Monday, November 3, 2008


I not only knew I wanted to be rich when I was young, but on a peer to peer basis I was rich. Rich is a subjective matter, and at 13 when you have your own money, money you've earned and can buy anything you want, at least anything within reason, then you're pretty much rich. I knew I wanted to be rich at a very young age. I didn't know why, didn't really have a purpose for money, I just knew I wanted to be rich. And rich I became. When my friends in junior high wanted to buy or do something they went to their parents and asked if they could have whatever it was, but when I wanted something I just went to the bank and took out the money and bought it. When everyone wanted that very cool surfboard at the beginning of summer I was usually the only one who had one. When skateboarding first became popular in the United States I was in my early teens and every skateboarding teen wanted Tony Alva everything, boards, wheels, trucks, the whole bit. All my friends begged their parents to buy them the cool skate board stuff. Not me, I just went out and bought my own. In fact I bought extras for my two brothers to go boarding with me.

In high school this peer to peer rich continued. When I turned 16 and could get my drivers license I did and then bought my first car. Paid for my own insurance and never had a problem paying for maintenance, performance upgrades, and gas. I learned how to fix clutches, transmissions, water pumps, and the like but I never had a problem buying the parts for the repairs. I also bought a new cafe racer motorcycle and road it traveling around the southwest. I packed a backpack full of food and supplies, tied a sleeping back to the back of my seat and hit the road. I was sixteen and I knew what I wanted. If I wanted to do something when I was in high school money was not an obstacle. I did almost anything I wanted providing my parents gave me permission to do it, and then sometimes when they wanted otherwise I did it anyways. I'm not to proud of that today but we all run a bit astray when we're young and don't know any better. I went to the Colorado river with older friends and played on speed boats. I went skiing nearly every weekend during the winter at local California mountains. I hated fishing when I was a kid, but my little brother loved to fish so I would take him out to the rivers whenever I could to go fishing. And we bought new fishing poles to make sure our catch didn't get away. I did all of this and paid for it all from money I earned. I was rich in many respects because I had the freedom to choose what I wanted to do and where I wanted to go. After all isn't being rich about choosing how you want to live? Yes, I would say there is some truth to this but the type of rich I was as a teenager is not the wealth I sought as an adult.

After finally making some money through my twenties I had an opportunity to start creating real wealth. What is real wealth? Wealth is something obtained when one can live on ones own terms. You are wealthy when you can support yourself through no other means other than the money you have already earned. As I turned thirty I started to accumulate this type of wealth. I lived in a big house in an affluent neighborhood on the coast, drove nice cars (bought used of course), lived out my passion of sailing on weekends in the ocean on my old but dependable sailboat, and then skiing the very next weekend or sometime the very next day. And I continued to work hard at my business. Not because I had to but because I chose too. This freedom of choice is real wealth. I wasn't wealthy enough to fly around in my own private jet or ditch everything and sail around the world (but would have loved to) but I could go and do as I pleased providing I didn't mind flying commercially. The wealth I enjoyed allowed me personal freedom. No job, no boss, no pressures.

After starting my second business it became apparent that even though I lived well and did as I wanted I did not have the type of wealth I thought I wanted. You know the saying the grass is always greener on the other side of the fence. I wanted the type of wealth many of the people I socialized with had. The type of wealth to buy a Ferrari or a Bentley on a whim, fly to Aspen on a private jet, and bask in the sun on secluded private islands. I found myself wide eyed once again just like when I was a kid. I didn't just want to be rich I wanted to be wealthy. I had finally arrived to the stepping stone of wealth but had some serious dues to pay in order to start my assent up those pearly steps. And in order to attain this type of rich I thought I also need to look and play a certain part to gain acceptance into this new world of wealth. So I started upgrading my life. New cars, new cloths, new friends, new everything. I had a Jones to feel like the Joneses. As this new me started to peek its head out of the proverbial coattails my current business was starting to struggle. With the expenses of this business, the expenses from my old business, and the expenses from my new lifestyle the entire cost started to pile up and started to stretch my finances. At first it was relatively easy to adjust to the increase in expenses. I started buying things on credit. When I bought new luxury cars I took out car loans to buy the cars, after all I could afford the "payments". Then I started to make purchases of fine clothes like suits that cost $1,000 and tailored shirts by the dozens. This also led to an upgrade of my old used boat by buying all new gear, new sails, new hardware, new ropes, and all of the other expensive marine equipment boats require. Our kids were also just reaching school age and we had to make a decision concerning their education. A product of the public education system which I feel failed me we decided to enroll our kids in an expensive private school. Within a short period of time I was living a larger than life lifestyle and the cost was starting to take its toll.

In baseball you are given multiple tries to hit a ball. In one of these tries when life throws you a curve you have three choices to make. You can step up to the plate and swing away, you can adjust to the pitch and swing, or you can simply wait for the next pitch. I chose the first when I should have chosen the last. Instead of taking a step back and realigning my business plans, cutting back my lifestyle, and preserving assets I stepped up my business efforts and took on way to much risk and swung for the fences instead of waiting for a better pitch which would have eventually come in its own time. In my humble opinion it is not only important to remember how you make money, but it is more important to remember how you lost money. And believe me when I say I was feeling the pain from losing money at this time.

Anytime I invest in the stock market I remember every big winner. I vividly remember making my first big trade earning $2k on apple computer in the days following the stock market crash in 1987. I bought one company stock (that's all I could afford to buy) and I made money. I remember this because I held on to this money and reinvested it and then used some of it to break away from a job and enter life of the self employed. However, I can tell you I've also had some really bad stock buys. And of these bad buys six really stand out. Enron, Cisco, Sun Micro systems, XOXO Communications, and of all things apple computer. I bought these darlings in the pre tech bubble. And I watched them go higher, get even, and then fall, and fall, and fall. I rode these suckers down to levels you would never had thought these stocks could go. I not only rode them down but I kept buying them as they were falling thinking I was buying these darlings at a discount. And then the bubble burst. Oh my, did that hurt. In a matter of months I saw my portfolio almost evaporate. And the timing couldn't have been worse. My savings was dwindling due to my lifestyle and my businesses, and my investment portfolio took an incredible hit. I was a financial mess and I hadn't yet realized it.

After liquidating my investment portfolio and licking my wounds I focused on trying to correct my business losses. The writing was on the wall, I needed to make some drastic business decisions or I was toast. Within just a couple of weeks I decided I needed to close down my second business to stop the bleeding. Fortunately my business partner was also feeling some pain and we decided it was time to hang it up. I still had my partnership to fall back on but because there were a lot of personal issues associated with the return to this business I knew it wasn't the best option. However, it was an option open to me and at that point in time I needed to take advantage of all opportunities. So I returned to the partnership and gave it another run but my heart just wasn't in it. After the tragic events that unfolded in New York on 9/11 I knew it was time. I gave notice I would be leaving the company at the end of the year. I was getting low on available funds and didn't quite know what my next move was going to be. Fate sometimes deals you a good hand when you aren't expecting it and I was about to learn a valuable lesson. After taking a couple of months to look at various opportunities I settled on starting my third business. I would renter the same business as the business of my partnership but would do it on my own. With hard work I was able to start this third business in a relatively quick amount of time and before I knew it I was right back to were I was before I left my partnership. I was making less money but I was at least now starting to make money again. In just a couple of years time I was able to claw my way back to creating some wealth. There is something to be said about hard work and this great country of ours. America is the great land of opportunity. Its the best place to live on the planet.

As I mentioned I was now operating this new company on my own. I had few employees and just me as the primary producer. The business model in this industry evolved from the time that I enter it. It went from primarily working with wealthy entrepreneurs to institutions dominating the marketplace. And these changes forced my industry to convert from a local service provider to one of national companies designed to service the institutions who now dominated the industry. So I looked at ways to put myself on an equal playing field with my competitors who now worked for some of these national companies. My search brought me to the conclusion that I either had to join one of my competitors or align myself with an organization that offered me the opportunity to continue to own and operate my own business but also brought a national presence and the infrastructure that would allow me to compete for the new institutional business. After considerable search I decided my best option would be to join an organization that was part of a franchise structure, and I joined them in early 2005.

Now because I was joining a very large organization, and they were granting my company a franchise as one of few franchises sold to an individual in a major metropolitan area, I was expected to grow my company. Upon officially opening the franchise office I had quite a bit of growing pains. I had to relocate the business from its current location into space which was 20 times the present size which meant leasing a large block of office space in a core metropolitan marketplace, build out the office. buy office furniture, phones, and build out the technology infrastructure. I also had to quickly add a considerable amount of sales staff, support staff, and integrate each into the structure of the franchise system. It was a busy six months before we were fully up and running, and it cost us a small fortune. The first year was ho-hum so to speak. We earned some money but it was all absorbed by the business and I had to cash flow a good deal of our operating expenses from personal funds. Our second year was better but we also added more people, moved into yet larger office space, and we were still not able to pull any money out of the company, and I had to continue to cash flow some of our operating expenses from our personal funds. Our third year started out very good and it looked like we had started to turn the corner, but then we had some personnel which we had spent considerable amount of time training leave to go and work for some of our larger competitors. Then it happened. The credit squeeze started in April 2007. Businesses started having difficulty borrowing money. And as time moved on they continued to have problem borrowing money. The business that just a couple of months earlier looked like it might turn the corner and start to earn some money started to turn another corner and it started a downward tailspin. The first two years of operating this business had consumed my savings, and I had to tap a personal credit line to live on while the business was getting its sea legs. During the early part of this third year the credit freeze all but froze our business. There was very little business activity and my office had no sales through the rest of the year, zero, zilch, Nada. With business all but non existent we started having financial problems. The overhead to run a 30 person office is HUGE and we started to really feel the pain. I used my personal credit line to carry us through the end of the year but I was also using it to support my household. After waiting several months to see if the credit freeze was going to correct itself it became apparent the credit squeeze and the economy both spelled trouble for our industry. With this new found wisdom I started to cut back by negotiating yet another move to a much smaller suite with our landlord. We cutting back on technology services, phone lines, and just about anywhere we could save money. By years end 2007 I had arranged for us to move to a smaller suite with fewer desks and reduced overhead.

Just after the Thanksgiving holiday in 2007 my wife and I determined our already reduced lifestyle had to get leaner. We started to cut out any and all non essential purchases. We stopped going out, eating out, and commuted to the office together to save. We also instituted a spending freeze on our kids. We told them the situation in our business and they gladly stopped doing and buying things which were very normal to them. With my oldest away at college it was hard to say what he did differently but he didn't ask us for any money. And our youngest responded by asking permission to get a job as we had discouraged both from working while in high school do to studies and involvement with division I sports (very competitive and 40-50 hour per week practice and game commitments). In the office we announced the relocation to the new suit at the end of the year and immediately six people left. After several more weeks we had another half dozen go. By the time we got through the holidays we had two employees left. After all the time, energy and money spent on hiring these employees, training them and then supporting them they left us at the drop of a hat. There is a testament to loyalty, there is none in business if you are an employee. If you can't guarantee someone an income then they are going elsewhere. The irony here is that they went to other places but because these other business where in similar financial chaos they couldn't take in new relatively inexperienced salespeople. It costs money to house employees even if they are working in an all commission environment. By June 2008 we had no choice but to close our doors.

So that leads me to the present. I'm broke, with no assets, and no income. I've got loads of personal and business debt and in the present no way to pay it. I am a believer in America though, the America my family has fought for in wars from the Civil War to Vietnam, an America open to prosperity and justice, freedom and capitalism, an America to be proud of and cherish. This great country of ours has opened her arms to me and let me see here true beauty and she will be there arms open wide when the time is right and I will embrace her with all the love and gratitude she deserves. Its now time to get back to basics. Regardless of my current personal circumstances I can affirm to you today November 3, 2008 I will pay all of these debts, will rebuild savings, will invest, and I will create new wealth. Not only will I create new wealth but I will create the type of wealth I sought at the beginning of the millennium. The type of wealth few people enjoy, the wealth that brings freedom, freedom of choice, freedom to go and do what I'd like to do. The type of freedom I had when I was a teenager and I WANTED TO BE RICH!

To your Health, Wealth and Happiness

The information contained in this site consist of a series of articles and are the sole opinion of the Baron Von Savings. The Baron is not a professional money manager, tax expert, accountant, attorney, or stock broker. You should consult with an appropriate professional before making decisions concerning your finances.

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