HowToBuildWealth Chapter1

How to Build
Wealth
_________________________________________________
By Peter Suchy
• How to start without skills, connections, or money

• How to control costs, negotiate, and understand finances
• How to apply sound principles for wealth building
• How to make wealth building a subconscious action
How to Build Wealth

Copyright © 2008 Peter Suchy
All Rights Reserved
Table of Contents
How to Build Wealth 1
The powerful wealth building process that works
regardless of upbringing, past mistakes,
income, or connections
The One Hundred Million Dollar Question 45

Are your views about money in line with reality?
The Value of Money 51

How you determine the value of a dollar
A Thirst for Knowledge 67

The cornerstone of financial success
Education 87
Why you need it, how you get it,
and why you might not want it
Assets 101
What they are, how you use them, and how
you increase your chances of success
With No Remorse 115

The right way to buy and sell
Table of Contents
Spending Money Wisely 129
Cutting costs and getting a steal deal
Evaluating Needs 141

Practical methods for getting what you want
Holes in the Bucket 153

How to control your finances
Constant Vigilance 171

Protecting what is yours
From the Bottom Looking Up 185

A real world account of starting at the bottom
Gaining Traction 209

Capitalizing on opportunities and creating the rest
The Well Oiled Machine 239

How everything comes together to support your success
Engines on a Train
…that is how I see these books. Each book in the How to
Build Wealth series stands completely on its own, but joined
together the books are far more powerful.
Before there ever was a How to Build Wealth, there was over
600 pages of content – in the draft. Realizing that I myself
would never want to read a 600 page book, let alone pay for
it, I structured books one through three and expounded. The
first title, appropriately named How to Build Wealth, is the
first in the series. Book two is called Choking the Goose, for
reasons you will see later, and the third book, as of the
publication of this first one, is still undecided. Choking the
Goose will not be released until the latter part of 2008 or early
2009, depending on my other commitments.
In addition to the core books, there are several other books

to support a specific focus. The first of these is Gainful
Employment: How to enrich yourself while working for others,
with a release date in mid 2008.
Finally, with so much to say, I was forced to start a blog at

www.chokingthegoose.net. The irony of being an author, for
me, is that the more I write the more I have that I need to
write.
I need to see about getting a clone…

A Message to the Reader
I wanted to read a book that would instruct me how

to build wealth regardless of where I was. I wanted to read
a book that was practical and did not provide vague or
general advice. I wanted to read about how to pull together
the concepts of investing, finances, emotion, good behavior,
morality, hard work, dedication, and education, along with
cost cutting and wise spending habits, to create a practical
plan for building wealth. I wanted application, not hype.
I could not find that book. So, I wrote it.
-Peter
Where to Go & How to Get There
The secret to success is in having a goal that you can achieve
and in knowing how to forcefully pursue it.
Chapter 1
How to Build
Wealth
The rich get richer because they know how. That is all
there is to it. Someone who consumes everything that they
produce cannot possibly build wealth. It does not matter
how much money you make, it matters what you do with it.
The rich are on top because they create a system that
is self feeding. Their actions build wealth. Their wealth
builds more wealth. Their wealth building accelerates – as
they reinvest their profits.
Is that how you run your life? Do your actions
prepare you for greater success, or do you only produce and
consume? If you do the latter, you will never build wealth.
Answer this question: If one person was taxed at 90%
but knew the “secret” of how wealth was created (by living
below one’s means and investing the difference), and
another was taxed at 10% but did not know the “secret,”
who do you think would be wealthier in the long run? The
answer is simple. The person who knows how to build
wealth is going to be the one with the wealth.
2 Chapter 1: How to Build Wealth
If you want to be wealthy, you have to know how it is

done and you have to act on that knowledge. You see, it
does not matter what tax rate, regulations, income, family
background, or upbringing you have.
The System
Your decisions, today, can change the course of your
life so that you either start to build wealth or accelerate your
present wealth building. You can setup that self feeding
system. You might be at the very bottom of the financial
ladder – maybe you are not even on the first rung – or
maybe you are in the middle or much higher up. It does not
matter. The system is the same. For the poor, the middle
class, and the wealthy, the system shows no favorites. It
regards no persons. The system rewards those who follow it,
and punishes those who do not. Do you build wealth?
You cannot measure a person entirely by where they
are in an instant. Many people have lost fortunes. To be
wealthy, in a way, is a mindset. Wealth is built by people
who know how. People who understand how wealth is built
will become wealthy eventually. It might take a long time, or
it might happen relatively quickly.
The person who knows how can look from one day to
the next and see that their net worth is increasing, instead of
decreasing. You want to build wealth? Follow the simple
wealth building formula shown on the next page.
How to Build
Wealth:
Spend less than you earn.
Invest the difference.
Ok, you can close the book now…

Cause and Effect

When a person works, only to consume everything
that they earn, there is nothing that moves them forward.
There is no wealth being built. It does not matter how much
you earn, it matters how much you keep. If income does not
go into savings or investment, then you are not building
wealth.
At the same time, wealth with a parallel amount of
debt is not wealth. You might live in a house on a hill, but if
you owe the bank the full amount, you are nothing but a
fraud. It does not matter how much income you have, it
matters where that income goes.
Your income cannot build wealth if it is directed to
entertainment, eating out, vacations, non-collectible cars,
lottery tickets that do not win (no, America, the lottery
cannot be your retirement plan), home remodeling that adds
little to the house value, and education that does not
increase your ability to earn. Income spent on these types of
things will neither store wealth nor create wealth. When you
look at the examples above, we might also add in clothing,
coffee, home furnishings, and items that have little value (a
souvenir that is stored in the closet, at the bottom of a stack
of boxes) or items with limited cost effectiveness (a $10,000
table with the utility of a $175 table).
Now, contrast this with items such as stocks that bear
dividends, income producing real estate, precious metals
such as gold, a cost effective home, a business, an
employment contract, an education, an insurance policy, or
even a book on How to Build Wealth.
Which of the above paragraphs describe your
purchases? There is a difference. You are what you buy. If
you buy the things that build wealth, then you will build
wealth. If you spend your money without purpose, then you
will not.
I know of many people that spend their money on
passing pleasures and useless junk. Money is spent on things
that do not increase wealth. By the way, something that
decreases expenses can also be considered an asset. So, while
the paragraph on stocks, real estate, and gold was describing
assets, the earlier paragraph was not.
What Really Defines the Classes?
We all know who the poor are, right? The poor are
typically those who have unmet needs. They are the people
with more month than money. They are people who have
limited incomes and limited assets – or none at all. Now,
don’t kid yourself, you might be poor, at least by definition
of net worth, even if you live in a nice house in a nice
neighborhood and drive an expensive new car, but
pretending does not work forever. You cannot be a
“pretender” and expect to get away with it. Even if you
succeed at being a “pretender” your whole life, your lack of
wealth will be evident in your death.
There is a dirty little secret to being middle class. I
have never heard anyone say this, but if one wishes to be
middle class, he or she needs only to have an elevated
income. Income is what separates the middle class from the
poor, in all practicality, because the middle class is, for the
most part, “high earning poor.” Now, what do I mean by
that? That sounds foolish, doesn’t it? Well, we’ll look a little
deeper.
The members of the middle class do not really have

enough assets to live off of, and so they are dependant upon
the employer to provide an income, for which they must
work. This is why there is such volatility in the middle class.
Their lifestyle is dependant upon one thing: wages.
Members of the middle class are almost completely
dependant upon their employer. Does that sound safe?
As a person moves higher in the middle class, to the
“upper middle class,” the person most likely has a higher
level of income. While getting to the upper middle class
requires a higher income, such people are not necessarily
rich. Obviously, there are fewer jobs in the society with a
higher salary – even in the same industry – as a portion of
the whole. Like a pyramid gets smaller as you approach the
top, the highest paying jobs are fewer than the lowest
paying. But, what if a person is self-employed? The same
thing applies. The self-employed person must continue to
sell their own personal services or they will no longer have
any income.
So why does this matter? This matters because I am
sure you have probably heard of people who have lost their
jobs and cannot find a new one. Well paid workers in
American heavy industry who see their plants close and
production move offshore - what do they have left? Is the
income really all that separated a person who was “middle
class” from one who is poor? Well, yes, it is. If that same
“middle class” person is not able to find a job paying the
same amount, they might be forced into a low enough
income class to be considered poor. The luxuries that they
once enjoyed will have to stop due to lack of income, the
house might have to be sold for a more affordable mortgage
payment, and the car will not be replaced by the same make
and model when it is time to get another one. The “middle
class” therefore are typically separated from the poor by
income. The danger, then, is that if you are just “middle
class” you may be one pay or several months from moving
to the lower class. You cannot survive without your high
income. You’re addicted to it. This is why it is important to
know how to build wealth.
Gaining Discernment
So, what goes into income? Well, normally, income
has something to do with skills. A carpenter who has people
skills and is good with his trade can normally make a
reasonable living. A plumber can do the same. Whether
vocational, hands on, or all the way through college, an
individual with a useful education is an individual with an
asset, and that asset is called knowledge. The asset of
knowledge can be used to increase income and move a
person to the middle class.
If you want to move from the lower class to the
middle class, the easiest and safest way to do so is to gain an
education. Education moves a person from being poor and
not being able to afford necessities to someone who has
some excess. That excess is important, as you will see further
on in this book, because even a small amount of disposable
income is powerful. It gives you options, and it is good to
have options.
Yet, the middle class teacher, network administrator,
or accountant is not going to retire on education alone
because education is not enough. The education only makes
a person more able to work and earn. Education only makes

your income go higher; it does not make you wealthy.
If a person has an education in a very highly
specialized or in demand area, perhaps they can earn
enough income to retire, but most likely this person will
want to keep up their standard of living and will have to
keep working to do so.
If education that leads to increased wages was
enough to retire on, who would ever invest in a 401(k)? Even
people who are risk averse can understand that investing is
necessary, because working is not enough. Education does
not allow people to retire, but education can surely bring
someone up from the depths of poverty, in time. If you find
yourself at the bottom looking up, then your first priority
should be education. You want education so that you can get
an income that gives you options to choose where you can
put the excess.
Choking the Goose
If you plan on building wealth, you need to know
more than just work hard, save, and keep costs down.
However, you still must work hard, save, and keep costs
down if you want to build wealth – this admission will
surely disappoint many, so let me add that you also must
have discipline, direction, drive, and patience. For the I-
want-to-choke-the-goose-and-get-golden-eggs-now method,
I would have to refer you to certain other authors for the
fictional methods of building wealth without risk, effort,
knowledge, direction, patience, or discipline, but they would
probably not appreciate the referral.
I know that the financial charlatans will tell you that

you can just go out and buy real estate or start a business
with no knowledge, no credit, no money, no tools or
equipment, and no plan, but many of them have made their
money selling books and other material that tells the people
who buy them to do things that the authors could not and
did not. Don’t be misled; if choking the goose was all it took,
everyone would do it.
Middle Class Assets
Many people considered “middle class” have two of
the safest assets: an education and a home. While those two
assets will not make the middle class person “rich,” they are
fantastic assets to acquire as soon as possible. A home is an
asset – regardless of what some people will tell you –
because a home normally holds value and it can also
increase in value. Unfortunately, you have to sell the home
to get the gain, but a home is definitely an asset.
A home FORCES you to build equity, and this is the
power of homeownership. With every mortgage payment
you make, your equity (your percentage of ownership) of
the home increases. But, aside from equity, a home provides
storage, a home can be used to decrease costs (such as
having a place to change your oil, rotate your tires, write a
book, work on homework, exercise, etc), a home shelters you
from the increases of rent (which are not always due to
increases in land taxes), a home allows you to better enjoy
your time if you purchase it near your source of
employment, and a home provides the utility of allowing
you to do the things you enjoy without approval from
others. Oh, one more thing: because a home is tangible, it
provides a defense against inflation. While inflation

decreases the purchasing power of your money, it does not
take away the value of the home. This is very important.
When I say “home,” perhaps you think of a sprawling
monstrosity that is expensive to heat, close to nothing, and
has high insurance costs. Oh, and it is, of course, sitting on
top of a hill. I did not say dream home, I said home, no
dream was included. Although for some, the dream of a
home is a worthwhile one. The home does not need to be in
the area that you want to put your future children through
school. It does not need to be in the nicest of neighborhoods,
though safety is important. It does not have to impress
anyone. Your home must have utility if you want to build
wealth. Your home must represent value.
Buy your first home as close to where you work as
possible. Buy a home that is comfortably in your means (you
can pay the mortgage, taxes, and insurance easily).
Additionally, consider it pleasant to know that you are wise
enough to buy a home that meets your needs but does not
cost you more than a quarter of your gross income – less is
better. If you take this advice, you are taking it because you
know that you can sell this home and buy another one. This
is temporary.
The people who buy as much or more than they can
afford will do the opposite of one who takes this advice. In
the future, the squanderers will be living in smaller homes,
or renting, because of their short sighted got-to-have-it-now
decision making.
The Pattern of Wealth Building

The way to move from the lower class to the middle
class is, first, get a job, any job. Minimum wage counts, if
that is all you can get. If you are limited because you cannot
even afford transportation then get a job that you can walk
to. If you cannot afford anything then bum money for a bus
ticket and go to a cheaper area and seek shelter. As I assume
you’re not homeless and reading this in a public library, get
as cheap of an apartment as you can get without being
attacked by rats and roaches, or the meaner things that are
on the street outside – unless, well, you can handle those
things. If you’re the meanest man or woman on the street,
then I guess you have little to worry about.
Then, if you think you can get a better job by buying
transportation, save your money and get transportation. It
does not have to be anything pretty, just functional. My first
car cost me less than $1,000, but it made a nice appearance.
Credit and Borrowing
Before we go any further, you need to plan for the
future by getting a credit card. I don’t care if you have just
turned 18 or if you are already 81. If you want to build
wealth as fast as you are able, then you need a credit card.
You need to get a credit card as soon as you are allowed to
get one. If you can get someone to cosign for you, do it. If
you can only get a low balance card, get it. Even a credit
limit of $100 is enough to start.
If you have a job, you need a credit card. If you are
making the minimum wage, then you need a credit card far
more than those of us who make more than the minimum
wage. You need a credit card because it is one of the best

ways to build credit.
The higher your credit scores are, the more money
you save on paying interest. However, good credit is worth
far more than that. Good credit increases the likelihood to be
accepted for an apartment, decreases the cost of insurance
premiums, and can even be used as a factor for whether or
not you are hired. People who neglect their credit will be
doomed to pay – literally – their entire lives. With poor
credit, or no credit, costs increase and the opportunities
decrease.
Let me interject: you need to learn financial discipline.
Discipline will determine your success or failure, and a
credit card is a great way to gauge how much discipline you
have and how much more you need. When there is next to
nothing for you to afford, learning financial discipline is
easiest. So, start early. Early, by the way, is NOW. Get a
credit card and pay all of your bills on it. Pay your balance
off in full every month. You need to learn discipline.
Parents, Grandparents, Guardians, want to teach your
children financial self control? Get them a credit card and
explain the proper use of it. If they cannot handle a credit
card when they are making the minimum wage, they will
not be able to handle it when they are making more. Also,
do no disservice to your children by helping them out of debt.
Leave them in pain. Make them pay. Make them learn. They
will be better off.
I discuss credit, borrowing, the time value of money,
and credit cards in a chapter in the following book of the
How to Build Wealth series, but let me just whet your appetite
by extolling the virtues of the responsible use of credit and
borrowing. Debt is a tool. In the hands of the undisciplined,

debt is dangerous. Consumer debt is unwise (cars, toys,
vacations, dining, etc), but borrowing to buy assets can be
very wise indeed. For one who knows how to use it, debt
can be extremely beneficial, but you must have the
discipline.
In the second book of this series, I talk about my first
home purchase, an investment property, and I show how I
used an unconventional approach to save money on interest.
I used a credit card to offload almost $10,000 of my home
debt onto a fixed, yes, that’s right, FIXED FOR LIFE loan at
the rate of 1.99%. Where did I get a loan fixed at 1.99%? I
used a credit card. And, there were NO BALANCE
TRANSFER FEES. Who do you know that borrowed money
for their home at a FIXED FOR LIFE rate of 1.99%? Just think
if I had a higher balance. I could have purchased my whole
entire home at a rate of 1.99%.
Borrowing, no matter its kind, but especially credit
cards, can be considered playing with fire. You take a risk
when you borrow. You might not be able to repay. But that
does not mean that borrowing is bad. In nature, fire is a very
powerful force and we control it for our automobiles, for
heat, and for cooking. And, have you ever noticed what the
sun is? Yes, one giant ball of fire – though I would not want
to get too close to it.
For now, get a credit card. When you have used it six
months faithfully and paid your bill off all the time at the
end of the month, then call in and get a credit limit increase
whether you need or not. Yes, I said that right, whether you
NEED IT OR NOT. If you don’t get the increase, and even if
you do, another card may be in order. A mere $100 of credit
is not enough for a lifetime. Keep building up your credit.

Your credit is not a direct function of your income, by the
way, so your usage and responsibility will allow you to gain
more, to an extent, even if your income stays constant.
The Right Direction
After you have the ability, through working, to
provide for food, clothing, and shelter, and transportation if
you need it, then get an education or a skill. If you need to
work two jobs and put yourself through a local community
college to get an associates degree, then that is what you
have to do. If you need to work with someone you hate
working for only so that you can learn a trade from them, do
it. Remember, no matter how stingy, cheap, unappreciative,
and evil the employer may be, he or she can never cheat you
out of experience, which is an asset.
If you cannot find a job where you will learn a skill,
and cannot afford college by yourself, then look to
government programs offered in your local area. When you
are trying to get a skill, you do not need to spend $100,000 to
go to college for it. Most likely, someone who spends
$100,000 to go to college has spent far too much – doctors
aside, of course. If you spend much more on college than
you can make in your first year out of school, you will have
probably paid too much.
You might need to read a book on how to do
carpentry. You might need to read a book on how to repair
computers – like I did. A little bit of knowledge might be
enough for a low end certification that will help you to get
your foot in the door. You might need a noncredit course, or
courses, at a local community college.
What if what you want to do will require more

money than you have? Go get an in-the-meantime skill. Get
a trade that has the purpose of getting you a higher pay. I
remember that at a time when the minimum wage was $5.15
per hour that I could have been working for the U.S. Postal
Service as a data entry person. The job was not fun, but the
pay rate was $11 per hour. I only needed to teach myself
how to type and pass the exam the post office required. I
could have learned to type at a library if I needed more pay
– for free. I could have taken a class at a community college
or bought a book and a cheap typewriter or a computer for
under $100 – just enough to type on – and learned to type by
teaching myself. That would have qualified me for such a
job. Instead, I learned to fix computers.
Learn to cut hair, fix basic computers, do home
repairs or landscaping. Try your hand at painting – even
student painters can make more than $10 per hour. Just
because you do not have a skill does not mean that you
cannot get one relatively quickly. Skills that are learned
quickly do not typically pay well long term, but if you are
going to put the extra money into improving yourself, then
do it. With a little positioning, you do not have to settle for
just a minimum wage job even if you have very few skills.
Chase a Higher Income
In the early phases of moving between classes, you
need enough money to survive, but you need to invest in
your ability to earn more. Your only asset, when you have
nothing, is your ability to work. That is the first thing that
you upgrade. You upgrade your ability to earn by increasing
your skills and education. If it is hard, if you have to work
two jobs, or if you have to work, study, sleep, repeat, you

will do it because you know that things will get easier as
time passes. When you get that skill or get that education
then you will eventually get a job that provides enough to
support yourself without having a second job or without
working long hours. Your experience and education will lift
your wages, eventually, and you will move higher in the
lower class, if not immediately to the middle.
Also, as I show in the other chapters here in this book
and in others I have written, before I had a marketable skill, I
switched jobs to slowly increase my pay. If you get more
experience, even as an unskilled worker, then sell yourself
out to the next highest bidder. An employer who will pay
you fifty cents more than you presently make, due to your
increased experience, is worth the move. Do not pooh-pooh
the small changes, because they make large differences over
time.
Even when you gain a marketable skill, you are going
to have to switch jobs occasionally so that you can gain more
experience and become more knowledgeable in your trade
or vocation. Get started gaining the experience of being a job
shopper. Learn to succeed at interviews, learn different
nuances of your line of work. Learn different industries. For
an expansion of employment topics: how to get it, how to
succeed, and how to enrich yourself, consider reading the
book Gainful Employment, because that book is targeted
specifically toward employment success.
I can say from experience that working with
technology for a retail store was far different than when I
worked with technology for an accounting firm. The
accounting firm was very different from the steel mill. Even
with similar jobs, the environment made the experience very

different and valuable. The experiences you gain will make
you very desirable to your next employer, when it finally
comes time to settle down.
A person who goes to school to become an accountant
may not be able to work at only one place because he or she
will not gain enough experience. The work might teach the
core nuts and bolts of bookkeeping, but what if the person
wants to be an auditor? They may need to change jobs so
that they can increase their experience. Working for one
place and waiting for your employer to give you raises is not
the way to increase your knowledge or compensation in
either the short or long term.
When you have pretty much gained the majority of
skills that you need in your chosen career, only at that time
can you start thinking about staying in one place. At that
time you can concern yourself with good benefits – paid
time off, a retirement plan, and paid health insurance – but
until then, you need to move around so that you get a
quantity of knowledge and varied experience. The benefits
do not matter as much as the experience. As a matter of
comparison, the experience is even more important than
compensation. If you do not have experience, then you must
pursue experience. Always concern yourself with growth
and positioning. If you position yourself the right way, the
money will follow after you and you will always be trending
upwards in the long run.
You, the Employee
At any job you work, your employer would be happy
to replace or eliminate your position if there was a way to
get the same job done as quickly and efficiently, or more so,
with the same or less cost. Do not think unkindly towards
the employer, however. Even if it means getting rid of jobs,
efficiency is desirable because the whole society benefits.
Blacksmiths are no longer needed because we have
machines that can replace them. Those machines, however,
are run by machinists and technicians. How efficient would
it be to hire a crew of workers to dig ditches by hand when a
fewer number of workers could be hired to use machinery?
It would not make sense. It would not be efficient.
It is good for the society when efficiency increases
because we can produce more goods with fewer resources.
We “free up” those previously employed workers to retrain
and take a job in a different or newly created industry.
While it is good for the society, it is not necessarily
good for the person who gets displaced. Employees must
strive to see the big picture and to adapt. It is up to the
employee, not the employer, to stay relevant and employed.
This is why education is so important. Also, potential
unemployment underscores why having assets and savings
are a must.
On the other hand, realize that your employer is
making money off of you and you should be paid as much
as the market will BEAR – yes, every single penny. That
means if your skills are worth more down the street, then go
down the street. You are entitled to nothing but what you
negotiate for, but if you can negotiate for it, then you must
be worth it. Everything is worth what the buyer is willing to
pay, and employers buy services from employees.
If you work for any company long enough, you will
meet people who complain about being underpaid. Few
things are more juvenile than a person who complains about

their pay but never does anything. If you are one of those
people just described, keep quiet and don’t embarrass
yourself in front of others. So, if you are underpaid, quit
your complaining and act, or at least position yourself to act.
Education
When you have developed a marketable skill, at least
sufficiently for gainful employment, it also means that you
will have more time. If you had been working two jobs to
make ends meet and going to school to invest in your only
asset, yourself, then you were devoting a huge portion of
your time with what seems to be little return. It is worth it.
After you no longer need to work longer hours just to get
your needs met, you are going to have more time. If you
increase your income and decrease your time, you have
made a wise choice. With more time, you can choose to
devote your efforts either to other pursuits or to spending
some of that time on what you enjoy (although things that
you enjoy are just consumption).
One other thing that I want to say about education is
that you cannot lose it. Joking aside, what you put into your
head is not going to be lost. You cannot make a bad financial
move and have the education wiped away. No one is going
to come and reset your mind and undo your college or
vocational education or remove the trade that you learned as
an apprentice or through on the job experience. Education,
in this regard, is a form of security. And, although it is very
rare, security is a good thing. Normally, security appears
where it is not noticed, and flees from the places where
people suspect it to be. The job may not be secure, but the
education surely is.
Also, I am not obnoxious enough, or foolish, to say
that you have to go to college. Even though I went through a
Bachelor’s and Master’s degree, it is not for everyone and it
need not be for everyone. Mark Twain, when he said that he
never let his education interfere with his learning, was
telling the truth. The two are different. They are not the
same. You can learn without formal education, but formal
education does have its uses. Regardless, you certainly must
learn or you have relegated yourself to a low level of value,
and, therefore, a low level of compensation.
The Home
After you have a skill that is marketable and you
attain a higher income (that does not mean six figures of
income, you short sighted impatient college graduates), then
get a cost-effective home. You need to save for this as early
as possible. If you can save for it while even getting loans to
pay for your schooling, do it if the opportunity presents
itself. A conventional down payment is 20% of the purchase
price of the home. This is also a way to buy with a measure
of safety and security. With a down payment less than 20%,
you will have to pay for Private Mortgage Insurance (PMI),
or a higher interest rate for a second loan to cover your
shortfall of capital.
Also, if you have been using credit cards as I suggest,
then by this time you will have good credit and the home
mortgage will be more affordable and reasonable. The home
is the next important thing, as I mention, because it gives
you a place that you can control and you can return to and
recharge your energy. From that home, you can prepare for
more. The home is discussed elsewhere in this chapter, other
chapters, and in other books that I have written.
To get a home, you need to have a down payment.
Sure, I know that the financial charlatans will tell you that
you can buy for nothing down, but let me tell you from
experience – the interest rate you are charged is higher
compared to putting 20% down. You don’t get anything in
this world for free except for air and salvation (and you have
to choose to accept both of those), so you will need to realize
that you need a down payment if you want to buy a house
that has a comfortable mortgage payment with a reasonable
interest rate. Variable interest rates are good when rates are
HIGH and going LOWER. Fixed interest rates are good
when rates are already LOW and appear to be going
HIGHER. Many people seem to have this backwards, and it
comes as a surprise when they get skinned alive by higher
rates or when they forfeit lower ones.
Don’t buy as much of a house as you can afford
because you limit your ability to take advantage of
opportunities in the future. You limit your disposable
income.
Retirement Perspective
Prepare for retirement. Safety is important when you
are building up your financial empire in the early days – it is
important always – but it is important especially when you
are financially “weak”. There might be many financial
advisors or stock market investors that say “whoa, this is far
more important than buying a home” and it should be
second. So, answer the following question.
Why live your life inefficiently today and under the

roof of someone else when your assets 20, 40, 60, or 80 years
from now, assuming you live that long, may be enough for
you to continue your current standard of living? That is, if
we never experience any high inflation, instability, etc. And,
of course, hope that you do not have to retire and start to
draw from your retirement account when the income taxes
are high, or if the stock market is down. What if you die by
the age of 35? What good would the preparing be? It makes
no sense.
While I am goal and future oriented, I want some
things today, not 40 years from now. What kind of person is
so short sighted – and I mean SO short sighted – that they
would sacrifice the majority of their younger life just to have
enough to retire when much of life is passed by? I want
some things a few years from now, and I won’t wait until I
come far closer to the end of my life just to maybe possibly
enjoy my efforts – if I’m still healthy and alive.
You should want to increase your standard of living
now and keep on increasing it until you retire. Personally, I
want my income to keep increasing through my retirement –
more on that some other time. The only reason that I would
say to fully fund a retirement plan before you get a house is
if you know you are going to be able to use that retirement
plan for the purchase of a house, or, if you have a
guaranteed gain (like a company match).
Depending on the kind of retirement plan that you
have, you may be able to use the money for the purchase of
your first home. If you had an employer who contributed a
match of even 50 cents on the dollar for every dollar you
contribute to your retirement plan, fully contribute as much
as you can. You’re making 50% on your money. That’s a

great investment.
If you do not get an employer match and are just
investing your own money, then wait until you have
purchased a home. Retirement is important, but it is a long
way off. You must prepare, but you cannot ignore the
present.
The home, when purchased right, is very important.
Perhaps you are one of the many people who is renting
because you are waiting to find a spouse. After you find a
spouse, you will try to buy a home. Let me ask you this,
what if you and your spouse each had a home before you
married? Hmm… that would seem like a step, or two, in the
right financial direction wouldn’t it? I don’t even have to go
into the details of the homes, do I? Nope. When I say that,
you immediately know that the prospect of two people
marrying and buying a house is not as good as two people
who each own a home before they are married, providing
that their homes represent value and even discounting the
experience gained from being homeowners.
The Retirement Plan
Now that I have talked about why you would not
want to get the retirement plan before a home, let me tell
you why you want to get the retirement plan as early as
possible. When you get a retirement plan you are preparing
for a time in your life that you will probably reach, where
you are not able to work or where you do not want to. You
are basically admitting that reality does finally rule the day.
Getting older is going to happen. You cannot live and work
as though you will always continue to be able to work,

especially if you have a physically demanding occupation.
I was blessed to have found an employer that had a
good retirement plan for me. All of the employers that I have
worked for, from my first fulltime job, have offered me a
401(k) plan with a company match. The benefit of this is that
I can invest money and the company will match a certain
amount of my contributions up to a particular percentage of
my salary. Think of it like getting free money without
having to work for it – although technically you are working
for it, but don’t let me rain on the parade.
Suppose I work and earn $1 which I contribute to my
retirement and my employer throws in an extra 80 cents.
Even though I put in $1, I get $1.80 in my retirement
account. That is an excellent return. It is 80%!
I do not like the tax deferred (meaning you pay taxes
when you take the money out) part of the plan, however,
because I do not believe that paying taxes in the future will
translate to any savings. I think it is actually detrimental.
Plus, the tax deferred nature of retirement can lull people
into a false sense of security. They look at the balance of their
account and say “look how much I have!” They fail to take
into account the need to pay taxes on everything that they
take out. There are other retirement plans available besides a
401(k), however, but this is a very common one that many
employers offer. Whatever retirement plan you have, or if
you have to open your own IRA or Roth IRA, make sure that
you choose a plan that fits into the bigger picture of your
life. Remember, the retirement plan, like a home, a job, and
an education, is just one part of the bigger picture.
Don’t Get Sidetracked

Now you have a reasonable income that you can
support yourself on - maybe that is only $25,000 per year,
maybe it is more - you need to remember that you can shoot
higher. Don’t get sidetracked just because you have some
disposable income.
You have purchased a home and you have started to
prepare for your retirement. The home might not be very
great, and the retirement plan moves upward slowly, but
you are on the right track. All is well; it is time to stop, right?
Well, if you do you will be stuck in the middle class forever,
unless your job gets outsourced and you cannot find another
one, then you can go back to the lower class.
I know several individuals who are always buying
“toys.” They are always proud of the latest thing purchased
and act like life is going to be different – it never seemed to
convince me, but that never mattered. These “toys” are
basically anything that these individuals want and feel that
they deserve – and can afford to pay or borrow for. But what
do these toys get them in the long run? They get very little.
For a while, the toys are fun to have and to make use of, but
they do get old. Maybe these people will even get a
comment of jealously or desire from someone who knows
what they have, but that won’t last.
Eventually, the toys become just background.
Eventually, they are nothing new. All new toys are fun, but
eventually they decline in appeal. How many of the “toys”
that you bought 5, 10, or 15 years ago are you still using?
What happened to all of them? Why aren’t you still using
them now? Oh, you mean you bought other toys? Will you
be using your new toys 5, 10, or 15 years from now? That is
unlikely. Certainly there might be a classic car that you can

give as an example, among a few other things, but by and
large you are unlikely to be using them in the future.
Now that you, or a fictional person following the
above path, are considered middle class, it is time to look
higher. To look higher, we need not just income, we need
assets. Let’s stop and look at education for one more minute.
The Middle Class Error
Many of the middle class seem to think that more
education is their ticket to the “good life” and to all that they
desire. They are wrong. Education for the poor might be a
ticket to a better life, but the middle class does not derive as
much gain from additional education as the poor and
uneducated will. So, would you follow the table below?
(Note: This table was generated, in part, from information obtained

from the U.S. Bureau of Labor Statistics)
Degree Median Salary Additional Years of Schooling

Doctoral $74,932.00 8
Master's $59,280.00 6
Bachelor's $50,024.00 4
Associate's $37,492.00 2
High School $30,940.00 0
Let me add something to this: to get a higher salary, you

typically need to work in more intensive and mentally
demanding occupations. I have seen a lot of times that while
the mental demands increase significantly, there is also a
good likelihood that the number of hours you are required
to work will increase beyond the standard 40, as well.
Is it worth your time, if you are already making

$30,000, to go for a higher degree? For me it was. I was not
yet at the top of what I could earn in my field (while still
having pleasant working conditions and sane hours),
because I knew that when I got to the highest level that I
could get to with a Bachelor’s degree, and experience, that I
would still want a higher salary.
Do you need to be a Doctor? Where would you stop?
Where is a good place to stop? It depends on what you want
out of life. Advanced degrees might do you no good
financially, even if you earned a higher salary, when you
figure out the time you need to put into it and the upfront
cost required. Maybe it would be worth it. It depends on
your field and it depends on your life. Consider this intently
because it can have a very significant impact on your quality
of life and your future.
Differentiating the Classes
When I said that the middle class is made up, largely,
of poor people with high incomes, I said that to distinguish
them from the upper class. Plus, I wanted you to think. I
wanted you to see the frailty of the middle class. They have
the most difficulty hanging onto their position in life because
of their dependency on income alone. The upper class is
completely different from the lower and middle classes
because of assets.
Generally speaking, the poor have low assets and low
income, the middle class has low to medium assets and
medium to high income, and the upper class has high assets
and high income.
The middle class has the most risk from taxation.

People who are high earners but have little net worth and
few assets derive their lifestyle from what they can earn, not
from what they already have. A tax on high incomes
(mistakenly regarded by some as “the rich”) can be
devastating on the upper middle class, while it does not
affect the upper class as much because the upper class has
options to work with. Their assets give them a great degree
of leverage in arranging their finances – maybe by buying
tax-exempt municipal bonds, for example – that the high
earners without assets do not have.
The upper middleclass, those with high incomes, are
some of the most vulnerable people in the economy. These
high earners with low assets add a tremendous amount of
value to the economy because of their high level of
specialization and skills, but when the tax hike comes, they
shoulder some of the largest burden as a percentage and
have the fewest options because they only really have their
high income, either through salary or self employment, and
they take a more severe tax hit. It affects their lifestyle more
than it does the upper class. This may be a new perspective
for you, but it never hurts to see something another way.
Additionally, the lower middle class is in a similar
situation. The lower middle class can have unique
challenges of their own. At one point, they are middle class
and they are not poor, but they might feel that they are. They
are ineligible for government assistance because they make
too much money, but they are squeezed by expenses that
their modest incomes do not easily cover. They cannot quite
afford healthcare, but they earn too much for assistance, for
example.
A Different Take on Wealth

Assets are important. Assets are what separate the
upper from the middle and lower classes. Yet, before we get
all financial in scope, I want to make it clear that assets are
not just financial. Although we are primarily talking about
finances, it is impossible to separate finances from the rest of
your life.
Here will be where this book veers to the side and
moves beyond what a typical financial author would just
talk about, because, finances are a PART of life – there is
more to life than finances and so you have to realize that
your health, your relationships, your spirituality, your
morality, your demeanor, your education – all of these
things have a profound effect on your finances. If we leave
these out of the equation, we miss something. It is as if we
only play the first half of a basketball game and compete in
score with others who play it all.
You want to have every edge in life that you possibly
can, so it is necessary to keep control and oversight over all
areas of life. Also, the end goal of this pursuit, at least for
me, is not to go buy a gold Rolex watch and drive around in
a Porsche. I want to have time and resources to devote to my
interests. I believe that there is a purpose to my life and that
I have a calling. I can best meet my goals by gaining wealth
and having the time to use it wisely. Read: use it wisely.
Why should your goals be any different than mine?
There is little that is more offensive than obnoxious
and lavish displays of wealth, but take heart, such displays
typically come from people who live lives wherein
something is lacking and they are compensating. It is better
to live life with needs met and contented than with wealth to
aid the destruction of a life out of control. Those who display

obnoxious and lavish displays of wealth for the purpose of
impressing others are those who have lost their way in life
and have no purpose. I cannot speak to their contentment,
but I doubt that their ending will be as good as their present.
How do we determine what an asset is? An asset is
something that provides a continual return to you or that
makes you better able to produce. In a broad sense, a
treadmill and a set of weights could be an asset as they
provide assistance in maintaining one’s physical body. Also,
a cost-effective suit can be an asset for a man because it
allows him to portray a professional image and it may be a
necessity for job interviews.
An asset, financially, is something that has value or
that provides an income stream. Gold is an asset because it is
a great way for storing wealth. A business is an asset
because it generates an income stream.
Moving on Up
Getting into the upper class requires income and
assets. It would be possible to get into the upper class, I
suppose, by being a starving rock star and becoming famous
overnight, but I doubt that most of us can get there that way.
For those of us who do not believe that wealth will come in
an instant, we must realize that building wealth is a process.
You do not need to find the winning lottery ticket, but if you
do, your ability to stick to the principles that make a person
wealthy will determine your success or failure. Money
gained quickly is not the same as money that was gained
through a methodical process, although methodical does not
have to be slow.
Wealth is built by increasing assets and decreasing

liabilities on your balance sheet. When your assets go up and
your liabilities go down, you are building wealth. When
your assets go up faster than your liabilities, you are also
building wealth. If both assets and liabilities move in the
same direction, as I experienced mostly through the time I
was putting myself through two college degrees, then it is
possible that you could actually be staying at the same level
of wealth from paycheck to paycheck.
Looking beyond the balance sheet, however, it is
obvious that while my wealth was not increasing during
certain periods in my life, my ability to earn was going to
increase because of my educational pursuits. I was preparing
to build wealth. I was positioning myself. It was simply not
yet reflected on the balance sheet. Education was an asset
that made me better able to earn. I was able to accelerate my
path to building wealth because of a higher salary. While I
have been completely out of school for a while now, I started
on my path to building wealth a long time ago.
Assets
To build wealth, you need to increase your assets, but
not all assets serve the same purpose. Buying gold, which is
an asset, is not really a good way to build wealth. Gold, for
example, is a great way to store wealth, but it is not a great
way to build wealth – if you were to buy a gold mine, on the
other hand, then that might be a different story.
Building wealth involves buying assets that will
increase in value or that will provide an income stream.
Never much of a speculator, I am not a large proponent of
capital gains, but they do have their place. Also, I do not
mean to say that capital gains are only for speculators. They
are not. I have just found that seeking capital gains is less
methodical and less conservative, for me, than pursuing
income producing assets – it merely is a preference.
Many people have been made wealthy through
capital gains. If you purchase land or improved real estate
and the demand for land increases then, similar to what
happened in the U.S. state of California, the value of your
land will increase because more people want what you have.
The increase in value will be a capital gain when you sell for
profit. If you rent out that improved real estate, then you
will have an income stream.
If you build a business that sells widget fluffers, and
your product sells, then you will have an income stream. If
you can sell that business at a profit to another person or
entity, then you will have built wealth through capital gains.
If you purchase items at discount and resell them at a
markup, you can build wealth that way as well. So, could
you build wealth by trading baseball cards? Sure. If you
educate yourself on the mechanics of trading baseball cards
and learn which cards are valuable or will become valuable,
then you absolutely can build wealth through trading
baseball cards.
Saving
Once you have disposable income, you will need to
save. It is important to save even when you do not know
exactly what you are saving for, because opportunities can
arise when you least expect them to. Saving is a process that
takes time. You cannot amass a large percentage of your
income overnight. So, start now.
You need savings so that you can buy assets with a

cushion of protection. You might make a mistake. You might
be laid off. The market might go against you. There could be
unforeseen difficulties. Your savings, then, are what provide
the ability to purchase wealth building assets, but they also
provide protection. If you put a down payment of 20% on
income producing real estate then your monthly mortgage
payment will be lower than if you put nothing down. Also,
if you have to sell you will have an easier time in a market
that is down, because you have equity.
Start Where You Can
Do not worry about how little you know. Start with
whatever seems to fit your personality and your interests.
You learn as you go, and maybe your interests will change.
As you learn about different types of assets, you might
discover that some things are not for you. If you initially like
the thought of buying real estate to gain rental income, but
then decide that you do not want to deal with people, you
might discover that investing in stocks which pay a dividend
may be more suitable. More opportunities will be discussed
throughout this book, but I’ll give an example of how to take
the process from this point onward.
My primary interest was in the development of cash
flow. I desired to increase my income and I desired to
increase the amount of free cash flow available to pay down
debt and to save and invest. My first attempt at buying an
asset came at the age of 21. I decided that real estate was for
me. Once I found my way, I looked at real estate that would
have as many benefits to me as possible.
Let me tell you why I chose income producing real

estate. You will probably never hear a more honest reason as
long as you live. I did not know what else to do.
About the time I purchased my first building, I was
only making about $30,000 annually. My options were
limited. I did not have sufficient interest and enthusiasm for
technology to try to open a technology business, my only
trade. I was not far enough along the career path to have the
experience, and I had not met the connections that would
aid in my success if I were to try to open my own business.
Examine Yourself
When I took a look at my inventory of marketable
skills, I found that my major skill was that I knew how to fix
computers. That was about it. I could do a variety of things
fairly well, but nothing was really marketable. Yet, I had the
qualities necessary to manage my finances, and I was willing
to take conservative risks if there was a reasonable and
realistic potential for gain. That really limited my options.
You might be reading this and saying “wow, I really see my
options being limited too.” If you are, keep reading.
Because my options were limited at the time and I
didn’t really have any marketable skills outside of
technology, I knew that real estate was really my only hope.
If you have a skill that can take you into business for
yourself or if you have such a knack for people that you
would be a fantastic restaurateur, or if you are a skilled
investor in the stock market, then go with those methods –
none of those were an option for me. Even if you think you
COULD see yourself doing the above, you can start there.
You know your personality better than anyone else on earth,
hopefully, so go after what is best suited for you. What do

you like? Do you like watching stocks rise or collecting rent?
Do you like welcoming people to your business? Do you like
marketing? What do you enjoy? What can you talk about for
hours on end? (Here’s a hint: that’s what got me into writing
this book and the rest in the series). Discover what you
already like. That’s the first step.
Any method you find that is able to build wealth and
is suitable to increase your net worth is a viable method –
well, if it is legal. You have to decide what will build wealth
for you and I cannot tell you what it is, although you may
get some ideas. Rest assured, unlike all of the get rich quick
schemes, real estate schemes, stock investing schemes, and
everything else that the financial charlatans and snake oil
salesmen are peddling, you won’t find that here.
Taking the Next Step
I saw the next step of building wealth, for me, to be
conservative. When I was 21 years old, I was making $30,000
(there about) per year - no magnificent sum of money, as
most people reading will say. I did not have it easy, but the
power of this principle will work for you the same way that
it did work and is working for me.
If you make far more money than I was making, then
you might have it easier. You have, hopefully, more
disposable income that you can put toward wealth creation
by investing in assets. Paying down debt is important, but
paying down debt will not necessarily make anyone rich. If
you spend your life paying down the mortgage on the single
family home that you live in, you will not really have built
all that much wealth that you can use. Sure, your net worth
will rise, but unless you sell your home you cannot have
access to the wealth. And, it will not build all that much
more. Will paying off your home allow you to quit your job?
You should leverage the strengths of being in the
middle class (having very conservative investments such as
education, a home, paid time off, and a retirement plan) and
continue to apply the method of building wealth so that you
can move toward the upper class. You keep living below
your means and you invest in assets.
In the same way that I got a degree, two of them, and
several certifications in my field of computers to increase my
income and move to the middle class, I was now interested
in buying assets and paying down liabilities so that I could
buy more assets. I pursued a more conservative asset:
income producing real estate, before I positioned myself to
open my first company, publish this book, and do various
other things. Why? I could handle the risk of income
producing real estate. Remember the words of Poor
Richard’s father Abraham: “Vessels large may venture more,
but little boats should keep to shore.” What that means is
that when you have little money you should take small risks.
Remember what I said at the beginning, you can get
on the road to wealth from anywhere. You can build wealth
when you are poor and you can do it when you are already
wealthy. The process does not regard persons. Just live
below your income and invest the difference. Even though
there is so much more to the wealth building process than
the simple concept of living below your means and investing
the difference, you cannot go wrong with that process.
A Wealth Building Example

I bought my first home at the age of 22, very shortly
after my birthday, and it was not just a single family home, it
was a duplex. I did not have that much money to put into it,
but I had enough for a conventional down payment.
I understood at that age that while I was never going
to get wealthy off of one single apartment unit, I at least had
moved in the right direction. Don’t forget what I just said.
You need to start somewhere and you need to move in the
right direction. How can you go wrong moving in the right
direction? Even though you can fail, you have a far better
chance of success going in the right direction than you
would if you were NOT going in the right direction. So, take
that first step. Position yourself to build wealth. At least
position yourself so that you COULD succeed.
Your first attempt at building wealth may be very
small. Although I was making $30,000 per year, I added a
mere $4,500 to my gross income. I think that anyone reading
can see that $34,500, before taxes and building expenses, is
not what might be considered the profile of one building
wealth, but looks can be deceiving.
My income went up about 15% with the purchase of
that duplex. The most important thing, even though the
numbers are so small, is that I now had a repository, a
storage bin if you will, for wealth. In real estate, that wealth
was equity. My ownership of my building was fairly minor
when I purchased it, but it was only going to grow larger.
However, by the time I was 30, far earlier if I kept the
building until then, the mortgage would be paid off. This
building, although it generated a mere $400 per month
(about), was a first step towards investing in assets and
continuing to build wealth. The rents would increase while

the mortgage stayed the same – a lovely combination!
Even though my income was low, the debt was going
down and my equity in that building was increasing. When I
paid the debt down enough, I would have free cash flow.
That cash flow could be used to buy other assets. When I
purchased the building, the rent went entirely to the
mortgage, taxes, and insurance and it did not even pay it in
entirety, although it was a majority of those monthly
payments. So, here’s a question: what about when the
mortgage is gone? Where will the rent go then? It will help
to pay down another asset, of course, because the process
keeps going.
Instead of squandering the rent, I would save it or put
it towards other investments. I fully expect that it is not the
rent that is going to be buying other investments in the near
term, but my salary, however. In time, the rent that I gain
from the building will contribute positively to other assets,
instead of just this one. And, of course, I’ll sell the building,
take my equity, and invest in a larger asset.
Until that point, the rent pays down the mortgage and
increases my equity in the building. The equity has value
because I can borrow against it, or if I wanted to I could sell
the building and take out my equity to buy a larger building
with a higher potential income. If my building were worth
$64,000 when I purchased it and if I paid the entire mortgage
down by the time I was 30, 7 years from the time I wrote
this, then I would have $64,000 worth of equity with which
to work. That sure does sound like a good bit of money,
doesn’t it? If you understand how to build wealth, as you
should by this point, you definitely know, at least generally,

what you would do with $64,000.
Building Wealth
So, let’s move out into the future. I have $64,000
worth of cash. If, following commonsense and conservative
methods of borrowing, I put 20% down on another income
producing building, then that means I could buy a building
that was worth $320,000. In this case, perhaps the building
had ten units. If each of the ten units still provided $400 per
month, then my income before any expenses would increase
to $4000 per month or $48,000 additional per year (of course
this assumes no rental loss, I know, but this is an example).
If I could pay that building off in 10 years then I
would have $320,000 that I could spend on another building.
With 20% down – being safe, remember – I could buy
property worth 1.6 Million dollars. If I still assumed $32,000
per unit (this is theoretical and assumes no appreciation for
the example purposes) I would have 50 units. Income would
be $20,000 per month or $240,000 per year. By the time I
would be fifty, with this conservative approach, I would be
making $240,000 per year without having to go to work for
someone else, assuming I pay the building off in 10 years as
well. That might make for a nice retirement.
This is not rocket science. The formula is sound and it
could occur slower or faster – most likely faster. Realize, just
because I am giving the example of real estate, if you were to
insert dividend producing stocks, if you were to insert
restaurants, convenience stores, mining, or anything else, the
pattern would stay the same. Buy an asset, pay down the
asset, gain equity, take your equity, and buy a bigger asset.
Back to Reality
If I were a financial charlatan, I would say that the
above is how it works. It isn’t. You have lost income due to
tenants moving out. You have costs for operations. Your
furnace breaks. Your boiler goes. A tenant trips and falls – in
front of their friend’s video camera. You have increasing
taxes. You face competition when interest rates are low. You
cannot apply all of the gross income to paying off the
building because you have ongoing costs for operation. Are
the painters free? Is the paint free? Advertising is free?
Cutting the grass is free? Who is going to clean and maintain
all of those fifty units? Do you like mixing cement?
There are costs to everything. And who do you think
has to do the work of keeping the units rented? The owner,
at least when few units are owned, is going to be responsible
for getting them rented. It costs too much to have someone
else rent them for you and you cannot necessarily trust that
someone else will get a quality tenant.
Drawing From Your Strengths
However, one of the ways to overcome these
limitations is by drawing from other areas of life. This is
where emotional intelligence and some of that middle class
income comes in. Keep your expenses as low as possible so
that you can have as much money to pay down debts as you
possibly can. Keeping your expenses as low as possible is a
function of intelligence and discipline. Your discipline also
affects your credit score which will determine your ability to
borrow at lower rates, decreasing your interest expense.
While the rent can only do so much, there is still a

salary to draw from. Salary is the largest and most important
component of income, when starting from nothing.
The reason that I went for two degrees is so that I
could have a higher income. I wanted my salary to be as
high as possible so that my salary could contribute to my
investments. If I had a higher salary and lower expenses in
my personal life, then I could pay down my debt on my
assets quicker. What if I put aside 5% of my gross income
annually to add to the $64,000 I get when I sell my building?
I would have more than 20% to put down on my next
building, or I would pay that next one down faster – now
there’s a concept worth hanging on to! As a matter of fact, if
I put 5% of my gross salary aside ($1,500), assuming I was
still making that original $30,000, then I would have $10,500
in seven years. Alternatively, I could put that extra 5%
towards the mortgage and pay off the mortgage faster.
Because the mortgage was only about 20% of my
gross salary when I bought the building, there existed a
cushion of being able to put aside the extra 5% of gross
salary. I could use my salary to pay the mortgage, taxes, and
insurance, and apply the rent to the principle of the
mortgage. I can comfortably make all of the payments
because even with the mortgage, taxes, and insurance, and
another 5% of my gross, the total is only 25% of my gross
salary. It is not a burden.
A down payment of $74,500 ($64,000 + $10,500) on
$320,000 would be 23.28%. Or, I could buy a building that
was $372,500 and contained 11 to 12 units. Or, I could still
have the $64,000 but could have paid the building off earlier
instead of saving the money. Isn’t it nice to have options?
With safety being a concern, I would opt for the

former rather than the latter. It does not hurt to be a little
conservative because you never know what will happen.
Just to illustrate, the cost of a 30 year mortgage at
6.5% with 20% down would be $1,618.09 per month. With
23.28% down, the cost would be $1,551.73. If not every unit
is rented all the time, which sounds safer? Would it be better
only to put 20% down and keep the extra $10,500 in reserve?
It probably would be. Savings are important even when
things are going well. Don’t fall into the trap of no reserve.
Choose Your Debts Wisely
Unfortunately, when you have to pay for your own
schooling, you incur debt upon that investment, but that is
just like anything else. School was an investment for me as it
is for everyone else who has to pay for it themselves.
Thankfully, while the return on my real estate was very low
compared to my expenses - as a relatively new owner - the
return on my investment in my education was paying off. I
had an education for a longer time. I also had a while to let
that education produce a return by gaining experience with
work and moving to other companies and gaining increases
in salary while keeping my expenses fairly level from the
time that I was only making $30,000 per year. I still had the
same building, two job changes later, as I did when I was
making $30,000. So, did the mortgage get even easier to pay?
The margin, the different between my income and
expenses, grew. It also gave me options. I could devote
funds to paying down my student loans, or I could devote
funds to paying down my mortgage. It depends on which
has the higher interest rate as to which I would pay down
first. As it is all debt on my balance sheet, I need to pay

down the most expensive debt first. The most expensive is
the debt with the highest interest rate because it reflects the
debt that costs more. The only exception might be if I
needed to free up cashflow, then I might pay down a debt
that had a high payment relative to the total amount owed.
No Longer Lost
Once you have the path set and you know where you
are going, you simply try to accelerate your efforts. Using
real estate to build a cushion of wealth was a good example
of a way to prepare for more risky investments. Be
methodical and take things one step at a time.
When you know how to build wealth, you will want
to get to your goals sooner rather than later. That is normal.
That is why you do not forget your ability to earn. You need
to focus on your ability to earn more up to a certain point.
Your salary supports your investments. So, do not put the
cart before the horse. If you are in the lower financial class,
be reasonable and get an education and then start investing
in other assets. The process is safe and it works.
Because I know what the path is, and because I know
I want to get there sooner rather than later, I accelerate my
efforts by trying to gain a higher salary. I accelerate my
efforts by trying to reduce my expenses. I accelerate my
efforts by saving for the next down payment. I accelerate my
efforts by utilizing compound interest to my advantage and
paying down the most expensive (highest interest rate) debt
first. You need to be patient and let the process work, but
you also need to move as fast as you can.
Patience, Have Some

At some point in time it is important to wait and
allow the process to work. Life normally does not materially
change from week to week, so you have to have patience.
When you look at your balance sheet and see things are
moving positive, and with a very slow increase in the rate of
positive movement, you should be happy. But, don’t go out
and buy a Porsche and expect to continue building wealth
because you would have incurred a huge amount of debt.
That debt, or loss of capital, would be a huge setback to your
finances, and that would be foolish. Wait until you can
absorb the cost easily, before you buy the Porsche.
Whether it is a Porsche that you would buy or
whether it is some other luxury, you cannot squander a little
success by indulging in a lot of spending. The moral is that
you need to CONTINUE building wealth. If can be
disheartening to look and see that wealth is being built so
slowly, but you must realize that wealth will accelerate
slowly until it appears that wealth building is occurring at a
moderate pace and then at a rapid pace. Just because things
move slowly does not mean that they are not moving. If you
are moving in the right direction then you will eventually
get to the goal. The financial charlatans would tell you
otherwise, but you must have perseverance and patience.
Remember this, just because you live below a bridge
does not mean that you cannot live in a mansion. When you
think of living below your means, think of it this way: if
your means keep increasing, wouldn’t it be easier to keep
living below them? The time for change is now.
You now know how to build wealth.
Want More?
As you can see, building wealth does not simply involve
taking risks and getting rich. Building wealth is a process. To
understand that process, you need to know how to make
good decisions and leverage your strengths. For additional
insights, visit my websites:
www.howtobuildwealth.net
The How to Build Wealth series website
www.chokingthegoose.net
Good advice, entirely free
Additional copies of this book

can be purchased at
www.howtobuildwealth.net
or
www.amazon.com

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How to Build

• How to start without skills, connections, or money

How to Build Wealth

The One Hundred Million Dollar Question 45

The Value of Money 51

A Thirst for Knowledge 67

With No Remorse 115

Evaluating Needs 141

Holes in the Bucket 153

Constant Vigilance 171

From the Bottom Looking Up 185

Gaining Traction 209

The Well Oiled Machine 239

In addition to the core books, there are several other books

Finally, with so much to say, I was forced to start a blog at

I need to see about getting a clone…

I wanted to read a book that would instruct me how

I could not find that book. So, I wrote it.

If you want to be wealthy, you have to know how it is

Ok, you can close the book now…

Cause and Effect

The members of the middle class do not really have

a person more able to work and earn. Education only makes

I know that the financial charlatans will tell you that

provides a defense against inflation. While inflation

The Pattern of Wealth Building

wage. You need a credit card because it is one of the best

borrowing. Debt is a tool. In the hands of the undisciplined,

is not enough for a lifetime. Keep building up your credit.

What if what you want to do will require more

two jobs, or if you have to work, study, sleep, repeat, you

with similar jobs, the environment made the experience very

things are more juvenile than a person who complains about

Why live your life inefficiently today and under the

as you can. You’re making 50% on your money. That’s a

as though you will always continue to be able to work,

Don’t Get Sidetracked

unlikely. Certainly there might be a classic car that you can

(Note: This table was generated, in part, from information obtained

Degree Median Salary Additional Years of Schooling

Let me add something to this: to get a higher salary, you

Is it worth your time, if you are already making

The middle class has the most risk from taxation.

A Different Take on Wealth

aid the destruction of a life out of control. Those who display

Wealth is built by increasing assets and decreasing

You need savings so that you can buy assets with a

Let me tell you why I chose income producing real

hopefully, so go after what is best suited for you. What do

A Wealth Building Example

continuing to build wealth. The rents would increase while

should by this point, you definitely know, at least generally,

While the rent can only do so much, there is still a

With safety being a concern, I would opt for the

first. As it is all debt on my balance sheet, I need to pay

Patience, Have Some

Additional copies of this book

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