View — ۲۳ فروردین ۱۳۹۱

By Behnam Rad

 

۲۰۱۲ is here, and I hope you have had fun so far in the New Year.

Have you set goals for the New Year? Maybe you think the Mayans are right and 2012 is the end of the world. In that case, you’ve probably said to yourself “to heck with goal settings, I am going to enjoy myself in 2012”. Actually, that can still be considered a plan. Not a perfect plan, but a plan nonetheless.

All right let’s get more serious.

If you are fortunate enough to not be stuck in rush hour traffic, hanging off the handle bar of the bus, or having just rescued this magazine out the mouth of your two year old baby, I would like you to take a piece of paper and write down the following words on top of a page: where, what, and how.

Next, write down the following words in a numbered order down your page: career, financial, physical, family, and social.

These are the five basic factors with which you need to set goals in your life.

The process is very simple.

First ask yourself where you would like to be working in the next one, two, five, and ten upcoming years. Next ask yourself what you would like to be doing in the next one, two, five, and ten upcoming years, and how you would like to be achieving this in those years to come.

For example, in regards to the financial factor, consider how much you would like to make in those years, where you would like to invest the money you are making in each year, and what you would like to be doing with your money in the next one, two, five… and so on.

You get the idea.

The key objective here is to at first allow your mind to run free. Unleash your thoughts, let them fly, let them go wild and crazy! For each of those five factors, write down whatever you would like to do, wherever you would want to be, and however you would want to live in the upcoming years.

After you are done having fun writing down all your dreams, regardless of how silly they might seem, it is time to look at all of them realistically.

In terms of being realistic, I mean that you can’t set a goal to earn a million dollars this year if you have only made $50,000 last year. You cannot try to fool or trick yourself. If the goal is unrealistic, not only will you fail to meet the goal, but you will also hurt yourself in the long run with feelings of regret and disappointment.

This is not to say that this can’t be an excited process! In fact, here it gets particularly exciting because most people think that these five areas of goal setting are separate from each other, when in fact they are very much related.

Where you want to work is in direct relation to how much you would like to make, while the people you would want to be friends with in your social life is in direct relation to where you work and what you do. If making lots of money is your goal and that job requires high amounts of energy and alertness from you, then guess what? You have to be physically fit, eat well, and sleep well.

Hopefully I haven’t scared you off, but real goal setting means to be real with yourself and to truly allow yourself to see the big picture. This includes knowing exactly what you expect from yourself ten years from now and then reverse planning in order to figure out where you have to be in five years, two years and one year from now. I’m sure you know what happens if you leave your house and then just drive around without any specific plans. Not only will you not get anywhere, but you will also waste your precious time and resources. It’s time to stop wasting time and write down your goals on paper.

The entire reason that I ask of you to set goals is that no matter what your goals are, seeking happiness and financial wealth will most likely be a part of your goals. Financial Wealth, as Gary Keller puts it, is “the unearned income to finance your life mission without having to work”.

You might be wondering how exactly you can obtain an unearned income. The answer is simple; the easiest way to obtain an unearned income is to invest your money. Where should you invest your money? The answer to this question is what we talked about in our previous article where we mentioned the topic of stock markets, mutual funds, and GIC.

I have previously mentioned how the right investment for me is one that I can learn from; an investing where I can take full responsibility, manage my own money, and most importantly, be in control. An investment that I cannot be in control in is not the right path of investment for me.

Stock markets, mutual funds, and GIC are some investment paths in which you pass the control of your money to others and are no longer in charge of your own money. In those cases, you are only an observer, like the audience of a football game, with no control over the results and only hope that everything turns out in your favor.

I just want to remind you that I am not against financial advisors or mutual fund specialists; all I am saying is that if I am betting all my money on a game, I prefer to be in the game so that I can have some control in winning the game.

Now you may be wondering what other investing options are available.

Another awesome and effective way to invest your money is through buying other successful businesses. This is exactly what companies like Microsoft, Google, Facebook and brilliant investors like Warren Buffett are doing. I particularly like what Warren Buffett does because he mainly goes after family owned small to mid-sized businesses which have been doing well financially in the past five to ten years. He buys more than 50% of their share so he can be in control, and usually doesn’t touch any piece in the management unless he thinks it is absolutely necessary. This way he benefits from the revenue of that company and the other shareholders benefit of having a mentor like Warren Buffett sitting at their board of management. Yes, I know, you may say that you don’t have that kind of money, but it is worth thinking about it. You never know, you may play your cards well and get to that stage in your life. The beauty of life is that everything is possible; you just have to reach out. Now we get to the last method of investing money, which is through real estate.

Real estate includes houses, condominiums, multi-unit apartment buildings, land, shopping centers, or office buildings.

I mention this in order to ensure that you don’t limit yourself to only condominiums or houses when it comes down to real estate.

Investing in real estate can be passive or active.

For example, if I purchase a house in cash, that can be considered to be a passive investment. Regardless of whether I live in that house or not, the house will receive some appreciation value in subsequent years and that will be the return on my investment. If I buy the house and rent it out however, then I am creating an active investment because cash flow will be generated from that property. This allows me to no longer rely solely on the appreciation value of the house. In choosing which type of investment to go forth with, it’s best to remember that passive investments are more ideal if you have lots of money and you don’t mind leaving it somewhere for a while. You are putting your money down and are aware that there will be no return for at least the next two years. You definitely won’t lose, and you will get the return you are looking for, but there will be no cash flow for at least two years. You should never go and borrow money to buy a pre-sale condo. That is a huge mistake because you have to pay the interest out of your own pocket till the condo is built and sold. As I already mentioned, you should only get into passive investments if you already have the cash, since borrowing money for a passive investment is a bad idea.

Contrary to that, if you buy a house and rent it out, not only can you cover the mortgage and all the other expenses of the house, but you can also make some cash on the side (even if it is just a little bit).Active investments are always the best investments. If you do the math (we will touch on this subject in future articles) and there is no cash flow or if the cash flow is negative, stay far away from that property. The fact that you would have to put money down out of your own pocket to simply break even makes that investment a bad one, and one that you should walk away from.

If you ask why real estate investment is a good choice, I would say that because it is simple and easy to learn. You can take full responsibility when it comes down to picking the property as well as managing your own money because you know exactly where you are putting it. In addition, you are in control of your money because you know exactly how much your return on your investment will be as long as you own that property.

The best thing about knowing how much the return on your investment will be in the future is that you can plan ahead to see what you can do with that money.

Stay tuned for our next article when we delve deeper into real estate investment. Real estate investment is something that everybody can do if they focus on smart planning.

Behnam Rad, Real Estate Investor;

behnam.rad@sigmarealty.ca

www.sigmarealty.ca

Read the first part of this article at

 

 

 

 

 

 

 

 

 

 

 

 

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