10. Multiple Revenue Streams:
Throughout this book, I’ve tried to share lessons I learned from masterminds. They taught me that I could advance my prospects for success if I lived in the world of reality rather than the world of fantasy. When authorities took me into custody, back in 1987, I had to live with the reality that I had made many bad decisions as a young man. While locked in the Pierce County Jail, prayers led me to the story of Socrates. From that story, I learned to think about the avatars that would influence my prospects in the future.
Instead of dwelling on challenges that my bad decisions created, I had to think about the best possible outcome. With that vision, I could engineer a path that would take me from a jail cell, through multiple decades in prison, and into a life of success upon release.
Certainly, I wish that I had made better decisions as a young man. If I’d made better decisions as a young man, I wouldn’t have been locked in jail. But I couldn’t deal with the world of wishes. No one advanced a station in life by wishing or complaining. Instead, we had to take action, disciplined action.
Reality required that I make new decisions. By thinking about the future, I realized that if I didn’t adjust wisely in prison, I would have a very difficult time finding employment once I concluded my prison sentence. In fact, I accepted that the length of time I expected to serve might make it difficult for me to find any type of meaningful employment.
Throughout the journey, I contemplated what resources I would need to start my life upon release. If I didn’t adjust wisely, I wouldn’t have anything when my term ended. I wouldn’t have clothes to wear, a car to drive, a savings account, or anything. Fortunately, decisions I made inside opened numerous opportunities. Yet when Carole and I began, I anticipated that my prison term and criminal record would always be hanging over my head. If I could create several different streams of income, I anticipated that I would advance our prospects for stability.
Those who read Earning Freedom: Conquering a 45-Year Term or any of my earlier books will know that the stock market had an influence on my adjustment through prison. I wanted to speculate on stocks after my release, but I had priorities. Although trading in stocks opened opportunities to build an additional income stream, there were also inherent risks. I wasn’t prepared to take those risks until Carole and I had more stability.
By early 2015, however, our asset base had grown. The San Francisco real estate market was one of the hottest markets in the United States, and soaring prices lifted our equity. The house we purchased for $390,000 was worth more than $525,000 in the fall of 2015. And with the rental income from our tenants, we paid down our mortgage each month. Our equity in that property grew to more than $200,000 since we moved to Orange County.
In addition to the paper equity we had in real estate, by living frugally and saving income that I received from speaking events, consulting, and ghostwriting, we built a high balance in our savings account. When the account balance grew to exceed $200,000, I decided to open a brokerage account. With a net worth of more than $400,000, the time felt right to speculate with stocks.
That turned out to be a bad decision.
I traded aggressively for several months. But after bad trades in Twitter and Alibaba resulted in more than $40,000 vanishing from our stock portfolio, I decided to stop trading in stocks—at least for the time being.
I’m not implying that the stock market doesn’t offer great opportunities. It’s just that I had to focus on the goal that I had set with Carole. Since I’d set a goal of earning my first million by August of 2018, I needed to think prudently about every risk and opportunity. With stock market indices rising and falling by several percentage points each day, I realized that it was too risky for my portfolio. Further, with my commitment to build a digital product strategy, the work I had to complete for clients who retained me, and responsibilities of creating regular podcasts, I couldn’t allow the ups and downs of the stock market to distract me.
After liquidating my stock portfolio, I decided to take a pause. Carole and I purchased a 90-day Certificate of Deposit for $160,000 in the spring of 2015. I would need to look for more opportunities. Although the CD offered us stability, our monthly interest statement from Wells Fargo showed that the CD paid less than $9 per month in interest. Saving, it would seem, was not a prudent strategy to advance the goal we set of earning our first million by August of 2018.
Investment Real Estate:
The 0-0-0 credit score I had when I walked out of prison had changed. By paying our mortgage and credit card bills on time each month, I built the score to the mid 700s. Carole and I decided to use the combination of our credit, our cash savings, and our tax returns to launch a plan of acquiring more real estate.
We considered the pros and cons of investing in real estate. On the plus side, we saw how effectively real estate could advance our net worth. In 2015, we knew that more than half of the equity we had built since my release from prison in 2013 came from our real estate investment. That means we made more money while we were sleeping than we earned while we were working. If we had been able to purchase additional properties from Chis and Seth, each of those properties would’ve appreciated equally in the neighborhood. In other words, if we could have replicated our initial investment five times, we would already have a net worth of more than $1 million.
We wouldn’t have had to work any harder. We simply needed to control more appreciating assets in appreciating markets.
Instead of looking at the past and wishing that we had purchased more, we chose to act. We started looking for where we could replicate the strategy. Wages from earnings alone would not deliver our first $1 million. We’d need to create wealth through prudent investments, and real estate offered a great opportunity.
We contemplated purchasing a house for us to live in. The compensation package that Andi offered when Carole and I moved to Orange County included housing expenses for our first year. When we began looking at houses to buy, we saw that real estate values in the Irvine / Newport Beach / Costa Mesa areas of Southern California had appreciated nearly as much as San Francisco. With prices for single-family residences in Newport starting at $1 million, and in nearby Irvine starting in the $750,000 range, we decided that it would be best for us to continue renting. Rather than buying our own house, we anticipated we could move closer to our goal if we used our savings to purchase additional rental properties outside of Orange County.