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Don't Fear the ZEROs!

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Russ H

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This is not "My Story" per se, but it's one of the things I've gone through on my journey to be a self-made millionaire.

If it makes more sense to move this to a different forum, please do! :)

-Russ H.

"I haven't figured out how to keep my income over $20K. It's like some mental block . . ."
I can totally relate. Part of my journey to become wealthy has meant conquering my fear of zeros.

An example, on a personal level:

$5,000 is not scary to me.

$5,000,000,000 is scary!

What's the difference between $5,000 and $5,000,000?

Just 3 ZEROs. :)

I had a heck of a time with my hourly rate over the years. I started working for minimum wage in the 1970s (single digits). By the mid 1980s, I was charging $35 for a house call, then worked up to $35 an hour by the late 80s (double digits).

By the early 90s I was charging $50/hr, then $85/hr. Still only 2 digits.

I couldn't get to $100 an hour. I had some kind of mental block with 3 digits.

So I charged $99/hr for a few years . . .

By 2002, I had made the jump to 3 digits. I charged $150/hr for my services, and was turning down more than half of the work that came in the door.

* * * * *

So you're 100% right-- Not being able to personally process $50,000 or even $5,000,000 is a mental block.

But I truly appreciate Robert Kiosaki's point that money is an idea. For too long, money was something I was scared of (still am, to some degree). My middle class upbringing makes me break out in a sweat whenever I'm looking at a deal that involves lots of digits . . . 5,000,000,000,000 . . .I'm sweating!)

This is *my* limitation-- I just have to get past it.

As I've gotten older, I could handle more and more zeros and be comfortable. But it's taken me a while.

My digital progress:

10 years old: $5 is OK ($50 is scary)
13 years old: $50 is OK ($500 is scary
18 years old: $5000 is scary
25 years old: $50,000 is scary
34 years old: $500,000 is scary
45 years old: $5,000,000 is scary (I'm 42 now, and just typing this number scares me!)

At this rate, I'm gonna be 52 before I can handle $5,000,000 deals, and nearly 70 before I can stomach $50,000,000 without getting the heebie jeebies.

That's not good.

So I'm working at trying to see money for what it is-- an idea, if you will. The total number of digits in a deal is just that-- digits. Zeros. If I have enough experience to do due diligence and make the numbers work, 7,8,9, or even 10 digits are within my grasp (that's $1,000,000,000-- a number that I can't even relate to on a personal level right now).

So that's what I'm working on these days.

Zeros.
Update: I just turned 46. Our current loans total over $3,000,000, and our total net worth is within striking distance of $5,000,000.

So $5,000,000 is OK.

And thinking about $10,000,000 is no longer scary, so I'm actually doing better than I predicted.

But what about one more ZERO: $50,000,000?

I'm OK with $50,000,000. It's no longer scary for me. But it also doesn't seem real.

So I still have some work to do! :banana:

-Russ H.
 

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JesseO

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Re: Don't Fear the ZEROs.

I remember when I was 10 years old and saved up $100 from my allowance. I went to Toys R Us and wanted a gigantic LEGO set, but it would have cost me $90 or so, I think. I told my dad I didn't want to waste my money on it and kept saving. I guess that's where having a good mentor from age 1 counts, eh? =)
 

yveskleinsky

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Man, that is so true. I get so sucked in to my fear sometimes that I forget that fear is all relative.
...My challenge is getting comfortable manipulating and getting creative with numbers. $100k is scary to me. ...Even $5k a month passive is scary for me. Why? I think because the more passive income I am making, the more my neck is on the line for debt, and the more debt I have the more correct my numbers had better be. I feel there is no room for error and so much of RE and business is learning by failing. I feel like I don't have room to fail so I don't set my sites too high. Catch 22. :smxE:
 

snowbank

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S928

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Achieving small accomplishments, and then moving on to bigger things, is the best way to lose fear of "the zeros".

When I was in high school (some years back, but not too long ago), my goal was to make over 60k a year. Well, at the age of 22 I achieved that goal and honestly, it was too easy. Now, my goal is to break seven figures and that's, well, a work in progress. In all, it's the freedom and the pursuit that makes it interesting for me.

:smx7:
 

TNT

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Aug 31, 2007
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The Number of 0's has always been a problem for people in general. That is one of the reasons most financials are writen in $1000 or Millions. So when people see $50 they know it means a million but they do not feel the anxioty of seeing it. Their mind just has to deal with the $50 not $50,000,000. It can be a true challange to expand your personal concept of money. I think in that fact I am lucky. when I look at numbers I just see the numbers. I do not feel that same emotion about them. weather I am dealing with $10 or $10,000 or $10,000,000 it is just numbers for me.

( a little story so if you do not want to be board stop reading here) A friend and I went to a casino and he has a hang up on money. He can not deal with large sums very well. Guess thats why he works an assimbly line job. But I was Playing on the craps table and he come over and was watching. he had played his $50 he had brought. He looked down and seen all the chips on the table. he looked up at me and ask how I knew what was mine I reasured him that I knew. Then he ask me how much I had on the table. I think it was around $2800. I thought he was going to passs outon me. he just could not handle that kind of number and to me it was not that big of deal. And before anyone goes on about how risky it is and a waste of money I already know all of that. By the way I walked away that night up arounr $7500. Now this is not a massive amount to a lot on here but to some people that is the world to them.

This same person went to an auction with me when I was opening a restaurant and I was buying a lot of things. He would have to leave the room as the bidding would go up. I got everything I wanted and for great prices but I was buying things that he just could not handle buying.

Some people can not handle the numbers. Some can get use to them or train themselves. while others just see numbers and do not stress over the dollar figure.

Talmadge
 

nomadjanet

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Aug 28, 2007
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When you are part of a couple the issue of the 0’s is even harder to deal with. I have a high tolerance for debt, my husband does not. We cannot do a deal that involves more debt than 500k because this is his limit. So in order to buy a 900k deal I must have 400K cash into the deal. There are plusses & minuses with this the consequences are: Building this way has slowed us down considerably. We have no real debt personally or on our real estate. That’s right $0 debt. Our plumbing company only has debt on the new service trucks. We never make a loan that we can’t pay off in 7 years. If we make a 20 year note, it is always with the plan to sell the property within the first 7 years. If it can’t pay for itself in seven years and cash flow at least a little bit, we don’t buy or we buy it only with the plan to sell. This limits the deals we can do so our growth is limited. It is difficult to change his belief system because he can point to the relative success we have had using his system. I am ready for a bigger, longer term deal, he says he is not. So I need to find a way to add at least one 0 to his tolerance level. J
 

REI

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Oct 2, 2007
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Hi guys, I am new to the site.

I struggle with the Fear of the Zeros as well. I have discovered that my fear stems from taken on debt. I am extremely conservative and my risk tolerance is low when it comes to taken on debt. However, I think I have come up with a solution to this issue. I wanted to run it by you guys.

I try to remove emotions out of business decisions and come up with quantifiable ways to make decisions. In keeping with that, I wanted to take the same approach with dealing the Fear of the Zeros. So, I thought that I would use a financial calculation called the Cash Asset Ratio or Cash Ratio to address this issue. The term is defined below.

****************************************************
Liquidity Ratio (Cash Asset Ratio or Cash Ratio)
****************************************************
Liquidity Ratio is the total dollar value of cash and marketable securities divided by current liabilities. Also known as cash asset ratio or cash ratio.

A liquidity ratio measures a company's ability to pay its bills. The denominator of a
Liquidity ratio is the company's current liabilities, i.e., obligations that the
company must meet soon, usually within one year. The numerator of a liquidity ratio
is part or all of current assets. Perhaps the most common liquidity ratio is the current ratio, or current assets/current liabilities. Because current assets are expected to be converted to cash within one year, this liquidity ratio includes assets and liabilities of equal longevity. The problem with the current ratio as a liquidity ratio is that inventories, a current asset, may not be converted to cash for several months, while many current liabilities must be paid within 90 days. Thus a more conservative liquidity ratio is the acid test ratio -- (current assets – inventory)/current liabilities -- which excludes relatively illiquid inventories. The most conservative liquidity ratio is the cash asset ratio or the cash ratio, which includes only cash and cash equivalents (usually marketable securities) in the numerator. Finally, note that the liquidity ratio sometimes means the cash ratio.

Cash Asset Ratio = (Cash + Marketable Securities) / Liabilities

I have discovered when analyzing my personal finances, I am comfortable with a Cash Asset Ratio of 0.3 to 1. For me the following rules work.

Example:
Cash Asset Ratio = (Cash of $10,000 + Marketable Securities of $20,000) / Liabilities of $100,000 = 0.3

With a Cash Asset Ratio of 0.3, I must have $300,000 in Cash and Marketable Securities to carry $1,000,000 in debt.

Cash Asset Ratio : 0.3
Debt : $1,000,000
Cash/Marketable Securities : $300,000 ($1,000,000 * 0.3) is required


With a Cash Asset Ratio of 0.3, I must have $3,000,000 in Cash and Marketable Securities to carry $10,000,000 in debt.

Cash Asset Ratio : 0.3
Debt : $10,000,000
Cash/Marketable Securities : $3,000,000 ($10,000,000 * 0.3) is required


With a Cash Asset Ratio of 0.3, I must have $30,000,000 in Cash and Marketable Securities to carry $100,000,000 in debt.

Cash Asset Ratio : 0.3
Debt : $100,000,000
Cash/Marketable Securities : $30,000,000 ($100,000,000 * 0.3) is required

I know many of you will think this is SLOOOW LANE thinking. But, I think this a good strategy that requires your assets to be in other forms than inventories, real estate, etc. I know in the business world Lenders like to see a certain amount of liquid assets on hand. I am not sure as to what that amount (ratio) should be.

Is this realistic in the real estate world? Is using a Cash Asset Ratio of 0.25 or 0.20 for real estate finances more realistic? In researching this topic online, I have seen articles where some business requirements are 1 to 2.5. Wow! Thanks!
 

sugar

PARKED
Nov 6, 2007
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A good movie to watch for those with this fear is called, 'The Secret.'

Great Post btw.
 

dhuang

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Aug 16, 2007
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2 years ago, I remember I was making $250/week as a computer camp counselor. I used ~$120 for a computer upgrade, and I thought I was set for life.

When I get my Corvette, I think I'll be set for life again...till the Bugatti...*shivers*
 

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Russ H

Russ H

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Update: I just turned 46. Our current loans total over $3,000,000, and our total net worth is within striking distance of $5,000,000.

So $5,000,000 is OK.

And thinking about $10,000,000 is no longer scary, so I'm actually doing better than I predicted.

But what about one more ZERO: $50,000,000?

I'm OK with $50,000,000. It's no longer scary for me. But it also doesn't seem real.

So I still have some work to do! :banana:

-Russ H.
UPDATE: I turned 48 this year.

Our current loans total over $5,000,000. Our total net worth is debatable, given what's happened w/RE prices. Suffice to say, lenders still think we have equity, b/c they're still lending us money!

So $5,000,000 is OK (and something we live with, day to day).

And thinking about $20 or $30 million is no longer scary.

$50,000,000 isn't that far away from $20-30,000.000.

So I guess I'm doing better than expected.

But our PLAN is still in smaller numbers-- $10-12,000,000. Not 50.

Still, looking back at what I wrote 6 years ago-- I'm handling the zeros better than expected. :)

-Russ H.
 

lightweight99

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Im a little confused as to the sole reason why some here are afraid of zero's. You're afraid of having that much money in your account or you don't think you can make that much?

I've never heard of this before so its a bit interesting.
 
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Russ H

Russ H

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lightweight-

Each poster has outlined what their issues are w/large sums of money.

For many, this is a limiting belief.

If you don't have it, that's great. This thread prolly makes no sense to you!

But I wonder-- do you not have this limitation? Is making 1,000,000 a year something you WANT, and expect to do?

How about $10,000,000 a year?

$100,000,000 per year?

See what I mean?

-Russ H.
 

Runum

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I had to learn from others who are ahead of me. I always assumed that having a certain amount of money would eliminate problems in your life, easy street. I have come to realize that the more you achieve, the bigger the challenges you have. Sometimes those challenges come with lots of zeros. Writing checks with lots of zeros is still a white knuckle experience for me. I guess I should be thankful that I have the ability to write those checks.
 

lightweight99

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To Russ-

No, I do not have that limiting belief, my goal is to have 200,000 coming in per month. That goal is set to be achieved or overly achieved, so big numbers dont scare me. I look forward to the day I surpass that goal
 

mkzhang

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Fortunately the only 0 I am afraid of is a single 0 by itself. The more zero's the better :p

I guess that's why younger people are always ambitious, we haven't failed enough to be afraid yet.
 

LondonLife

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There is a definate fear of zeros you have to overcome.

For me it's not so much the fear of having the zeros in you account, it's the amount of zeros you'll gamble on a deal. When you have £30,000,000 a £1000 deal is not scarey at all, it's rare you'd ever make it because even a good investment would barely make it worth it. But a £25,000,000 deal would be mind boggling terrifying.

I just purchased £5,400,000 worth of property (12 apartments). Was that scarey? Yes and no. I'm only just getting used to having liquid assets available to me, so it seems alot to handle that amount of cash. Once I got my head around it though, worst case scenario is that I'd only lose a small chunk of that. This isn't a risk all investment. Everything is in my favour in this case.

You have to break the fear of zeroes to make money. If you spend your time making £1000 deals when you have you first million, your money is squadered in a low interest account. You might make it to 2 million eventually, but it could take years and years. If however you start making £200,000 deals your risk is obviously a lot higher, but it's the only way you'll get to a significantly bigger balance in the end.
 
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Russ H

Russ H

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To Russ-

No, I do not have that limiting belief, my goal is to have 200,000 coming in per month. That goal is set to be achieved or overly achieved, so big numbers dont scare me. I look forward to the day I surpass that goal
Bump for those who haven't seen it.

lightweight, I wanted to ask: What is your PLAN to get to $200K per month? Is that profit, or just revenues coming in?

(we're averaging about $100K per month right now-- but it's all getting sucked up by expenses!!!)

-Russ H.
 

FDJustin

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Hmm.. I don't sweat the idea of having that kind of money, or spending it. Charging people for things is something I do feel anxiety over, however. I find it very difficult to decide on a fair price for any service (or, I guess, product) I render. I'm an expert at negotiating myself down.
 
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Russ H

Russ H

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Hard to believe I posted this almost 13 years ago.

Update: We *did* get past the digits, a bit. Sold our business in 2017 for 8 figures. Barely. But I'm still counting it. ;)

We sold our Napa Valley home last year for 7 figures (again... barely). But it had no debt. So after all of our deductions, we got a nice stack of cash.

We kept it all in cash, in prep for the upcoming (predicted) downturn.

That's where we're at right now.

Back in 2007, we had more than 5 million in loans for Real Estate. So when the doo-doo hit the fan in Fall 2008, we were underwater in a big way. Took us 8 years to get our heads above water. And another 1 to 2 to get profitable enough to sell the biz.

When we sold, I vowed we'd never do that again. Even though 1031'ing our sale would have meant millions more to invest. My logic was investing meant more leverage, more loans, to make it profitable.

Did you know that 1031ing in the USA requires you take on the SAME AMOUNT of debt as your prior holdings?

In our case, that meant we'd need to take on 5 million in loans, and use the rest for equity.

BUT... if our equity fell (like it did in 2008... back then, by 58%), we'd lose everything we'd just worked so hard to build. AND... we'd still have ALL the debt.

Not something I wanted to do.

Good to pop in and post an update. Not sure who will see it. Not sure how many folks here today that were also here 13 years ago! :smile2:

-Russ H.
 

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Johnny boy

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This is part of the many reasons why you should play loose and fast. For years I knew big numbers are only big if you’re broke. So even when I had 20 bucks in my bank account and made $10 an hour, I still affirmed that 50,000 was small. A million was small. Even when those were amounts I have never seen before.
I’m only just getting started, but I’m making more than I ever have before. We’re eclipsing 10k a month and I’m looking to get it to 16 before the end of this season, maybe more. People say that’s doing good and I still just think it’s chump change to train myself to be comfortable with bigger amounts. Don’t be afraid of the zeros. Think big and then think bigger than that.
 

MJ DeMarco

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Great to hear from ya Russ.

Back in 2007, we had more than 5 million in loans for Real Estate. So when the doo-doo hit the fan in Fall 2008, we were underwater in a big way. Took us 8 years to get our heads above water. And another 1 to 2 to get profitable enough to sell the biz.
Nice, congrats on not only surviving, but getting thru it and thriving to the top.

Not sure who will see it. Not sure how many folks here today that were also here 13 years ago!
There are several folks still pop in here and there from the pre-2009 days... @SteveO @biophase @Sid23 @Luke12321 @royemunson @andviv just to name a few that come to mind.
 

Ing

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Hard to believe I posted this almost 13 years ago.

Update: We *did* get past the digits, a bit. Sold our business in 2017 for 8 figures. Barely. But I'm still counting it. ;)

We sold our Napa Valley home last year for 7 figures (again... barely). But it had no debt. So after all of our deductions, we got a nice stack of cash.

We kept it all in cash, in prep for the upcoming (predicted) downturn.

That's where we're at right now.

Back in 2007, we had more than 5 million in loans for Real Estate. So when the doo-doo hit the fan in Fall 2008, we were underwater in a big way. Took us 8 years to get our heads above water. And another 1 to 2 to get profitable enough to sell the biz.

When we sold, I vowed we'd never do that again. Even though 1031'ing our sale would have meant millions more to invest. My logic was investing meant more leverage, more loans, to make it profitable.

Did you know that 1031ing in the USA requires you take on the SAME AMOUNT of debt as your prior holdings?

In our case, that meant we'd need to take on 5 million in loans, and use the rest for equity.

BUT... if our equity fell (like it did in 2008... back then, by 58%), we'd lose everything we'd just worked so hard to build. AND... we'd still have ALL the debt.

Not something I wanted to do.

Good to pop in and post an update. Not sure who will see it. Not sure how many folks here today that were also here 13 years ago! :smile2:

-Russ H.
Thanks, Russ
Old stories are good to follow.
 

Sid23

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Great to hear from ya Russ.



Nice, congrats on not only surviving, but getting thru it and thriving to the top.



There are several folks still pop in here and there from the pre-2009 days... @SteveO @biophase @Sid23 @Luke12321 @royemunson @andviv just to name a few that come to mind.
@Russ H - great to see you on here! Glad you are well. We never met in person, but I remember countless discussions with you and the others online that helped me see possibilities!

For others, don’t fear the zeroes! I spent my first few years on this forum stuck in place. Then I moved cities, got into therapy and turned my life, or at least my mental health, around. It’s enabled me to do things I never thought possible.

I’m currently $67,000,000 in debt (All construction loans.) I was always afraid to take the leap, but once i actually signed the first loan, I realized I felt NO DIFFERENT. All the fear was gone. It feels the same to have no leverage, or have a lot. At least for me.

This pandemic has obviously complicated my loan exits, but still hoping to come out in one piece, and likely with significant long term equity.
 

Charly

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That's great to hear! I haven't been a member back then, but it's good to read your story with a positive outcome! :thumbsup:
 

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