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From 04/11/2006

I have been thoroughly enjoying Gordon Ramsay’s tv series on kitchen disasters. Tonight the show included his “rules” for a successful restaurant.

It reminded me of the importance of rules for investing and the fact that sound principles apply across all disciplines.

One of the issues facing him tonight was a restaurant owner and chef who basically couldn’t cook. He was cooking with fancy ingredients but couldn’t cook for diddly.

Gordon said repeatedly Rule number 7. Don’t try and cook fancy food until you have mastered the basics.

Exactly what investors need to understand. Don’t try and do advanced strategies like sandwich lease options or high end trades if you can’t reconcile your bank statement.

I met a lovely couple today who wanted help to get going with investing and overcome their cashflow shortage. My initial consult included gathering basic information like income and expenses etc.
Now this couple did nothing extravagant, no expensive toys or lifestyle, yet they were really struggling to make ends meet.

The bit I haven’t told you yet is that in their worst year they earned 200K. When I asked them where the money went they didn’t know. They really didn’t know.

My homework for them was to record every cent they spent until they built a picture of where the money was going. I had to be honest with them and say that unless they got this under control I could not help them invest. Anyone who has money vanishing left right and centre and doesn’t even know where is unfit for investing. They would simply go broke. If you can’t exercise enough self discipline to have your basic finances under control you will not succeed in property.

I also had to tell them honestly that I doubted they would do what I suggested. This has been my experience with many people. The pain of where they are is inadequate to drive them towards a better place.

I share this with you because maybe it’s you? Is your current pain great enough to motivate you to be and do things differently? How committed are you? A close friend of mine told me recently that they were looking at getting a job again as they “needed money”.
I thought how sad that was because in their case filling up their day with a job shouldn’t be in their mind. It shouldn’t be an option. Only things that move them closer to their goal should be an option. If they haven’t been able to trade up from 4 green houses to a hotel yet then they need to look at how they are playing the game, not pull out the Scrabble instead.

I actually feel like I need to apologise to you all. People like me maybe do you a disservice by talking about property like it is a game. In one sense it is but it has serious consequences if you break the rules.

I do play it like Monopoly but I know the rules and I stick to them. I can play hard because I never try and cheat. There is safety in rules and self discipline. Sometimes someone won’t sell me Park Lane but that’s OK. I know that if I buy everything I can then eventually I’ll be able to negotiate my way to where I need to go because I will control the game.

So I’m sorry if I have led any of you astray by painting a picture of property as a solution to all your ills. Not because it isn’t. It is, but only if you are willing to learn the rules and stick to them. Sometimes we get carried away with the results without thinking about the effort and education we have put in to learning how to play the game.

My wife comments often that I spent huge $$ and much blood sweat and tears learning what I know and now I give so much of it away for free. As a Christian I believe that life is upside down. Being a servant can make you a leader. As I sow so shall I reap. So I happily give of my expertise to the extent that I can without cloning myself.

However it is interesting to note that those people who pay for my help so often outperform those who get the same help for free?? I never got that until recently. I hate charging for my time but people who invest in themselves seem to win??

Maybe they appreciate the value and therefore take the game more seriously?? How about YOU!!

Rereading this blog I think this is really critical stuff for us as investors.

1. Get your financial house in order. Know where your money goes. Keep good accounts.

2. Decide what you really want and decide that you will pursue it until you get there. Make your current situation so unpleasant that change is the only acceptable solution.

3. Know the rules, get educated to know how to win inside the rules. If you are unwilling to invest in yourself, don’t expect life to serve you up success for free and without effort.