I’m often asked what is it I actually do. I’ve worked on my answer to that question for quite awhile.
What I do is show regular folks how to retire very well — and sooner than they thought possible.
The next question, as you might have already guessed, is usually, “How do you do that?”
It’s simple, and it’s not. But there are some common denominators that will always be present. Ask anyone who has retired with impressive income, and at a relatively early age how they did it. If you listen, you’ll hear the same principles being repeated every time.
Before I continue, you can listen to a Purposeful Planning podcast on this site. (There are actually two of them.) But the principles spoken of in those interviews, though they form the foundation and steel girders of what I do, also entail other principles left unspoken.
One of the bedrock principles with which we help people advance toward their retirement the way my son does a carne asada burrito, is known as the Flywheel Principle. I wish I’d thought up the name for it, as I’ve been employing the principle for decades now. I not only employ it for my clients’ benefit, but for Brown & Brown too. I just always thought it made sense, though I didn’t have a name for it. Grandma taught it to me.
The Chinese have used this principle for countless centuries. It’s actually become part of their culture’s DNA.
There was a book published about six years ago, Good To Great that talks about and explains this principle magnificently. Here’s how it works. I very much like how the book explained it, so I’ll loosely paraphrase that version and apply it to what I do — the Purposeful Plan.
Imagine a solid steel wheel 30 feet in diameter, about six inches thick, and in a horizontal position. It’s massive, and you can only guess at how many tons it weighs. Now picture yourself (and your better half if you’re married) trying to get this thing turning. By turning this wheel you generate power — energy. Your only allowed to get it going by your own efforts — pushing with your shoulder(s) to the wheel. Since this giant, heavy flywheel is perfectly balanced it can be turned, but only with determined, and consistent effort.
The Flywheel Principle: Once you know, in any endeavor, what behavior is required to accomplish your mission statement, you focus only on those behaviors. You keep focusing on them, no matter what. Even though it may take years, and at times you don’t seem to be advancing by any measure — you keep doing what you KNOW will take you to the mission statement’s promised land. You do this until, almost like magic, you realize you’ve broken through to the other side.
The first day of pushing this monster flywheel for all you have, results in almost a whole revolution. Of course in your Purposeful Plan, this ‘first day’ is really your first year or two. You’re not discouraged though, because you know what’s possible. You understand that the faster you get this dang thing turning, it will reach the point at which its weight will cease being your foe, and turn into your friend. We call this inertia. More on that later.
So you’re sweating blood with your partner pushing this monster wheel, and you begin to notice the RPM’s increasing — as long as you keep paying attention to the force you’re applying. Translation: You’ve got a Purposeful Plan (represented by this flywheel) and you’re doing everything you possibly can to keep it turning. As time passes you’re becoming encouraged and excited by how you’ve managed to get the wheel spinning almost like a top. What you’re also noticing is that even though the RPM’s are increasing at an impressive rate, you’re also not having to expend so much of your own energy towards that result.
This is creating the inertia, mentioned earlier, that keeps it moving in the right direction with less and less effort.
Now you begin to smile. It’s been 5-10 years and your flywheel is now spinning like something you vaguely remember from Star Wars. Your effort has now been reduced to ensuring you don’t do anything to alter the wheel’s direction. You’re really liking these two trends.
This is usually the time you begin to notice something. The flywheel is now spinning so fast and creating so much energy, you can’t believe it. You’ve experienced The Breakthrough. It’s that moment in time when you realize you’re worth more than you’ve ever imagined. It’s not like you weren’t paying attention — you’ve been paying very focused attention.
And there it is. There wasn’t a specific day you woke up and said, “We’ve broken through Honey!” That’s just not the way it works. There is a moment though when you realize what you’ve accomplished. And it happened because of the Flywheel Principle.
At this point it makes sense to point you to a very recent post in which the flywheel principle was illustrated without naming it. The Purposeful Plan and the consistent ‘pushing’ made the results shown in that post possible — over a 20 year period.
You created a Purposeful Plan — your own personal flywheel. And since you realized that Plan, like the wheel, wasn’t going to accomplish anything by it’s mere existence, you began ‘pushing’ for all you were worth. And now that Plan is generating the huge smile on your face as you can now easily visualize your retirement dreams — as reality.
My favorite client meetings are those in which I get to show them they’ve reached breakthrough status. There are two such meetings. One is when I can inform them they’re now easily worth seven figures — exclusive of their own home. My favorite though, is when I get to tell them their Purposeful Plan has now made it possible to quit their jobs any time from that day on. Their ‘wheel’ has created enough energy (Read: Retirement Income) to last them a lifetime.
Those who choose to ignore this principle are doomed to experience mediocre to good results. If you insist on great results, the Flywheel Principle is a must. There are no exceptions.
Often, we are a product of the questions we continually ask ourselves. Try this one on yourself.
Given the choice, do you want to live an average to good retirement — or a great retirement?
That’s a great question, isn’t it?
What’s your great answer?
Related posts:
About BawldGuy
What happens to the Purposeful Plan when all that heavily leveraged property stagnates, or worse, goes down in value?
Isn’t that a real danger right now?
Jonathon – An excellent question. Let’s see if I can respond with an excellent answer.
The simple answer is what separates the pros from the amateurs. A pro knows, through astute and in depth analysis, which areas are very likely to grow, and which ones are not, or are temporarily flat or declining.
An example would be Phoenix. In 2003 San Diego had begun to reach price levels for income property that were bordering on silly. It was just a matter of time before prices there would hit ‘critical mass’.
I spent a few months looking at 10-12 cities west of the Mississippi as candidates for my clients’ attention. It turned out Phoenix was my pick. Those who traded and/or bought then and for awhile after did exceptionally well – with low downs of 10-20%. Once the market there showed signs of tiring, we shifted our attention to other cities, deciding on Boise.
The clients in Phoenix are fine. They’ve made money, and will move their gains to another growth regions in the next year or two. Some have refinanced and moved that equity into Boise.
I was recently referred to a nice lady who had done her own research, and bought two Phoenix condos – in ’06 – using 100% financing. Not a good move. I had to tell her she was dead in the water until that market recovered and began to move up again – which it will. The question is, will she survive her amateur mistake?
So the long answer to your question is know what you’re doing. Really know – or know someone who does.
It definitely is a real danger – especially if you’re guessing about some or all of the factors involved.
In the end Johnathon, there are no guarantees. It’s called risk capital for a reason. That said, there is a reason the same investors seem to always be in the right place at the right time.
They’re not betting the horses based on what colors the jockey’s wearing. They’re doing things on purpose.
I hoped this helps.
Great question – thanks.
That helped to explain the process and the risks but not to mitigate my worries.
The Purposeful Plan is too risky for my own personal level of comfort.
Thank you for the prompt reply.
Jonathon – I think you misunderstand my Purposeful Plan. It is different for each client. Many of my clients never used 10% down.
Comfort levels vary from client to client, and whatever the level, we have a policy to adhere to it. There’s nothing holy about 10% down payments.
Your personal comfort level will be the deciding factor in how we approach creating your particular plan.
Thanks for allowing me to clarify that.
Jeff, had I come to you 3 1/2 years ago, in January 2004, where would you have advised me to buy real estate, what kind, how many units and what kind of financing would you have recommended?
Do you have any archives from 2003 and 2004 that I can go back and read?
Sorry, I don’t mean to take up so much of yor time!
Jonathon – another cool question. You’re growing on me.
Archives? I’ve been blogging less than a year.
Case studies? I’m working on one now. But let’s take a case that actually began in ’04.
Two fourplexes bought in the general Phoenix area in the spring of ’04. Both using traditional neg-am loans, with 10% down payments. They were purchased for $200K apiece, with both buyer & seller being represented by separate brokers. It was an arm’s length transaction.
They still own both of the properties. They are currently worth about $350,000 apiece – a gain of $300,000 in three years.
It took about $48,000 to clsoe to close the original purchases in ’04. By selling them now they’d net about $244,000 – which includes accounting for higher balances than the original 1st loan amounts.
Gee – (use of that word telegraphs me coming up with a very cool number) I wonder what their capital growth rate was for the three years?
Try 71% a year. For real. And they used only 10% down payments, ALONG with neg-am loans. And, did I forget to mention the 2nd TD’s at 10% interest?
Will you get 71% capital growth every year. Not in any world I’m aware of. Will it happen every now and then? Yep. What usually happens Jonathon, is our clients will benefit from a modest to moderate property appreciation rate, which will translate into a capital growth rate of 18-35% a year, give or take.
If you had been the client Jonathon, we’d have put twice as much down, and your capital growth rate would still have been magnificent.
That’s a real life ongoing example which began, as you hoped, in ’04.
Does this answer your question?
A final thought. As I mentally review the various purchases and exchanges I executed for clients in ’04, the results have been, without exception, uniformly stellar.
Thanks again for teeing it up for me Jonathon. Your questions are excellent.
Hi Jeff, I followed your trail from Bloodhound Blog to here.
You have an interesting site and some very interesting ideas.
In reading through your posts, I noticed that you had chosen Boise, ID as the place to invest, that’s why an article this weekend caught my eye:
http://www.theolympian.com/130/story/104475.html
“Experts say investors trying to unload houses in highly populated southwestern Idaho have likely boosted the number of homes on the market.
They say a recent drop in median home prices might have triggered the sales rush.
Nearly 8,000 homes are for sale in the area.
Financial experts say that many homes on the market will likely continue driving down home prices.”
In light of this development, have you changed your mind about Boise?
Robert – Thanks a million for the comment. You’ve teed it up wonderfully for my Monday post.
Please come back.