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Facts of day trading
Are you thinking of entering the fast-paced world of day trading? Arm yourselves with the information from this fact sheet on day trading. What is day trading? Day trading is an investment tactic that does online daily stock trading with a...

How To Realistically Set Your Fees - Part 1
We all know there are 52 weeks in a year and 40 working hours in a week. Therefore, we can bill 2080 hours per year, right. Wrong. Too often this is the trap that many new service businesses fall into. The first step in calculating your...

Payroll Taxes
If you have employees, you are responsible for payroll taxes. This is a term that lumps all the different forms of employment taxes into one category known as "payroll tax". In reality, payroll taxes encompass Federal and state income...

The Cost of Going Public in the United States
The following data is taken from "Going Public" by James B. Arkebauer (1994) and the IPO cost website at: http://www.intranet.ca/~tgil/p2.html You should keep in mind that costs vary based upon the complexity, the size of the underwriting and...

Who Wants To Be A Millionaire? ©
In order to achieve what you've never achieved before, you must be willing to do what you've never done before. While this concept may not be a secret to you, the overwhelming percentage of people who actually apply this principle is staggeringly...

 
How To Start Investing For Financial Independence, Part 2

Last week, we started a multi-part series about how to go from being a beginning investor to being “financially independent” in a steady and predictable way. Many, many people want to overly complicate this process so let's briefly, let's recap that discussion.

The bottom line steps that I suggested in the last article was:
1) Look for an opportunity that will return at least 150% in 2 yrs or less;
2) Be mentally and financially prepared if the investment does not work out;
3) Have VERY good reasons why you don’t think you will lose money…… You may not make as much as expected, but you would rather not lose money at this stage.
4) Be patient. This single result should not either make or break you but it is crucial to a longer term plan.

I gave an example where a hypothetical person had gone through this process and ended up with a profit of $43,000 (before taxes) and $36,000 of after tax profit. When this profit was combined with their original investment, they now had around $55,000 of operating capital for Step 2.

Before we get to Step 2, let's take a step back. For a lot of people, if I told them that somebody made $43,000 on a quick investment, they would think these people had "struck it rich". Kind of like winning the lottery, right? NO! In the grand scheme of things, this investment will do very little to impact their financial independence. That is, it will take discipline to now use these profits to go into the next investment, and then use those new profits to go into the 3rd investment, etc. So, in our opinion, this first investment was merely a stepping stone towards a much bigger objective.

In Step 2, most savvy investors will now realize they have just been given some extra monopoly money, or money that was not originally theirs, to work with. In the investment and trading world, this is referred to as the "market's money"; i.e., money that you got from the market that you can then use to generate revenues above and beyond what was possible with your original investment. Quality traders can use this concept to produce huge % returns in a year while risking no more than 10% of their original portfolio.

So let's say the investor now decides to repeat the process and buy two more preconstruction lots in a different development. In the two years since the first investment was made, suppose now that property has escalated. In addition, the investor finds a good deal on two lots and each is $250,000 to purchase.

Now, the investors visits their check list to see if this makes sense:
1) Look for an opportunity that will return at least 150% in 2 yrs or less -- yes, they have reason to believe this will occur for their down payment amount;
2) Be mentally and financially prepared if the investment does not work out--yes, they don't think it will happen but if they lose their entire 10% down payment, they are ok with this.
3) Have VERY good reasons why you don’t think you will lose money…… You may not make as much as expected but you would


rather not lose money at this stage -- They have done their due diligence and feel strongly about the investment.
4) Be patient. This single result should not either make or break you but it is crucial to a longer term plan-- they are not swinging for the fences but rather patiently using the previous market's money to increase their investment.

Well, like the other investment, suppose this one works out in their favor. In their two year holding period, the lots experienced a 35% increase in price. Not bad. They were hoping for more since they knew some places had that kind of increase in a few months but they are not complaining. After closing costs, the investor had about $55,000 invested and netted a total of $162,000 after expenses. Of course their silent partner, Uncle Sam, wanted their cut so now they are left with a $137,700 in profits and $192,700 in working capital. Not too bad after only 4 years.

Now let's ask the question are they financially free? We'll, I doubt it. The investor could probably now survive for 2-3 years on the nest egg but only if they did not reinvest it. However, if the family and friends find out about this gain, then they will think the investor is now "rich" and living like the Vanderbilts...... For anybody that has made it to Step 2, you know they are far from rich because now they want to invest to go to Step 3 and this will likely consume most of their money. Frequently you will find people in the $0.5 -$2Million dollar net worth in this category where they are doing great on paper but they don't have any more "extra" money to spend than they did a few years ago. After Step 3-4 however, this can change dramatically.

Before we conclude this week's article, let's talk about a very common, and deadly mistake. In the language of Texas Hold'em poker, it is the All In mentality. Frequently, after a first success, people now feel bulletproof and decide they want this process to go faster. They leverage everything the have and take on as much risk as the banks will allow them. If things work out for them, they will explode their wealth with that step. However, if something slips up, they are in trouble.

Most people believe nothing like that can happen to them they are too smart. I mean everybody knows that real estate does not go down, Right? I know a gentlemen who is extremely smart, extremely business savvy, and grew his net worth to well over a BILLION dollars. Within a few years of that mark, he net worth was NEGATIVE and had to declare bankruptcy because of real estate. The process of building wealth in a controlled fashion over 6-10 years is so straightforward that I cannot see taking those kind of risks to make it happen in a much shorter time frame.
Chris Anderson is a leading authority on preconstruction real estate investing and has been referenced in many venues including the New York Times and USA Today. Get updated information about preconstruction projects at GetPreconstructionDeals.com.

 

Internal Revenue Service
The US government agency responsible for tax collection and tax law enforcement. Includes income tax forms, instructions, and agency publications.
www.irs.gov
 
Tax Information for Individuals
Access to useful information, booklets and other tools from the Internal Revenue Service.
www.irs.gov
 
Tax Center - Yahoo! Finance - Tax forms, tips and calculators.
Yahoo! Finance: Tax - Find all the resources you need for tax season. Review recent tax law changes, estimate your taxes, find tax tips and expert answers ...
tax.yahoo.com
 
Taxes: Tax Planning, Tools and Advice - MSN Money
Microsoft's Tax Preparation site, in association with Tax Server.
moneycentral.msn.com
 
Tax - Wikipedia, the free encyclopedia
Governments use different kinds of taxes and vary the tax rates: ... Taxes are most often levied as a percentage, called the tax rate, of a certain value, ...
en.wikipedia.org
 
H&R Block | Taxes, Online Tax Preparation, Tax Software, Filing ...
Offers online and in-person tax preparation and tax software, mortgages, brokerage and financial services, consumer tips and tax planning information.
www.hrblock.com
 
TaxCut Online | H&R Block | Online Taxes, File Taxes Online ...
File your Taxes online with TaxCut Online. Learn how to file taxes online here.
www.hrblock.com
 
Income Taxes, Tax Returns, Refunds, Deductions and E-File Software ...
Popular tax preparation software by Intuit. Integrates with Quicken, spreadsheets and offers state by state electronic filing.
turbotax.intuit.com
 
Taxes & Estates, Tax and Estate Planning Advice - Forbes.com
Personal Finance - Get tax and estate planning advice and information from Forbes.com.
www.forbes.com
 
Essential Links to Taxes
TurboTax Premier For Federal Returns 2005 Win/Mac, TurboTax Total Tax Solution Deluxe 2005 with State Win/Mac, TurboTax Basic 2005 Win/Mac... ...
www.el.com
 
Government > Taxes in the Yahoo! Directory
Yahoo! reviewed these sites and found them related to Government > Taxes.
dir.yahoo.com
 
Taxes - Tax News for Home and Business from CNNMoney
The latest in tax law updates, news, forms & advice from CNNMoney.com. Includes a refund savings calculator, and interactive tax lessons.
money.cnn.com
 
The Tax Foundation - Educating Taxpayers Since 1937
Devoted to educating taxpayers about tax policy and the total tax burden borne by Americans at all levels of government.
www.taxfoundation.org
 
Welcome to the Vermont Department of Taxes
Welcome to the Vermont Department of Taxes... ... Changes to Property Tax Adjustments in 2007 - updated 10/18. - Tax Expenditures Transition Report on ...
www.state.vt.us
 
Franchise Tax Board Homepage
The department that collects state personal income taxes and bank and corporation taxes for the State of California. Access to forms and tax information.
www.ftb.ca.gov
 
HM Revenue & Customs: Home Page
News and information on tax and national insurance, including downloadable leaflets and forms and the latest news on filing tax returns on-line.
www.hmrc.gov.uk
 
State and Local Tax
Piper Resources; State Tax Rates and Structure ...Federation of Tax Administrators; State Payroll Taxes Information ...Symmetry Software ...
www.taxsites.com
 
Quicken.com
www.quicken.com/taxes/ - 3k - Cached - Similar pages
 
Tax news and advice from Bankrate.com
Information on all phases of tax planning and preparation.
www.bankrate.com
 
Online Tax Advice - Tax Preparation Help - Income Tax Tips
Income Tax Tips - MarketWatch offers online tax advice and tips. ... IRS inflation adjustments mean tax break on next year's taxes. ...
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