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Cautious Lawyer Slowly Merging Into Fastlane

Radagast

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Hi all. You can call me Grek. After sacrificing heavily on expenses and my personal time, I saved about a million dollars after seven years in the slowlane at a NYC law firm and a few years as an inhouse brokerage lawyer (where I currently work). Last week I picked up a copy of Fastlane Millionaire on a whim and plowed through it in two sittings reading through the night. It was -- by far -- the most American book I have ever read and really changed my perspective as to what might be possible if one took an adventurous tack in life.

In the coming days I am sure I will read and learn a great deal from what has been written here. As an initial offering I will share a cost-saving tip that you may already know if you have traded through a brokerage: the use of margin as a source of liquidity.

Most people think of margin as money that you borrow from your brokerage to buy additional securities. This is true, but what is less known is that you can actually just withdraw this cash and use it for whatever you want (e.g. to finance your business). For example: let's say you have 200K in fully-paid S&P500 index shares; you need to quickly raise 10K; you can simply withdraw 10K from your account instead of selling any of those shares. What you are doing is equivalent to taking out a collateralized loan out against your portfolio. Since this loan is backed by collateral, you can get it at very low interest rates at certain brokerages. (For example, I can tap my portfolio for many thousands of dollars at about 2% interest).

Nothing is free in life and the same is true of margin borrowing. By taking out margin loans, you are putting up your portfolio assets up as collateral and if those assets fall in value, you risk liquidation (i.e. the forced sale of those assets) if you have overborrowed. So you have to fully understand the risks before you do any of this. There are also tax consequences, such as dividends from margined shares being taxed as ordinary income instead of cap gains.

With that said, the ability to tap your portfolio take large amounts is extremely useful and if the risk is managed properly, beats the hell out of a lot of other financing options.
 
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MJ DeMarco

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Welcome to the forum and thanks for the margin tip. Glad you enjoyed TMF .

Your intro stated you're "cautious" -- in what way?
 

Radagast

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Welcome to the forum and thanks for the margin tip. Glad you enjoyed TMF .

Your intro stated you're "cautious" -- in what way?

Hi MJ --

Much thanks for the reply and I have to reiterate how much I enjoyed your book (and am sending copies to my friends, which I rarely do!)

I'd consider myself cautious because I have traditionally favored smaller but surer bets over bigger but riskier bets, even over a long time horizon. When I play chess, for instance, I play conservatively and try to eke out an advantage of a pawn or two before trading down to a favorable position, even if I know there is a possibility of a quicker knockout blow using a good (but risky) combo. I treated life in the same way, at least historically, and tried to incrementally save a few pennies here, get a promotion or bonus there, etc.

As TMF persuasively argues, however, everyone will have left the chess table by the time the game is over using this approach and that is the real risk. (Besides, it makes for a very boring game). I don't regret my choices but I do wish I had read something like TMF in college so that I would have access to that perspective. Nevertheless, it is not too late for me to get out there and start a side business that I intend to grow into my own money tree. Reading the book sparked a latent fire (?) that I was not even aware of; my prior plan had been to continue skimping on expenses and live off my dividends. Now I plan to reach as far as I can.

--Grek
 

MJ DeMarco

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however, everyone will have left the chess table by the time the game is over using this approach

Ha Ha, here's how I explain it in my next book...

You're on a sinking Titanic and the fiscal prognosticators say "Don't worry! A life boat will be here in 5 hours to save you!" The problem with this advice is NOT the lifeboat -- the lifeboat works perfectly. The problem is its arrival in time, a mere 5 hours later in which time, the ship has already sunk and taken your life with it.

We are on that ship, and while the lifeboat sounds great, it's patient arrival is what makes waiting for it a death sentence.
 
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458

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A million in cash for you is actually a negative in my opinion. Since you have little experience being an entrepreneur it will be easy for you to fall into a spending trap where you believe more money is the answer to your cash flow problems. My advise would be to start a business with 10k and let it ride so you can learn the ropes. Think of it as a 10k initiation fee.

Goodluck
 

Young-Gun

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A million in cash for you is actually a negative in my opinion. Since you have little experience being an entrepreneur it will be easy for you to fall into a spending trap where you believe more money is the answer to your cash flow problems. My advise would be to start a business with 10k and let it ride so you can learn the ropes. Think of it as a 10k initiation fee.

Goodluck
just my .02, but same. Keep 90% of your current cash as a nest egg, and start the business on a shoe string.
This will force you to provide value and uncover profits FAST.
There are so many little mistakes to make the first time you start your own company, and they tend to MAGNIFY the more money you're spending.
Start with 10% of your cash or less (even just 1% of it) until you've got a repeatable model in place that makes scalable profit.
Otherwise you may find that Million dollars of startup funds disappears far faster than you would ever expect.
Businesses will absolutely SWALLOW money if you allow them to. Staying disciplined is key, and for me, I only like to spend $1 on the business if it's making me $1.01 and I can prove it.

Next recommendation, DO NOT try to start a business based on an "Idea" you have.
Not unless you validate with 20+ Potential Customers who desperately NEED your Idea.
Make sure your Fastlane business is something people ACTUALLY need, not something you think would be cool.

To me, working on my Fastlane business is one of the most satisfying things in life. Right on up in my top-10 with playing music, riding motorcycles, hanging out with friends and family. So I truly encourage you to try it out yourself.

I (and most of this forum) will be 110% behind you.
As MJ says, the 67 steps to success are basically "Try, fail, adjust, try, fail, adjust, try, fail (x67)...... SUCCEED"
 
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Radagast

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A million in cash for you is actually a negative in my opinion. Since you have little experience being an entrepreneur it will be easy for you to fall into a spending trap where you believe more money is the answer to your cash flow problems. My advise would be to start a business with 10k and let it ride so you can learn the ropes. Think of it as a 10k initiation fee.

Goodluck

Thanks for the advice, 458! It makes a lot of sense and I intend to start small to learn the ropes. I reckon that there's a learning curve with being an entrepreneur in a same way that there's a learning curve to investing, where a large bankroll without discipline and experience is often the beginning to a tragic story.
 
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Radagast

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just my .02, but same. Keep 90% of your current cash as a nest egg, and start the business on a shoe string.
This will force you to provide value and uncover profits FAST.
There are so many little mistakes to make the first time you start your own company, and they tend to MAGNIFY the more money you're spending.
Start with 10% of your cash or less (even just 1% of it) until you've got a repeatable model in place that makes scalable profit.
Otherwise you may find that Million dollars of startup funds disappears far faster than you would ever expect.
Businesses will absolutely SWALLOW money if you allow them to. Staying disciplined is key, and for me, I only like to spend $1 on the business if it's making me $1.01 and I can prove it.

Next recommendation, DO NOT try to start a business based on an "Idea" you have.
Not unless you validate with 20+ Potential Customers who desperately NEED your Idea.
Make sure your Fastlane business is something people ACTUALLY need, not something you think would be cool.

To me, working on my Fastlane business is one of the most satisfying things in life. Right on up in my top-10 with playing music, riding motorcycles, hanging out with friends and family. So I truly encourage you to try it out yourself.

I (and most of this forum) will be 110% behind you.
As MJ says, the 67 steps to success are basically "Try, fail, adjust, try, fail, adjust, try, fail (x67)...... SUCCEED"

Much thanks for the sage words, Young-Gun! I completely agree that discipline is key. (I learned this the hard way with investments . . .) I consider my savings/investments to be my financial fortress -- sparse and unadorned but not to be dismantled because each brick took so long to earn on a wage basis ^_^ Your points regarding actual needs vs. ideas are very well taken and I'll definitely keep that in mind.

Plus, I think a huge part of the fun -- and the satisfaction -- will be "creating something out of nothing" (which is a bit of a misnomer since it doesn't describe the efforts and choices going into the company). This is probably just regular course of business for you guys, but for a non-entrepreneur, that's like magic because it both confers and implies such a huge degree of control from someone who can pull it off.
 

Radagast

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Ha Ha, here's how I explain it in my next book...

You're on a sinking Titanic and the fiscal prognosticators say "Don't worry! A life boat will be here in 5 hours to save you!" The problem with this advice is NOT the lifeboat -- the lifeboat works perfectly. The problem is its arrival in time, a mere 5 hours later in which time, the ship has already sunk and taken your life with it.

We are on that ship, and while the lifeboat sounds great, it's patient arrival is what makes waiting for it a death sentence.

That's a great metaphor. My problem was that I had considered compound interest as being really powerful, not realizing that it derives its power from time and it is really time that is powerful.
 

MJ DeMarco

I followed the science; all I found was money.
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That's a great metaphor. My problem was that I had considered compound interest as being really powerful, not realizing that it derives its power from time and it is really time that is powerful.

Bingo... so big bingo gonna feature it!
 
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LPPC

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Welcome Radagast. In 2 months I will have finished Law School myself, but I'm not going to do anything with it. Maybe later in life, when my priorities have changed. Law can be interesting too ;) Good luck on your journey!
 

tristano

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I work as a lawyer in south Europe as well. Really, TMF gives a new prospective on job, business and life. I'll follow your path for sure!
 

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