanced in a way that you can live every dream you want within the context of it. And that’s the challenge I’ve set in front of myself that I’m trying to live with Financial Mentor and with where I’m going with all these things.
So what I’ve learned is I’ve gone the extremes. I started in poverty, and not poverty, I came up from a middle class family but I had to work my way through college. I didn’t have any money. My story is I went through one whole semester in college with $100 and I had money left over at the end of the semester.
JT: That’s awesome.
TT: I had to learn the ropes. So I started with nothing and then I became a millionaire, a multi-millionaire and I had everything and then I started a family and I realized even that wasn’t enough to raise a family with two kids in private school and everything at the level that I wanted to be at. Now for others it would be more than enough. So I’ve gone back and forth. I’ve lived the wide extremes in between and so I’ve had no work for years where all I did was travel and play sports and outdoor recreation lifestyle and read books and that’s okay for a little while but it’s a vacation. When it’s your lifestyle, it’s not fully satisfying.
JT: That’s really important to say though. I mean I think that’s the thing that you were sort of hinting at before is that when somebody is on the other side of it and going I need to make a million, or at least I need to make money, you know, more money, more money will solve all my problems. You’ve been to both sides and you’ve said A) getting to a million isn’t that big of a deal but B) even doing all those things that the million is supposed to give you is just a vacation. It’s just something that doesn’t satisfy everything either and that’s sort of really important to get across because we just assume oh well anything’s better than what we’re doing right now. I can’t imagine not working for an entire year and only doing everything that I want to. But truly, that is not 100 percent fulfilling either. So tell me about what you learned in all that.
TT: Well, I mean you hit it on the button. I mean there’s a bunch of stuff you just said. One is I call it the millionaire myth, right. So everybody thinks that they just get a million that all their troubles go away. That’s the millionaire myth. All it does really, it’s kind of a funny twist on things. When you get a million or you become what you consider financially independent whatever that is, now what you’ve done is you’ve lost all your excuses for happiness. Okay, I’m sorry I said that wrong. Every excuse you have for unhappiness.
So every excuse, what happens is when we’re working so hard, right and we’re in this goal-oriented activity building our career whatever. We have all these excuses for why we’re unhappy. My boss is a jerk. If I only had enough money to buy this thing. Once you have enough money to buy everything you want and you don’t have a jerk boss and you have no requirements on you, guess what? You have no excuse for being unhappy. Now you have to look yourself right in the eyes and you have to know that it’s you. Everything that’s going on in your life is all about you. It’s all about self-responsibility. You can’t blame it outward anymore.
JT: Wow. Yes.
TT: Yes, powerful stuff. It’s really cool. And so there’s that aspect. Now you hit on some other things too though and I lost them while explaining that. There was a couple other things you gave in there.
JT: Just the year of travel and everything that you would assume it would be. It’s not.
TT: Oh yeah. Like for example, when my wife and I got married, it was after I sold the hedge fund business and she and I got married and we took off and traveled for just under six months. So we went through the bulk of Europe and some of the Middle East and that was our honeymoon. It had always been a dream of mine. I wanted to just put a backpack on and be a free spirit and just travel, right.
For the first month and a half it was heaven. I mean we were just on, it was everything I dreamed it would be. It was perfect. It was ideal, right. And then kind of around the two-month period it started becoming sort of a way of life if you will. Like you had this almost like routine of how you travel. You have to find the guide book. This is before Internet was really available everywhere and so we’d find the guide books for the area and you’d learn where to go. You’d find your hotels and you’d choose what restaurants you are going to and what sites to see and there’s almost like this kind of routine to it all, right.
And then like three months in it almost became a job. Like, okay so now we’re on to the next town and I’ve already been to the top of 30 churches and I’ve seen this and I’ve seen that and I’ve, you start finding out like much of the history of the world is made of the wars and battles and dividing lines and you started seeing these patterns and it just becomes kind of this job and it was a wonderful experience. I would never give it away but what we found, at least for us as a couple, is between a month and two months is our ideal travel experience. What we like to do is go to a country and hang out and get to know that culture in that country for about a month, month and a half, two months and then we like to come back home and stay connected to our community.
When we left for six months, it was long enough we had to turn our lives off back home. And so by turning our lives off back home, we had to complete, when we came back, we had to completely rebuild our lives. We had to start from scratch because we had to turn everything off to be gone for six months. But to be gone for a month to two months you don’t have to do that and so we found that that’s having the maximum vacation experience and coming home and still being connected to community and friends and what we’re about in our lives. So that’s been our balance point.
That’s another example where we’ve lived the extremes. We tried week long vacations they’re not enough for us and we tried sixth month vacations and they’re a little longer than we need.
JT: See, but being able to have that opportunity and see both sides so you can find out what is in it for you, I think that’s what everybody really wants truly. To be able to make the choices themselves. So whether they go to the extreme and then realize that’s too much or not but being able to have that choice is really what everyone is looking for.
TT: Yes, and that really is what it’s about. It’s about living your dream. Finding out what your dream is and what makes you happy and what honors your deeper values.
JT: That’s excellent. So it’s funny because I could talk to you forever too. We’ve been at it 30 minutes right now. I’d love to get in at least a little bit about the business side of things because you are an entrepreneur and you built businesses and I’d love to hear just a little bit more. How did you start doing that? I mean I know you touched on it a little bit but how did you go from making nothing and only having 100 bucks in your pocket in college to creating, should be buying a Corvette lifestyle.
TT: I’ve been an entrepreneur all my life even as a kid. So like my starting root you can go all the way back to grabbing a paper route as a kid, right. The difference was I’ve always been a little unusual with it. Like as a kid, when I did the paper route, I looked at it and there was, paper routes would come up periodically in neighboring neighborhoods. That’s probably not saying it right, close by neighborhoods. Every now and then they’d come up, right and I thought wow, if I just bought a motorcycle I could do more paper routes, make more money in the same amount of time and I could ride a cool motorcycle around town every morning.
And this was when I was a kid. I didn’t even have a driver’s license, right. So I went ahead and did it and I picked up, I forget how many I had. I probably had like three or four paper routes at one time and I could do them in the time it would take me to walk one and was making more money. And then I love sailing. I used to teach sailing so I did a boat refinishing business. That one failed. Again, not everything is a success. I mean it made money but for the time spent, it was just a nightmare.
JT: I’m going to stop on that one for a second because so far, the entire time we’ve talked you’ve talked about successes and how great it is and this is sort of the first time we talked about failure. So tell me a little bit more about this.
TT: I have lots of failures. If you’re going to try you’re going to fail. That’s one thing you learn as an investor by the way is don’t get attached to your losses. They key is you want to fail fast and fail small and when you win, win big and rump it for all it’s worth. That’s the key point. Everybody fails. If you’re going to try you’re going to fail. It’s no big deal. It’s part of playing the game. But take a lesson from any successful company out there. The key is get it out there, test it and fail fast and control your risk.
You want to get the principle out somewhere you can test it. Prune it out. If it’s a failure, fine, scrap it, move on. But you got to test the stuff and figure it out. You got to get a valid test. So I fail a lot and I have no problem with that. I did one boat in the boat refinishing business. I figured out how I had the whole idea wrong. We finished it. We got out of there. We made a little bit of money on it. We said that was a failure even though we made money on it.
JT: How did you do that? Because a lot of the times people go in businesses and they go well we made money. Maybe I just need to rework the plan or maybe I just need to make it bigger or smaller. There’s all sorts of things. So how did you really determine? I know you’re a math guy. That probably played a bit in it anyway. But how did you determine to cut your losses?
TT: I’ve always valued my time. It took a lot of time. It took a lot of effort to refinish that boat and the amount we made on it, it just wasn’t worth the work. There was easier ways to make more. So while we made a profit on the boat, it just wasn’t worth the time. I’ll give you another example. I did one summer in college. I decided I had this clever idea I could run a pool supply business. I knew that I could go to a wholesaler and I could buy pool supplies for a tiny fraction, you know when you have a swimming pool you got to buy all these supplies.
JT: Yes I do. It’s a pain.
TT: So I knew I could buy them at a wholesaler for a tiny fraction what people were paying for them at the retail outlets. So I just had this idea. I said well everybody has to get a building permit to do a pool, right. So I went down to the county records and I made a mailing list and this is before computers were prevalent so I couldn’t put it in a database. So what I did was I typed them all out on preformatted labels, right. Got this whole database and then I would just mimeograph or photocopy the things onto peel and stick labels and I did this massive mailing campaign all summer and I made enough to get back into college.
And so I just direct sold. I mean I would literally go over and deliver the pool supplies to somebody’s house. It was home delivery pool supplies. So I would take orders. I would go to the wholesaler pick them up, go back and sell them for twice what I paid for them.
JT: That’s awesome.
TT: So I did that but that was just a summer business and then to finish it off I knew I didn’t want to come back to that so then I sold that list to another pool supply company in town to finish it off.
JT: See that’s smart though. That’s a really smart way to go about it because usually as a kid, you’re like oh that didn’t really work. That worked but I don’t really want to do it anymore and not actually sell your list. Selling your list is a great idea. Do you just do that innately? I mean do you think that entrepreneurs there’s a difference between successful ones and unsuccessful ones in terms of the way they think or anything like that?
TT: You know, that’s a tough call. I’m sure there is. Here’s what I know. It’s very hard to take somebody who’s seriously a W2 person, W2 wage earning employee, and make them an entrepreneur. I think you either kind of have a bent for it and it’s a way you see the world. It’s like a set of sunglasses you look through the world with. I mean I see opportunity everywhere and so I just kind of look at equations, I can see the equation. I can see like oh they’re doing this and you can do this and here’s the angle on it that isn’t being figured out, the exploitable inefficiency if you will. Taking a term from investing again.
There’s an angle in it that somebody hasn’t developed that I think I can do that should work.
JT: And it sounds like then you attempt it and then do it on a small scale, see if you can make it go bigger or if not, cut your losses and leave. Is that sort of the way you run?
TT: Yes and some of it, it’s just something that’s in your heart that you want to do like for instance take Financial Mentor, if you look at the history of Financial Mentor, I had a classic static site up the first gosh, I don’t know, seven, eight years. I think I put it up in 2000 and all I wanted to do was attract coaching clients and so it ranked number one for financial coach, financial coaching and it was just enough to keep the practice full and I work financial coaching clients because my real question that I entered that business with when I became financially independent, people would turn to me and they’d say, “How did you do it, Todd?”
And back then, this is when the stock market was going crazy. It was back in the late 1990s and people wanted hot stock tips because that’s all anybody wanted back then. I mean they weren’t even asking the right questions. I didn’t even have the skills to relate it back to them. But I knew I had a lot of background in this area and I had a real passion for it. I love this whole idea. It’s like adult monopoly. It’s just like monopoly for an overgrown kid in my opinion and so I have passion for the subject and people were asking me about it and I just got this bug up my rear and I thought, you know, can I really help, normal people is a weird word, the average person, a person who is working, struggling, trying to build their wealth. Can I really figure out how to help somebody succeed financially that cares enough to put in the time and effort?
So if you look at the history of the site, it mimics that. So for the first five, seven years whatever it was, I was figuring out my Seven Steps to Seven Figures. I was fumbling forward learning what worked and what didn’t with real clients and I was okay with that because at the rates I charged, I knew I was creating more value for them than I cost. So it was revenue generating market research.
JT: Smart entrepreneur.
TT: So I was getting paid. I put up a single static site. I had the cost of hosting, the clients paid me so it was positive cash flow from the get go and it was revenue generating market research where as along as I’m creating great value for the client, I’m okay with it. And you know you’re creating great value for them because they continue on. I’ve got clients that have been with me for eight years now.
JT: Nice. Nice.
TT: So as long as you’re creating more value than they pay for, they will stay with you. In the process, I developed the Seven Steps to Seven Figures. Over time, I started seeing a structure, how people came to me, what pieces they were missing and how they needed to flow through the process. Once I got that structure down, now you see me going into the rollout phase and I’m following a definite plan. I’m walking my talk. So I have a plan which is I build the traffic for the blog first which is something you and I talked about offline before we came on the call which is I’m now getting to that point where I got sufficient traffic to launch a membership program.
So my vision has always been I really want to have a membership site where I just serve people like crazy within that membership site and it’s an affordable level so anybody serious can play the game full out. So the next step is and hopefully I’ll be able to start it this summer, I’m trying to get some wrinkles out of the way with video production, audio production, all that. But I move to the membership site phase some time this year and because I’ve already got the traffic phase. Then I build the conversion into the front end of the site which converts to the membership site.
It’s an entirely structured plan if you look at the history of the site and look at the various generations of the site you’ll see it absolutely mimics what I’m talking about.
JT: I love how systematic the way you think too and it works out really well for the way I think. Let’s talk a little bit, because we have a couple minutes left and I think a lot of my audience is sort of interested in this because you hear about it a lot, the make money online. Ooh start a blog and you’ll have tons of traffic and people will pay you money for an eBook. Unfortunately, you and I both know that it’s more difficult than that.
TT: Oh yes.
JT: Actually going about doing it. So tell us your experience and what you’ve had. I mean you’ve been doing this for a very long time if your sites been up for that long and you’ve been ranking for that long. So you even have a leg up over most people. What do you think? What are your opinions on the make money online and the membership communities and stuff like that to go about trying to get into that.
TT: It’s a lot of work. It depends on, I’ve done it through the natural search strategy which I’ve been successful with and there’s a huge upfront price to pay for that. I have a post on my site called passive income hoax and that’s not a slight to Pat Flynn by anyway. I have great respect for Pat Flynn so Pat if you’re listening I love your stuff. What it is, is it’s talking about the idea, passive income implies that you don’t work for it and that’s what I’m really attacking. Pat’s totally upfront with how he teaches it.
But most people think of passive income as money that you don’t work for. Mailbox money or whatever and I use that term, I call it leveraged income where you pay the price upfront for a payment stream down the road. So you take the risk upfront, you do the work upfront, so a great example is the eBook which you already brought up and which I have on my site. So you write the eBook, you edit the eBook, you have to learn all the stuff about how to put it online, how to sell it online and then you have to drive targeted traffic to the sales page for the eBook.
There’s quite a bit of work involved in that. Depending on how you approach it, there’s a fair amount of effort involved in getting that up and getting good traffic to it and even then, conversion rates, I have not proven out my conversion rate yet but my understanding is one to two percent is fairly industry standard and I’m probably right in that range. So you’ve got to drive a lot of traffic to make a lot of money on a $27 or $37 eBook.
TT: And so, once you look at, I mean here’s the equations a lot of people miss. So let’s say you rank for a Google term. Well if you understand how people click on Google terms, the stats vary from research study to research study, but something like 45 percent of the clicks go to the first number one rank and then 90 percent of the, and the rest, it breaks down something like 18 percent and then 9 percent on clicked positions one or two and three. So the vast bulk are in positions one through three. The remainder of page one takes up the total of about 90 percent and then you have about 10 percent for everything left.
JT: Which is pitiful. You’re excited to be on the first page of Google and then I’m like oh that didn’t really help unless you’re in that number one spot.
TT: Well, yeah, you can be on a first page of Google and if you’re in position six, I think it’s like position five, six, seven, I think you’re in like a 2 percent range. You can expect 2 percent of the clicks which is really, that’s pretty poor. So let’s say you’re in a keyword that’s getting 1,000 people. So 2 percent is what – 20 clicks? Is that right?
TT: Wait a minute, a thousand, two…
JT: Yes, it’s 2 percent.
TT: So 20 percent would be 200 so yes, 2 percent is 20 and then let’s say you got a 1 percent conversion. So how many eBooks are you selling? You’re selling 0.02 eBooks per month?
JT: Woo hoo! I’m going to retire. Yes, definitely.
TT: So I mean you have to have, use the eBook as an example, you have to have a highly targeted solution which I have, the two eBooks I have are highly targeted solutions. Then you have to focus on ranking for highly targeted keywords that have sufficient traffic to drive sufficient sales.
And now there’s other strategies too. There is affiliate sales where you create affiliate programs and whatnot. But again, somebody is only going to do an affiliate program if there’s enough money in it for them. Why is a guy going to put my eBook up on his site, right, when he’s going to drive some tiny fraction of his tiny fraction of traffic over for some tiny fraction of conversion. He’s going to pick up $5, $10 a month. He’s not going to last long.
TT: So that’s why you see when you see these product launches, you’re seeing $2,000 products because they have to have enough commission involved or you see the affiliate programs with long-term affiliate income. So yeah, there’s a lot to it. There’s a lot to it. The get rich quick stuff don’t listen to it. It’s a business. It’s a profession. There’s definite skills involved and it takes work to build it as you’re familiar yourself.
JT: Yes, though you’re making me think that I should have an eBook on my site now that I’m on the homepage of Yahoo today. So man I should have had an eBook.
TT: Yeah, you do need conversion strategies. You need various conversion points for your traffic that’s going to serve your traffic for your niche and that’s the piece I’m developing right now for my site is the various levels of serving them and the way I like to look at it, I call it conversion strategy, but really you think about what you’re doing is you’re serving them for what their needs are. So you’re trying to find, like if you look at the two eBooks I’ve got up there, those are a result of me working with clients where I have all kinds of people getting ripped off with variable annuities and it’s an incredibly, so I have a book called Smart Consumers Guide to Variable Annuities and the only reason I wrote the darn thing is I had so many clients that were getting ripped off and it’s such a complicated investment to explain and it wasn’t fair to the client, a coaching call is expensive.
So it wasn’t fair to them for me to be giving them mundane how to information via a coaching call. So I just committed. I said I’m going to write a definite eBook on this that explains these investments so the layman can understand it and they can know who it’s for, who it isn’t and how to counteract the salesman’s hype.
JT That’s a great idea. Definitely.
TT: So I wrote a targeted eBook specifically solving that problem and that way whenever a client had the problem I just gave it to them. In the meantime, I put it up on the site and it’s for sale and I make a few bucks on it and it’s the same thing with how much is enough to retire. I mean I’ve been through the retirement thing, upside downside and I’ve been through it with a lot of clients and so I got to develop a fair amount of expertise on the subject and there’s a structured way to explain it that really makes sense for people and so rather than burn my client’s time on the phone going through that whole process with them, I wrote an eBook. And it answers that whole question that has not been answered properly before.
JT: That’s a great idea. That’s a great idea just to even for value for your clients and stuff like that. It shows us that you have a lot of integrity too to be like hey I don’t really want to say this a thousand times and charge you tons of money when I can just sort of give it to you in a document. That’s awesome. Excellent.
TT: What it is is just walking the talk again, being congruent, being a value-oriented consumer is the hallmark of building wealth and so I’m a value-oriented consumer and I’m really uncomfortable doing anything other than delivering value because guess what? Somebody should call me to the carpet if I don’t deliver value. I’m out walking the talk.
TT: The other thing too on that if you notice, if you go to my site, I don’t have a whole bunch of affiliate programs up there. I think I might have finally located an adequate credit repair service. I haven’t done the due diligence on it yet so it’s not available but I finally found one where what I understand they do is it’s actually an educational program at a very fair price where they show you how to, they educate you on how to get the bogus stuff off your credit report which is the only valid approach to credit repair by the way.
JT: Thank you. Yes.
TT: What’s that?
JT: Well I just, being a financial blog and stuff, I’ve got so many people coming up to me, you know, how can I fix my credit? Like can I call somebody and just pay them to have them fix my credit? I’m like no you can’t just do that.
TT: Yes. No, there’s an authentic way to do it which is you have to have an illegitimate thing on your credit report which you then have to have a correct strategy going back to my seven steps, right? You have to have a plan based on proven principles of how you go about removing that. For the layman, that’s a big hurdle to overcome. They have to go figure all that out. So if you had a valid educational service that takes you through those steps, and shows you how to do it, that I could get behind.
You know as long as it’s a price point that makes some sense. So anyway, I think I might have found one and so maybe I will be able to offer that but as of right now, I haven’t done the due diligence to prove it out. I just kind of seen the sales material and I’ve talked to some people but I haven’t really dug into it yet. So that would be an example.
JT: And it’s funny. So we’ve totally debunked the myth. I mean pretty much every smart person knows that you can’t put up an online business and be like yeah I’m going to make money in two days or whatever. That doesn’t happen and I love hearing your story too because you assume the self-made millionaire would be able to go ahead and have thousands and thousands of visitors on the first day he started, you know what I mean. It’s not like that. It’s still step by step trying to make it better every step of the way.
TT: I suppose if I wanted to I could probably buy my way into it and figure out how to buy a bunch of traffic. It would be really dumb that way. I don’t know it that would create a valid business model or not. Here’s the thing that I’ve learned is that if I had just tried to leverage it right up from the get go and pay my way into it, I would have really stumbled and probably lost a lot of money in the process because I didn’t really understand what the market needed. I didn’t really understand how the business model worked ands o I had a lot of ropes I had to learn.
I mean you think about it, I’m a financial expert. I wasn’t an internet marketing expert. I wasn’t a writing expert. I hadn’t written hardly anything except for college essays when I started. I had to learn the craft of writing for the internet. I had to learn all the internet marketing stuff, what to pick and choose from because there’s way more than you can ever do and for me, I love it. To me, again, it’s adult monopoly. It’s just fascinating stuff. I love to learn. I love to grow so it works for me. But it’s a learning curve.
So just to come in and try to buy your way into it would be stupid because what you’re going to do is make all the obvious mistakes with the most money. Right?
JT: That’s not failing small and failing fast.
TT: No, no, no! What you want to do is go in, really test it out and once you figure out the model then you roll it out and that’s what you, that’s how you’re watching me walk the talk. I mean I spent years trying to figure out how to coach people first of all to see if I could even help people, right. And then once I figured out a model that consistently produced results with clients, I mean I got consistent results, now I’m going into how can I serve more people so I’m moving it into a group coaching program, right.
So now I’m trying to figure out how to bring more automation, more leverage into the model and so yeah, I’m trying to build a successful big business with it but it’s also about serving more people. It’s about reaching more people with the message. As long as I’m stuck with one-on-one coaching, I can’t reach that many people.
JT: Yes, and that information needs to get out into the world. People like me who are working towards a million need to know so I appreciate the fact that you do that too. Excellent.
TT: Yes, and also when you bring more leverage into a model, I have an article up on my site, it’s under the financial coaching section called Seven, ugh, I’m failing the title now. Basically, it’s a smart consumer’s guide to how to buy coaching and financial education and what it does is it walks though where are the value price points and what education you want to buy for what needs you have, right. So it matches the needs of the client to the education so they can get a good value for the money. So it’s a total consumer oriented article and I lost my train of thought.
JT: Well and I just want to stop and say too that your website was awesome and it has got quizzes. I’m one of those people that love quizzes and figuring out where I am and stuff like that. So it has tons of quizzes and lots of advice and stuff like that. So I think it’s, I highly recommend it of course for everybody who’s listening to go out and take a look at it anyway. But the quizzes and stuff are so much fun so I appreciate you putting them on there for people like me.
TT: Thanks. Thanks.
JT: Excellent. So we’re just about out of time and I want to ask you one last question that I ask every millionaire that comes on the show. What is one action that everyone can take this week that will move them forward towards their goal of a million?
TT: One action. Oh boy. You’re asking a guy that has all these systematic processes and builds this whole composite hole for one action so how do I pull one out of the woodwork? You know what? I’m going to hand it back and sort of turn your words on you and just say take action. So go ahead and take action and fail small. Procrastination is the biggest wealth killer out there. So if you’re taking action and moving forward and failing forward, then you’re on the right path.
As long as you’re correcting, adjusting and you’re constantly learning and you’re constantly building in your base of knowledge and you’re trying to improve and the other piece in here that’s critical is you manage your risk at every point that you fail forward then you will ultimately succeed. The only way you fail is by stopping at that point.
JT: That’s excellent advice.
TT: And so the one action you should take is to take action. But to take action with a layer of risk management and an underlying desire to constantly grow and improve so every action you take is more efficient, better thought out, more effective.
JT: So that would even be taking a look at maybe your to do list this week or your big goals and what actions you need to take there and really looking at them from a higher perspective and managing risk and trying to figure out what you can do better. A lot of people just put things on their to do lists and just sort of put them on the to do list without thinking about them going I need to do this and I need to do this without really taking that higher perspective on what they’re actually doing.
TT: Yes, see now you’re hitting into my step four again which is how you actually structure. So there’s a time for goal setting, right and that operates in one timeframe and that’s kind of a bigger overview of how you’re approaching things and then you work that down to a layered to do list so you’re never in overwhelm. You only want to work off what you can actually achieve within a confined timeframe. Otherwise you drop into overwhelm. So you want to relegate everything else off to other to do lists that are part of your structured plan.
Like my to do list is actually my structured plan and it’s laid out in a sequential order and then I extract pieces from it. I break them out and I go into action and that way I never drop into overwhelm. Well actually, I can’t say never, every now and then I feel that overwhelm. Particularly with internet marketing. My God, every now and then you look at all the venues and all the angles and all the stuff you got to learn. It’s hilarious.
JT: It’s immense. Oh yeah, I’m right there with you. Awesome. Well I appreciate that and I love how the way you structure things. This has been excellent and we can talk for a very long time so I would love to invite you back sometime in the fall to have you back and we can talk more about this stuff and maybe you’ll actually have it launched by then so maybe I can help you out there. But I hope all the listeners actually go to financialmentor.com.
TT: I thought you were going to say financial meldown.com or something.
JT: That’d be great. I’ll have to check out what that is after. Exactly.
TT: Financialmentor.com. One word.
JT: Financialmentor.com. Thank you very much. Everyone should take a look at it and thank you so much for coming on today. I really appreciate it, Todd.
TT: And there’s a free newsletter. Make sure you subscribe to the free newsletter and I’ve got two eBooks I’m going to be giving away. They’re right at the graphic designer now. I’m making them really pretty. They’re totally written. They’re getting all prettied up so they’re real professional and those are going to go to all existing subscribers free so make sure you get on the list.
JT: Great. So sign up for the list. Have a great day, Todd. Take care.
TT: Thank you. I enjoyed the interview.
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