Adrian John Cartwood : Hi Jaime thanks for having me.
JT : Excellent. I appreciate it. First what I’d like to do is get your background a little bit. Can you tell us a little of how you grew up? I know you’re in Australia. Did you grow up in Australia?
AC : The first thing I’ll say is that Adrian Cartwood isn’t actually my real name. Adrian is my real first name and the reason for that is during the interview I share fairly personal details about my financial life, and so I figured that being semi-anonymous is probably the smartest way to go. In effect, the name John Cartwood is a name that my daughter made up for me when she was five years old. I don’t know why, she just started calling me Adrian John Cartwood so I determined one day that I would use the name and this is how I use it.
JT : That’s a great story! I had no idea.
AC : I’m publishing a book at the moment and I haven’t decided yet whether I’m going to do it under the Adrian Cartwood name or under my real name so I have to make a decision with my co-author fairly soon. That will be a personal finance book.
JT : Nice. That’s a great name. It sounds real.
AC : To answer your question, yes I did grow up in Australia. I grew up in Australia and went up through high school in the early 70′s, so that makes me quite an older personal finance blogger. I’m 52 now and I retired when I was 49. Grew up in Australia and got married. Got two children and we moved to Chicago about seven years ago and we moved back to Australia about two years ago and now I spend my time between Australia and Chicago. We own houses in both locations.
JT : Oh wow, nice. So how did you start getting into personal finance? As a young kid, did you know a lot about personal finance? Did you grow up with it?
AC : As a matter of fact I didn’t at all. I had this idea that I wanted to be a millionaire by the time I was 21. That didn’t happen so I figured I’d work on a plan to skip my first million and just go working on my second one. That worked quite well for me and that was the result we got, seven million in seven years. Even though I was probably interested in finance I was a terrible investor, terrible with money. The two best investments I made in my younger days, my single days were, probably my 20′s, I bought an apartment, condominium apartments from a developer that was going broke and I bought a car. I actually made more money selling my car than I did selling the condominium.
JT : That’s unusual.
AC : My next big financial venture was buying five ounces of gold when I was in university, college as you call it in the States. I had some cash saved up from work, I bought five ounces of gold and I sold it five days before gold went up to a thousand dollars an ounce, so I think I’m the only person who lost money in the gold boom of the 80s.
JT :I love these stories! Keep going.
AC : So you’re probably wondering how I moved from there to becoming a multi-millionaire. Its probably more luck than smarts I think at the time. But the reality is that I somehow ended up in the family business that promptly went broke as soon as I joined. It was a finance company which I miraculously managed to restart in the early 90′s and I still own that business today. The good thing about a business lets you set up (INDECIPHERABLE), it runs itself. I haven’t touched the business in five, six years. I have relocated with my three employees but that’s purely coincidental. The business runs itself. But that business helped fund my next business, which is the main one that took me to the USA. From a personal finance perspective it was right around 1998 that I had a real breakthrough. My two businesses, between the two of them, were basically breaking even, so one made about $5000 a month, and then the other was losing about $5000 a month, and that was going on for about five or six years, so I was really going nowhere pretty fast. In 1998 I picked up a book by Michael Gerber called â€˜The E-Myth Revisited.’ There’s one thing in the book that really woke me up. It said, â€œYour business and your money isn’t about your life. Your life isn’t about your business. It’s the other way around.â€ What I meant to say was â€œYour business isn’t your life. Your business is there to support your life.â€ At the time my businesses were sucking me dry for 80 to 100 hours a week. I was work at least 80 hours a week. I was making no money. That really woke me up. I really had to sit down and think about what I was doing wrong.
Part of that process was I started to read some personal finance books and the thing that I found was I read the standard personal finance books. I read â€˜Rich Dad, Poor Dad’, probably the very first one I read. That really woke me up. There’s some things I really liked, obviously. Since then, there’s Robert Kiyasaki’s â€˜Detractors’ but I guess I’m a fan because he did wake me up. I also read â€˜The Richest Man in Babylon’ which is really a good little book for anybody wanting to learn how to save money and put that money to work and start to make money slowly. But the most important thing I learned was to think of how much money I wanted to make and what I wanted to do with my life and when I wanted to retire. That really changed my outlook completely, Jaime.
JT : Wow, that’s amazing. So, how did that change your outlook? I mean, from making $5000 a month to a goal of over two million, that was a big leap. How did your mind set change from then until (AUDIO SKIPS)
AC : Its true I mean I had, effectively I was like anyone working for a job with the worst possible employer in the world: myself. (AUDIO SKIPS) I don’t encourage anybody to go into business if that’s your endgame. You might as well keep working for a living. But I had no plan. I had no goals so everyday was â€œAs long as I’m not broke I’ll keep going.â€ Paid myself a small wage and I could eat. That was it. Then in 1998, I suddenly realized that Michael Gerber’s book made me think about what I actually want to do with my life. What was the endgame? The endgame for me isn’t working, the endgame for your isn’t working either. We all work and blog and do things to achieve the endgame. The endgame for me was I wanted to be a traveler, I wanted to travel not just physically but mentally and spiritually and that’s very hard to explain to people. I came up with what I call my Life’s Purpose. I found what I wanted to do with my life. What I really wanted to do was have the freedom to do lots of different things and expand my mind, expand my philosophies and I realized if you want to do lots of things and travel, you can’t very well be tied down to a job or a business 50, 60 hours a week. It just doesn’t work.
So I realized that in 1998 I wanted to give myself five years to retire. That’s a pretty big goal to go from virtually broke, in fact I was $30,000 in debt at the time, to be retired in five years. But that’s what I decided I had to do. I wanted to retire basically by the time I was 47. That was my plan. I was 43 at the time. I didn’t want to be too old before I travel so if I retired before 50, that’s a good goal for me. That was step one.
Step two was if you want to retire you need some money, right? So I sat down and figured out how much money I would need to pay myself if I wasn’t working. I worked at that number, for me unfortunately it was about $250,000 a year. Yeah that’s crazy, I could live off $30,000, you can live in a little house but the reality was what I wanted to do was travel, I wanted to invest in small businesses, try different ventures because I’m entrepreneurial, I wanted to do lots of things. I wanted to go and do something Eastern philosophies which don’t take much money I guess the ashrams need ice (????), that’s what I mean.
For me, I needed a $250,000 lifestyle. That was just the reality of it. Other people calculate they need a 20 or 30 thousand-dollar lifestyle but that’s the first step. From then on all I did was simply multiply that number by twenty. Twenty came to five million dollars and why twenty? Cause twenty roughly equates to a five percent withdrawal rate, which means if I build a lump of money, 5% of that is churning $250,000 which I want to live off. Does that make sense?
JT : Perfect sense.
AC : 5% is not really a safe withdrawal rate, but that’s another subject. It’s a good planning number. Unfortunately for me the number I came up with was $5 million in basically five years. That set me on the path, I eventually made seven million in seven years.
JT : How did that seem now looking up $30,000 in debt and you decide you want $5 million in five years? Did it feel huge to you? Step out of your comfort zone?
AC : The one thing is it felt impossible but when I realized that’s what I wanted and needed to do with my life it suddenly became a â€˜has to’. It became a â€˜has to’. You don’t think about the goal anymore. You know its there you just start making the baby steps on the way. It’s like a huge ship turning. If you’re piloting the Titanic, and there’s an iceberg in front of you, you’re going to hit it, you’ve got no choice you’re going to crash into it. You’re going to fail completely. But if you’ve got a reasonable planning horizon, five years is pretty aggressive but if you’ve got a planning horizon and this huge goal at the other end, you can start to make very very small changes in that direction, and slowly, slowly, slowly over that period you’ve got more of a chance to reach that goal than if you didn’t have that goal in the beginning. So compared to flying blind I was already way ahead. Its isn’t huge but I started to take steps. In the back of my mind I always knew what my goal was. If I was ever presented with two choices, I would already know which one was the right one that would take me closer to my goal.
JT : What did you actually (AUDIO SKIPS) business almost (AUDIO SKIPS) money. Creating so much wealth in such a short time.
AC : The reality was I didn’t make I didn’t make much money from the business, not at that stage. I turned the business around, I put some software in, and I’m from an IT background. We Web-enabled the business, which was very big for us. Even so I realized our business in Australia wasn’t going to make me the businessâ€¦wait backtrack a bit.
Step two, now I know I want to make five million dollars in five years, I had no investments, the only thing I had to my name was the business. So next step is what does the business need to sell for to get five million dollars in five years’ time? To sell a business for five million, you probably need one to one and a half million dollars profit. Because that’s what people will pay, about three to five times your annual earnings, will give me five million dollars. Does that make sense? I need to make one to one and half million dollar a year profit, not breaking even or losing money. That was a big challenge. Like I said, I had to do a number of things.
One of the things I did was I put some new software in the business that made it a little more profitable in Australia, but I realized it would never make me a million dollars in Australia. It was just impossible. The number of clients I would need to get in that space of time was impossible and I thought what can I do? I thought â€œWell I’ll take the business to America.â€ And had I not had that plan, I would not have the guts to take the business to America but I had to put everything on the line and I did it. I moved to America. I created a partnership in America. The business did eventually sell for more than five million dollars, but that’s not what made me my seven million in seven years because the second thing I did was I started buying investments, and rather than spending the profits I was making, I became quite frugal and as my business was getting more successful I probably started spending less because I had this maniac goal to make this money and started investing. I started buying real estate, I started buying stocks, and I started learning everything I could about personal finance. And that’s what began my personal finance journey. I really made my seven million dollars that I wrote about, seven million in seven years in my blog, I really made it by investing, using the money from business as a cash flow, which wasn’t big at that time. I turned it around; I wasn’t losing money anymore, but small amounts of cash flow using every spare penny to buy investments.
JT : So real estate was a really big (AUDIO SKIPSâ€¦pita?) seven million dollarsâ€¦
AC : I remember one of the big events that happened to me wasn’t even my own doing. We had through the building we were renting in for the business, we had five staff at that stage and we got a couple of big contracts I knew I needed another ten to fifteen staff so I would need place for at least sixteen people. We started renting a place and then suddenly I grew my business again I realized we needed a place for twenty or thirty people. This was only a year or two later. We were already outgrew the place we moved into so my accountant said, â€œWhy don’t we buy a place?â€ That was really scary because I didn’t have the money in the bank to put a deposit down on a building at that stage. I didn’t have the cash flow to go and buy a place but we eventually found a building. It was a very expensive building, over a million dollars. I basically juggled all the money I had, all the small investments I had, I found a way to raise the down payment and we bought the building and moved in. That was a major undertaking. I sold it five years later for well over $2.5 million so that was probably one of my best investments. It made me over a $1 million profit.
JT : That worked out really well for you.
AC : I encourage anybody of our listeners who are in business, one of the things of the things I sayâ€¦if you’re just starting life, you should buy a house. If you’re starting a business, as soon as you can afford one, you should buy a building. Because those things are almost forced savings, forced investments, but better than that they not only give you rent or stop you from paying rent elsewhere, they also have the potential for capital appreciation. I know this is a bad story in the US at the moment, the housing market is depressed, but depression is the best time to get rich. Now’s the time to start buying these things. Not with a short-term outlook but a long-term outlook. That’s why I say buy your house. You’re probably live there, or a similar house for many years and if you have a business, buy your business premises because you’ll probably be there for many years too.
JT : That’s good advice. I’d like to go back to real quick. So you moved your business in Australia to the US. Did you have to change (AUDIO SKIPS) business to go one to the other or is there just more (AUDIO SKIPS) in the US than there was, cause if you were able to sell it for $2.5 million (AUDIO SKIPS) change, was there anything else that made that change possible?
AC : I sold the business for a lot more than $2.5 million.
JT : That was the building, that was the building, ah.
AC : Yeah I sold the business for many more millions than that. But the Australian one, not the US one. Major things had to happen. In order to move my business to the US I realized straight awayâ€¦when you run a small business you run everything yourself. Everything is in your head or in the head of your staff. You feel indispensible. Your staff feels indispensible. We really had to change that culture. The first thing we did was we basically created our business as though it was a franchise prototype. We immediately sat down, this being my Australian business; we sat down and started writing systems and processes across the whole business. We put the proper organization charts; we basically systemized and processed everything. We structured everything in a way that we felt we could then open a hundred more businesses just like it, even though we only had one in Australia. There wasn’t room for anymore. That enabled me then to basically put all those of those business processes on a CD, put our software to run the business on another CD, and we tested our ability to run it in another country. We moved, I found a partner in New Zealand, and I sent him this startup with two CDs, and we got the business up and running within two or three weeks and transacting. Recreated that business as a prototype of a franchise.
JT : So that’s actually what (AUDIO SKIPS) the book the â€˜The E-Mythâ€ says. That surely had a profound effect on you, I (AUDIO SKIPS) thanking Michael Gerber right now.
AC : Michael, I love you, and if you give me your email I’ll buy you lunch. And I pay it forward, so part of what I do is talk about people doing these same sorts of things. Bolstered by the idea we could do this so quickly in New Zealand so easily. New Zealand has four million people; Australia is only 22 million people. The US is 350 million people so we took the same CDs of software and systems, found a partner in the USA, went there, and within two weeks were we live, going and transacting, and became the third largest company in our sector in the USA, in a matter of months.
JT- That is really impressive.
AC : I started in the USA in the middle of 2005, I’d like to say. Eighteen months later I sold the business for seven million dollars.
JT : Eighteen months later? Wow that’s a great story. Especially looking at (AUDIO SKIPS) the mountain saying â€œHey I conquered the mountain pretty quickly.â€
AC : From a personal finance perspective I want to come back and say that that was not made my first seven million. My first seven million was from taking a small amount of money every week or every month whether I could wring out of my business is a profit. It’s no more or no less than you could get out of any reasonable paying job. I wasn’t making millions or hundreds of thousands in those days. Purely investing that money. That’s what I talk about on my personal finance blog.
JT : You’ve actually been blogging for three years and since I know you don’t need the revenue from it, what do you really get out of it?
AC : That’s a really good question. I’ll tell you the honest truth. As I mentioned before, I read those books that were so helpful to me in the beginning, but in fact I did just read â€˜Rich Dad, Poor Dad’ and â€˜Richest Man in Babylon’ and all these other books. I read almost every personal finance book I could get my hands on and my biggest problem for me was this. All these personal finance writers seem to have made their money from writing personal finance books. They weren’t rich before writing the books on being rich. Some of the information was really good and some was really poor, and I just felt that that was unusual. I determined my personal finance journey was mirroring my journey as I was actually making money. My personal finance grew at the same time. What I determined was this: One of the reasons I wanted to become rich, and this is serious, one of the real motivations to become rich, was so I could be the first personal finance writer who was actually rich to write a book on personal finance.
JT : That’s great. I thought of the exact same thing. That’s an amazing thing. So that was actually pushing you forward as you were going.
AC : Exactly. I decided that my first step to writing a book was to… well writing a book is a really big job. It’s a year of your life and where am I going to find that time? I spoke to a friend of mine who’s in Philadelphia and he said, â€œWhy don’t you start writing a blog?â€ and I didn’t know what a blog was. If I don’t do it now, I’ll never do it. As soon as he said that I went online, researched free blogging platforms, came up with WordPress.com and in a couple of hours I had my first post up and running. You can see it on my website right now and if you look, you’ll realize my first post happened in literally two hours from not knowing what a blog was to being a blogger.
JT : Wow. And you’re sort of on the forefront, because three years ago blogging wasn’t nearly the craze it is now.
AC : I didn’t even realize that. I was just naively doing what my friends suggest. I had no idea blogging was big or small. I knew that there were a few guys that made a little money from blogging but all my research showed I could make about $4 a week doing it, so I figured I’m blogging for love and I’m never going to charge on my blog. I’m never going to accept advertising. One of the reasons I won’t accept advertising on my blog is I’m coming from this moral high ground, being this multi-millionaire, who’s so p’d off at everyone else plugging personal finance who don’t know what they’re talking about, setting up blogs and getting rich, but they’ve actually never done it. How can I take advertising? And also, we’re not taking advertising. I’m taking it from people, typically who try to sell products to an audience interested in personal finance, be it the funds and all these places, where I tell people not to put their money. I can’t take advertising for those three reasons: moral reasons, financial reasons, I don’t need the money, and three, conflict of interest reasons.
JT : It’s the same with me. I don’t take advertising on my blog either for those exact same reasons. When you’re in the personal finance world, everybody wants to sell you advertising for credit cards and advertising for debt consolidation and that’s about it.
AC : I’m not saying there’s anything wrong with that. If you’re riding on being debt free or being frugal or writing about your journey to making money, those are legitimate, you’ve got to earn an income somehow. But for me, my particular niche, I’m talking about making a lot of money and becoming wealthy, which is my niche. I’m not talking about how to make $30,000 a year. I’m talking about you being able to go from a standing start to a multi-millionaire within seven years. That’s exactly what my blog is about. That’s a niche on the inside I have, and for that niche I can’t advertise. There’s a lot of things I can’t do.
JT : I think what you hit on before was so pertinent because listening to all the books you’ve read and stuff like that, I’ve heard these books over and over again, but I’ve heard them from people who haven’t necessarily made millions of dollars, they’ve just said this is a really great book. I’ve haven’t actually heard someone come back and say this book changed my life, and that’s really pertinent for me to know that it actually works. Its not just someone telling me, just like the personal finance authors telling me what sounds good, someone who’s actually been through it, actually done it.
AC- If you want to have a real retirement, life after work and believe me there is life after work I’m talking about your audience not necessarily you, Jaime. You have this idyllic life with the blogging, I’m not sure what else you do, but people see that ideal as freedom, I don’t. I’m tied to a blog every single day. I post now twice a week, started posting daily, then posted three times a week, now I’m posing twice a week, and I don’t want to go over all old ground. Whatever I write I want to be new and fresh information. I don’t talk about any of the basics of personal finance. I don’t talk about anything people can read somewhere else. What I want to do is give them information taken to the next level and that’s a commitment. I’m actually tied for that (INDECIPHERABLE) to make myself tied to that (INDECIPHERABLE). It’s my passion. Its not losing money. It won’t make me wealthy. I don’t need to be wealthy. Its what’s personal finance, I love starting businesses and getting involved in ventures and help a lot of people financially but my real passions is in my blog and the books I write following my blog, and I feel that it’s the only manual that you need to take you from starting with a little bit of money to becoming wealthy. I don’t think you need to read anybody else after that.
JT : It’s a breath of fresh air to read your blog, you have your own spin on things. Like you said, there are some great blogs that talk about frugality, and you are completely honest and its really great.
AC : One of the greatest tools I implemented in the early days was delayed gratification. Delayed gratification is not quite the same as frugality. I allow myself to spend money, but I delay the gratification and the reason for that is it stops the impulse buy. Lets say you want to go, and you’re in a frugality stage, I say you’re going to spend ten dollars on lunch or something else, take ten minutes before you reach into your wallet and spend that money. You might come back and realize I could spend ten dollars and get all those fancy things or I’ll go buy a five-dollar lunch. If you go spend a hundred dollars, say there’s a little dress or a shirt or something you want at the store, don’t go and reach into your pocket and pay for it straight away. Take an hour out, go and do something else. After an hour, you still want to spend the hundred dollars, go buy it. If it’s a thousand dollars, you might take a week out. If its ten thousand dollars I suggest you take a month or a year out, depending on what your financial situation is. For me that worked very well.
JT : Our society is all about instant gratification right now. Is that something you learned?
AC : I’m an instant gratification, if I see something I stick my money in my wallet and grab it type of guy. So unless I discipline myself, and I keep a laminated card in my pocket and unless I pull it out and look at itâ€¦lookâ€¦.the whole of retail America and most of the western world is setup totally to get you to reach into your pocket, pull out your wallet and credit card for things that you don’t want and you don’t need. But the things that you do want and that you do need, you need to be thinking about it. If you got the money, buy them. Just to put it in a nutshell for you, Jaime, there’s probably four steps to what I say from people who are $30,000 in debt to seven million dollars in the bank in seven years.
The first step is what we talked about before, getting that vision for your life. You have that goal, that big audacious goal that seems unachievable but really resonates with what you want out of your life. Two, turn that goal into a number and figure out how much you need to live off and multiple that by 20 and that gives you a financial goal to aim at. Then you’ve really got to start, that should really give you some motivation. Look at your current financial position compared to that goal, there’s usually a pretty big gap I find. That motivates you to get your financial house in order which is the second step and that’s the sort of stuff most bloggers talk about getting your financial house in order, delay gratification is one of the major tools, and probably another is what I call paying yourself twice. You don’t just pay yourself once in a 401k, but you pay yourself a second time into money you access and use today. You try to build up a nest egg or some sort of starting capital and the really good thing to find something you’re passionate about and start a blog on that. I’ll tell you why in a minute, but start to get your financial house in order and try and save up a little bit of money. You can call it emergency fund, I call it an investing war chest, and the third stage is how to really accelerate your income, because you’re never going to get wealthy working a 9 to 5 job. You have to try and find a way to accelerate your income and I think the way to do that is to start a part time business. If you start to write a blog, perhaps you can write a post from that blog and turn it into some sort of product. An e-book or an e-course. Lets say you write a blog about sewing, you can film yourself and do some videos on how to sew and create a course around that and create a website. Even if that doesn’t make you a lot of money it will teach you a lot about business.
Maybe try and find something you can do part time in the business world to try and accelerate your income, be it blogging or selling an e-course or maybe you do a Web 2.0 course, I don’t know, anything. The younger you are, the easier this is to do. Once you’ve got that experience and you’ve got money coming in the door, and then maybe you can maybe get serious with investing. I would buy real estate. I would stocks. I wouldn’t buy mutual funds. I would buy things you can get your hands dirty with. There’s a great book on stocks its called â€˜Rule Number One Investingâ€. I would buy that and just do that. If you’re interested in real estate, look up anything by a guy named Dave Lindahl has a fantastic course about multi family apartments. I’ve actually used, believe it or not. You can apply that philosophy to single-family residences, so that’s probably the third stage to start investing. The fourth stage is hope to retire and protect your newfound wealth.
JT : The last question I want to ask you is what do you think separates someone that is successful with personal finance from someone that isn’t?
AC : I boil it down not to luck or intelligence as most people might think, or even the Midas touch that some people think, I boil it down to having that vision. To the point where you actually have to get a certain financial result. Once people have to do something its amazing how good they are at doing it.
JT : Excellent advice, thank you so much for being on today. I highly recommend everyone go to the blog 7million7years.com. It has quality advice for anyone looking to create wealth with a big vision. Adrian, thank you again so much for being here and have a great day.
AC : Thanks a lot Jaime, nice to speak to you.