How To

ESCAPE THE RAT RACE

Four Keys to Acquire the Life of Your Dreams

SHERRY PEEL JACKSON

© 2016 by Sherry Peel Jackson
Heartworks Publications, LLC
P.O. Box 1085
Cumming, Georgia 30028
www.heartworkspublications.com
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All Scripture quotations are taken from The New King James Version / Thomas Nelson
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Library of Congress Cataloging-in-Publication Data
Jackson, Sherry Peel
How To Escape The Rat Race,
Four Keys To Acquire The Life Of Your Dreams
ISBN: 987-1-943254-03-3
1. Financial Planning
2. Wealth Creation
3. Business Creation

Kindle edition
CONTENTS
INTRODUCTION
SECTION ONE: DECREASING EXPENSES
How To Decrease Expenses
How To Eliminate Debt
How To Make And Keep a Budget
Knowing How Much You Owe
What’s Good and Bad About Interest?
What About Borrowing and Lending?
Why Impulsive Buying Kills Your Dreams
SECTION TWO: INCREASING INCOME
How To Improve Your Finances
How To Improve Your Net Worth
How To Increase Your Income
What About a Home-Based Business?
What is the Ideal Home-Based Business?
What About Taxes and Home-Based Businesses?
Why Teach Your Children About Money?
What’s Important About Giving Back?
SECTION THREE: SAVING
Why Should I Save?
How Should I Save?
Where Should I Save?
SECTION FOUR: INVESTING
Where is the Road to Wealth?
How Do the Wealthy Stay Wealthy?
CONCLUSION
What is Your Recipe for Financial Freedom?
Two Possible Futures
EXHIBITS
 INTRODUCTION

Hi. My name is Sherry Peel Jackson, retired Certified Public Accountant and Certified Fraud
Examiner; and former IRS agent.
I’ve been teaching about finances for over 30 years, and have seen the results of the vicious cycle
called “the rat race”—mental breakdowns, broken marriages and even suicide. I’ve even seen
people resort to crime, such as embezzlement, just to get relief from the drudgery of the race. Of
course there’s a better way.
There are many financial gurus out there who tell you all the wrong ways to escape the rat race.
They’ve told you to do everything from get an extra job to sell your house and live in a
commune. Many of you have followed their advice but it didn’t free you from the race.
When the market crashed in late 2008, millions of people lost over half their savings and
retirement funds. Over ten trillion dollars in savings was transferred from the middle class to the
ultra-wealthy. That event sent thousands of people into a tailspin that will have them running the
rat race for the rest of their lives, and even thousands more had to delay retirement or return to
work, because they weren’t preparing themselves to get off at the next exit ramp. They listened
to traditional advice from traditional financial “experts” and they lost their shirts, literally.
Wealthy people have escaped the rat race. Do you want to escape? Here’s where you learn how.
The wealthy people that I interact with haven’t followed traditional methods in decades. Some of
them never followed the television guru’s at all. They don’t invest in the traditional manner that
we’ve been taught via main stream media.
In this book I will show you the steps to get off at the next exit ramp. You’ll learn how to be
financially free by decreasing your expenses and increasing your income. You’ll also learn the
proper way to save for future purchases and to invest so that you will have resources in your
latter years. You can be out of the rat race in as little as two or three years if you prepare and
follow a plan. You’ll also learn how to help others escape with you.
This book contains four sections; keys to acquire the life of your dreams:
· Decreasing Expenses
· Increasing Income
· Saving
· Investing
Each of these sections will comprise several chapters to bring clarity to the strategies that will
free you from the rat race.
I’ve traveled to Canada, Europe, Africa, East Asia, Malta, Central and South America, and the
Caribbean. In many of these places there is no middle class! The United States is not far from
that point! The United States is becoming like those other countries that have only the rich and
the poor.
The education that you receive in this book will show you how you can avoid landing in the poor
category, or escaping the poor category if you are already there.
This book does not contain legal advice. This book is designed to provide accurate and
authoritative information pertaining to the subject matter covered. It is sold with the
understanding that legal, accounting, or other professional services are not included. If you need
legal or accounting advice, or other expert assistance, please seek the services of a competent
professional.
Every effort has been made to make the course materials current. Laws affecting our finances are
subject to rapid changes, however. Congress has authority to modify the law, and it has done so
on numerous occasions in the recent past. Court decisions and rulings may significantly affect
the applications of financial laws to individual circumstances. Such changes may affect the
accuracy of this book.
This information comes from over 30 years of study and experience, from one who has run the
gamut of making six figures a year to being flat broke, and from observing others in the same
situation. This perpetual rat race is an epidemic in our culture and is slowly killing us mentally,
physically and financially. Let’s get started on our journey out of the rat race!
SECTION ONE
 DECREASING EXPENSES

First, I’d like to talk to you about implementing a plan that will help you become debt free and
stay that way.
Becoming debt free today is a very daunting task. Current statistics reveal that Americans have a
negative rate of saving, meaning that we spend more than we earn. We have created a massive
amount of debt, and we are witnessing devastation around the country because of this debt.
I want you to avoid the coming economic earthquake, and you can if you take the proper steps.
Time is of the essence.
As I interact with people on a regular basis I find that many are in debt because they are self-
indulgent. Self-indulgent people have tell-tale signs:
1. Buying items without thinking about the bills that are already due.
2. Living a lavish lifestyle to try to impress others.
3. Buying or leasing a new vehicle every two years.
4. Having closets full of clothes, many with the tags still on them.
5. Always talking about department store sales.
6. Making sure that everything they buy carries a well-known name brand.
One of the hardest things for people to do is decrease their expenses. Whether out of habit, pride,
or for whatever reason, people don’t seem to be interested in decreasing their expenses. They
always talk about making more money to make ends meet, but never mention cutting the grass
themselves or doing their own hair or nails.
The fastest way to have extra income is to immediately decrease your expenses. Write down
your monthly income and all of your monthly expenses in a notebook. Then decide which ones
to reduce or eliminate. For example, if your monthly income is $3,215 but your monthly
expenses are $3,795 then you are spending $580 more per month than you’re earning! It also
means that you are probably floating this overspending with credit card debt that is steadily
mounting. The types of expenses that you should consider decreasing or eliminating are:
· Gym memberships—walk around a park or your neighborhood
· Beauty salon, barber shop and nail shop—do it yourself
· Eating out—cook more
· Car detailing—wash your own vehicle
· Clothes and Shoes—wear what you have or shop at thrift stores
· Cable TV—read books that will help improve your finances
A woman came to me in desperate need of financial counseling. She had been spending on
things that she didn’t actually need and things that she could do herself. When I told her that she
could at least even out her income and expenses by eliminating many of her discretionary
expenses and that she could get ahead of the game by eliminating entertainment and music all
together for a while, she was very angry and did not want any more counseling. Unfortunately,
she is not unlike many Americans who want to live a lifestyle that is higher than they can afford.
If you want to become financially free, you must get out of the overspending syndrome.
Over the years I have heard of or have developed creative ways to improve my finances by
cutting costs. I have listed a few of the ideas below and I will explain the reasoning behind them:
· Make out food menus for the month. Make a shopping list and only buy what’s on the
list. Some people are very good at shopping for only what’s on the list, but many are not.
You will buy much more than what is on the list and go over budget time and again if
you don’t develop discipline.
· Use coupons—these are little jewels of saving. I heard of a woman who was able to
purchase a good used car using coupons. Every time she went to the grocery store, she
would get the receipt with the amount of money she saved and put that amount in a jar.
For example, if the receipt said she saved $2.93 during that grocery store trip, she would
put $2.93 in the jar. The jar turned into a box and after all was said and done she had over
$3,000 to purchase her car! Many people are not going to be that disciplined, but this is a
sure way to help with your finances.
· Don’t go to the grocery store hungry. Every single time I go hungry I overspend by at
least $20. When I must go to the store and I am hungry because I have been on the run, I
will stop at a convenience store to buy a small pack of peanuts and eat them before I go
into the grocery store. I become more sensible and don’t go crazy in the store when I
practice this procedure.
· Buy in bulk if possible. Food co-ops are available in some areas. Stores like Sam’s Club,
BJ’s and Costco have some things in bulk for a lower price. Be careful, however, because
sometimes these items are not any less expensive than they would be at a regular grocery
store.
· Use a calculator to total your store purchases. When you have a set amount of money to
spend and you do not monitor your spending, it can be embarrassing. For example, if you
go to the grocery store with $100 and start dumping items into the grocery cart without
keeping up with the prices, you could end up at the checkout counter with $113 in
groceries and have to start putting things back. This happened to me once and once was
enough! When I am shopping for multiple items, I bring a small calculator, paper, and a
pen. Many people don’t do this because they just have the total debited from their
checking account, but this is not good for your budget. If you have $100 allotted for food
and you are not careful, you will blow the budget in other areas by not monitoring your
food purchases.
· Use cloth napkins and rags instead of paper towels and napkins for cleaning. I know a
family that is having severe financial problems. When I went to their home, they used
paper plates, napkins, plastic forks, cups, spoons, and paper towels. I asked them why
they used all this picnic paraphernalia instead of regular cups plates and silverware. The
response was surprising. The husband said, “Nobody likes to clean up, so we just eat and
throw everything away.” They ate out quite frequently; which we will talk about later.
When your budget is tight, you can save a lot by using regular kitchen goods, cloth
 napkins, and towels that can be washed and reused. Using these can save hundreds of
dollars a year and those funds can go toward getting you out of debt.
· Rarely eat out. I understand that sometimes you have to attend luncheons and parties, but
when you are in debt, one of the main things that will keep you there is eating out. The
average square meal in a restaurant will cost you about $20 with the tip. However, if you
cook that meal at home, it will cost $7! Many people who are in debt do not realize that
eating out is a big part of the problem. Convenience sometimes has to be sacrificed for
good sense and time at the stove.
· Try to shop for advertised specials. Many people, like me, don’t like to go grocery
shopping. It’s one of those necessary evils. If you go to the store in a hurry and don’t pay
attention to what you buy, you could lose out on lots of savings each trip. For example, if
you just grab your usual brand of peanut butter from the shelf and toss it in the buggy,
you may have missed out on the fact that the comparable brand, which is sitting right
next to it, is 80 cents less! Many stores have newspapers with advertised specials each
week. If you read over the specials for your favorite grocery store before you go
shopping, you can rack up on good savings. This also works if you are shopping at
discount or department stores. These retailers also have specials and discounts advertised
in the Sunday newspaper or on line on a regular basis. One thing that will kill this savings
strategy is if you hop all around town to get all the specials; you will waste more in gas
than you will save. Select the store with the most specials that you are planning to take
advantage of and go there. You will save on your purchases and on gas.
· Use non-name brand items. Because of advertising, many people prefer to purchase all
name-brand items; however, most generic (not name-brand) items use the exact same
ingredients, and there is often no discernible difference in the product beside name
recognition. I have started using generic paper goods when I shop. I even get generic cold
medicines if the ingredients are exactly the same as the popular brand.
You can use your own judgment about using name-brands. I bought some generic canned
vegetables in the mid-1980s and found a grasshopper in the can. I threw it out and went back
to name-brand canned vegetables. In the mid-1990s I again tried the generic canned
vegetables. Incredibly, I found a moth in that can! I stopped buying canned vegetables all
together and started buying frozen, then fresh ones after that. You have to decide for
yourself how you want to save by using generic products, but at least give it a try.
· Don’t go berserk during Christmas; hand-craft gifts or just buy Christmas cards.
Christmas has become a time of getting people further in the hole by making them feel
like they must get a gift for everyone in the entire family. I personally know many people
who buy gifts for nieces and nephews that they don’t see but once a year, on Christmas.
By mid-January when the credit card bill comes, they are uptight because they spent all
that money out of pride or guilt. When I was younger I decided that I would not get into
that trap. I bought Christmas cards for everyone and I bought my parents gifts. When
friends and relatives bought me gifts, I thanked them but refused to feel guilty.
After a few years, I became known as the broke Jackson because I didn’t go into a spending
frenzy during Christmas. However, now those same folks who were calling me names are in
financial turmoil and asking to borrow funds from me. In the long run, it is not wise to spend
 a lot for the holidays. It should be the heart that counts. Make gifts if you have those skills,
or just buy Christmas cards until your financial situation improves drastically. You will
thank yourself in the end.
· Take vacations at friends’ homes in distant cities, or join a house swapping group. This
may sound outlandish, but you can save thousands of dollars a year this way. If you have
a relative or friend on the west coast and you are on the east coast, you can swap houses
for a week and have a great vacation, saving between $800 and $2,000 that you would
have paid on hotels or resorts. You can cook instead of eating out and save hundreds on
food. People around the world have created house swapping groups; they have very strict
standards and rules to be a part of the group, but once you join you can virtually travel
around the world and stay at someone else’s home.
I have a friend in San Diego who is a part of a house swapping group; she joined years ago
and she is glad she did. As long as she posts her home as being available a few weeks a year,
pays a small dues fee to keep the Internet site up and current, and keeps other group rules,
she can travel the world. She goes on the group site and keys in her destination of choice to
see if anyone has a home available to swap during the time that she wants to travel. If there
is a home available then she registers and she is on her way. See if you can find such a group
to join and start saving thousands!
· Read and play board games instead of going to the movies every week. A trip to the
movies averages $20 per person if you buy popcorn and drinks--$80 for a family of four!
Many families go to the movies every week even though they are in severe debt, using
the excuse that they need relief from the stress. However, there are several less costly
ways to relieve the stress of life. One is to play board games. In the 1970s, my family and
others got together on weekends and played board games. There were games for adults,
teens and young children to play, and we had fun interacting with each other and building
strong friendships.
Nowadays, everyone is glued to the TV or movie screen like zombies with no interaction
and relationship building. The TV will distract you from achieving the things you need to
achieve, like finding ways to become debt free, bonding with your family, and creating
wealth for your future. The folks on those “unreality” shows, talk shows, and sitcoms are not
going to be there to bail you out when the excrement hits the portable cooling device in this
country, so turn off that electronic intellect reducer and get busy helping yourself and your
family become financially free!
· Buy a good used car instead of a brand new one. Were you aware that when you drive a
new car off the lot, it immediately loses at least $7,000 in value? If you bought a new car
for $27,000 and drove it off the lot ten miles, then decided that you did not want it and
came back 4 days later, they would consider it a used car and possibly give you only
$20,000 back. It’s called depreciation, and businesses all over the country use it by
buying cars on December 30th or 31st and taking a large deduction on their business tax
returns. Buying a good used car will speed up your retirement by five years. Spent money
is gone, so you may as well spend less on a car, drive it until it will not drive anymore,
and get another good used car. When you do this, you save thousands each year in car
notes, and can put that money toward retirement or starting your own business. People
 who think they have to have new cars every year or two are either wealthy already or will
be perpetually in debt. Buy a good car from a rental car company, car dealer, or, if you
are brave enough and have a good mechanic, from a private owner.
· Discipline your family to wear practical clothes. These days families, especially
teenagers, are caught up in name-brand clothes. One pair of gym shoes can cost $120,
when it actually costs the manufacturer $5 to make them. Our youth are learning to be in
debt by spending their money, or their parents’ money, on impractical items. We need to
wear washable, practically priced clothes and stop paying to impress others. As long as
we try to keep up with the Joneses, we will be in debt like they are.
· Use proper care for clothes to prolong them—if it says dry clean, dry clean them. When
we buy clothes, we can save by keeping them in good shape. Buy wash-and-wear as
much as possible to save hundreds in dry cleaning expenses.
I go to the cleaners once a quarter and spend about $60 because I try to wear more wash-
and-wear clothes rather than dry clean only garments. Don’t buy too many “dry clean only”
clothes. Wash and wear clothes are less expensive.
· People who sew may save 45–60% on clothes. If you have the gift of sewing clothes, you
can save thousands. Take time to perfect that gift, learn that gift, or refresh your sewing
skills to make clothes for you and your family. Often the clothes you make yourself are
more durable and well made. They will last longer and save you even more because of
the durability. Note that sewing may also be a means to increase your income, which we
will discuss later in the book.
· Buy clothes out of season for the greatest savings. Smart shoppers will buy summer
clothes at the end of summer and winter clothes at the end of winter. For example, one
year I had to make a trip to Central America in October; I had no summer clothes
appropriate for business, so in September I visited a local major department store on a
friend’s tip that summer clothes were on sale all week. I found summer business casual
pants and blouses for $4 each! I bought enough for the trip and for the next summer.
Since then, if I shop at department stores, it will be during the off season.
· Buy clothes at thrift stores. I said “if” I shop at department stores because I do most of
my clothes shopping at thrift stores, where I have purchased $700 in name-brand clothes
for $70 in one three hour shopping spree.
Make sure you have a few hours to shop, and take your time going through each rack to find
things that you like and think will fit.
My favorite thrift store does not have dressing rooms, so I wear a full bodysuit under
jogging pants when I go; after I gather up all of the clothes in a buggy I go to a large mirror
and strip down to the bodysuit. (Interestingly enough the traffic of men in the area increases
significantly when I go through this ritual). I try on everything, purchase the things that fit,
and use the money saved to have the mostly designer suits and blouses dry-cleaned and
altered if necessary. Then I invest the rest of the money. I have had people I’ve counseled
tell me that they won’t shop at a thrift store because the clothes stink; I tell them to wash the
clothes or dry-clean them. They still don’t want to go to the thrift store and are still in debt,
even to the point of bankruptcy, yet they dress in designer labels from head to toe. What a
 waste!
· Mend clothes and shoes instead of throwing them out. If we find a good alteration shop or
learn to mend clothes ourselves, we can save hundreds even thousands of dollars a year. I
found a good, inexpensive place to have clothes altered and shoes mended. I once tore a
very nice blouse that I really liked; the tear was not at a seam and I was not sure that it
was repairable. The seamstress was able to repair the blouse and I could not even see
where the tear was! This may seem trivial, but I have saved hundreds by having coats,
suits, and even shoes repaired. Repaired heels are very durable, much less expensive than
a new pair of shoes, and they often last longer than the original heels.
· Exercise daily and drink lots of water, and you’ll save thousands on doctor bills and
medications. We go and go and don’t tend to listen to our bodies when they need care. If
we get regular checkups, and go to the doctor before we get so broken down that we can
hardly walk, we may save money as well as our lives. People who exercise spend less
time in medical facilities and less money buying medications. Medical expenses are near
the top of things that can quickly get people into debt.
· Shop around when getting prescriptions filled. Prescription drugs are a big rip-off in my
opinion; unfortunately, many people opt to take them. If you purchase prescription drugs,
shop around for the best prices; there could be a $50 difference in the price between
stores, or between generic or name-brand prescriptions.
· Take care of your teeth to minimize dental costs. If we just brush and floss our teeth and
keep that candy away from our children, we can save thousands in dental bills.
· Try to do some home repairs yourself; it could be very expensive if we called an expert
every time something went wrong on our homes. Home Depot gives classes on simple
repair techniques, and you can save money by learning how to do some things yourself.
For example, a vent cover flew off of my roof and was not found, so to temporarily take
care of the problem without going into debt I got a 5-gallon bucket and some duct tape,
climbed on the roof and secured the opening until I was able to pay cash for the proper
repair.
I would caution you, however, not to try to fix electrical sockets or plumbing unless you are
very sure of what you’re doing. Not only could you make things worse, you could get hurt.
· Don’t use overdraft protection. If your bank offers overdraft protection, leave it alone.
Overdraft protection means that when you have used more money than you have in your
account, the bank will give you a loan to make up the difference. For example, if you
have $428 in your account and you used checks and the ATM over the weekend, bringing
the total spent to $562, the bank will put $134 in your account and charge you up to 28%
interest on it along with a $35 fee! Most of the interest rates that I have seen can be
considered usury!
· Get a prepaid credit card for booking airfare and rental cars. Some people need real help
controlling spending, and a prepaid credit card is a good way to start the process of
learning how to combat overspending. You can purchase prepaid cards almost
everywhere; load the cards with a certain amount of money and when it’s gone it’s gone.
If the prepaid credit card has a major credit card logo you can even book airplane tickets
 and rental cars. The prepaid card is also a great tool to give your teenagers for class trips,
birthdays, or Christmas. These cards will help them manage spending because when all
of the money is gone they will not be able to continue to spend until the card is reloaded.
If they have a job, they can use their earnings to reload the card, and establish credit this
way.
· Make your lunch and your children’s lunch instead of eating out. We have discussed
eating out earlier, but in the context of lunches, let it be known that you can save
thousands of dollars a year by making your lunch and your children’s lunches instead of
buying at school or eating out during lunchtime. You will be much healthier, also.
· Eliminate nonessential expenses like cable TV. Read instead. When you are in debt, the
luxury of cable TV, which averages $70 with tax, is something that you really need to do
without. You need to spend less time watching TV and more time devising ways to
improve your finances, so one of the first things you should do is cancel the cable TV
contract.
· Cut and wash your own hair. Although it may be inconvenient if you do your own hair,
you can save hundreds each year. I tried that, but I can’t make my hair look half as good
as my beautician, so I opt to cut costs in other ways when my finances are in good shape.
When finances are tight, I just do the best I can with my own shampoo and conditioner.
· Keep your thermostat at 68 degrees and wear sweaters around the house in the winter to
save lots of money. Also, get your house better insulated so that you can keep the heat
inside in the winter and outside in the summer.
In addition to the above, there are many other methods that I have employed and recommended
to immediately improve cash flow without working harder. The problem that I sometimes have is
that people aren’t so open to utilize these strategies.
Most people have been persuaded that they have to work hard for years, grinding themselves to
the bone in order to be wealthy somewhere down the road. This is so sad, because it’s just not
true. That’s the poverty mindset. The misinformed, conventional mindset about wealth creation
says:
· If I spend the majority of my life working hard to survive and (maybe) doing something I
don’t really want to do for the sake of my family, then if I’m lucky I will earn the right to
continue to “survive” when I’m older.
· Work hard, pay your bills on time and keep your credit score high. Save your pennies in a
piggy bank for your children’s college education and your “retirement”. When you have
enough money, give it to your stock broker or financial planner and hope that he or she
will do well for you.
· Keep contributing to your IRA; trust that it will support you in your later years.
· Buy a home since this is your most important “asset”
The Core Belief that people have been fed about wealth creation is: Since I can’t possibly
understand investments, I had better go to an expert who has studied this area, someone who is
licensed, therefore approved by the authorities and knows what they are doing.
The old-timers and media guru’s have been teaching you using this accumulation mindset. And
while the numbers may seem to make sense, the concept is functionally bankrupt in this day and
age because most Americans live paycheck to paycheck.
The old-fashioned financial world puts their trust in this outdated wealth formula. Their formula
says, if you want more wealth, you have to add more money to the prescription. Or, if you want
more wealth, you have to take on more risk to boost your rate of return. Or, just wait it out 30 or
40 years because given enough time you will become wealthy. I hope that all of you reading this
book are beyond believing that crock!
There is always a better way! If you change your mindset and think about wealthy living in terms
of cash flow, not accumulation, you will probably wind up wealthier in the end and you will
probably develop a wealthy lifestyle as you move forward with the proper strategies.
The key to increase is to improve your cash flow without having to work longer and harder,
without being required to invest more in losing investments and without embracing more risks.
Three great ways to achieve those goals are (1) stop overpaying the government by having so
much taken out of your check each pay period, (2) stop overpaying the banks in exorbitant
interest payments, and (3) stop overpaying Wall Street and big insurance companies with
brokerage fees, excess insurance and insurance that doesn’t serve your purposes. You may be
able to save thousands of dollars annually by making adjustments in these three areas! The
bottom line is that you must stop the bleeding.
You can utilize these three cash flow strategies as a catapult to acquire the life of your dreams
because positive, consistent cash flow leads to wealthy living now and in the future, as opposed
to 30 years down the road like the retirement planners advocate.
First, let’s talk about how to stop overpaying the government.
Studies show that over 60% of individuals and businesses overpay taxes. I believe that the reason
this happens is because their tax preparers are too afraid to push the limit on lawful deductions. I
don’t advocate overstating expenses or understating income when filing tax returns. But I have
personally seen hundreds of tax returns on which the preparer left off valuable deductions,
causing their clients to pay more. A recent incident was told to me while I was at my doctor’s
office. She told me that her husband’s practice (they are both doctors) sold some equipment and
their personal tax return was heavily taxed. One of the partners in her husband’s practice had a
different tax preparer and as the two doctors talked, my doctor’s husband felt like he needed his
colleague’s accountant to look over their return. Turns out they overpaid by over $12,000
because their preparer didn’t handle the sale of the equipment properly as it flowed through to
their personal tax return. When my doctor and her husband confronted their tax preparer about
the improper treatment of the transaction and subsequent overpayment of tax, he shrugged his
shoulders and told them that he wouldn’t charge them to prepare next year’s tax return. Then she
looked me in the eyes, and in the midst of a few colorful expletives said he wasn’t getting their
business next time.
This scene plays out all over the country because tax preparers are afraid to have their client’s tax
returns selected for audit. They make individuals and business owners suffer financially because
of their fear.
I think people should try out new preparers every other year, or at least have two different tax
preparers complete the return in the same year and see which one has you paying the least
amount, especially if you are a high income earner.
Now let’s talk about how to stop overpaying the banksters.
Business owners and individuals may be able to improve their cash flow by taking a closer look
at their loans. One strategy that may help is to consolidate several loans into one to acquire a
lower minimum payment, and maybe even a better interest rate. Just walk into the bank and see
if they will consolidate your loans without closing costs or with a very low closing cost.
Another possible way to stop overpaying the banks may be to cash out low-performing
investments and use the money to pay off high-interest loans.
That strategy will more than likely get you a higher return. Understand that if your investment is
earning 3% and your loan interest rate is 9% you will benefit by using the funds to stop the
bleeding on the 9% interest loan.
And there are other productive strategies as well, such as refinancing vehicles or mortgages at
lower interest rates, to access money to pay off your high-interest loans.
It is entirely possible that you could free up $500, $1,000 or even more per month just by
restructuring your loans. If you are successful at restructuring some of your loans please don’t go
create additional expenses to use up this new cash flow. Start a business. We will discuss starting
businesses later in this book.
Next, go and review your insurance policies. It’s entirely possible that you could be paying for
policies that you no longer need, or overpaying on policies because you have improved your
lifestyle. For example, your home owner’s insurance may be reduced by $1,000 a year if you
increase your deductible or if you’ve installed safety or energy saving features and appliances.
There’s one other unconventional technique that I want to propose. What would happen if,
instead of putting tons of money into unpredictable retirement accounts full of mutual funds, like
the financial guru’s tell you to do, you kept the money for extra cash flow to use in your own
business? That’s what I do. Ponder that thought and we’ll discuss starting your own business
later in this book.
So let me make this clear; instead of investing money in other companies that you don’t know,
understand or control, you have money available to invest in your own business where the
returns are going to be much greater than they will from other avenues.
Just by taking these steps you can put yourself in a position in which you are bringing in more
money than you are spending, and you don’t have to work harder, invest more money or take on
additional risks to accomplish this result.
Last but not least, there are websites that post unclaimed money. These are insurance payouts,
mortgage overpayments, law suite winnings and other payouts that were processed but never
claimed either because the organization couldn’t find the rightful owner of the funds or they
didn’t do a proper search. The government and other organizations are supposed to post the
available information for at least three years before adding the unclaimed funds to their coffers.
If you go to one of the websites and search for your name and everyone else that you know, you
may be able to find unclaimed money. I first learned about unclaimed funds in 2011 and I took
about an hour and looked on all of the sites that I was informed about, searching for my name
and the names of all of my family members. Sure enough I found an insurance policy belonging
to my father’s father. Although my granddad had already transitioned, my grandmother was still
alive and living with my aunt. I immediately called my aunt and she moved on it, obtaining
granddad’s records, death certificate and marriage information. She was able to receive a check
within three months and she used the funds to help take care of my grandmother. My aunt was
very grateful for my research and I’m sure she continues to browse those sites regularly, as I do.
The sites that I know about are listed below:
https://www.unclaimed.org/
http://nupn.com/state.php
I am sure these are not the only sites and some may reveal international funds.
HOW TO ELIMINATE DEBT
There are different schools of thought concerning the definition of debt.
One school says anything you owe is a debt and you should owe no man, which has become all
but impossible today, unless you are a Gates or a Rockefeller. The more modern school of
thought concerning debt says that when you borrow or use credit cards and can’t pay the bills
when they’re due, you are in debt.
In ancient times, if you owed someone and couldn’t repay them, that creditor had the right to put
you in prison until you repaid every dime. The creditor would then own everything that belonged
to you, including your spouse, children and all of your possessions!
Today, I think debt encompasses more than either of these definitions. Debt is the result of a
mindset—a mentality that we must destroy.
Let’s start off by talking about the mindset of the poor. The poor buy liabilities, and their minds
are focused on survival. The mindset of the poor is, “I can’t change my circumstances—I need to
make the best of what I have.”
Many of these people are not looking for a way out or a way up. They just want to survive.
Constantly in a situation where their expenses are more than their income, many take to illegal
means to support their families or their habits. I call this a poverty mentality. Many poor people
settle for being poor because changing their circumstances requires energy and thought that they
are not willing to expend and employ. Tragically, this is becoming more widespread in our
society as we see welfare rolls and crime rates increase.
Granted, there are some people who are not mentally or physically able to change their
circumstances, but the vast majority of poor people in the United States can change their lives
with just a few important adjustments. I have seen it happen and know that it is possible.
Lydia grew up in the projects with two younger brothers. Her mother was a single parent but
instead of acting like a victim Lydia’s mother worked two jobs to make ends meet. She also
taught her children a good work ethic and did not ever let them use their poverty as an excuse to
gain pity or unearned rewards. As a result, Lydia worked hard and put herself through college
with few student loans. Today, Lydia is an executive at a large multinational corporation; she
travels around the world for this company and is enjoying life, having escaped the poverty cycle
from which she came.
Now let’s talk about the middle class. Middle class people buy liabilities, often believing that
they are assets. Society has placed a picture of the American dream in front of the middle class
and they are chasing that picture like a race horse chases a carrot. They work harder and longer
to keep up, but their fundamental situation doesn’t change. They get caught in the earn/spend
cycle, are very frustrated, and sometimes give up on their dreams.
These are the people with “decent” corporate or blue collar jobs. They go out and buy big houses
and cars and have credit card and other consumer debt that is constantly drowning them.
These are the people who get paid on Friday and immediately go to the mall to buy the latest and
greatest gadgets and name-brand clothes. By Monday they are “broke, busted, and disgusted,”
and they survive until the next paycheck, when they do it all over again. Some are not even
aware that they are literally two paychecks away from living on the street. Daily, I drive in my
neighborhood and others around town, and I never fail to see furniture and clothes on front
lawns, as people have been evicted or their homes have been foreclosed.
As a result of this middle class mindset:
Over 40% of all American families are in debt at a given time. Credit card debt averages around
$16,000 per household and total consumer debt averages around $32,000 per household. Some
people are actually borrowing money from one credit card to pay the minimum balance due on
another one.
How did all of this get started in the first place? Did people always amass a lot of debt? Here are
some answers:
In the early 1920s debt was uncommon. In fact, Americans usually only borrowed to buy homes.
Back then, loans were for seven years or less, based on the Bible. Deuteronomy says, “At the end
of every seven years you shall grant a remission of debts” (15:1).
When thousands of GIs returned after World War II, the trend of consumer debt started.
Americans had lots of disposable income and were well able to handle debt.
As the debt craze escalated, by the mid-1960s, Americans could buy almost anything on credit.
Major retailers became lenders; some even charged higher interest rates than banks! This was
possible because the salesperson had the customer right there as a captive audience, and after the
big sales pitch, the customer just signed on the dotted line without thinking about the higher
interest charges.
During the late 1960s, women started to enter the workforce and the lenders were forced to start
including both incomes when considering a home loan. Thus, housing prices skyrocketed
because sellers knew that two-income couples could “afford” to pay more for homes. This tactic
is typical of the greedy banking society in which we live.
The results were as follows: by 2002 the median income per family was $49,000. Based on that
income, an average home should have cost $98,000, but was selling for just under $108,000.
By the early 1970s, due to the profit seen by big retail stores like Sears and Montgomery Ward,
the credit card binge was in full bloom. Some retailers made as much on financing as they made
on merchandise!
These days’ banks and retailers make much more with the interest and late fees than the costs of
the items purchased. We will discuss interest and the Rule of 72 in a later chapter.
The difference between the early 1970s and now is that Americans were more hard-working,
ethical, and debt conscious then. There was much more trust that the loans would be paid on time
and eventually paid off. Today, people file for bankruptcy at the drop of a hat, so lenders don’t
mind sticking it to everyone with outrageously high interest rates.
The problem with all of this debt is that the national debt is also increasing due to the
government borrowing more and more from the Federal Reserve and printing more and more fiat
money, paper money based on government whims, not tangible goods.
When there is not enough income earned to cover credit card debt and interest, the average
consumer will now go bankrupt, and the government will just go out and borrow more from the
“Fed.”
This is an escalating cycle of debt and soon the house of cards is bound to fall. According to a
financial news article, Americans spend over $22.9 billion on clothes, $3.2 billion on electronics,
and $11.6 billion on furniture put into homes that in many cases are rented. In addition, we spend
$46.7 billion on new cars. Americans and others are not paying attention to the coming economic
tsunami, and these are the people who will be hit the hardest if the principles in this book are
ignored.
HOW TO MAKE AND KEEP A BUDGET
What is a budget? A budget is just a plan for how you will spend your money for a set period of
time.
A budget will help you live within your means and not go into debt, or it will help you get out of
debt if you are already in debt. It will tell you when you have spent all that you can afford each
month. Budgeting will let you know how much to save for major expenses like car repairs,
property taxes, and college tuition.
You have a set amount of money to spend and to save. A budget will help you decide how to
treat it. Most families don’t have a plan for their financial future, so they continue to use credit
cards and create debt beyond their ability to repay.
The system of debt has become so corrupting that people who don’t even have incomes are being
pulled into debt. The most egregious example is students. High school students now receive
credit card offers in the mail; ironically, many high schools across the country don’t even teach
these students how to balance a checkbook. Credit card companies bank on the assumption that
parents will pay the bills that their high school students amass; this throws the student into a
“buy now pay later” mindset, and throws the parents further into debt.
In addition, our college students are graduating with $80,000 or more in student loans. They
begin life behind the eight ball and the struggle to get out of the pit can cause problems for the
rest of their lives. These problems include:
1. Difficulty purchasing a home because of the student loan amount.
2. Difficulty in marriage because of mounting bills.
3. Decline in quality of life due to having to work overtime and second jobs to pay off
debt.
4. Decline in health due to working multiple jobs and not getting enough rest.
5. Rapid aging because the body is breaking down from overwork and worry.
A budget will help everyone from the high school student with her first job to the retiree on a
fixed income.
Before I get into budgeting methods I want to say a word about having a poverty mindset. What I
don’t want you to do during this expense reduction and budgeting process is obsess over limiting
your expenses. You as a budgeter shouldn’t always be saying “no” or “I can’t” or “I shouldn’t.”
If you do, you may develop a mindset of scarcity, so please don’t focus on scarcity.
There are ways to budget and reduce expenses which won’t cause you to have a poverty mindset.
For example, don’t necessarily set monthly limits in your flexible spending categories. We know
the mortgage or rent is a set amount each month and we put funds aside for those fixed expenses.
However, for other spending areas be a little flexible. For example, don’t limit your movie
spending to $40 each month but pace it out based on your level of success the previous month
and based on other expenses for the month. You may not see any movies that you are interested
in this month and you may see three the next month. Being rigid would be to miss one of the
movies you want to see because it would take you over your set movie budget. Let’s avoid this
behavior because it will only keep you in a poverty mindset. A poverty mindset can hurt your
self-worth, your peace of mind and make you less productive in every other part of your life.
However, being flexible let’s your mind focus instead on business building and increasing your
income, which will translate into eliminating debt and accumulating wealth. Make sure that the
things you spend money for add value to your life, make sure your purchases are going to be
worth using that money for.
The overarching rule to remember with this “flexible budgeting” is to never spend more than you
earn and save a set percentage each month. We will talk about saving and investing later in the
book.
So let’s get started with budgeting methods:
I like two methods of budgeting: the spreadsheet method and the envelope method. We will
discuss both methods and observe examples of both. The first step to budgeting is to know how
much money is available each month and where it is currently being spent. You gain this
knowledge by going through the last few months’ check registers to chart your previous
spending habits. Take some time to go through your check register today to see where you have
been spending your money. For those who don’t use checks, go back through your receipts; if
you haven’t been keeping records, jot down from memory how you have spent your money over
the past three months.
You will see average family spending trends later in this section. This chart shows what the
average family spends for housing, clothes and other items, and where you fit into the average.
To prepare your budget you must place all of your annual spending categories on paper, along
with the household annual salary. Go through the last few months’ check registers to figure out
how much you spend on these items annually. Your goals are: (1) to make sure that no one
category is out of proportion and (2) to see where you need improvement in reducing expenses.
Don’t try to overcorrect previous bad habits by not allowing any flexibility in your budget. For
example, when I got married, my husband and I had about 13 credit cards between us. In my zeal
to get them all paid off, I would send extra payments to the detriment of any entertainment
money for our “Friday night dates.” I had to strike a balance between my zeal to be debt free and
my family fun time.
To married couples: The budget has to work for both of you, not just one. It’s not a budget if one
is following it and one is frivolously spending.
Be patient. It may take up to a year to balance the budget on a monthly basis. Remember, it took
you more than three months to get into the hole and it will take more than three months to get
out. A budget requires discipline.
For those of you who have fluctuating income, such as salespeople, consultants, real estate
agents, contractors and seasonal workers, don’t think that you can’t budget. A budget can help
you tremendously. The trick is not to borrow during lean months and not to spend all that you
have during high-income months.
First, figure out your average annual income from last year. Divide the result by 12 and develop
your budget around that monthly figure. You should put all of your income in a savings account
and draw your average monthly salary from that.
Let’s look at a couple of examples:
Randy Reid is a single real estate agent. Randy earns commissions when he sells a home; he
doesn’t have any other income, but usually sells enough homes in a year to make sure that he can
keep his own home. In months when Randy’s sales are high, he has been spending all of his
money on the latest electronic gadgets known to man. In months when Randy does not sell a
home or just one home, he has been using his credit card to get cash advances for his bills.
I asked Randy to figure out how much money he made last year, and determined that he made
$70,000 that year and averaged around $70,000 the past two years. Dividing $70,000 by 12
showed that his average monthly earnings are $5,833. Randy completed a worksheet detailing
his monthly income and expenses. Remembering that his average monthly income is $5,833; he
wrote in all of his monthly expenses, line by line, adding a couple of miscellaneous lines.
Next, Randy opened a savings account in which to have his commission checks direct deposited.
After determining that Randy’s monthly bills averaged $5,000, it was clear that Randy should
have enough income to avoid being in debt, and even to start saving.
When Randy received a commission check that was more than $5,000, he only withdrew that
amount from savings and transferred it into the checking account for expenses. When Randy’s
commission check was well below $5,000, he had money in the savings account to cover the
difference, instead of getting a cash advance from a credit card to pay the bills.
As you can see in this example, Randy was able to balance his budget and start saving almost
immediately.
Now, let’s look at Bert and Benita Benford.
Benita Benford is a master beautician with a young son. She runs her beauty salon in her
basement. Benita has struggled with her household finances, even after leaving the salon she
used to work for. Her husband Bert is a bank teller who makes $3,000 per month. Benita’s
monthly income fluctuates between $2,000 and $4,000, including $1,000 per month from her
father’s death benefit.
When Benita and Bert sat down to do a budget, they first needed to be on one accord about how
they would run their household. They needed to agree:
1. To do the budget together and stick to it.
2. To talk about every spending decision over $20 that’s outside of the budget.
3. Not to create any additional debt.
Once we charted all of the Benford’s expenses we noted that their monthly expenses were above
$6,600 and they were not consistently earning that amount.
The first thing they had to do is get their expenses down to $6,000 or less. After some heated
conversations, Benita agreed to give up spa treatments, Burt agreed to give up golf, and they
both agreed to drastically cut movie going and other entertainment until the budget is balanced
and they are able to save a little.
Last year’s records show that Benita consistently makes around $30,000 per year, and we know
that Bert makes $36,000, for a combined total of $66,000. After taking spa treatments and golf
out of the budget and reducing entertainment and eating out expenses, they were able to make
progress. Bert had his funds direct deposited into the couple’s checking account along with all of
Benita’s beauty shop income; her death benefit money was direct deposited into their savings
account.
When Benita had good months, they left the death benefit funds in the savings account to be
available for months that they came up short. After the savings account grew to about $2,000, the
couple opened an additional savings account to actually save for emergencies and after that to
invest for their future.
The two previous examples utilized the spread sheet method of budgeting.

Now let’s explore the envelope method of budgeting.

The envelope method is where you use cash or money orders instead of checks. Many people, for
many reasons, do not like to have money sitting in banks. We will not get into that debate here,
but suffice it to say that you can still manage a budget without utilizing a bank account.
With the envelope method, you still chart out your expenses on paper, but instead of depositing
your income into a bank, you cash checks or receive cash payments and put the cash into
envelopes or purchase money orders with it.
For example, let’s meet Patrick Peterson.
Patrick Peterson is a 58 year-old plumber who loves his craft and has been doing it for over 30
years. He used to work for a company, but decided that he wanted to control his income, so he
started his own company—Peterson’s Plumbing Solutions.
Patrick’s grandparents experienced the Depression and taught him to never trust banks. Even
when he worked for the plumbing company, Patrick would cash his pay checks as soon as he
received them. He lives in a rented condo and drives a 20 year old Honda Accord named Bessie.
Patrick came to me when he realized that he didn’t have enough money saved to retire, and he
doesn’t know how long he can continue to twist and turn his body into cracks and crevices to
reach pipes to fix plumbing fixtures. Therefore, he was ready to take radical action to get his
finances in order.
It is NEVER too late to start a financial action plan. I have seen people get their finances in order
and land in top shape in three years! I have to say though that it will not be easy for most people,
and extra effort and discipline are definitely mandatory.
Because Patrick was not one of the best record keepers, I had him collect all of the bills he paid
over the last two years to get a picture of how he spends his money. He got a printout of the rent
paid on his condo from the rental office, printouts of phone bills, insurance payments, and car
repair invoices from the Honda dealer (Patrick took good care of Bessie).
After I gathered all of Patrick’s expenses that he could find, I factored in things like food (he ate
out a lot), music (he loves to buy CDs), and vacations, which he took every year with his older
brother and his family. They usually went somewhere out of the country like Europe or South
America. After much work we determined that Patrick was not in debt, but he spent everything
he had every year. I realized that in order to get Patrick to the point of saving for retirement, he
had to make drastic changes in his spending habits. Patrick also told me that he could work more
hours than he was actually working just by accepting more jobs, which we agreed he should do
immediately.
Patrick went to the local dollar store and bought 20 little plastic boxes with tops, which he then
labeled. Giving, rent, insurance, food, savings, entertainment, vacations, supplies, utilities,
miscellaneous and many other labels were taped on Patrick’s boxes. He made four (4)
“Miscellaneous” boxes for those irregular expenses that occur occasionally.
Patrick put all of his monthly expenses on a spreadsheet, along with his monthly income. Each
time he did a plumbing job; he either received cash or cashed the check. Next, he placed the
funds into the boxes based on the budget, and when one box was empty he had only a few
options to rectify the situation.
For example, if the “Entertainment” box was empty because he went to the movies twice the first
two weeks of the month, he could not go to the movies or pay for other entertainment that month
unless the funds came from the “Vacation” box. Because Patrick looked forward to vacationing
with his brother, he would not go to the movies any more that month.
As time went on, Patrick’s “Savings” box grew to the point where he was ready to invest in
rental real estate by buying homes to fix up and rent out. We will discuss long term savings and
retirement later in this book, but Patrick was able, within three years, to increase his income,
reduce his expenses, and get his retirement portfolio together while still being able to go on
lavish vacations with his family.
The envelope or box method of budgeting will also work for children, and is a good starter
budget for them. We will discuss children and finances later in this book.

Now let’s talk about average family spending trends in budgeting.

Below I have listed the average family spending trends based on data from the Bureau of Labor
Statistics. What you need to do is reduce these expenses, especially the housing expenses, as
much as possible, and increase your savings. As you can see, the average…
Housing—32.83% Rent/Mortgage, Utilities, Taxes…
Food—12.83% Groceries and eating out
Auto—17.50% Car notes, gas…
Insurance/Pensions—10.87% Personal, pension, life…
Clothing—3.37% Self explanatory
Health Care—6.91% Self explanatory
Entertainment—5.06% Recreation, vacations…
Contributions—3.72% Tuition, tithes/offerings, alimony…
Other—6.91% Alcoholic beverages, credit cards, tobacco…
You don’t want to be average, and the way to break the chains of financial bondage is to reduce
your expenses below the statistics on this chart, increase your income, and start saving and
investing.
Adjusting your budget
After you have figured your personal percentages for the major categories by reviewing the
average family spending trends, you need to be flexible and adjust your budget where necessary.
Don’t feel badly when some of the percentages are above the norm. Adjust your budget to match
what you can handle at the time. If you stick to your budgeting plan, you will soon see positive
changes and a reduction of your debt stress level.

Bank Reconciliations
When you budget and use bank accounts, you must reconcile the accounts on a monthly basis or
your budget and bank account will suffer.
Many of you who use checking and savings accounts fail to exercise control over them. I was
surprised to learn that thousands of people don’t even reconcile their check registers with the
monthly statements.
You can’t keep a budget in order without reconciling your bank accounts.
Errors are made regularly by you and by the bank, and if you don’t reconcile the accounts, you
could lose money.
For example, were you aware that if the bank makes an error in your account that causes a
decrease in your funds, you have to bring that error to their attention within 60 days or the bank
is not obligated to replace those funds? However, if the bank makes an error that increases your
funds, they can take back those funds at any time—even a year later! This fact can wreak havoc
on your finances if you are not careful.
Banks are in business to make money. They charge all kinds of fees that can add up to hundreds
and even thousands of dollars per year, especially if you are not managing the accounts by
reconciling them monthly.
Here is how to properly reconcile your bank accounts:
You must write down every transaction in your check register, including all ATM and debit card
transactions.
Please try to limit the number of ATM withdrawals that you make, to avoid spending cash and
not keeping up with it, and not making sure it is used for budgeted items. I have heard of people
who use the ATM on a daily basis; these folks are usually the ones who spend all they have
before the month is over.
Also, please try to limit the amount of debit card purchases as these also tend to ruin a budget;
because of so much identity theft and financial fraud, debit cards have become a favorite for
crooks. If someone gets access to your debit card information and drains all the funds from your
checking or savings account, you may be in a world of trouble, as your mortgage, car note, and
insurance payments start to bounce. Correcting debit card fraud will take much more time than
you can imagine, and can ruin your financial situation faster than credit cards ever could.
In a household where two people use the same account, one person needs to keep the check
register and be responsible for registering every transaction that applies to the account. The other
person needs to be responsible for telling the register keeper of every check written, every debit
card purchase, and every ATM withdrawal.
Many times we forget to record ATM withdrawals, and that will catch up with us as checks start
to bounce and fees start to accumulate.
Reconciling a bank account is very simple. First, draw a line down the middle of a sheet of
paper.
Next, put the balance from the bank statement at the top left of the page and the balance from
your check register at the top right of the page.
Figure out the check numbers that you have written since the last day of the previous month, or,
if you have been reconciling, the last check posted on the last reconciliation. Place the very next
check number (which should be the first check of the month being reconciled) and the last check
of the month being reconciled at the bottom of the page. This is done so that you will be aware of
all checks that need to be accounted for.
Next, log all outstanding checks that have not cleared the bank yet in the left column and all of
the bank charges in the right column.
Place all deposits that have not cleared the bank yet in the left column. Add any interest earned to
the right column.
Next, correct any errors in your check register by placing the change in the appropriate column.
For example, if check #3600 cleared for $20.41 but you have it in the check register for $20.14;
you need to subtract 27 cents from the right column to correct your check register.
Another example is if the bank charged your insurance draft of $50 per month twice, you need to
add that amount back in the right column and contact the bank immediately to reverse the
additional charge. If you wait three months to contact them, they are not obligated to reverse the
charge and you will have to go directly to the insurance company to handle this error.
Once you add and subtract all of the numbers in the columns, you should see the same balance in
each column. Work with your reconciliation until all errors and items are detected, and the
reconciliation should be balanced.
After reconciling, make sure that you log all necessary corrections in your check register or those
same errors will show up the next month.
It is good to do your reconciliations and keep your check register with a pencil. Otherwise, you
will need to purchase plenty of whiteout!
For savings accounts, you need to do the same thing. However, make sure to post all deposits
and withdrawals. Savings accounts should be much easier to reconcile. It is usually a matter of
adding interest income to the reconciliation and to your savings account register.
Now you need to implement bank reconciliations on a monthly basis. Have fun!

Knowing How Much You Owe

When I counsel people in severe debt, one of the first things that I ask is, “How much do you
owe?” Believe it or not, that question often stumps them. They know they owe a lot, but they
have no idea how much. This is a big reason why they are continuously in debt.
When people come to me for help with their finances, I first ask them to collect all of their bills
and list them on a spreadsheet. They are often surprised at the debt amount because it is usually
much more than they have mentally calculated. For instance, one couple told me that they
thought their debt was $11,000, but when they completed the spreadsheet, it was actually
$27,000!
In keeping track of what you owe, you should make a spreadsheet and list mortgage, credit cards
and other consumer debt purchases, cars, and other items you are purchasing or have purchased.
You should not include rent, utilities, telephone, day care, and expenses that are not purchases.
Although these are monthly expenses, they are not permanent, and you can stop them without
much trouble.
For example, if you purchased furniture that costs $5,000, you are obligated to pay that amount
until it is paid off. On the other hand, if your child’s day care costs $300 per week, you can stay
at home, change day care centers, or have grandma keep the baby; you won’t have to go through
a credit report debacle like you would if you stopped paying for that furniture.
The bottom line is that the totals that should be placed on this list are for purchases that you can’t
change and that must eventually be paid off or sold.
Write the following captions across the top of your spreadsheet:
1. Name of the creditor
2. Total balance
3. Monthly payment Amount
4. Number of payments left
5. Interest rate
6. Payment due date
7. What I purchased
Placing items on this list will surely let you know what you have done concerning your finances!
Once you list these items, your goal is to get them paid off as soon as possible. I advise people to
pay the smallest balance off first. This gives you a sense of accomplishment and motivates you
to pay off the next item. One thing people can do is to take any extra funds, like refunds or
company bonuses, and use all or part of the money to pay off some of the debt.
When I utilized this method early in my own life, I started with the smallest of my multiple credit
cards and had it paid off in two months. I then ceremoniously took the card into the garage, cut it
into four pieces, placed it on the ground, and did a dance on top of it. I did this with every
subsequent credit card until they were all paid off. I then obtained one credit card for all of my
needs and I was done with playing the multiple credit card game.
Understand that you do not need a card from every department store, every gas station, every
airline, and every professional organization with which you hold a membership. One card,
whether it is a Visa or MasterCard, will suffice for all of your travel and other needs. You can
use Visa or MasterCard at department stores, to book airline tickets, or to buy gas or any other
product or service. You can even use them internationally. Get rid of all those other cards and
keep one card.
You will be careful about running up the balance, and you will cut down on spending, knowing
that you have limited access to credit.
The ideal situation is to have one credit card whose balance you pay off every month, and have
no other consumer debt. Sometimes we have to have a car note and a house note, but make sure
you keep these debts to a minimum.
For example, don’t buy a $400,000 home if you can’t truly afford it, just because a lender says
you qualify for it! That is a trap and if something happens to your job, you are really in trouble.
Get a house that you can comfortably afford without working overtime or being in a crisis
situation if you or your spouse loses a job.
It is very hard to do today, but we all need to purchase homes that we can pay for on one income.
Many times a wife will work for one or two years after marriage and all is well, until the couple
gets pregnant and the wife takes time off from her job. Many companies are insensitive and do
not welcome the woman back after her child is born, or they may cut her hours, thinking that she
will have another child soon. Couples really need to plan in advance for such occurrences so that
when the new baby comes, the financial strain won’t come with him.
Don’t buy a brand new car when you can get a used one of the same year, make, and model with
about 10,000—20,000 miles on it for up to $10,000 less. There is no need to ever purchase a new
car today. The only thing a new car can get you that a good used car can’t is more unnecessary
debt!
I have purchased only used cars since 1987, and statistics tell us that if we only buy used cars
and run them until they won’t run anymore, then for each of those automobiles we buy and keep,
we have shaved five years off of our retirement date—if you utilize the other financial principles
noted in this book. That means that you are saving around $10,000 a year by buying a good used
car and those funds can instead go toward retirement.
Make sure that you are always able to show what you owe. Make sure that you routinely pay off
the debt and don’t create more. Also, try to resist the temptation to keep up with the Joneses by
buying big houses and new cars. By the way, who are the Joneses, and why are we trying to keep
up with them? For all we know, the Joneses are trying to keep up with us! That’s another story
for another day.

What’s Good and Bad About Interest

You will be learning a lot more about interest as you implement your plan to get out of debt;
however, right now I will give you the basics. Personally, I think that paying interest is evil. Our
society has gotten so tangled up in borrowing that most people think interest is a part of everyday
life.
You need to stop paying interest on credit cards and other consumer debt; you will learn how in
this book.
Banks and other financial companies calculate interest in different ways. They use simple
interest, compound interest, and add-on interest. Today, banks even tack on late payment fees of
up to $39.99 per month! You must understand that no matter what type interest you pay, you are
slaves to this financial system.
It is rumored that Albert Einstein was once asked, “What is the most important mathematical
formula?” His response was, “The formula for compound interest. Those who understand
compound interest collect it, and those who don’t, pay it!” You collect compound interest by
becoming business owners and investors, and it starts with getting out of debt and ceasing to pay
compound interest to the bankers.
Let’s discuss the Rule of 72, which can be extremely useful and valuable to you. It’s a handy
mathematical rule that helps to estimate approximately how many years it will take for an
investment to double in value at a specified rate of return. To estimate the number of periods
required to double an original investment, divide the most convenient “rule-quantity” by the
expected growth rate, expressed as a percentage.
For instance, if you were to invest $2,000 with compounding interest at a rate of 9% per year,
the “Rule of 72” gives 72/9 = 8 years required for the investment to be worth $4,000.

Using realistic interest rates:

The Rule of 72 tells us that if you obtain 2% interest on your investment, it will take 36 years for
$1,000 to become $2,000. Isn’t this the interest rate that you get at the bank on your savings
account and on your CDs? Do you have 36 years for that investment to double? NO! Are there
better ways? YES! Later in this book we will discuss ways to increase your investment income
and retire financially fit.
On the negative side of interest, the Rule of 72 tells you that if you obtain a car loan for $20,000
at 18% interest, you will have paid a total of $40,000 for that car after four years! You will have
actually paid for that car twice after four years.
You may not be aware of it, but people in this country pay 18% on debt like cars and credit cards
due to their poor credit rating. Credit card debt in the United States is an epidemic!
A $5,000 CREDIT CARD BALANCE @ 21% BASED ON A MINIMUM MONTHLY
PAYMENT OF $150 (3% OF THE UNPAID BALANCE) WOULD TAKE YOU 22 YEARS
TO PAY OFF!
This is how most Americans are kept in financial bondage all of their lives.
I am sure that you now see how interest is shackling you with your mortgage and other long-term
debt.
Let’s talk about mortgage interest. By the way, the Latin for mortgage is debt until death.
IN A TYPICAL 30 YEAR MORTGAGE for $150,000 at a 7% rate with a MONTHLY
PAYMENT of $ 997.95 and TOTAL YEARLY PAYMENTS of $ 11,975.40, you will pay more
principal than interest only during the last five years of the mortgage!
How many people do you know who live in a house 25 years? Not many. This means that you
are usually just paying interest, virtually renting, most of the time that you are in a home.
An amortization table is a form that shows how much principal, interest and escrow you pay
monthly on a mortgage. Normally the vast majority of each payment goes toward interest and
only around one-tenth of the annual payment actually goes toward knocking down the principal.
You could change this debt cycle by paying additional principle payments, but due to the cost of
money it may be more important to use the extra money for savings, investments, and starting
successful businesses. Yes, spending money has a cost and we might as well discuss it here.
Your cost of money is very essential to every financial decision you make. For example, if I
proposed to lend you money at 40% interest, how much would you borrow from me? Hopefully
you would reject that proposal. Your basis for refusal of that proposal is obvious to most anyone
—the cost of money in this scenario is 40%.
But if I loaned you the money at 0% interest you’d be smart to borrow as much as you could get
and pay me back as slow as you could because your cost of money in this scenario is zero.
Now that we’ve determined how to calculate the cost of money let’s look at how it affects your
spending decisions, including everyday purchases.
Here’s a good example. Let’s pretend that you have a credit card that charges you 9.9% interest
and your balance is $11,500. You find out that your next door neighbors, the Jones’s, are going
on a cruise to the Bahamas and you get jealous and want to book a cruise for your family. The
cruise for your family of four costs $4,750 and you plan to use part of your income tax refund to
pay for it. Is $4,750 your cost of money? Certainly not. When you shell out the major portion of
your tax refund for that vacation you have decided not to pay down the 9.9% interest credit card,
so in the end it will cost you $4,750 at 9.9% interest to go on that cruise. In addition, if you have
an interest bearing investment that pays you 6% and you choose to go on the cruise instead of
taking the refund check and placing those funds in this investment, your cost of money is $4,750
at 6% interest. In the second scenario you are paying a high opportunity cost for not investing the
refund check.
To be clear, every time you chose to make a purchase, even small one, instead of paying off debt
or increasing your investments, there’s an additional cost you have to pay. That cost is
determined by two numbers. The first number is the highest interest rate that you’re paying on a
loan and the second number is the highest secure, predictable return on your money. When I say
predictable I am not including the stock market. You know that I believe that entire system is a
wicked game when it comes down to us outsiders. People are constantly advised to put money
into 401(k)’s their whole working-lives, but their money is nowhere near secure. It is not and has
never been guaranteed against loss and I believe that those that continue to put money there after
2008 will suffer the same fate again soon.
Please don’t get paranoid and stop spending because of the cost of money. That reaction will
cause you to develop a poverty spirit. Just be aware of the cost and spend more wisely. I am
hoping that exposing you to the cost of money will cause that very reaction.

What About Borrowing and Lending?

Before we move away from decreasing our expenses, I would like to say a few words about
borrowing and lending. It is very hard not to borrow in our society. For those who did not learn
to save for their expenses when they were very young, and those who don’t have rich relatives,
you may need to borrow for a home and car, which are very large expenses. However, borrowing
—using credit cards—for other items many times shows our lack of self-control and costs us
greatly in the end.
If you only borrow for homes and cars that you can afford, you will keep your debt load low and
increase your chances of obtaining wealth. Borrowing for college may be on your list, but if you
start planning far ahead of time for your children’s college education, there will be no need to
borrow when the time comes for them to attend college. The bottom line is: borrow as little as
possible and as infrequently as possible and, most importantly, only borrow what you can afford
to pay back!
As far as lending is concerned, I learned never to lend what I can’t afford to give away as a gift.
When you start to use the principles in this book and your finances start to improve, people may
start to notice. One important thing my Italian mentor taught me is that when I start to obtain
wealth, “DON’T TELL NOBODY NUTIN.”
People are very interesting, and when you stop complaining about being in debt, start taking nice
vacations, and building savings and investment accounts, people will concentrate less on asking
you how you did it and more on asking you if you can lend them some money.
In my experience, and based on the experiences of friends that I have talked to, we all like to
share our victories with our friends and relatives, but you need to be careful that you don’t get
pressured to “share” the resulting financial blessings with others. One of the worst things that
you can do is to build up a little savings and have others “borrow” it from you “just for a little
while.” This scenario actually happened to me.
I had saved up $16,000 for emergencies, but because I verbally shared my financial victories
with others, I let myself get pressured into lending those funds for others’ mortgage payments
and other similar “emergencies.” Soon the $16,000 turned into $2,000, and I still have not
received the repayments from these people. That was not money I could afford to give away, and
I learned a hard lesson. Aside from the fact that I didn’t have that nest egg anymore, some of the
people won’t even call me, probably ashamed to talk to me because they have not repaid me.
I had to start all over from $2,000 and build up for my wealth plan.
So the bottom line with lending: do not lend what you can’t afford to give away, and don’t tell
friends and family when your savings accounts and investments are on the rise, or you may be
pressured into lending some of your nest egg.
I am totally against co-signing on loans. I have seen people co-sign for grown folks who had not
kept their finances in order. When you co-sign for another person, it is just as if you were buying
that item yourself—you are ultimately responsible for the loan payments if the person you are
co-signing for defaults.
For example, in one case a trifling couple walked away from their house and car, and left their
relative with a substantial car note. The relative who received the car was not fully prepared to
take over that note, and this situation was a substantial setback for her.
IMPULSE BUYING
Impulse buying kills any budget and financial improvement plan. Here are ten questions that you
need to ask yourself about any purchase.

TO BUY OR NOT TO BUY

1. Do I really need it? Television, newspaper, radio advertising, and infomercials egg us
on to buy thousands of items, but do we really need them? Before making most
purchases, even groceries, we need to get into the habit of asking ourselves if we really
need the item. It’s easy to get caught up in the hype, but if you take time to think about it
instead of whipping out the credit card and calling the 800 number, you will find
yourself saving and climbing out of debt. Late one night I was flipping through channels
(which is a very bad idea because late night TV infomercials will get your money).
There was a company that would build a new room onto your deck or patio, and I really
wanted to enclose my deck. By the end of the infomercial, I had taken down the
telephone number and would have called then at 2 a.m. if I hadn’t needed to check my
bank balance. I was thinking more clearly at 9 a.m. and that immediately cooled my
heels; I realized that I had other house maintenance projects to complete before I did
anything with that deck. It dawned on me that the infomercial made me forget about the
more important projects which needed to be completed. Many people impulsively
purchase items, not thinking about the fact that they are already in debt or that they have
more important goals and projects to complete first.
2. Have I searched for the lowest price for this item? Even if you determine that you
need the item in question, have you searched for the lowest price? Take that deck
enclosure for example. If I had determined that it was a good investment, the next thing I
should have done was to call other deck enclosure companies for their prices for my size
deck. Companies that advertise the most often charge the highest prices, because they
have to pay for all of that advertising.
I might have found a few companies with lower deck enclosure prices than the one
advertised on the infomercial.
3. Is the price right for my budget? If you have placed something in your budget, you
need to make sure that the price of the item you are looking at is right. If I had budgeted
$2,000 for a deck enclosure and the infomercial was charging $3,000 and other
companies charged $2,700, I would have needed to either find a company in my price
range or wait until I had the money to get it done. Impulsively going with a company
over $2,000 and not having the extra money would have taken money from some other
part of the budget and thrown me further into debt.
4. Is this the best time to buy? Sometimes we just need to stop, wait, and use common
sense about buying. Getting that deck enclosure in the dead of summer would be the
most expensive time, because most yard work is done in the summer. I could almost pick
my price in the winter because then these types of companies have less demand and are
often starving for jobs.
5. Do I have the cash? The worse thing about impulse buying is when you spend
 impulsively using credit cards. Make a declaration that if you don’t have the cash for a
thing you will not buy a thing. My family took a trip to Africa in the late 1990s, and we
were on a strict budget. We wanted a video camera, but because we did not have enough
cash for a video camera, we bought several instant cameras instead, with a difference of
about $500. We missed a lot on video, but our instant camera pictures came out
wonderfully, and we didn’t return from the trip in debt.
6. Is there a substitute for this item? Sometimes there is something else or something
less expensive to purchase instead of the item being advertised for you to buy
impulsively. For example, I was watching another infomercial that advertised these
wonderful shoe insoles that would help with everything from posture to corns to energy.
When I went to purchase them at this exclusive store, I found that they were very
expensive. I hunted around and found some much less expensive insoles with equally
impressive results. A little extra time and energy on my part saved me hundreds of
dollars.
7. Does the item have any major disadvantages? Sometimes when we are caught up in
the hype we don’t think about the disadvantages of certain purchases. Someone that
impulsively buys that boat that they always wanted may not think about the fact that they
have to pay for boat storage; they can’t keep it in their driveway, garage, or backyard.
They may not think about having to pay for the annual boating license, fishing license,
and other associated costs. Ask yourself if this item requires expensive upkeep. Count all
of the cost of impulse buying; that new Corvette will not only bring large monthly car
payments, but your insurance will go up about $1,000 a year and ad valorem tax may
apply.
8. Have I researched the item? Many times when we buy impulsively based on
advertising, we don’t research to see whether the advertised information is true. Weight
loss plans that claim to help you lose 30 to 50 pounds in six weeks generate millions of
dollars. People don’t research these wonder pills and end up spending a week’s grocery
money on them, not knowing that some of their ingredients are very dangerous,
[1]
according to the Food and Drug Administration. Even if there is a secret, patented
ingredient that helps with weight loss, the boxes always tell you that proper diet and
exercise are essential to lose weight. If you did those without buying the pills, you would
lose weight!
9. Will the item’s value increase or rapidly decrease? Sometimes impulse buying leads
us away from seeing that the item we want to purchase will soon be worthless. If
someone advertises a computer or other electronics at a deep discount, we need to
determine whether the item is already obsolete and whether we will be able to get
replacement parts after we buy. Also, you want to purchase items that have the potential
to increase rather than decrease in value, like silver and gold, which we will discuss
later.
10. Will the item contribute to family unity? Sometimes we want things so badly,
perhaps since our youth, and we don’t stop to see how they will affect our families.
Impulsively buying that little red Corvette that you always wanted before you have the
means to pay for it, or without consulting your spouse, can really wreck a family. Men
sometimes go through a mid-life crisis and impulsively buy large, expensive toys to try to
satisfy that forty year itch. Be careful to make sure that as a family you discuss purchases
that carry large price tags. When a family eliminates impulse buying, they will be able to
save thousands of dollars a year and be a happier less debt ridden family.
SECTION TWO
 INCREASING INCOME

IMPROVING YOUR FINANCES

In order for us to improve our finances, things can’t stay as they are. The definition of insanity is
to do the same things over and over and expecting different results. We have been operating in
insanity by going to the same job with the same pay, keeping the same spending habits, and
putting money in the same failing investments that the professional gurus have been telling us
about for the last five decades. It’s time to get out of the insanity mindset and our circle of
sameness, and improve our finances!
It’s interesting to me that foreigners come to this country, whether legally or not, and before you
know it they have a store or some type of business up and running. They hire only their relatives,
who then start their own businesses. They seem to grasp the fact that in order to make it in this
country, they have to improve their finances, which usually start off at zero or sometimes less.
Although some come here with savings from their home country, most come with just a little
money in their pockets and some even come in debt, having to pay someone for their
transportation to the States.
The only way for those of us born and raised in the United States of America to really improve
our finances is to reduce our expenses and/or increase our income. We have discussed
decreasing our expenses. Now we will discuss increasing our income for maximum financial
empowerment. This section is geared toward those of you that are very serious and want to be on
the fast track to financial freedom.
IMPROVING YOUR NET WORTH
Most people think that assets are things you own or buy, like homes and cars. However, we
know that assets are things that put money into your pocket.
Examples of real assets are:
1. Profitable rental property
2. A profitable business
3. Income investments
4. Savings
5. Precious metals
6. Agricultural land
Most people think that liabilities consist of what you owe on the things that you buy; we know
that liabilities are a lot more than that. Our homes are liabilities unless they bring money to our
pockets, as in the case of rental property.
People have challenged me and said that their homes are assets without being rental property.
The question that I ask is, “How is the home bringing money into your pocket?” It still needs
painting, roofing and other maintenance on a regular basis, and if you skip paying the property
taxes to the county for a while, you will see who really owns this so-called asset.”
Other liabilities are cars, vacations, furniture, and credit cards. Some people say that our children
are also liabilities, but I don’t want to say that and spark the heated debate that always occurs
when that statement is made in a public forum.
Conventional wisdom says that your net worth is assets minus liabilities. Banks and other
financial institutions would like you to have a high net worth or low debt to asset ratio if you are
applying for a loan of any type. Therefore, I am going to show you how to calculate your net
worth.
Let’s go over the placement of conventional assets and liabilities:
In the left column of a sheet of paper, list items that you are purchasing, have purchased, or
otherwise own, including your home, automobile, jewelry, savings accounts and investments.
Let’s say that your home cost $150,000 and, based on a recent appraisal, is worth $175,000. You
would place $175,000 in the asset column.
In the right column, place all balances of items that you are purchasing. For example, the home
that was purchased for $150,000 has a current balance of $125,000. The amount to list in the
liabilities column is $125,000.
There are various forms or set-ups to record your net worth, but the simplest one is to place your
conventional assets in the left column, your liabilities in the right column, and subtract the
difference. In the example above, the assets total $175,000 and the liabilities total $125,000.
Therefore, this person’s net worth is $50,000.
Interestingly enough, once you achieve a high net worth, you may not even have to worry about
getting bank loans because your assets should pay for your liabilities. Many wealthy people are
in this position and are able to pay cash for cars or boats; some are even able to pay cash for
homes.
Our goal is to have a high net worth and start investing for our futures, so we must get out of
debt, get out of debt, get out of debt!
ABOUT INCREASING INCOME
All day financial advisors will tell you not to spend more money than you earn. When we hear
that slogan we always think we have to cut back, delay purchases, skimp and penny pinch.
My philosophy about not spending more than I earn is to just increase the amount I earn! I focus
on creating more value and revenue in my life rather than having a poverty outlook. The key is to
make money faster than I spend money. That takes a lot of forethought and creative thinking.
I see so many people being penny wise and pound foolish in their lives, thinking that they’re
building wealth. They throw the baby out with the bath water by not being increase conscious.
Increase consciousness is your ability to focus on ways to increase your income, thus building
wealth, even if these ways cause you to spend a little more than you normally spend.
For me, being wise about spending entails growing my businesses, not just reducing my
expenses. For example, when I conduct seminars I chose to use high-end hotels. I used to use my
basement to save money. My basement is large, clean, set up like a classroom and has tables and
a small refrigerator to accommodate snacks and drinks that cost an arm and a leg at a hotel.
However, I stopped doing the seminars in the basement because while I was saving money I
didn’t realize that I was damaging my status as a wealth creation specialist. People would see me
as a saver, someone with lots of financial knowledge making wise spending decisions, but not a
wealth creator. They couldn’t see past the fact that I live in a lower-middle class neighborhood
even though my home is large and immaculate. I didn’t realize that in order to grow my business
and reputation as a financial expert and wealth creation specialist I had to exude wealth. I didn’t
want to go out and buy an expensive house with a large monthly mortgage payment, so I spend
the extra money and rent nice hotel meeting rooms, and I still feed the guests. That way they can
listen to what I am saying and see wealth around them at the hotel. We will talk about starting
businesses a little later.

Ways to Increase Your Income

When it comes down to increasing our income, we have to think about several factors. Some of
these factors are:
· How much extra time do I have to dedicate to increasing my income? If you are
already working 60 hours a week, you don’t have a lot of time to add additional
responsibilities. Some people work jobs that require more than the typical 9 to 5
schedule; for them to increase their income they can either:
1. Ask the boss for a raise, which I don’t recommend.
2. Find other avenues of income while they are still on the job.
3. Find another job with higher pay, while they are still working.
4. Quit the current job and find another job, which I don’t recommend.
5. Quit the job to start a business, which I don’t recommend.
6. Start a business on the side and build it until the income from the business replaces the
income from the job.
Asking for a raise or quitting one job and going to another with higher pay are only temporary
fixes and may backfire on you due to layoffs and other factors beyond your control.
Quitting a job before you find another job or quitting a job to start a brand new business can get
you into financial trouble because your bills are still due on a monthly basis.
· What skills do I currently possess, or can I easily obtain, to help me increase my
income? If you have or can obtain skills that will get you a better job, a second job, or
help you start a home-based business, you may want to consider these options. A
computer operator with a demanding job and no time for family can start a computer
service business on the weekends and grow the business to the point where he can fire his
boss.
I have a friend who started and built his home-based business to the point where right before
Christmas he went to work wearing a Santa Claus suit and told his boss, “I’m sorry but I’m
going to have to fire you.” He took down the large bag he had on his back and proceeded to
give the boss and his co-workers gifts. Next, he walked out and never returned, because he
almost tripled his annual income with his new business.
Another example is someone who has a talent that they love. If you have a job that is totally
different from the hobby that you love, you may be able to make a business out of that
hobby and cash in on it. You may grow to the point that you don’t have to work overtime, or
you can quit your job altogether. We will talk about the potential for hobbies as businesses
later.
· What are the best ways for me to increase my income in the shortest amount of
time? If you are in debt, selecting a solution that will start your income increase as soon
as possible will motivate you and boost your confidence.
· For couples; what can we do together to improve the household income? A good way
to increase income is for a couple to work together as a team and share in responsibilities
in this quest. There are many couples who desire to find something to do together; it may
be good for one of them to start off with a business that they both love, then quit the job
and do the business full time. Later, the second spouse, who has been helping out during
weekends and evenings, can quit their job after the business is consistently earning more
than both of their salaries combined. This may sound farfetched, but couples determined
to grab hold of their financial futures are doing it all over the world.
· Do I have any assets that I can put to work to help increase my income? Some people
have assets they can put to work or even sell to increase income. Have you taken the time
to look through your house to find items that may increase your income? Do you have
any old coins that may be of value? Do you have an old car that someone would be
willing to buy and refurbish? What about old jewelry you no longer wear?
It may be to your benefit to search your house or your parents’ house for things that may
bring a little extra money to jump-start your finances.
I heard of a man who went to clean up the attic and found a box of old coins, which he took
to a dealer and found out that he was sitting on over $20,000 in rare coins. I don’t know
what he did with the money, but that surely would have been enough to start a new business
or an investment portfolio. There is a television show that values antiques that you may want
to watch for great ideas about valuables around the house.
It should now be obvious that you need to get creative to find ways to increase your income if
you are serious about fleeing the rat race!
WHAT ABOUT A HOME-BASED BUSINESS?
The best solution for increasing income, in my opinion, is to start a home-based business while
you still have a job. Even if you don’t have a job, a home-based business is a great way to
increase your income.
It’s a new day! In the past, jobs provided most everyone with a dependable paycheck and long-
range security. Now, along with diminishing retirement benefits, jobs are hard to find and hold
onto; the alternative is to start a business. Obstacles to success are not as difficult when you start
a home-based business, and you can even start without quitting your job. Become a moonlighting
entrepreneur!
Millions of people all over the world have started and are managing successful home-based
businesses. Statistics say that the average income for a home-based business is $37,000 per year
in the U.S. This includes full time and part time businesses, and is an excellent trend; it may be
the key to catapult you into economic freedom.
If you decide to start a home-based business, you will have lots of company. According to the
Small Business Administration (SBA), over 50% of all small businesses are home-based. Your
start-up costs are small, you can take your time to build up sales, and you can set your own
hours. There’s less to lose and more to gain!
Based on whether you are single or married, have children or not, and several other factors, you
may decide to pick a business that operates only on the weekend, only in the evenings, or both.

Here Is A Short List Of Businesses That Require Little Or No Money To Start:

· Consulting
· Deliver dinners for restaurants and clients
· Direct Sales / Network Marketing
· Event planner (parties and events)
· Freelance writing for media
· Gift baskets
· Handyman services (Consider focusing on a specialty.)
· Hobbies (cookies, decorating cakes, etc.)
· Housecleaning
· Personal shopper
· Photographer (weddings, parties, or businesses)
· Remodeling (specialized)
· Resume/document writer
· Senior care services
· Teaching/tutoring: computer, musical instruments, languages, etc.
· Transcription service
· Website design and management
SPECIAL BENEFITS OF A HOME BASED BUSINESS
Home-Based Businesses Require a Minimum Investment
Operating from a spare bedroom or a garage, you can run a business with a minimum
investment, and exit it with a minimum of obligations and risks if you decide that business is not
for you. Thousands of people use extra space at their homes for full or part-time business. In my
previous neighborhood, there is a family who has been running a T-shirt company from their
garage for over 25 years. Many times when I would pass by in my truck, they would have the
garage door open and I could see hundreds of T-shirts and boxes.

Communication Technologies Enhance Home-Based Businesses

The Internet, computer, and communications technologies now offer home-based entrepreneurs
the same tools to operate as those used by multi-national corporations! If you have a cell phone,
laptop computer and a good Internet connection, you can operate your business from anywhere
in the world. When I go out of town, nobody knows that I am gone because my businesses don’t
depend on me being at my home. Even when I go out of the country, as long as the Internet
connection is decent I can continue to manage the businesses.

Your Business Can Start Small and Grow By Compounding

Start with one order at a time and grow by the power of compounding. For example, if your first
six months produce $1,000 per month, you may grow by 20% each month to reach $370,000
annually in five years. The mistake most people make is taking on too much business at the
beginning and then getting overwhelmed with orders. Avoid this temptation, because if you
spread yourself too thin, you won’t give your customers the best products and service and your
business will fail. I have seen many times where greed and ambition drove a start-up business to
ruin because customer service totally collapsed due to the owner biting off more than he could
chew.

You May Already Have a Potential Organization

If you involve your family, it’s possible that you will become closer by spending time together;
you have common goals and can utilize individual and collective family skills. When I had a
CPA firm, my children helped out and I paid them, and they enjoyed their duties and learned a
lot about business. Other family members have worked alongside me over the years, cousins who
had a good work ethic and even did more work than asked, because they cared about my success.
Don’t feel obligated, however, to hire or otherwise include family members in your business if
you think that they are just after money; those relationships are worth keeping separate so that a
permanent rift will not form in the family structure.

Home-Based Businesses Are Open to All Races, Ages and Situations

It doesn’t matter whether you have a degree or not, whether you are old, young, black, white,
Asian or even if you’ve been in prison; if people want your product or service, they will look
beyond the person, if they can even see you. Many home-based businesses are Internet-based,
which we will discuss later in this book.

You Determine Your Success In The Business.

A home-based business depends on you, the owner; its success or failure is not dependent on a
boss or other employees. You don’t have to wait for a board of directors to make decisions, and
you don’t have to tolerate lazy and vengeful co-workers. You can go as high as you are willing
to climb with your home-based business. Remember, though, to strike a balance between work
and family time. In the end, nobody ever wished that they made more money rather than spend
more time with their families.

Starting a Home-Based Business Is Productive For the Unemployed

If you are unemployed, you can gain the satisfaction of being productive by putting your skills to
work in a home-based business, and you can operate your business while still looking for a full
or part-time job. The home-based business will help defray living expenses while you search for
work. Then, once you land a job, if you still want one after starting your business, you can still
run your business on your own time schedule.

Approaches to a Home-Based Business

The two approaches to a home-based business are (1) moonlighting, which means that you run
your business while you are employed full or part-time, and (2) running a full-time home-based
business.

Moonlighting
When moonlighting you can use the money from your job to start the business while you keep
your fringe benefits. However, don’t quit your job until you are earning three times more money
working your home-business. I have seen people who started a business at home, were very
successful in the first year, then decided to quit their job. That turned out to be a premature
decision in most cases, because after the initial surge the business leveled off and the income was
not enough in the next year to support the household. Many of these people went back to jobs,
though some kept their home-based business on the side, and others gave up on their home-based
businesses. The ones that gave up didn’t seem to want to put forth the extra effort to move from
survival mode to actually thriving. This was sad, because they could have worked hard for a time
and then eventually leveled off their work and reaped a great reward.
Remember, never use time or tools from your job to do your home-based business when you are
moonlighting. It is not ethical to use the employer’s time to do your business unless you have
been given permission. Sometimes when work is slow you may have permission to read,
research, and study for your own purposes, but don’t abuse that privilege. Also, don’t compete
with your employer. If the skill you are using on your job is one that you can utilize in your
home-based business, please find your own customers and don’t try to take the customers from
your employer.
In my own CPA firm, I had several workers during busy seasons; two different clients called to
inform me that the worker at their location was soliciting them for business on the side. I had to
let these two workers go because I knew they were not operating in integrity and could
compromise my business, and that I could no longer count on them to do their best job for my
firm. They had their own agenda. When you start your home-based business while you are still
working, please avoid this mentality.

Full-time Home-Based Business

If you feel like it is time for you to go full-time in your home-based business, please follow these
steps before quitting your job:
· Work in that field first. If the field you have selected is new to you, take the time to
work part-time for someone else doing that same job; you will find out if this is really
something you want to spend most of your days doing. Some people learn a new skill and
quit their jobs, only to find out that they hate their new profession. If you at least spend
volunteer time working in that field, then you can get a good feel for how you like the
work before launching out on your own.
· Write a business plan. Once you have decided that you want to start your business full-
time, write a full-blown business plan. Even if you are not trying to get a loan, your
business plan will clarify your mission, vision, and core values, and help you stay
focused on your goals. It will also show others that you are serious about what you are
doing.
· Prepare cash flow projections. Within the business plan, you need cash flow projections
for one to five years. Based on your mission and vision, you will need funds to operate
and grow; these cash flow projections will keep you on budget, plot a steady growth, and
will also help you succeed by keeping spending within your original plan. I know of
several businesses that failed because they received initial start-up funds and started
spending wildly without waiting on the cash flow to “kick in.” Once the start-up funds
were gone and the infrastructure was not in place to produce monthly cash flow, the
businesses sunk fast.
· Get the business started. After you have worked in that field and completed a business
plan, start small and slowly. Try to use social media and word of mouth to advertise;
spending thousands of dollars on advertising does not mean that customers will come.
Social media has become a vital way to let people know what you are doing, so there is
no longer a need to spend lots of money for advertising.
· Have adequate accounting knowledge. One big thing that causes businesses to fail is
the owner’s lack of accounting knowledge. It is not necessary for each home-based
business owner to have a degree in accounting, but they should not depend solely on an
accountant to handle financial matters. Smart business owners know about receivables
and payables, they keep up with all bank account balances, and they know what types of
business taxes are due and when they are due. Many home-based business owners have to
learn these skills on their own because they can’t afford to hire an accountant. Even if
you hire an accountant, you need to be able to know what they are doing.
I know a businessman who hired an accountant fresh out of college because she was cheaper
than the CPA firms. She did not pay the quarterly business payroll taxes because she had not
studied that in school, and because he did not have that knowledge either, the business all
but folded. The taxing authorities came in and assessed three years of payroll taxes after the
fact. When you start your business it would be wise to take some small business or
accounting courses.
· Construct a Website. Once you get started, you must have a website. People will take
the time to look on line to see who you are and what you do. When I need goods or
 services, I compare businesses based on their websites; unless I know the owner
personally, I don’t even take the time to look at a business that does not have a website!
Your business will suffer if you don’t have a website, and it will suffer if the website
does not project professionalism.
Once I reviewed a particular organization, and when I examined their website the quality
was so poor that it looked like a high-school student created it, and actually that was not far
from the truth. Spend the extra money to get a professional to produce and manage your
website, or take classes to learn how to build a professional website yourself. Your
competition is doing it, and you will suffer if you lag behind in this important technology.
One misspelled word on your website can cost you clients and dollars.
Make sure you install a credit/debit card payment option on your website. You want
customers to have the option to pay on line, which is the way most home-based businesses
are paid today. With services like PayPal, Stripe and others, you can receive instant
payment, and easily keep up with your sales and expenses.

Selecting the Right Home-Based Business

Some businesses are appropriate for part-time at home, and some are not. Web-based, family-
run, single product and hobby-based businesses are the best to run from home. Avoid labor
intensive businesses, those that normally run during working hours, and businesses requiring lots
of travel.
For Traditional Home-Based Businesses Ask Yourself:
· Should I enlist the support of others or family? You will need the support of friends
and family in so many ways when you start your home-based business. When I was
starting my businesses, I asked my friends and family to do everything from watching the
children on weekends to delivering packages. They were very helpful and they rejoiced in
my success. As stated before, some family members may be able to work for you and
earn extra income as you grow. Some of the most trustworthy workers are people who
have your best interest at heart; although sometimes it’s the opposite, so avoid those who
just want a paycheck.
· Do I have the necessary experience? When you start a home-based business, make sure
that you can deliver to the customers. I have met so many people who received shabby
service from businesses. The business claimed to have the knowledge and experience to
meet the needs of customers, but in the end the owner was just practicing or trying to
gain experience. Sometimes the business owner was so eager to get the money without
having the skill set for the job, that he took it on anyway and delivered poor products and
performance.
Once you get a bad reputation it will be hard to reverse that impression, so do not take on
jobs unless you already have the skills, or plan to learn and research to get up to speed prior
to receiving payment. If you know the learning curve will be long, you need to inform the
potential customer and let them decide whether to use your business or find someone with
more experience. If you are honest about your skill level, often the customer will see your
integrity and hire you, even though you will be learning as you go.
· Do the projects fall within the limits of what I can risk? Sometimes taking on a job
will require you to expend funds up front, so you need to be sure that you can take on that
job and complete it for a profit. I have seen small home-based business owners so eager
to get customers that they didn’t sit down to count the entire cost of the job. In one case
the home-based business owner took on a job that required him to pay for all of the
materials up front; he ended up losing on that job because his out-of-pocket costs ended
up being much more than he anticipated.
I recommend that each home-based business, whether product or service oriented, develop a
cost analysis form and complete this form before taking on each job. In completing the cost
analysis, the owner will at least know what it will cost up front to complete the job, and then
build in a reasonable profit.
· Will this business conflict with my job? If you are still working for someone else when
you start your home-based business, make sure that there will not be conflicts with your
job. If you are running your business in the evenings and on the weekends, make sure
that you are getting enough sleep so that your performance on your regular job will not
suffer.
Moonlighting is good only if you are fulfilling your obligations to your job, and coming to
work tired and filling up on coffee to stay awake is not your best and can make enemies on
your job—especially if they know you are making money in a side business. Make sure that
your home business does not require you to regularly miss days at work. Taking on a client
who requires you to come to his office on Fridays would not be prudent if you are already
required to be on the job on Fridays. If you work part-time and already have Fridays off, this
arrangement would not be a problem. As long as you are still working for somebody else,
their schedule should be the one to work around, not yours.
· Have I checked local zoning and license rules? Every state, county, or township is
different, but each has rules about what you can and can’t do in your home. There are
always neighborhood fights about people who have too many cars parked in their
driveways and on the street around their home. There are also fights about noise during
the day and late at night. In my county, you must complete paperwork asking for
permission to have a home-based business; once you pay a fee, the neighborhood will
have 30 days to complain about your home-based business. A sign in your front yard
announcing a County Commission hearing for your home business notifies the neighbors.
Then you must stand before the county commissioners to present your case for your
home-based business, and the neighbors can come to present their case for you not to
have a home-based business. Some counties don’t require this procedure if you don’t
have customers come to your home. However, even if your business is only Internet-
based, you need to check with the city or county to make sure you are in compliance.
· Is it possible to meet my financial goals with this business? Ask yourself if this
business will produce the resources to increase your income and help get you out of debt,
or if this is a fun hobby for your pleasure. People often spend time and money on
businesses that will not produce the resources needed. You may love to build model
airplanes and put them inside jars, but how much money are you going to make doing
that versus the time it takes to put those planes together? Some activities need to stay
hobbies! Research your area of business to make sure there is a viable market for your
 product or services. If not, then you need to find a business that will bring in the revenue
you need to thrive.
· Will this business be satisfying or nerve-racking? Some people start businesses for the
money but burn out in the end. Stress is a killer, physically and mentally, and if you are
busy doing a business that you don’t like, you are causing yourself harm. Make sure that
the home-based business you select is something that you like, or at least care about;
don’t pick a business only for the revenue it will produce.
COMMON PITFALLS WHEN STARTING A HOME-BASED BUSINESS
Here are some of the common pitfalls that stop home-based businesses from succeeding:
· Failure to compartmentalize. When you have a family and a business you must keep
them separate, especially if you are living in the same space as your business set-up.
When you have an exciting day, operating your business is usually not a problem, but
when you have a bad business day, do not bring that into the family time and take it out
on your family. A good rule of thumb is to end the business day by 6 pm at the latest and
don’t talk about the business past a short dinner discussion. Carrying a business into the
home life can ruin the business and the family.
If your children work with you, make sure they also stop working and talking about business
at the close of the business day. This routine will teach them how to compartmentalize and
keep them from thinking about business nonstop. It is essential for married couples to keep
the business separate, especially if only one spouse is working the business; the other spouse
may start feeling left out or ignored, and this can kill a marriage. Try to keep a totally
separate work area and NEVER bring work into the bedroom. One thing you don’t want to
do is make your family life suffer by being on the job all day and being at the business or
doing the business all night and on the weekends. You may have to do this for a while in the
beginning, but later you should be able to settle back down into having regular family time.
· Failure to limit your liability. When you have a home-based business, it is easy to get
trapped in many ways. One way is to over commit your time and resources; if you fail to
meet customer deadlines you may end up in a lawsuit. Be careful about hiring day or
part-time workers; if they get hurt, they may try to sue you for their injuries. If the
workers cause problems with your customers, they may hold you liable for the workers’
errors. Always make sure that you have business insurance and try to get an umbrella
insurance policy to cover everything beyond what your home, auto and liability insurance
covers. An umbrella policy is usually for $1,000,000 coverage, so that if problems arise
they won’t shut down your business.
· Failure to learn zoning and licensing rules. As discussed earlier, you need to find out
the zoning and licensing requirements for your home-based business. You don’t want to
start up a thriving business and have the county or city come shut it down because you
violated some ordinance.
· Failure to take into account physical limits. Sometimes when we get excited we over
commit our time. Working around the clock is not only bad for your body, it could cause
you great physical harm; after working so long, our minds start to shut down, our work is
no longer productive, errors increase, and injuries could occur if your business requires
physical activity. Long ago, I had some report deadlines at my CPA firm, and I would go
into the basement office and stay all night with old Star Trek episodes to keep me
company. My productivity would start to falter around 3 a.m., but I would still work until
I was done, which caused me to spend extra time correcting the errors I made due to
fatigue. I usually got to bed at 7 a.m., after I left notes for my husband to take the
children to school when he got home from the fire station that morning, and I would get
up at 9 a.m. to deliver the reports downtown, which was very dangerous. I once ran off
 the highway because I fell asleep on the way downtown. Thank God the traffic was still
bumper-to bumper and I wasn’t traveling at a high rate of speed. I got off at the next exit,
parked in a gas station parking lot, let the seat back, and went to sleep. I was a little late
delivering the reports, but I was safe and so were the other drivers! Make sure you don’t
overload your brain circuits and wear out your body for the sake of the business.
· Failure to practice proper accounting. As we discussed earlier, you should know some
accounting so that you pay bills, properly account for income, and take care of all other
business obligations. You will not succeed without proper accounting and oversight.
Once you choose a business and start operating it, avoid the trap of spending all of the
extra money that comes in.
Please don’t fall into the earn/spend cycle with your business! Use all of the extra money for
growing the business, savings, and investing. This is your key to financial freedom. Don’t
blow it; it is so easy to have a few extra dollars go here and there. Pretty soon there are no
extra dollars and all of your efforts have been in vain. Use the new business funds wisely,
and you will soon be out of the rat race.
· Failure to know when to fold ’em. Although we put much time and effort into
businesses, sometimes they do not succeed. You may love what you are doing, but if it is
not producing profits you really need to shut the business down and go back to the
drawing board. I know a woman who loved to bake. Instead of just baking at home, she
wanted start a business outside the home, so she took out a loan, rented space in a strip
mall, bought lots of equipment, and started baking.
The business wasn’t making money in the first three months, and she should have closed it
down at that point because all of her loan funds were gone and sales were not covering the
rent, let alone the utilities. She wanted it to work, so she ignored the warning signs and just
kept saying that sales would pick up in the summer. She started using funds from her and
her husband’s retirement accounts to make ends meet.
Sales didn’t pick up in the summer and she ended up folding when she couldn’t make the
rent anymore and her husband refused to let her withdraw any more retirement funds.
Just because you love to do something does not mean it will be successful as a business.
Know when to quit.
INTERNET HOME-BASED BUSINESSES
The vast majority of home-based businesses are those that sell products and services exclusively
over the Internet; businesses that design custom rugs, deliver groceries and other goods for you,
and even produce strategic plans for your life all thrive on the Internet, where nobody knows
what you look like, nor do they care. The customer wants a product or service, and if you can
deliver, satisfied customers will give you repeat business and referrals.
· Internet marketing (IM) is a marketing strategy in which the individual is compensated
for the specific products and services sold on line. This strategy can provide
compensation to the degree that the individual sells the product or service. A good
website and search engine optimization is the key to prospering with Internet marketing.
· Network marketing (NWM) is a marketing strategy in which the sales force is
compensated by getting others to join the same business and market the same products.
This recruited sales force is referred to as the participant’s payline. The members don’t
generate income from multiple levels of the sales of the individuals they recruit, but they
may receive bonuses based on the production of the people in their payline.
· Multi-level marketing (MLM) is a marketing strategy in which the sales force is
compensated not only for sales they personally generate, but also for the sales of the other
salespeople they recruit. This recruited sales force is referred to as the participant’s
downline and can provide multiple levels of compensation.
MULTI-LEVEL MARKETING BUSINESSES
There is much talk, both positive and negative, about Multi-Level Marketing companies, or
MLMs as they are often called, and I have seen so-called professionals look down on people who
do MLMs. On the other hand, Donald Trump and Robert Kiyosaki praise them, and network
marketing is now taught at Harvard University.
The truth about network marketing is that it will work for you if you work it. People who join
MLMs for $500 or less usually join on the spot at some business opportunity meeting because of
the speaker’s hype, which does not mean that the business is not good, it means that you need to
think about whether this business is for you before you get involved. Don’t feel guilty because a
friend or family member is pressuring you to “join their downline”. Research and answer these
questions:
· Is this product unique or can it be purchased at the corner store? If this product is
not unique, the chance of obtaining regular customers is slim. People are busy and they
will buy a similar product at the corner store when they run out, rather than going through
the ordering process with you.
· How many customers do I need in order to reach my monthly financial goals? If the
product or service will require 1,000 customers per month in order for you to prosper or
meet your goals, this may not be the product or service for you. Even if you are told that
people in your downline will produce thousands of dollars for you, don’t depend on that.
Figure out how many direct/personal customers you will need because your downline
may buy into the company on hype and never produce a dollar for you.
· What is the compensation plan and how many times has it changed? I was involved
with network marketing companies in the 1990s, earning $3,000 per month in one of
them. All of a sudden, the company owners or founders changed the compensation plan
so that we either earned less commission, needed to meet more requirements to earn the
commissions, or both. Be careful that the company is stable and has had the same or an
improved compensation plan for some time.
If the plan has changed frequently in the past, it may change after you start making money;
these plans usually change for the benefit of the founders. You don’t want to put your time
and energy into an MLM only to be told that there are new requirements for you to make the
same amount of money that you had been making. That’s as bad as being on a job.
· Is the person asking you to join this MLM making money? If that person is not
making money, that is a strong indicator of your probable success. Make them show you
proof that they are making money because many people will lie about their
accomplishments.
· Is the person asking you to join a leader? If that person is a leader, they will probably
help you and motivate you to succeed. If that person is not a leader, then you must
become a leader for your team.
· How many marketers are there in your area already? When you start doing an MLM
business that has been around for a while, you may notice that everyone you ask to join
 or to be your customer will most likely have already been asked several times by others.
There is a company that is currently popular, and I have been asked to get involved by
eleven people and counting within the last six months. The more people already in the
business, the harder it will be for you to gain customers or get others to join you.
Those are only a few of the questions that you need to ask yourself before joining an MLM so
that you can be on the winning track and not just spinning your wheels.
You really need to assess your personality, skills, schedule, and needs before choosing what you
will do to increase your income. Go to the local library for books on home-based businesses;
there are several books that will give you ideas. The Internet is full of ideas, along with business
magazines. Take your time, and you’ll come up with a good business for yourself.
To recap starting home-based businesses:
· If possible, specialize in a single product or service.
· Get your family involved with the business.
· Work for someone in that field first.
· Complete your written business plan now.
· Prepare cash flow projections.
· Take classes on your shortcomings, such as accounting or operating on the Internet.
· Start small to gain credentials and experience.
· Consider moonlighting without quitting your regular job.
· Always remember to operate with integrity.
· Don’t rule out a hobby as a potential home- based business.
· Don’t quit your job until all preparations are complete.
· Don’t compete with your employer.
· Don’t conduct business on your employer’s time.
· Don’t overlook a small, humble beginning.
· Don’t ignore zoning, licensing, and permit requirements.
· Don’t rush to get started; use a start-up checklist.
· Don’t incur unreasonable liabilities when starting your business.
· Don’t neglect the importance of customer service.
· Internet-based businesses are growing and are a great way to start a home-based business.
· Multi-level marketing home-based businesses are fine as long as you have done the
proper research and have the time to work them. • Don’t think it’s too late to start!
THE IDEAL HOME-BASED BUSINESS
I have given you the basics about home-based businesses and shown you that this is a great
method to increase income and thrive. Now let me share some secrets to selecting home-based
businesses.
I took great pains to find home-based businesses that fit most of the categories I will mention
below, and now my businesses continue to grow no matter what the overall economy does. I
repeat: it will require extra time for you to start a business. You need to make sure that you are
balancing your family life with any business that you start. You also need to make sure that you
have the skills to operate the business that you select.
There is no more embarrassing situation than someone who starts a business without the proper
knowledge and then ends up out of business within a year or less. However, this happens
repeatedly as frustrated workers impulsively quit their jobs to start businesses that they know
little or nothing about. You can avoid this scenario by carefully studying your options for starting
a business, the amount it will cost to get started, the amount it will cost to capitalize the business
for at least six months, and the amount of time and energy you, as opposed to your work force,
will have to lend to the business. Now you are ready to select the ideal home-based business.

The ideal home-based business:

· Has a digital product or service with wide appeal
· Requires no technical knowledge
· Has a small time commitment
· Has a generous compensation plan
· Has an automated marketing system
· Has leverage via word-of-mouth marketing
· Requires no special training or large financial outlay
· Provides mentorship by skilled and successful professionals
· Allows you to quickly generate at least $3,000 or more each month
· Offers the potential of earning over $10,000 per month in one year or less
· Offers products and/or services that make life changing contributions to people
· Can operate from anywhere with a computer, phone, and Internet access
· Offers unique products for which there is a strong demand
· Will challenge you to grow beyond your comfort zone, build your knowledge base, and
enhance your relationship skills
· Empowers you to embrace a new paradigm about life
· Has a powerful customer acquisition strategy
· Is fully portable and available internationally
· Is membership-based with recurring income
· Has a unique, utterly compelling sales proposition
· Anyone can do it, young or old, experienced or not
· Is affordable, with low running/monthly costs
· Is fun to do, something that gets you excited
· Has the potential to deliver true financial freedom
· Has the ‘X’ Factor, so it stands out from the crowd
· Involves some type of Internet Marketing
When you select your home-based business, please review the above list as a guide to pick a
winner!
WHAT ABOUT TAXES AND HOME-BASED BUSINESSES?
We’ve talked a lot about home-based businesses. We have learned that a home-based business
can dramatically increase your income by bringing in more revenue. We’ve also learned various
types of home-based business and the criteria for selecting a home-based business. However, do
you realize that home-based businesses can have a positive effect on taxes?
I’ve been in the financial arena for over three decades and one thing that I do know is that many
small businesses are not taking advantage of the deductions that congress allows. As a result,
these businesses were paying much more in taxes than is necessary.
I was crowned “The Deduction Queen” by many of my clients when I used to prepare tax returns
because I saved them thousands of dollars every year by utilizing the tax laws to their advantage.
Now I will share with you methods to reduce taxes by properly utilizing home-based business
deductions.
The difference between a person that has a home-based business and one that doesn’t is simple;
the person with the business gets to deduct expenses that the other person also pays but can’t
deduct. For example, a person with a home-based business can deduct a portion of their
telephone bill, Internet service, travel expenses, office supplies and even mileage. The person
that sits at home in front of the television after work does not get to deduct these same expenses
even though they are also paying them monthly.
ABOUT THE INTERNAL REVENUE SERVICE
From My Experience:
The IRS has good and bad employees. However, their main purpose is to extract money from
you. Even though employees are not always directly rewarded for assessing and/or collecting
large amounts of taxes, those who do are promoted faster and receive annual cash awards.
If an audit is conducted in which the business owner (you) has only a few or no records at all, the
IRS auditor (one that sits in their office and makes you bring in records) or the IRS agent (one
who comes to your home/office) will have a “field day”. They are able to disallow each and
every expense that you deducted on your tax return for which you have no documentation. Per
the Internal Revenue Service, you have to substantiate everything that you deduct.
Those business owners that have excellent records during an audit usually escape with a “no
change” report.
The bottom line is that if you own or plan on starting a home-based business you should keep
very good business documentation. You don’t have to keep sophisticated records, but keep all
receipts, invoices, canceled checks and other records that will prove your expenses in an IRS
audit.
In this chapter you will learn what to keep, how long to keep it, how and why to keep it, and
what is acceptable to the IRS. You will also learn tax saving strategies that wealthy people pay
accountants and lawyers thousands of dollars for. The bottom line is that you will learn how to
keep more of what you earn in your business and give the IRS the very minimum.
Let’s move on and talk about the Schedule C: The Sole Proprietor’s Profit or Loss from Business
form.
SCHEDULE C: PROFIT OR LOSS FROM BUSINESS
Exhibit A is a 2015 copy of the Schedule C. This is the form on which you will report your small
business earnings and expenses to the Internal Revenue Service unless you incorporate. We will
go over this form section by section and I will give you tax tips along the way.

PART I: INCOME
The income line is where you will report all of your small business income. This includes
payments for services, checks from clients and money collected from the sale of items that you
had in your possession (this is called your inventory). Each time you sell products you should
record this information in a log and a receipt book. After adding the sales tax you should give the
customer one copy of the invoice and you keep a copy. If your products or services are sold
electronically this process is already done and recorded in your database. These invoices will be
added up at the end of the year and the sum will be your inventory sales. For example: if you
receive $4,250 in checks from clients for services, and your receipt book(s) for the sale of
products total up to $1,250, then you will insert $5,500 on the income line.
Returns and Allowances
Whenever you have to return funds to a customer you include that sum on the returns and
allowances line. This will probably rarely be the case, because you have quality products and
services ☺.
Cost of Goods Sold
Cost of goods sold refers to the cost of products that you sell. For example, you sell widgets and
you pay $12.96 for each widget. Your cost of goods sold is $12.96 times the number of widgets
you sold. Any widgets left over at the end of the year are included as your ending inventory.
These inventory widgets are not deductible until you sell them the next year.

PART II: EXPENSES

Now we will discuss expenses. Internal Revenue Code Section 162 gives small businesses the
right to deduct “ordinary and necessary businesses expenses.” Almost every business expense
can be classified as ordinary and necessary as long as you execute proper planning to receive the
deduction.
For example the use of your cell phone to do business is ordinary and necessary business use,
especially if you are away from a land line.

Advertising Expenses
This category is for items including your company business cards, your company web page, your
flyers, newspaper ads and radio announcements. Now days people purchase leads for their
Internet businesses. Keep all invoices, a copy of each flyer, radio airtime confirmation and
newspaper ad in a file marked “Advertising.”

Bad Debts
Because most home based businesses operate on a cash basis, (no accounts receivable or
accounts payable on your personal tax returns), bad debts do not apply. If you have to reimburse
someone for product, that amount is detailed on line 2 of the Schedule C: Returns and
Allowances.

Car and Truck Expenses

This expense can yield thousands of dollars in tax deductions for your small business. The IRS
allows you to take either actual expenses or the standard mileage rate. If you use actual expenses
you will need to keep gas receipts, credit card statements, car repair invoices and your odometer
readings. Most people prefer the standard mileage rate because you need only to keep your
odometer readings. For every mile you drive you are allowed a specified deduction. For 2015 the
rate is 57¢ per mile. This means that if you are not actively working your home-based business,
when you drive you might as well stop every two miles and throw one dollar out of the window!
The IRS says that if you have a home-business and you travel from your home office to a
business stop (the bank, the gas station, the post office, a client…) this mileage is deductible if
your home actually qualifies as a home business. You need to make sure that your home
qualifies by setting up an office in your home. It may be a good idea to have your inventory
displayed in that office if you sell a product.
The next thing you need to do is get a mileage log. Instead of going out to buy an expensive log,
just use one of your extra check registers or a calendar. You need to log the following each day:
· Destinations
· Business Purpose
· Beginning Odometer Reading
· Ending Odometer Reading
· Total Business miles
In many automobiles, there is a little dial that will set your miles on zero each day and this will
help you determine your daily business miles. The IRS would also like you to know your
beginning of the year odometer reading and your end of the year odometer reading. These
numbers will help determine the percentage of business versus personal usage of the automobile.
Commuting miles are not deductible. Commuting miles are the miles you drive from your home
office to the very first stop of the business day. For example, if you leave your home office and
go to a client’s home 25 miles away it’s considered commuting miles. Therefore, you want to
make sure your first business stop and your last business stop of the day are strategically
planned. For example, instead of leaving home and going straight to the client’s office across
town, make your first stop your Post Office box, which is only
Five miles away from your home office. That way, your drive from the Post Office to the client’s
office (at least twenty miles) is fully deductible. If you leave the client’s office and go straight
home then all of that mileage is considered commuting miles. Thus, you may want to make
another business related stop (gas station, bank…) near your home office before proceeding
home. If your bank is near your home office, stop there on the way home, or at the ATM if it’s
after hours. Now your mileage from the bank to your home office (maybe five miles) is the non-
deductible commuting miles. Millions of people don’t know this and when they are audited they
will lose most of their mileage expense deduction because the auditor will change the mileage to
non-deductible commuting miles if this strategy isn’t followed.
Remember that even if you choose to use the standard mileage rate, you still want to keep track
of amounts spent for gas, maintenance and other auto expenses. However, credit card receipts
and invoices stored in a file will suffice for this purpose.
Parking and toll fees are separately deductible when you use the standard mileage rate.
Therefore, keep parking and toll receipts in a folder by themselves.
We will discuss leased vehicles in the “Rent or Lease” section.

Commissions & Fees

Commissions and fees are paid to individuals for helping you on a contractual basis. Unlike
employees, business owners who pay people on commission are asked by the IRS to complete a
form 1099 Miscellaneous Income and mail it to the individual and to the Internal Revenue
Service. This exercise gives the individual a record of how much you paid them during the year,
and it lets the IRS know that the individual had income during the year. For example: If you pay
a neighbor for referring other neighbors to the business, the amounts paid to the first neighbor
are deductible as commissions. In this case, you must fill out and mail a 1099 Miscellaneous
Income to the neighbor and to the IRS, but only if you paid the neighbor $600 or more. If you
paid him/her under $600 then you need only keep a copy of the checks and invoices, which you
will create at the time of payment.

Depreciation
Depletion is used for petroleum and similar products and does not apply to ordinary businesses.
However depreciation is the ability to make wear and tear deductions on equipment, machinery
and other fixed assets that we purchase. This topic can get very complicated, with all of the
different methods of depreciation. Therefore, I will only give you the basics.
If you use the actual costs for your automobile expenses as discussed in an earlier section, then
you may depreciate your automobile over a 5-year period. You will be limited in the amount of
depreciation that you are allowed if you have a “luxury” automobile, per the IRS.
If you purchase computers, furniture, equipment and similar items during the year and you use
them 100% for business purposes, you are allowed to deduct 100% of the cost of these items, up
to $25,000 in the current year. You must use these items 100% for business per Internal Revenue
Code Section 179. If you use the items less than 100% in the business you may deduct only the
business use percentage. You need to keep written records of your personal verses business use
of these items to justify your deduction.
If you already owned real property (real estate) and converted it to business use when you started
your business, you may depreciate it over a 5-year period at the lower of cost or current value.
However, when you sell the property you will have to deduct that depreciation from the original
cost of the property, giving you a larger gain on which to pay taxes. For more on depreciation
and depreciation methods you can visit the IRS website.

Employee Benefit Programs

Most home-based businesses do not have employees and this section will not apply. However,
remember that if you hire employees and you remain a Schedule C business instead of
incorporating you can expense some health care and other benefits paid to them, in addition to
their salary. This is the case even if the employees are family members.
Insurance
You may have insurance on your business in your home. This is an additional waiver that you
purchase from your homeowners insurance company for your business equipment. You may also
deduct the portion of your regular home insurance that applies to the office in your home. We
will discuss “expenses for business use of your home” in a later section.

Interest
You may obtain a business loan and deduct the interest for that loan in this section. You may
also deduct a portion of your mortgage interest here. When deducting mortgage interest, you
must determine the percentage of space used for your business and deduct only that amount. We
will discuss “expenses for business use of your home” in a later section.

Legal & Professional Services

In this section you can deduct tax return preparation fees, legal research done for your business,
professional word processing and other services. Make sure that you obtain invoices from the
individuals rendering these services.

Office Expenses
Office expenses include paper, pens, pencils, posters, staplers and most any office products that
you use in your business. Keep the receipts and write the business purpose for the expense on the
back of the receipts while you are still in the store. Keep all of these receipts together in a large
envelope marked “Office Expenses.” Because retail stores now make receipts from a special
inexpensive type of paper that quickly fades, you should make a copy of the receipts on regular
paper and staple the originals to the copies. That way if you are audited years later and the
original receipt is faded you can still see the numbers on the copy. There is no need to copy one
receipt per page; multiple receipts can be copied on the same page, especially if they are in the
same expense category.

Pension & Profit-Sharing Plans

This is another complex area but suffice it to say your personal pension plan and the plans you
started for employees are deductible under certain circumstances.

Rent or Lease
If you rent your home you may deduct rent amounts equivalent to the room or rooms used
exclusively for business. We will discuss “expenses for business use of your home” in a later
section.
If you rent hotel space for meetings or training the cost of the room for these events is fully
deductible.
If you rent equipment for a meeting, display or other business function, you may deduct these
costs in full. Remember to write the business purpose on the invoice. This is a good practice
because the IRS calls people for audits one or two years after you have filed the tax return.
Writing the business purpose on the actual receipt helps with your credibility. In my book, How
To Stick It To The IRS: Confessions From A Former Insider I explain how to make sure that if
your business is audited you don’t get caught in their traps and end up paying them more of your
hard earned money.
If you are renting a vehicle you must use the actual costs! Your deduction will equal your lease
payments times the percentage of business use.
Keep good records. This is a so-called area of abuse by business owners who lease cars
frequently.

Repairs & Maintenance

This area should not be used much, if at all. Repairs and maintenance on your cars will be
deducted in the Car & Truck Expense section if you use the “actual cost” method. Do not use the
standard mileage rate and also deduct repairs and maintenance on your vehicle. This is an area of
abuse due to ignorance on the part of the business owners. However, per the IRS, ignorance is no
excuse. If you have an office in the home and there are minor repairs, as opposed to major
improvements, you may deduct these repairs. A minor repair may be replacing a piece of
floorboard or crown molding that has rotted or broken. A major home improvement is putting air
conditioning in your home office. Make sure that you consult a tax professional if you plan to
make major renovations to your home/office.

Supplies
Supplies include your sales aids, such as banners, buttons, transparency presentations and similar
aids. They should be deducted in the supplies section.

Taxes & Licenses

Here is where you get to deduct the cost of a local business license or occupancy tax. This step
not only makes you legal in your county, but it also legitimizes you before the IRS. The IRS has
attempted to terminate many businesses and call them hobbies on the basis that the owner did not
have a business license.
If you plan to sell products at street markets you may also need a street vendor’s license. Check
with your county or your Secretary of State and find out what licenses you will need.
Most states expect businesses to collect and pass sales taxes on to them. Call your state
Department of Revenue and find out if they expect your type of business to obtain a sales tax ID
number and collect sales tax. If they say that you need to register with them, you will need to file
quarterly sales tax returns once you start actively selling products.
These sales taxes are not deductions on your tax return; rather, they are passed from your
customer, to you, to the State. The taxes that are deductible to you include:
· Payroll taxes, if you ever hire employees
· Use taxes, if applicable
· Advalorem taxes on your business
· Other state taxes that you must inquire about

Travel Meals & Entertainment

According to the IRS, this area has long been abused and they have severely cracked down on
business owners that have high expenses for travel, meals and entertainment.
First, we will talk about entertainment expenses. The IRS has limited entertainment expense to
50%. Entertainment is an activity that may be amusing. However, your purpose for the
amusement may be to generate business income.
Per Internal Revenue Code Section 274, you need the following items to substantiate business
entertainment:
· A description of the person being entertained and their relationship to you. It would not
look good if you were attempting to deduct entertainment expense for taking mom out for
her birthday.
· The purpose of the entertainment. Here you need to show how this amusement may
generate income for your business. For example, I took a nurse out to a restaurant
because she had good contacts in the medical field. This nurse was not a relative.
· The amount of the entertainment expense. This should be enumerated on a receipt unless
the expense is less than $75. For expenses less than $75 you may enter the information in
your travel log but I would suggest that you still keep the receipts.
· A written record of the date of the entertainment, the place of the entertainment and any
other relevant information, such as the contacts received from your meeting.
Make sure that you can show that you expected future business benefit from the expense,
that you discussed business at the setting and that you had a clear business purpose.
Now let’s discuss meals. Lunch appointments to recruit new distributors or dinner with your
current distributors are 50% deductible.
Example: You take a massage therapist out to Red Lobster. You discuss how your medical
products will enhance her practice. The meal costs $58. You may deduct $29. Keep the receipt
and write the therapist’s name on the back and your purpose for meeting with her. Put all of your
entertainment and meal expense receipts in a large envelope for tax preparation.
Opportunity meetings and training meetings are generally 100% deductible because actual sales
presentations are being made and they are a direct expense to your business. Make sure that you
are not extravagant in your presentation or you may be called to the carpet by the IRS due to the
expenses not being ordinary and necessary; despite the fact that they have not been using
restraint in their travel meals and entertainment expenses over the last several years:

IRS Investigation by House Panel Finds $50 Million Spent on Conferences

http://www.huffingtonpost.com/2013/06/02/irs-investigation_n_3375160.html
http://www.nydailynews.com/news/politics/irs-spent-50m-years-conferences-report-article-
1.1361220
http://www.cnbc.com/id/100783820
Moving on, it would be prudent to stay clear of entertainment spots like:
· Strip clubs
· Movies
· Sporting Events
· Casinos
· Horse Races
The IRS frowns on business owners who claim entertainment expenses in these establishments.
Now let’s move on to travel. Travel is different from using your car to attend local training or
interview potential employees. Travel is usually out of town trips for business. With the proper
planning, you can turn what would have been a totally personal trip into at least a partial business
trip.
Internal Revenue Code Section 162 allows you to deduct expenses incurred while away from
home on business. You must be able, however, to show that your trip had business intent and that
it was customary for you to conduct business in the travel area. For example, you would not get
away with taking a business deduction for your winter coat business if you flew to Cancun;
unless you were attending a convention of coat makers. Even then, only a portion of the travel
expenses would be deductible.
The following expenses constitute business travel expenses:
· Airfare
· Taxis
· Car Rentals
· Hotels
· Tips
· Dry Cleaning (away from home)
· Meals
If you spend more than 50% of your U.S. trip doing business, you can deduct all of your
transportation expenses. Make sure that you can justify the trip being primarily a business trip.
If your spouse or children go, you must not deduct their expenses unless they are salaried
employees of the business.
For example, if you, your spouse and two children go to Orlando and you plan a business
opportunity meeting at a local hotel, you may not deduct an extra hotel room for the children, or
food for the wife and children. The travel rules can get complex. However, for the simple trip to
conventions, Super Saturdays in a neighboring state, or business briefings for your brother’s
friends in Orlando, keep all of your receipts and a list of those in attendance at the meetings. If
the IRS inquires, you have proof that you indeed traveled for business purposes.

Utilities
The utilities deduction will be discussed when we get to “expenses for business use of your
home.” If you have another facility, such as a garage or shed, you may deduct the utilities on this
property if the property is used for business purposes.

Wages
When you have a sole proprietorship you do not pay yourself wages. Any profit after expenses
has income tax and self-employment tax attached to it. It is your goal to make that net income as
low as possible to reduce or even eliminate any tax burden. If you have employees, you will have
to pay them wages and withhold federal, state, social security tax and Medicare tax on the
employees.
However, you can employ your children between the ages of six and eighteen, pay them wages
of over $6,000 and pay no payroll tax at all!
This means that if you have two children between six and seventeen you can pay them $6,300
each in 2015 and have a $12,600 deduction for your business on your Schedule C. For example,
if you have an 8-year-old and a 13-year-old, you may have them sweep the office, take out the
garbage, shred papers, answer the phone, greet your clients at the door and a host of other tasks.
You were already buying them designer clothes, video games and expensive gym shoes. Now,
they can pay for these items with their own wages while you get a nice tax deduction. You may
even pay your children, let them gift it back to you and you use the funds for a down payment on
a home or for college tuition!
There are strict rules to this great benefit, however. First, you must actually pay the children.
This can’t be just a paper transaction. You need to pay them by check and deposit these checks
into their own personal savings or checking accounts. Next, you must fill out the proper payroll
tax returns each quarter. Instead of paying payroll tax, however, you write in “exempt student”
and put zero for the tax.
You must keep time sheets on your children. Actually make up a time sheet and run copies of it
for weekly completion. This practice will help your case if audited by the IRS. These records
will prove that your children actually worked. You may higher children over 18; however you
will have to take out taxes for these children. It may still be worth the hassle if they can use the
funds for tuition.
You may decide to pay your children more than the standard deduction amount, which is $6,300
for 2015. However, be prepared to pay payroll taxes on the difference. Also, your children will
have to file income tax returns for their income if you exceed the standard deduction in any year.
You must pay the children a reasonable salary. For example, $40,000 per year is not usually
reasonable for a 9-year-old that takes out the trash and vacuums daily. Remember, we want to
reduce our taxes without raising the eyebrows of the Insidious Representatives of Satan!

Other Expenses
Other deductible expenses are expenses that you pay for regardless of whether or not you own a
business. Some of these expenses are:
· Cell Phone
· Long Distance
· Subscriptions
· Bank Service Charges
The beauty of having your home-based business is that things that you are already paying for can
become tax deductions overnight.

Business Use of Your Home

You may deduct utilities, mortgage interest, insurance and real estate taxes related to your home
office. This is sometimes a red flag area to the IRS because if you aren’t using the entire space
that you are deducting then you don’t get the deduction. For example, if you do all of your
business at the kitchen table your deduction is toast! Designate a room in your house for business
use only, like a spare bedroom, and part of your home expenses can be deducted every year.

CHARITABLE CONTRIBUTIONS
The charitable contribution deduction is a deduction on the Schedule A; “Itemized Deductions”
form (Exhibit B). This form is not just for business owners. It can be used by anyone who has
more deductions than the standard deduction allows. For example, a married couple is
automatically given a standard deduction of $12,600 on their 2015 tax return. If the couple has
mortgage interest, real estate tax and state income tax withheld to deduct, more than likely, they
will have expenses that exceed the $12,600 standard deduction and would use the higher total by
completing the Schedule A.
Charitable deductions can be added to the above deductions on the Schedule A. These
deductions are classified as cash contributions and non-cash contributions.
Cash contributions include money given to churches and other non-profit organizations. If you
plan to take a deduction for cash contributions you must pay by check and/or get a statement
from the church or organization. Most churches and non-profit organizations send out annual
giving statements. You must keep these in your file; do not mail them with your tax return.
The best-kept secret on the Schedule A, however, is the Non-Cash contributions. This deduction
is for giving clothes, toys, furniture and other household items to the Salvation Army, Goodwill,
American Kidney Fund and similar organizations. You can deduct thousands of dollars in non-
cash charitable contributions every year, and it is all “perfectly legal”. Here’s how.
Contributions come in the form of cash and non-cash. Cash contributions are monies that you
give to non-profit organizations like churches, humanitarian charities and civic associations.
Non-cash contributions are items given to these same organizations.
On the Schedule A in the section entitled “Gifts To Charity” There is a line that says “Gifts by
cash or check” and another line that says “Other than by cash or check.” At the end of each year
most people receive statements from churches and other organizations that detail how much cash
they gave. However, because of fear, most people put $500 or less on the “other than cash” line.
This is where people miss out on thousands in deductions. If you plan to deduct more than $500
in non-cash charitable contributions the only thing you need to do is complete one extra form
called the 8283. All that form asks you is to whom you gave, when you gave, what you gave,
when you acquired what you gave, and the value of what you gave. Not a scary prospect at all.
Now I’ll tell you how to keep more of your hard earned cash:
When the American Kidney Fund or other charities call and say they will have a truck in your
area, or when you accumulate enough clothes and other stuff in your closet that you need to give
it away, do this:
1. Take all of the clothes, shoes and other items out of the closet and lay them neatly out on
the floor.
2. Take a picture of the items and print the picture as soon as possible.
3. Take a pen and paper and write down a description of all of the items that are on the
floor.
4. Place the items in a plastic bag or bags and put the bags on the front porch if they are
coming to get it, or in your car to take to the Goodwill.
Now, you’ll receive a receipt in the front door if they are picking up the bags, or you need to
obtain a receipt if you are dropping off bags. You have a receipt, a picture and a listing of what
you gave. On the Salvation Army website is a thrift store value guide:
http://salvationarmysouth.org/valueguide-htm/
This guide gives the thrift store value for most items that we accumulate in our homes. For
example, women’s suites are worth between $6 and $25. Well, you can’t tell most women that
their suites aren’t worth at least $25. Therefore, 4 suites in one bag is a $100 write-off. Now I
hope that you can see how one bag alone can be worth more than $500!
You can give as often as you want and accumulate as many receipts as you can get your hands
on. To add to this goodie, you can get clothes and stuff from family members and friends that
don’t itemize. If they don’t file tax returns or if they don’t have enough write-off’s to use the
Schedule A, you can go to their homes, pick up their stuff and take it to the Salvation Army!
When they give you their stuff, it is a gift to you, and its value is the same as it was when it
belonged to them. For example, if Aunt Mary is 68 years old and doesn’t file any more but she
gives you four nice suites, you can take them to the Goodwill and get a $100 write off from that
gift! Make sure you take pictures and make a listing of what Aunt Mary gave you.
When you keep good records of what you gave—your receipt and pictures from the charitable
organization—you have two good legs to stand on if you are ever audited!
I try to give non-cash donations to organizations twice a month. That way I have at least 24
receipts at the end of the year. With the donated items listed on paper, an accepted thrift store
valuation sheet and pictures to show that my deductions are legitimate and accurate, I’m
confident that my donation deductions will stand up to any scrutiny.
TEACHING YOUR CHILDREN ABOUT MONEY
Most of us have grown up with some of the worst financial teachers on the planet, our parents.
Unfortunately, they were not taught how to properly manage money, and they were not able to
teach us how to properly manage it. We love them and know that they did the best that they
could, but now we are learning and will be better able to teach our children.
Children as young as six or seven years old can be taught to manage money. You can start by
jazzing up the Monopoly game; by using the money in the game to teach them principles of
saving and giving.
I once used the money from the Monopoly game to gauge my then 6-year-old son’s aptitude for
money management. I told him that he was an architect, which is what he wanted to be back
then, and that he made $300 a week. I gave him $300 in Monopoly money. Then I told him all of
his expenses, and gave him different scenarios concerning his expenses. Incredibly, at six years
old he was able to pay all of his bills, get a raise, still pay his bills, and not over spend. Next, I
threw him a curve: I added a girlfriend, told him his bills for the week, and that his girlfriend
wanted to go to dinner and a movie on Friday. After he put all of his bill money aside, there was
no money for the date. When I asked what he was going to do he said, “I will just have to tell my
girlfriend that we can’t go out this week!” I was impressed. Even a six-year-old is not willing to
get into debt if he is taught the proper use of money and proper management of finances.
Another thing we can do to help teach children how to manage money is to get them small boxes
for savings. For instance, if the children have a box for giving, saving, and spending they easily
can learn to manage money.
Both of my children had one small box with three drawers in it. One was labeled “Giving 15%,”
one was labeled “Saving 35%,” and one was labeled “Spending 50%.” They did well to only
spend half of what they earned or were given. I pray that their use of this principle will carry on
throughout their adult lives.
GIVING BACK
Giving back is a universal principle. In virtually all religions, there are Scriptures or quotations
about giving back. The Bible says “He who sows sparingly will also reap sparingly, and he who
sows bountifully will also reap bountifully” (2 Corinthians 9:6). The principle of giving back
works whether people are religious or not. I’ve seen it work, even with hard core atheists.
Most people know about the principle of sowing and reaping; it applies to anyone who applies it.
In order for our country to prosper, people need to “voluntarily” give back some of what they
have acquired. However, the people are the ones that should decide who they want to give
charity to.
In the early years, our country didn’t have a welfare system. I learned from my grandfather that if
a family down the street fell on hard times and needed food, the whole neighborhood would rally
and that family would receive food until they got back on their financial feet.
When we give back, we are rejecting the evil characteristics of greed and selfishness that have
put our country in its current predicament. So many businessmen, politicians and bankers have
been so greedy and selfish, keeping the secrets of the wealthy to themselves. Consequently, an
attitude of selfishness has taken over the land. Instead of give and it shall be given unto you, the
new motto is:
· Get all you can,
· Can all you get,
· And sit on the can.
Giving will:
· Help others help themselves
· Help you have a cheerful heart
· Bring back more to you
I know several people who give bountifully on a regular basis. I was on a tour in a remote village
in Central America where the children didn’t have shoes and did not go to school often; the
school was several miles way and their feet would get sore from the exposed rocks after the
rains. My fellow travelers, who were wealthy, immediately jumped into action and not only had
one of the local women gather up all of the shoe sizes for all of the children in the village, but
they also bought them a forty-five passenger bus so that one of the local adults could drive them
back and forth to school! These people remain blessed, in my opinion, partially because they
follow the sowing and reaping principle.
Let’s get into the habit of giving back on a regular basis. Whether to your church, your
community youth center, or the Salvation Army, we need to come together to rid the country of
the greedy attitude that has so damaged it.
SECTION THREE
 SAVING

Once you have started to reduce your expenses and increase your income it’s time to start saving.
WHY SHOULD I SAVE?
Believe it or not some people don’t understand the necessity of saving and others don’t believe
that they need to save. No wonder so many people are constantly living on the poverty line.
When my children wanted to spend all of their allowance I wouldn’t let them. I bought both of
them three-drawer boxes and made them give 15%, save 35% and then they could spend 50%.
They didn’t like that rule and asked me why they had to save. I let them know that there would
be times that some special event was presented to them, or an opportunity to take a trip, and if
they didn’t have any money they would miss out. I turned into my father and told them that luck
is when preparation and opportunity meet, and being prepared often involves having the money
to take advantage of a given opportunity.
It is my understanding that Conrad Hilton purchased many of his starter hotels during the
depression at fire sale rates because he had the cash. From there everything is history. During the
depression of 2008 and for a few years following, there were thousands of people that were able
to purchase real estate for pennies on the dollar because they had savings. Not all of these were
rich people. I know of a couple that had been saving for a modest home and making sure that
they were working towards being debt free. They planned to purchase a three-bedroom home in a
decent middle class neighborhood. However, right after the crash when the housing market
tanked, they were able to purchase a five-bedroom home in an up-scale neighborhood for the
same down payment and monthly payments they would have paid for the smaller home a few
years earlier. Someone that had not saved and was living from hand to mouth in a large home
had to sell it and lose all of their equity in the house in order to avoid foreclosure and
bankruptcy.
Savings are also essential because they help you avoid using credit for purchases. People that
spend all that they earn end up using credit cards and loans for so-called emergencies; like new
tires, replacement appliances, repairs and funeral expenses. This is the money you put aside for
future expenditures that may occur in the next three to fifteen years. For example, I have an
associate that decided to go to graduate school. Because she saved lots of money she was able to
be a full-time student and live off her savings for the entire degree program instead of taking out
student loans. You also want to save for vacations. I know so many people that take vacations
using credit cards and loans. They may have had a nice time for a week or even two, however,
when they return home the bills start arriving in the mail, causing stress and diminishing the
value and memory of their vacation.
One other very important reason to save is in case of financial disaster. We never want financial
calamity to strike our families, and we pray that it doesn’t. However, sometimes bad things
happen. If you have saved money for “a rainy day” then your family stability can be kept intact.
For example, I have a relative that lost his job during the depression of 2008. Because he had
diligently saved his money he was able to live for two years until a new job came along. He
didn’t have to borrow or use credit cards during that time. If you’ve saved money for things that
don’t occur often and for financial tragedy, your diligence will save you from paying interest on
loans and credit cards, keep your credit score high and give you peace of mind.
HOW SHOULD I SAVE?
I believe that you need at least three “savings pots”. I like having a short-term savings pot, a mid-
term savings pot and a long-term savings pot. At this time I think it prudent to explain the
difference between saving and investing. When I mention the long-term savings pot people often
mistake this pot for investing but this is not the case.
The purpose of saving is to safeguard that set-aside money—the money for emergencies and
planned short-term expenses like vacation or college. The purpose of investing is to grow the
money that you have put away. Invested funds are above and beyond the amount you need for
future expenditures and possible financial disaster. In essence, the savings pots will be used at
some point in the near future or up to 15 years out, but it will be used for planned expenses. The
investments are put aside to constantly and consistently grow so that you can live off of those
funds and their earnings even when you are no longer physically working.
Now that we have discussed the difference between saving and investing let’s discuss the
different savings pots.

Short-Term Savings Pot

I believe that the short-term savings pot is something that you can save in a hidden place in your
home. The short-term pot may be up to around $6,000 and will cover some of the following
items:
· Tire replacement
· Major auto repairs (timing belt)
· Vacations
· Emergency travel (funerals)
· Appliance repairs and replacement (air conditioners, water heaters)

Mid-Term Savings Pot

These funds should be absolutely safe but not kept in your home because of the amount of funds.
A bank CD is an option but understand that you will not be earning any significant amounts of
interest on the funds. These funds should be used to accelerate debt payoff and to keep handy in
case you need to buy large items like used cars. The mid-term savings pot may be up to around
$12,000 and will cover some of the following items:
· Paying off a small credit card
· Buying a good used car
· Large home repair (roof repair)
· Long term or international vacations (Mediterranean Cruise)
· Six months of living expenses in case of a medical or other calamity

Long-term Savings Pot

The long-term savings should also be absolutely safe. These funds may be placed in a Money
Market Account or some other account/instrument that is (1) liquid and you have the ability to
access it within 72 hours or less and (1) earning some type of interest above what a regular bank
savings account pays. These funds should cover very large future expected or unexpected
expenditures. The long-term savings pot will be more than $15,000 and will cover some of the
following items:
· A new car
· College tuition
· Medical bills not covered by insurance
· Living expenses in case of a job loss or
· Other family adversity
WHERE SHOULD I SAVE?
This money should not be put in stocks, bonds or mutual funds because they are failures. If you
don’t believe that go back and look at news stories from September 2008. The value of stocks
slipped back into pre 1930 values after the depression of 2008 and even though the financial
gurus are telling you that the Market has recovered it’s only pumping up for another crash in the
near future. Your savings and investments should be kept far from the digital forms of investing
and put into hard assets. For the savings pots you may want to keep some in a Money Market
account, or a special college fund that lets you take the money out tax free for tuition, but that’s
as far as I would personally go. I have some of my savings in gold and silver, some in cash and
some in negotiable instruments (A negotiable instrument is a document guaranteeing the
payment of a specific amount of money, either on demand, or at a set time, with the payer named
on the document). Investments will be discussed in the next section.
Note that when these funds are diminishing in any category you must immediately begin to
replace them before they are depleted. Also, savings pots should never be invested in stocks,
bonds or retirement funds because you can’t take the chance of seeing your funds disappear like
they did in 2008; you won’t have time to recover!
SECTION FOUR
 INVESTING

WHERE IS THE ROAD TO WEALTH?

The Road to Wealth
High Risk/Speculative Investments (Last)
Capital/Guaranteed—Low Risk Investments Emergency Funds—Three Months of Household
Expenses
Insurance (Health & Life)/Assurance—Six Months of Expenses
Your stair step to financial freedom can be found above. If you follow this model and the other
rules in this book, before you know it you will be stress free and on your way to the winner’s
circle.
Let’s start out on the bottom with Insurance and Assurance.
Insurance is self-explanatory. It is good to have life and health insurance as well as home, auto,
and any other insurance that will help you in times of need. Make sure that you shop around for
the best prices as you have learned to do in this book. There are many Internet sites that will give
you quotes on all types of insurance coverages. Take time to research so that your expenses will
be low and your coverage will be good.
Assurance means that you have saved six months of living expenses in case of some disaster. If
you can’t work for six months but all the bills are still due, how much would you need to make
sure that you won’t fall into financial ruin? If your household income and expenses are $3,000
per month, you can see that you would need to save $18,000 in Assurance. You need to keep this
money very liquid.
One clever strategy is to purchase three bank CDs for $6,000 each as you accumulate the $6,000
increments. Purchase three-month CDs three months in a row, so that one will mature every
three months and you will have your expenses taken care of in case of emergency. Keep the
funds in any liquid means that you want, although I don’t recommend keeping that kind of cash
under your bed.
Emergency funds. This is an unreal term, because we really don’t have that many emergencies.
You know that those tires will be bald soon, and you know that elderly relatives will pass away;
these are not unexpected occurrences or emergencies.
Many people tell me that the reason they are in debt is because they had several emergencies and
that they had to charge their credit card to the max. When I asked what the emergencies were,
they told me things like:
· “My transmission blew,” but you knew you had 315,000 miles on that truck and that it
was time for some maintenance.
· “Aunt Lula Mae passed away and I had to get a flight to the funeral and because it was
last minute, the flight was $1,000 and I had to charge it on my Visa,” when you knew
Aunt Lula Mae and all of her sisters were elderly and that you should have put travel
money aside for the funerals.
· “I needed a vacation because I was under a lot of stress, so I charged a 7-day Caribbean
 cruise on my card,” and you came back more in debt and under more stress!
We can’t keep using excuses to hide our lack of planning. Put three to six months of living
expenses away for irregular occurrences to keep from racking up credit card debt and interest.
Estimate a monthly amount in all of your expense categories based on what you spent last year,
then add additional categories for your family, and multiply by 12 for the annual estimates. Take
that annual total to see how much per month you will need to put aside for emergencies. If three
months of living expenses is not enough, add additional months as needed.
For example, The Duncan family likes to take vacations. They have totaled up their so-called
emergency expenses and determined that they need $14,373 per year to take care of things other
than household expenses. Their lifestyle requires that they either set aside $1,197 per month for
this fund, or cut down on their vacations and other noted expenses. If they continue to fund these
irregular expenses without planning for them, they will fall deep into debt. Credit card debt is the
most popular way to get deep in debt, so stop using them for things you can’t afford to pay for in
cash!

Capital Guaranteed Investments

Capital guaranteed investments simply mean that if you put a certain amount into the investment;
you will at least get that amount back. These investments are available in the states and offshore,
but they are rare.
We will talk a little more about offshore investing in our section about what the wealthy do.
However, some of us have noticed that the “powers that be” and the news media try to scare the
middle class away from even thinking about investigating offshore by associating everything
offshore with something illegal. If you put on your thinking caps, you will see that all of the
wealthy families; the Rockefellers, Carnegies, Fords, and Kennedys have millions of dollars
invested offshore directly and indirectly. If you look at what they are doing, how can you be
scared into keeping your funds in losing instruments here in the States?
Investments that are capital guaranteed are better for the beginner investor who can’t afford to
lose what has been invested. A good investment coach will tell you, “Never invest what you
can’t afford to lose.” Many of us have been shell-shocked by smooth-talking investment gurus in
Italian suits, telling us that their investment will gain us 5% per month. There are investments out
there that will bring those kinds of returns; however, your job is to investigate and research these
investments instead of just throwing your wallet at the person with the smooth presentation.
Doing your research and finding capital guaranteed investments at the start of your investment
experience will keep you on the road to wealth without any sidetracks, such as those with pie in
the sky numbers that make you lose your investment funds.
One capital guaranteed/low risk (usually) investment is real estate. Real estate is currently
coming out of a free fall in the States, but real estate in other countries is another option that
many here, even real estate agents and brokers, have not looked into. Countries like Costa Rica,
Panama, Ecuador and Nicaragua are booming, and because of their weather, many retirees from
all over the world rush in to buy land.
Look into real estate deals in areas in the States that are not declining much, but also look closely
at international real estate, where you must learn the rules because they operate very differently
in many countries. In some countries, a realtor can sell the seller’s house for a higher list price,
give the seller what he asked for, and keep the rest!
I have friends who purchased a home in Panama, only to have the agent tell them one day before
they left to move down there that their home was sold to someone else for $95,000 more than
they contracted for, even though they put a down payment on the home and signed a contract!
They received their down payment back, but they had to find another home, which took them
two additional months!

Speculative Investments
Speculative (high risk) investments are just that. These are the high yield; high risk investments
that are offered mostly by companies that only deal with Accredited Investors.
Accredited Investors are people who have a million dollars net worth (excluding the value of a
primary residence), or who earn $200,000 per year as a single person or $300,000 as a married
couple. This designation, developed by the Securities and Exchange Commission (SEC), keeps
the middle class from excelling in income investments. By deciding that middle class people are
not smart enough to research and invest with wisdom, the SEC forbids brokers and investment
advisors from showing high yield investments to people who don’t meet the criteria. Even if you
have great investment knowledge, you can’t invest in certain investments if you don’t earn
$200,000 a year and you don’t have one million dollars net worth. This is wrong on so many
different levels that I just have to stop right here before I get angry all over again.
A stock broker who is licensed and regulated by the SEC and the National Association of
Securities Dealers (NASD) can have you in his office selling you on IRAs and Mutual Funds,
and the very next hour have another couple in his office selling them on high-yield investments
that you will never know about. Not all of these investments are high risk!
Another high yield investment strategy is to become a small venture capitalist who loans funds to
small up and coming businesses that prove that they will make a profit. This method takes
serious research. I know a man who makes a living investing in companies that show great
potential. He does his research and if he can make money investing in these small companies, he
invests and reaps large dividends, as opposed to throwing money into mutual funds that include
failing companies that he knows nothing about.
There are many ways for you to take advantage of some of these higher yield investments even
when you have the funds but are not an accredited investor, and I will discuss those options in
the next section of the book when we talk about what the wealthy do to become and stay
wealthy. Speculative investments should be your last step, though; like it does for the wealthy,
this is where your money makes money.

Questions you need to ask before investing

I talked earlier about how people go to investment seminars, get caught up in the hype of the
smooth talking presenter and throw their wallets open, often without asking any questions about
the investment offered. Before you invest anything, you need to ask these questions:
· What is being offered/what is the product? If the presenter can’t explain this clearly
and in detail, you may want to turn away. I attended an investment conference in Cancun
and another attendee had done his homework to the point that he ran circles around the
 presenter with his questions. I was embarrassed for the presenter, and she was as red as
an apple by the end of her presentation. Needless to say, none of the attendees invested in
the product she was offering.
· Why do they need my money? Often, they really don’t! Others could fund the
opportunity they present, or they may have squandered money previously invested. In
either case, you want to find out how much money the company has spent, and how the
company spent it.
· Who is in charge? You always want to know who is at the helm of the product or service
being presented. The presenter at an investment conference in Greece was the actual
product inventor and developer; he had put his life into the product, and I could feel his
passion. He was an engineer and he did a great job developing and presenting the
product, and I felt very comfortable with that investment.
· Do they make money even if I don’t? I don’t invest in the stock market or use stock
brokers, because they make me broker and broker. Whenever others make money
whether you make any or not, you are going down a dangerous road. Often when you
trade stock, the broker earns money on every trade. Also, stock and insurance brokers
earn differing commissions on different products, so they may offer you an inferior
product just to receive a higher commission.
· How much money does the presenter personally have invested? Presentations made
by sales people are turnoffs to me; I want to hear from the owner, founder, or an officer
who has a personal stake in the product or service. These are the people who have the real
knowledge necessary to make prudent investment decisions. In my previous example, the
presenter was a saleswoman who knew less than the attendee, and it showed when she
couldn’t answer questions that someone more intimately involved with the company
would have been able to answer.
· What market factors drive the amount of projected return? Market factors such as
interest rates, economic growth, trade and capital flows, and merger and acquisition
activity affect the amount of return you may receive on an investment. In addition, some
products are manufactured in different places of the world. You need to know where the
products are made and the political climate in that area. I lost thousands in an investment
based in a South American country when corporate greed and government corruption tied
the company’s hands and stopped production. Who knows whether I will ever regain my
principal investment?
· What is the company’s background? How long has it been in business? The shorter
the amount of time a company has been in business, the riskier the investment. New
companies need to work out their glitches before you invest substantial amounts of
money; they need to earn your trust by showing growth and profits. Make sure that when
you ask this question the answer includes only the amount of time the company has
existed in its current state. I have heard presenters give longer existence dates for
companies that started out with other names, but failed and re-opened with a new name.
Many companies don’t want you to know that they have a checkered past.
· Will all or part of my invested principal be at risk? Earlier, we discussed capital
guaranteed investments, in which you are guaranteed to get back at least what you
invested. Some guarantee only to return part of your investment should there be problems
or loss involved. Make sure you know the entire story and exactly how much is
guaranteed, and get it in writing!
 · Can I or any other investors visit the company’s facility? This is an important
question, as some “fake” companies operate out of a private mail box address, or even
from someone’s home. People tend not to invest in companies that don’t have a brick-
and-mortar presence, and some organizations try to hide the fact that they are small by
renting a private mail box on a busy street. I have seen some of them bring pictures of
their supposed facility, which turned out to be pictures of someone else’s business.
Before many of my friends invest, they pay a visit to the company and have a talk with
the partners and officers. Even if a partner or officer presented the investment, the
investor validates concerns by visiting the actual facility and seeing the work in progress.
· How often do investors receive updates and payments? When you are considering an
investment, you need to know the company’s policies and procedures. You want to know
how often you will receive updates about your investment; some companies send out
monthly or quarterly newsletters, while others only contact investors once a year. You
also want to know when you will be paid; some investments pay out monthly or
quarterly. I have heard about investments that paid out after five years and usually offer a
higher rate of return because they have your money so long. If you want a long-term
investment to generate college tuition for your teenager, this may be the way to go.
· What is the exit strategy to recoup all of my funds? You should always know where
the exits are when you are in a building and when you invest. If you don’t ask, you may
find out the hard way that you can’t get your money back or at least not before a certain
date. If you invest in a product that has a high rate of return and claims that you will
receive full principal and interest in five years, will you be able to get the principal back
after two years if you fall on hard times, or will you forfeit part of the principal and
interest earned by taking the money out early? You need to ask the hard questions, or you
might end up in a bad predicament.
If someone asked these questions during “slick” presentations, most people in the audience
would never invest unless the answers were true and acceptable.
I said all that about high-risk investments, but wealthy people put little into them. Wealthy
people invest in “high-yield low-risk” investments
While hanging around wealthy people I’ve learned some once classified information concerning
wealth. This information permits wealthy people to stay that way. What I learned is that wealthy
people only use a small percentage of their money on speculative investments. They first create
and grow a strong financial foundation that’s secure and virtually totally protected against losses.
Then they do research and find companies and opportunities in which to invest. Sometimes these
investments are “long shots” and if they fail all of the invested funds are lost. However, if the
investments pay off they bring high returns and the wealthy use part of these high returns to
invest in other opportunities that are considered speculative. Wealthy people invest most of their
money in companies and opportunities that they are familiar with, as opposed to throwing money
into the stock market. They start businesses, take over good businesses with bad management
and replace the management, and they constantly research to find solid opportunities. These
investments bring them consistent cash flow, and if they decide to sell a company that they have
started they usually earn millions of dollars.
From now on we must make sure that we carefully research before we invest or we will not be
able to climb the stairs to wealth without falling backward.
HOW DO THE WEALTHY STAY WEALTHY?
First, we need to define wealth so that we are all on the same page.
The best definition that I have heard for financial wealth is this:
Wealth is determined by (1) the number of days you can survive without working, (2) or anyone
else in your household physically working (3) and still maintain (or increase) your standard of
living.
That definition kicks out people who have a lot of stuff, but would lose it all in a month or two if
they could not work to keep that stuff.
There are literally millions of people in the US with luxury cars, homes, vacation homes and all
of the latest gadgets who would lose it all in a matter of months if there were a job loss, divorce,
medical catastrophe, or something of that nature. These people are not wealthy and they never
were. Wealthy people make money on their money and have multiple streams of income so that
they can go on for years or for the rest of their lives without physically having to work. This is
your achievable goal if you follow the principles and the rules you have learned.
We all want financial freedom. My favorite definition of financial freedom is the ability to do
what you love, when you want, with whomever you want, with no concern about money. In
order for you to have the time to do what you want and have no concern about money, you have
to get to work on your strategy right away.
Let me tell you the secrets of the wealthy. They have been teaching me for many years now
because they found that I was not only willing to learn, but willing to listen and implement the
strategies they shared. They realized that they were not throwing their pearls before swine, and I
gleaned an abundance of knowledge from them, for which I’m truly grateful.
Wealthy people buy assets, not liabilities. They don’t just rent a building for an office; they buy a
building, put their office in it, and rent out the other space so that their tenants pay the mortgage
for the entire building, usually without knowing that one of them owns the building! Wealthy
people buy or form profitable businesses. Instead of buying big cars and homes they can’t afford,
they wait until the business income is enough to pay for the cars and homes. They let the
company buy the cars and homes that they live in and drive. I have learned that wealthy people
endeavor to own nothing, but control everything through corporations, trusts and foundations.
Wealthy people’s assets grow based on the formula for compound interest and they become
wealthier. They use money that has been passively earned through investments, and their assets
pay for their liabilities. If they want a new house, they use the earnings from an investment to get
that property. They will purchase rental property, and when it is fully paid for (via the rental
income), they will use that rental income to pay for their new home. When they utilize these
strategies, their time is their own to use as they see fit; they find more ways for their money to
make money, instead of working ten hours a day only to come home to watch the ballgame.
They become powerful and influential; people with money-making opportunities introduce them
to more opportunities because they are able to fund their deals. As these opportunities roll in and,
after research, they take advantage of them; they build wealth and multiple income streams very
quickly.
One of the most important things about wealthy people is that they teach their children HOW TO
HAVE MONEY WORK FOR THEM, not how to work for money. They start their children off
young, teaching them that they can make money without working for other people.
Many wealthy people have their very young children involved in Internet businesses, so while
the children are asleep on a Tuesday night, they are making money because someone on the
other side of the country or the other side of the world is buying that product. That child will
learn the definition of “mailbox/inbox money,” when they receive checks in the mail or have
funds earned in their business downloaded to a prepaid debit card or to their bank account. These
children can earn thousands of dollars before even reaching high school, and be determined to
always make “mailbox/inbox money” instead of working for a paycheck.
Don’t get me wrong—cutting grass and babysitting are fine, but wealthy people teach their
children how to operate on a global level, and you need to start learning how and teaching your
children the same thing!
Wealthy people also make sure their children receive a good practical, hands-on education and
work in their business, instead of watching a lot of TV or playing too many sports and video
games. They tell the children that they will have to work now in order to receive a share of the
family business later, which gives them incentive to work hard and learn the business, like
Donald Trump learned from his father, and the Rockefellers and many other wealthy children
learned from their families.
Wealthy people create their own reality, and if something in their environment is not to their
liking, they have the money and power to change it. They find and utilize the resources they need
to accomplish their goals and dreams.
The wealthy are not limited by conventional thinking or the perceived limitations of the masses;
most people limit themselves with excuses and things that happened to them in the past. Wealthy
people do not let obstacles stop them; they move the obstacle, destroy it, or buy it!
The bottom line is that whatever wealthy people can conceive, they can achieve, and this is the
mindset that we all need to develop in order to become wealthy.
Some of the things we are not taught in the public school system but that wealthy people know
and teach their children are listed below:

How to keep the money we earn.

· Control spending. As discussed earlier, middle class people are in an earn/spend cycle
and as long as that is the case, they will never become wealthy. Wealthy people control
their spending and utilize the age-old principle of delayed gratification. My father taught
me about delayed gratification when I was eight years old, when he told me that if I saved
my little allowance instead of buying candy or toys, I would later be able to get nicer
things, like a bike or the archery set that I wanted.
Wealthy children learn about delayed gratification, unlike many children not born wealthy.
We need to get back to showing our children the value of saving for things instead of always
having their hands out. We ourselves need to learn that the mall isn’t the place to be when
we are in debt! Also, we need to practice delayed gratification daily.
How to research where to invest our earnings.
· Stop taking financial advice from financially illiterate people. People will listen to—and
throw money at—someone with the hottest stock tip, who may be more broke than a
panhandler. You need to pay attention to who advises you. If the people you learn about
wealth from aren’t wealthy, then you need to start listening to those who are wealthy and
those who are on the path to wealth.

How to keep other people away from the money that we earn.
· Let’s talk about contingency litigation and frivolous lawsuits. Our country is one of the
few that will let one person sue another without paying a bond.
A lawyer can take a case on contingency, which means that they get paid after they get a
judgment, which many so-called third-world countries don’t even allow.
In Panama, you have to put up a $25,000 bond in order to sue someone; if you lose, the
$25,000 goes toward the defendant’s attorney fees and loss of work dealing with the case!
Over half of the lawsuits would surely stop if that were the law in the U.S.; however, since
most legislators are also lawyers, we have as much chance of getting rid of contingency
litigation as I have of winning the lottery, which I have never played.
The United States has 5% of the world’s population and:
· 70% of the world’s attorneys 94% of world’s lawsuits
· 80,000 law school graduates annually 100,000,000 cases per year a new lawsuit filed
every 30 seconds Each American bears a 1 in 3 chance of being sued
· More law students than lawyers
With that in mind, it is suspect that asset protection is not a big part of the education of the
middle class, while the wealthy have been using asset protection strategies since the early
1900s and before.
When someone dies and has a few assets that they thought were going to be given to their
loved ones, the loved ones are in for a shock if the proper steps have not been taken to
protect the assets. For instance, the average time to probate an estate is about fifteen months;
because lawyers or trustees get involved and sometimes draw the process out, the average
loss to an estate is 30%. This means that if someone left $100,000 to split between four
people, and did not take proper asset protection steps, each heir will get only $17,500
instead of $25,000, which would make a difference for anyone in the middle class! The
probate business generates $25 billion annually, but as we educate ourselves on proper asset
protection, that amount will shrink significantly.
Have you ever wondered why the Rockefeller and Carnegie families have had land and other
wealth for hundreds of years, while your family members die and leave bills? Have you ever
wondered why the Kennedys never lose a law suit?
Wealthy people use business structures (trusts, limited liability companies, foundations, and
international business corporations) to protect their assets from lawsuits, divorce, and other
factors that may interfere with the perpetuity of their family legacies. Although that
discussion is beyond the scope of this book, suffice it to say that when you get out of debt
and start to invest, you will want to research these important ways to keep what you earn,
 protect it, and make it grow.

How to have your money work for you so that you don’t have to work for
money.
· We are not taught to become knowledgeable investors because many of the wealthy
want to keep these secrets for themselves. Consequently, these strategies are rarely
taught, even at the university level.
· We are not taught to create passive income streams, one of the main things we need to
learn in order to have our money earn money. We can get involved in businesses that will
generate passive income streams and invest in profitable ventures. We will discuss this
area shortly. We are not taught to create profitable systems or follow profitable systems
that are already in place. A profitable system is one which, once set up, requires little
oversight and maintenance, so that you can go on vacation and the system will continue
to work in your absence.
A good example of a profitable system is the restaurant franchise system. When you
purchase a Chick-fil-A franchise, you receive unchangeable rules and regulations.
Their system has proven to be profitable; even if you take a month long sabbatical, you will
still expect to earn profits in your absence. This scenario is not so when you have a job, or
when you work for yourself.
Once we study and find the profitable systems that suit our personalities, skills, time, and
lifestyles we will be another step closer to escaping the rat race.

Proper Business Structuring

Managing a business and having a job are truly like night and day. When a person has a job or is
self-employed (1099), he/she will be expected to pay lots of taxes. So, that cycle goes like this:
EARN — TAX — SPEND.
However, when a small business or corporation makes money there is a different outcome. They
spend the money first, on ordinary and necessary business expenses, and anything left over is
taxed. For example, a corporation will have expenses such as the company car, company travel,
and paying the manager’s mother to answer the phone for extra income.
Businesses have been utilizing these strategies for decades, while the middle class pays out
everything and is broke at the end of each month. As you start your business, you must first
structure it so that you own nothing and control everything as the Rockefellers do, and so that
you know how to add other structures (Limited Liability Companies, trusts, foundations, and
international business corporations), as we discussed earlier. As your businesses grow and you
utilize these complex business structures, you will be in the winner’s circle.

Diversification for Safety

Once or twice a year, I used to attend international conferences where wealthy people do their
continuing education. Wealthy people learn from other wealthy people, and now middle class
people are beginning to attend these wealth symposiums and glean from them.
One speaker gave a good presentation on diversification for safety. In our previous section, we
talked about these stair steps to wealth: insurance and assurance, emergency funds, and capital
guaranteed investments. When you become wealthy, you can invest in the speculative
investments that are high yield but also high risk. This gentleman gave us the chart that you see
below:
Silver & Gold—30%
Cash—10%
Low Yield Investments—25%
Profitable Real Estate—25%
(Maybe in other countries)
High Yield Investments—10%
(Oil, Water, Agriculture)
He became wealthy by diversifying his assets in the manner shown above. If you notice, he has
very little in cash, because the US dollar is steadily losing its value all over the world.
In a global economy, we need to think about wealth from a global prospective and make sure we
have access to silver, gold, and other currencies. Low yield investments and real estate were his
next most important investments, and the high yield investments were last; tied with cash. This
worked for him and many others, and it can work for you as you become disciplined and start to
implement the strategy.

High Yield Investments

There are many high yield investments out there that do pay off. Just because the middle class is
not told about them, or just because they always hear about the investments that go belly up does
not mean that the high yield market is not making other people millions of dollars each year.
Some of these investments earn 100% per year; however, I hope that you follow the strategies
mentioned earlier and walk, don’t run when your goal is to invest. If you take it slow and safe,
the safe investments will pay off and you will eventually have extra money to try some of the
high yield investments.

So what specifics can I give you on asset protection and investing?

I wished I could, but because I am not licensed I can’t go into detail about the wonderful
investment opportunities that I have been privy to examine. If you contact me after you complete
this book, I will be happy to share information with you about places to explore asset protection,
investing, and international real estate.
SO, HOW DO THE WEALTHY STAY WEALTHY?
· They invest in gold, silver and other precious metals.
· They invest in foreign exchange markets.
· They buy prime real estate in profitable U.S. markets.
· They buy international real estate.
· They start international Internet businesses.
· They invest in emerging technology off-shore.
· They broker goods and services worldwide.
· They invest in their health (eat well, alternative medicine).
· They take advantage of exclusive SEC investments.
· They invest in oil and gasoline, solar, and wind power.
· They invest in water wells and water desalination.
· They invest in agricultural land.
· They invest in businesses with high profit potential.
 CONCLUSION

We’ve reached the end of the book, so in closing, I will reveal to you your recipe for financial
freedom:
YOUR RECIPE FOR FINANCIAL FREEDOM
· Eliminate Debt
· Reduce Taxes
· Reduce Major Expenses Like Your Mortgage
· Create Wealth through International and Domestic Investments
· Protect Your Assets through Proper Structuring
· Increase Your Income to Match Your Goals
· Sustain Your Commitment to Personal Growth
I created this book because I see the middle class suffering, and I always have a problem with
injustice. It is not fair for the wealthy to keep the secrets to themselves and leave scraps for the
middle class. Now the middle class can access the same wealth strategies. If you are disciplined,
patient, and willing to learn and implement the strategies discussed in this book, you can be on
your way up the off ramp and out of the rat race!
TWO POSSIBLE FUTURES
Here are two scenarios for you to ponder:

The Future of the General Population

James and Beverly were finally on their way to achieve their life goals. Their new home was
beautiful; it costs them $360,000 but was well worth it. Though James would have to work two
jobs and Beverly would have to keep her full-time job, they were finally part of the “in crowd.”
Beverly would pay the BMW lease, James would pay the Lexus note, and they would split the
$3,700 per month mortgage payment. They had to accept a higher interest rate because they did
not have perfect credit.
After 7 months in the house, James was downsized from his information technology job. His
entire department was eliminated and the jobs were contracted out to a company in India. James
set out to get another job, but he couldn’t find one that would pay what he was making on his full
time job. He still had his part-time job, but after searching for six months, he ended up having to
take a full time job making half of what his IT job paid.
James kept looking for that higher paying job on the weekends because there was no time to look
for a job during the week. The jobs he had did not allow any off days because there were plenty
of other people waiting in line to take those jobs if anyone wanted “special privileges.”
James and Beverly borrowed from friends and relatives, hoping that he would soon find a better
paying full-time job, but weeks turned into months and there was still no job paying the amount
needed to keep the finances afloat.
The BMW went back first, as they could not make the payments any longer; Beverly had to take
a bus and train to work. James couldn’t do without a car because he had to get back and forth
between two jobs. There was a steep penalty for turning the BMW in before the lease was up,
which the couple borrowed money to pay.
Even after turning in the BMW, all the bills and expenses were much more than the money they
brought in from all three jobs. As this crisis escalated, the couple noticed for the first time how
much income taxes they paid, and realized that over 30% of their hard earned resources were
taken before it hit their hands!
Then the couple’s finances collapsed. One year from James’ job loss, the house was in
foreclosure.
How many people do you know who are just like this couple? How many of them will be able to
overcome that situation? They are the typical American general public, in debt up to their ears
with little or nothing in savings. The all mighty VISA is used for any unplanned situations, with
little thought of the future.
No economy or individual can absorb forever the amount of debt that our economy is
experiencing. The country is deeper in debt than ever, yet we continue to go on as if everything
is A OKAY.
The government’s multi-trillion dollar debt is set, unless Congress takes drastic measures (not
happening). The congressmen making the decisions are wealthy for life; they have six figure
salaries, hefty retirement packages, and health care plans different from the ones that government
mandated for the public. These congress people have trusts and foundations that are often
“blind” to the public eye.
It’s the general public that’s in trouble, swept away by the current of the falling dollar, the
tanking stock market, and the losing housing market. As people lose their jobs and are unable to
pay their bills, the foreclosure rate has doubled. Those with money are buying property for cents
on the dollar, and as they do, former homeowners are forced to rent them. A little known fact is
that many foreigners, mostly Chinese, are buying up U.S. real estate like it’s going out of style.
Research the implications of that trend if you will.
Those who lose homes are flocking to apartments. The suicide and homicide rates are drastically
increasing. If you don’t believe this, look at what happened in Argentina in the early 1970s and
what’s happening there and in other countries now. The debt has outpaced the gross national
product and they had to print more money to pay the debt. Eventually their currency was worth
less than the paper it was printed on.
Zimbabwe actually printed ten million dollar bills when the economy collapsed in 2008. In the
U.S., it is now against the law for people to melt down pennies and nickels. People found out that
pennies and nickels were worth more melted down than in their coined state, and people were
actually melting and selling them! To be sure, the economic meltdown has already started!
The point to this story is for you to figure out if this depicts you, and make you understand that
you can and must do something about it. Time is of the essence.

The Future of the Financially Sound

You have this book to learn how to avoid the situation I just described, which is a classic tale of
a family in the rat race.
Now you’ve learned how to become part of the group that is financially sound. When the
economy sinks to a critically low point, if you have taken advantage of the strategies that you
have learned in this book, you will be able to step over that dung pile and move on with your
family intact.
You will understand the true definition of assets, and you will be able to buy James and
Beverly’s $360,000 home for $130,000, rent it out for monthly income, hold it until prices rise
and make a huge profit, or you will be able to buy a condo in Costa Rica and stay there until the
U.S. economy gets back on its feet!
If you use the knowledge that you learned in this book, you will be able to help others. If the
home you live in is paid off, you can help your children and your grandchildren with college
expenses and with setting up their homes and their financial fortresses. This is what the wealthy
do.
You will be able to teach others how to take advantage of wealth building and asset protection
strategies, have fun with it, and earn while enjoying it.
I do not intend to scare anyone with this book; I only want to let you know the severity of the
problem. The economy will fail—sooner or later—but it will fail.
What position will you hold?
The position of the general population, or the financially sound?

You CAN ESCAPE THE RAT RACE!

Let’s get started!!!
 START A HOME-BASED BUSINESS!

FOR A FREE COACHING SESSION ON HOW TO START A

SUCCESSFUL

HOME-BASED BUSINESS

CALL:

START YOUR BUSINESS

AND EXIT THE RAT RACE!

CHECK OUT SHERRY PEEL JACKSON’S OTHER BOOKS AND
PRODUCTS:

How To Escape The Rat Race: Four Keys To Acquire The Life Of Your
Dreams
This audio series and workbook will jumpstart your race to wealth by giving you detailed and in-
depth practical knowledge and examples to use for debt elimination, income generation and
wealth creation. This series will put you on the exit ramp so that you can leave the rat race
forever!

Basic Financial Survival: Learning To Survive Then Thrive In Any Economy.

This book and workbook teaches the basics of managing finances and shows you ways to create
wealth. The set gives you actual forms to copy and complete for your debt-elimination,
budgeting and financial management plan!

How To Stick It To The IRS: Confessions From a Former Insider.

This book lets you inside the Internal Revenue Service and shows you what they do to
individuals and businesses all in the name of patriotism. You will learn how to arrange your
business and personal finances so that you won’t be devastated during an audit.

How To Stick It To The IRS: Confessions From a Former Insider.

This audio series takes you through in-depth strategies and steps to help you win an audit or at
least reduce the amount you give the IRS. It includes a PDF file with the actual Initial Interview
questions and Indirect Methods used by revenue agents and auditors to calculate additional
income tax on you and your business!

Appropriate Church Finances and Policy

This audio series/workbook, produced using Sherry’s decades of working with church finances,
explains the proper method of managing church finances and the do’s and don’ts of church
policies and procedures!

Church Strategic Planning and Growth

This audio series/workbook, developed using Sherry’s practical and formal training, teaches you
how to strategically plan for church expansions whether you have a building campaign or an
evangelism campaign. It also shows you how to acquire and keep loyal members and grow them
into disciples!

Pastors and Ministers IRS Audits

This audio series/workbook, based on Sherry’s experience auditing ministers while at the IRS,
reveals the methods that the IRS uses to find and audit ministers and includes real stories from
real audits and solutions to help pastors avoid or reduce entanglement with the IRS.

Wealth Creation for Pastors and Their Congregations

This audio series/workbook, based on Sherry’s formal education and over 20 years of experience
working closely with church finances and congregations, teaches pastors and church
administrators how to legally increase the churches’ revenue and the income of the staff
members and the congregation.
 RECOMMENDED RESOURCES

Download your FREE REPORT

The Red Flags That Will Prompt an IRS Audit
Go to www.StickIt2TheIRS.com
Download Your FREE REPORT
Ten Simple Ways to Decrease Your Expenses
Go to www.How2EscapeTheRatRace.com
Download Your FREE REPORT
The Secret to Why Pastors are Selected for Audit
Go to www.masteringclergyfinances.com
 A WORD FROM THE AUTHOR

As a retired CPA and CFE, and a former IRS Agent I have seen thousands of financial disasters
and successes. All of the financial success stories have a few things in common; namely, the
successful person was able to escape the rat race. Most people toil in their circle of sameness all
of their lives; going to the same jobs each week, looking at the same television shows each
evening and following the same weekend routines that keep them broke busted and disgusted.
They know that there is a better way but they don’t take action to pursue it. For this reason they
will never escape the rat race.
This book is for every day common people that want to escape the rat race. It is full of principles
that will help you improve your financial future.
How do I know it works? I have been a classic case study. I’ve gone from earning six figures to
hitting rock bottom and starting to dig. After getting a clear picture of my life and why it was
being forced onto the rat highway I stopped and took action. Following the principles that I share
in this book has taken me from that bottom dwelling place to a place of peace and prosperity, and
as a financial teacher I feel obligated to share this information with anyone that wants to thrive
instead of just surviving day to day.
I believe that it is my calling to help you become financially free, stress and worry free and to
step out of the rat race and into the life that you were created to have. I have experienced the
abundant life and now I have the privilege of sharing with you the steps that will allow you and
your family to prosper for generations to come!
EXHIBIT A
EXHIBIT B
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4592.htm