# how'd you make your fortune?



## joncnca (Jul 12, 2009)

there are clearly some posters here who seem to have (over the years) set themselves up very nicely, financially. i think i speak for most people on the forum when i say that much of the advice and nuggets of wisdom imparted by these posters have been invaluable, particularly for those of us at the earlier stages of our working careers. so i want to start off with a hearty 'thank you.'

it got me curious though, for those of you who have pretty much mastered the basics (i.e. out of debt, good financial habits, quickly paying down or already paid down mortgage, etc.) and moved onto actually building wealth (i.e. built a strong investment portfolio, cash positive rental property, entrepreneurs, etc.), how'd you get there, and more importantly, how did you start off?

for example, the first time you bought an investment property that made you money, did you already know to calculate the cap rate and to account for unforeseen expenses? or did you just jump in and learn about these things as you went along, and if so, did it work out the first time or did you have to overcome several failures before finally getting right? what made you take that first leap?

that's just a real estate question, but it applies to any other method by which you made your fortune. how did it begin for you? =)


----------



## Jungle (Feb 17, 2010)

Well I'm not worth a fortune and my job is not really high paying by any standards. I started working for money when I was young, paper route, for my dad etc. Then continued in high school at a department store, then when I was 18 I started working full time in fast food for several years. Kept going from crappy job and went to school for two years, worked two part time jobs while in school and paid for everything myself including rez for half a semester. After that worked a few more jobs, but then landed one when I was 26 with OK pay, benefits and pension. 

I continued to spend and save responsibly, then bought a house when I was 27. Started doing RSP and contributing to company pension. Kept saving and making extra mortgage payments. Starting putting money in TFSA. Worked on the side to make extra money. I got married and could not sell my house, so I started renting it out. Cap rate is not that good, but seem to be doing OK with it so far, been renting it our since 2008 without any vacancy or substantial repair costs. Marriage with no debt and everything was paid with cash from saving money. Parents helped pay for the venue. (big help) Read a lot of books and blogs about investing and saving money. 

Got married to a like minded wife, she bought real estate same time I did, had RSP and pension. With dual income, we live frugally and save a lot of money. We paid off over half the mortgage and then reborrowed it and bought stocks. 

Purchasing assets that increase in value or make money seem to take really take a long time to build sustantial wealth. Like I know in 30 years it will be worth it, but for now, getting a good job and spending less than you earn is likely to set up up faster. It starts like a snow ball being pushed off the top of a mountain, than it builds speed faster and faster as it goes down the hill. We're not even making good money with our stock investments over the last few years, so that thing takes a long time.


----------



## Jungle (Feb 17, 2010)

Here is some interesting stats about us: (two adults)

Just turned 30. 
Both incomes are in the 40K range. 
Last year we spent $20K total! (Does not include mortgage interest) 
Net worth is up 78% since Jan 2010!!
Investment retuns suck, last year we lost money. Avereage 4 year return on pension is only 4% per year!! ( the rest I dindn't track back then)
Over $215K in stocks and mutual funds - 99% equity
$210 in tax deductible debt
No credit card debt
Operate with one car
Usually never any liquid cash on hand ( don't like emergency funds)

Goal is for an early retirement and to start a family.


----------



## P_I (Dec 2, 2011)

Personally the following has served us very well and I'd recommend it to anyone.


Spend less than you earn.
If you must borrow, two things 1) Make sure there is a margin of safety in your calculations. For example, at around the time I got married we bought our first house. We made sure that the mortgage payments could be handled on a single salary, thus protecting ourselves from "life events". and 2) Plan to reduce and eliminate the debt as soon as possible. We used the mortgage double-up feature and annual lump sum payment priviledges to accomplish this.
When you have funds available for investing, minimize expenses. Fees matter. Returns can and will be variable and you don't control them. You do have control over your expenses, so keep them as low as possible, you'll benefit in the long run.
Think long-term, but have an emergency fund just in case. The emergency fund should have NO risk associated with it. Yes the return will likely suck, but remember it is for an emergency -- it has to be there!.
Expect the unexpected. Does your investment plan depend on a specific set of parameters to occur for it to be successful? If so, what happens if things don't go to plan? When we moved provinces a while back, we retained a property in our original province as a fallback plan if the move didn't work as expected. As part of our planning, we considered the possibility that the house could remain empty for a period of time, no income, but expenses still occur. For the first five years, we always had occupancy, so things worked out well. Then things changed, our last tenants left end of August 2011 and the house remains empty. Because of the conservative assumptions we'd made, while not desirable, this has still been workable. It just meant other trade-offs that we'd considered before hand. We never formally considered calculating a cap rate, although we probably did it informally now that I reflect on it.


----------



## kcowan (Jul 1, 2010)

Key to my success
1) Got a good education
2) Got a well-paying job
3) Always on the lookout for better paying positions
4) Unafraid to take risks
5) Learned from my mistakes
6) Never stuck with previous decisions when they no longer make sense
7) Always lived below our means.

I have held 25 different positions in my career.
Each move involved more ego on the line and increased earnings.
Have owned a rental apartment building but flipped it for $150k profit in my first 10 years.
Have owned a very large estate property for leverage.
2 kids and 2 wives.
Amassed a medium 6-figure investment portfolio.
Portfolio is Corporate Bonds, Individual Equities and selected foreign funds.
Retired and living in Mexico with a summer place in Vancouver.


----------



## Just a Guy (Mar 27, 2012)

Well, in the early 90's where job prospects looked slimmer than Twiggy, I was forced into becoming self-employed. Did fairly well, but knew nothing about investing. My mother-in-law was someone who I thought knew a lot, so I followed her advice and bought a mix of mutual funds for my RRSP. Like most mutual funds, their value today is basically the same as when I bought them.

Figured it was time to stop being lazy and learn something about how money works, so I started reading a lot, and THINKING about what I read...not all of it was good advice.

Bought my first rental house when I sold my first house. Everyone I knew told me how stupid I was for doing it. I had run the numbers though, and it was, in my opinion, a no lose investment.

Ran into some problems with my company, and had to look into taking contracts I didn't like and that didn't pay well...started having kids...bought a few more rentals (putting myself in a lot of debt, at a time when my income wasn't all that stable...but the properties I bought were high cash flow, no risk types (I'm actually a very conservative investor, I don't like risk).

As the stock market crashed, I bought companies that I knew. Most of them payed a dividend, and forgot about them. To me, I never invest money I need and consider any money I've invested to be spent money...gone, can't access it anymore.

I went though some pretty lean years, learned to spoil my kids cheaply, and one day while working on a bad contract, started to look at my portfolio for a bit. I realized, that the market was making me more money in a day than my company was...my rentals were paying my bills...and I somehow wasn't broke anymore, and hadn't been for some time.

Got a bit cocky, tried to buy some stocks that were being manipulated, or the fad of the day, and got burned by them. I soon realized I wasn't an investing genius, and went back to my boring ways.

Eventually, I changed the focus of my company, started working on things I wanted to. Picked my projects, and my prices, bought more real estate and stocks. Still have people thinking I'm crazy/stupid since I've never had a well paying job, I don't budget, don't like "advisors" and never did things the traditional way...

I've never been focused on money, have no drive for it, I focus on my family and live modestly. I don't have a lot of toys, and I'm disciplined at keeping investments as investments and my money as my money. I wouldn't call myself rich, but I do have the freedom now to choose my lifestyle.


----------



## joncnca (Jul 12, 2009)

just a guy, 
sounds like you're being modest but i think you're very successful in the way that i want (not to diminish the achievements of the other posters), of course i'm a little more anal and pour over how beautifully my budget is laid out, haha. anyway, for instance, when you bought that first rental property, you ran the numbers...what numbers were important to you? also, were you well prepared at the outset, or did you run into problems with your numbers that needed to be corrected after you were already in the thick of it? luckily, sounds like everything worked out, but did you find yourself thinking 'how'd i get myself into this' and how'd you convince yourself to keep going (or did you feel like you were already committed, couldn't give up?)

kcowan,
when you owned the rental that was later flipped, did you have the projected earnings all worked out before you bought the place, and if so, did it work out as planned? it's just one line in your response, but could you elaborate on some of the trials and thought processes? did you already have an idea that it would give you such a substantial gain? if not, how did you convince yourself to go ahead with purchasing and operating the rental anyway? what were some big lessons that you learned from your mistakes?

P_I,
i like to build some pretty conservative estimates into my projections, but sometimes i'm afraid of being too conservative. i'm fortunate that i'm not in any kind of 'desperate' position, so i'm not swayed by get-rich-quick schemes. and while conservatism has it's place, i want to be a participant not a spectator. lots of people talk about money and investing, but i feel relatively few actually act.

jungle,
you guys are awesome. i'm still trying to work out the details of cap rate, particularly NOI and what it includes...cause i'm a little confused and haven't gotten around to looking at it more.

===
i think my curiosity boils down to this....when you started with your investment (whatever it was), how much of the ultimate gain was due to planning alone, and how much was unforeseen? you might run some numbers, and it might have been a pretty lackluster 2% gain or something, but ended up returning much more because people bought more of the stock, or something was built to drive up rental rates/property values? looking back on events, it's easy to say "i flipped something and got a good return" but in the moment, how were you feeling about it?


----------



## Just a Guy (Mar 27, 2012)

joncnca said:


> just a guy,
> sounds like you're being modest but i think you're very successful in the way that i want (not to diminish the achievements of the other posters), of course i'm a little more anal and pour over how beautifully my budget is laid out, haha. anyway, for instance, when you bought that first rental property, you ran the numbers...what numbers were important to you? also, were you well prepared at the outset, or did you run into problems with your numbers that needed to be corrected after you were already in the thick of it? luckily, sounds like everything worked out, but did you find yourself thinking 'how'd i get myself into this' and how'd you convince yourself to keep going (or did you feel like you were already committed, couldn't give up?)


If I were to write a beginner's book on real estate it would be this one... www.easysafemoney.com/book/

My numbers are a little simple...Mortgage, fees, insurance, taxes, etc. vs. Rent in a bad market. My first condo cost me around $450/month. Current rents at the time were about $700, the lowest rent I'd heard of in years was $500...it was a no lose situation. I now rent the same place for $950/month, but I refinanced it years ago to buy more places.

The one tough part was believing in the investments. There was a time I was running up debt, had I liquidated I could have been even, but would have lost the passive income. It's hard to stay the course during times like that, but I knew it was only temporary, and it would be stupid to liquidate and be left back at the beginning. I also remember when the business first started to suffer and I bought another property...things were going south and I intentionally put myself a further $80+k in debt. My in-laws and family weren't too happy. Of course, I selected another no-lose property and the profits wound up paying my personal mortgage for the rough patch. It's hard to go ahead without support, I read that only 5% of Canadians invest in real estate, that means 95% of people will think you're crazy...not to mention the 3% who probably get burned by doing it wrong...


----------



## brad (May 22, 2009)

I worked hard.


----------



## Jungle (Feb 17, 2010)

joncnca said:


> i think my curiosity boils down to this....when you started with your investment (whatever it was), how much of the ultimate gain was due to planning alone, and how much was unforeseen? you might run some numbers, and it might have been a pretty lackluster 2% gain or something, but ended up returning much more because people bought more of the stock, or something was built to drive up rental rates/property values? looking back on events, it's easy to say "i flipped something and got a good return" but in the moment, how were you feeling about it?


Well the rental property was unforeseen, but it does make sense right now. It does cash flow positive and when I get 60 emails in two days for tenants, I know there is a market. Now I just lowered interest rate at 2.79% for three years and increased amortization to 30 years for cash flow and to pay less taxes. With no risk accounting (IE no vancancies, eviction, repairs, taxes etc) I could say it's cash flowing $313 per month plus paying down about $$250 month on principal right now. The cash flow is being invested in TFSA and paying down non- tax deductible debt. Now throw a bad repair or default and it goes out the window. No risk= no reward. Also I am advantaged because I do my own work and repairs and seem to be good and saving money on stuff. ( like the free dryer on kijiji for tenant! ) 

In 2011 I paid tax on $600 rental income.. pretty good IMO. We had lots of deductions. 

We did not expect the condo value to increase like it did, but hey look at Toronto Real Estate it's gone retarded anyway. 

The stock purchases and strategy was planned. Use tax deductible debt (in form of cheap mortgage) to buy Canadian dividend stocks on sale that increase dividends beyond inflation. Use dividends to reinvest. Cash flow pays the loan on a 30 amortization, 2.79 for three years. Extended for more interest deduction and pay less taxes. The plan was to buy stocks on sale, This was not easy to do during the last crash,

Behavioral finance screwed up my TFSA, RSP and pension. I sold all our bonds back during QE2. Then stocks crashed again last year and I had no means to rebalance... which was the whole point of the couch potato strategy we use. Now I am paying the price like last year returns but I have learned from my mistake and started an investment statement policy and telling my self not to screw around with market timing.


----------



## kcowan (Jul 1, 2010)

joncnca said:


> kcowan,
> when you owned the rental that was later flipped, did you have the projected earnings all worked out before you bought the place, and if so, did it work out as planned? it's just one line in your response, but could you elaborate on some of the trials and thought processes? did you already have an idea that it would give you such a substantial gain? if not, how did you convince yourself to go ahead with purchasing and operating the rental anyway? what were some big lessons that you learned from your mistakes?


It was a joint venture with a builder and a lot of the soft costs could be written off or passed on to a subsequent buyer. We rented the place up then sold it to a couple of dentists who bought it for the tax writeoffs. I was not making much money then so the soft costs were worth more to the dentists.

I did not do it again because:
1) I did not like all the work associated with getting the place rented out,
2) I was too dependent on the builder.

I took the money and started an investment portfolio. I was in my second sales territory and the seed money came from a big commission cheque.


----------



## Square Root (Jan 30, 2010)

A little worrisome that so many comments relate to real estate. I doubt there will be much money made this way for a while. My case: good education, hard work, significant luck, high paying job translated into a very secure early retirement.


----------



## Just a Guy (Mar 27, 2012)

Well, he asked for more details about the real estate. I did say I invested in stocks and my company too...

For stocks, I get more active in the crisis times. I bought income trusts when they announced the changes to the way they were taxed. Prices dropped by 25% overnight, then people realized that nothing was going to happen for 4 years, so they went back up...and paid a nice dividend for 4 more years, converted to stocks and still pay a nice return, plus increased in capital value. During the financial meltdown, I managed to pick up some stuff like BOM for $28...paying a $2.80 dividend...10% on a canadian bank, no brainer. The problem is, my stock system is pretty boring, hands off kind of thing.

I tried some more "exciting" systems, got burned, and now stay away from them.

As for the business, well it's pretty specific to me, so any advice I could offer on it probably wouldn't translate well.

I do think you need to be diversified, but not in the way they mean when talking to investment people. I don't mean being diversified in stocks, bonds and mutual funds, rather owning those, real estate and businesses.

As for real estate, I think it's just starting to be a good time to make money again. I hadn't bought much in the last few years because everything was overpriced. I bought 3 places last year though. I don't think I'll be making the capital gains I did on my old stuff, but I've found a pile of cash flow properties which will make me a nice return.


----------



## Montrealer (Sep 13, 2010)

I am not WEALTHY yet but am well off (I think) and this is what I did:

1) Started working at the age of 13
2) Got an education up to University
3) Specialized and got certifications in various areas of my main career
4) Got a Real Estate license 
5) Lived with my parents until the age of 30
6) Lived below my means
7) Saved and paid myself 10% off the top every week or second week
8) Saved to invest
9) Always had a second source of income with my Real Estate sales
10) Got advice and read forums like this one during my spare time


----------



## Nemo2 (Mar 1, 2012)

Me...among other things I traded a segment of my life for cash in Saudi Arabia.


----------



## houska (Feb 6, 2010)

A bit of a different trajectory:

Good education funded by scholarships and awards. Well paying but high-intensity professional job where others were paying student loans while I was saving. Lots of travel. Upshot was that I only bought a house when I got married at age 35 and we paid 80% down. Now that the house is fully paid off (except a targeted investment loan) have switched my career to reduced time to prioritize family/personal life more, but still save more than we spend. Aiming for findependence at approx age 45, depending on various choices.


----------



## Causalien (Apr 4, 2009)

Takes a whole week to weigh a decision on a new direction.
Then act on it.
Work hard
Gets burned
Try a different venue until I find one that's profitable.
Get efficient at it until it can be easily managed.
Repeat


----------



## valueindexer (Jun 17, 2011)

It's not really a fortune yet, but I went into a business with low overhead and capital needs with very little experience. Then just followed what looked promising (and what I learned from experience) and kept making incremental improvements.


----------



## marina628 (Dec 14, 2010)

I have bought 4 homes for total $917,000 that now are worth $1,296,000 ,that just since April 2009.I owe $524,397.87 in mortgages. My husband and I have another two homes free and clear so real estate transactions over past 21 years definitely huge part of our net worth.I started a business about 8 years ago as a hobby that today earns 1000% more than my goal ,find something you love to do and build it up.


----------



## Montrealer (Sep 13, 2010)

marina628 said:


> I have bought 4 homes for total $917,000 that now are worth $1,296,000 ,that just since April 2009.I owe $524,397.87 in mortgages. My husband and I have another two homes free and clear so real estate transactions over past 21 years definitely huge part of our net worth.I started a business about 8 years ago as a hobby that today earns 1000% more than my goal ,find something you love to do and build it up.


This is what I like to hear! Good job marina628. 

I also agree that you should do what you love in life, life is about enjoying your time and if it makes you money, you will be successful.


----------



## 44545 (Feb 14, 2012)

joncnca,

I don't have a "fortune" but I'm on my way to a comfy retirement.

#1 piece of advice for accelerating net worth growth: *be happy with the "things" you've got* and don't spend on "trinkets." (trinkets include electronics, jewelery, travel, sporting goods, luxury cars etc) This will let you sock away more savings.

The best illustration I can find for this is the Canadian Couch Potato blog entry on March 5th of this year: "Some Advice for New Potatoes"

I realize that's tangential to the thread but it's what I see derailing many people's efforts. These entitled gits, for example: http://www.torontolife.com/daily/informer/from-print-edition-informer/2012/02/15/almost-rich/


----------



## GOB (Feb 15, 2011)

I haven't made a fortune yet but I think I have got a good start at 24

- Went to a good school and got a good job as an engineer receiving a 25% raise over the last 1.5 years
- Despite the high salary for my age I live quite frugally without going overboard and have a good amount of money to invest every paycheque
- Started researching Apple heavily several years ago and recognized how amazingly undervalued it was
- Once I was employed and had cashflow I put the majority of my investable capital into AAPL stock and options - it has paid off very nicely
- Along the way I have dipped into some stable dividend paying stocks to get the ball rolling on future cashflow
- Starting to get into selling options for income and am already seeing a great boost to returns

The key to my success has been my decision to focus on a single stock rather than the traditional diversification route. Diversification would have got me average returns and I have received exceptional returns. With the amount of research I put in, combined with my age and the fact it was money I could afford to lose, it was certainly the right decision. When you know something inside and out, it only makes sense to take advantage of it. I am now putting much of the money I've made off AAPL options into dividend payers as I now have enough invested into AAPL that I can plan for a more stable and diversified cash flow for my later years.


----------



## kcowan (Jul 1, 2010)

GOB
At your age you can afford to take risks. Don't get too conservative just because the numbers are getting large.

Give some thought to asset allocation but keep a segment for "high risk/high reward" investments.


----------



## GOB (Feb 15, 2011)

Thanks for the advice. I'm definitely not being conservative - I just want to take advantage of the compounding effect of dividend growth for several decades. I am still investing in growth stocks as well and playing some options.


----------



## Assetologist (Apr 19, 2009)

Not at the 'dollar' fortune level that I aim for yet but;
15 years of university led to a great job
Utilize income by investing in stalwart DG stocks as well as forays into aggressive swing trades
A great wife and kids
Bought a house for $835 and sold for $1.7+ four years later

I have made lots of mistakes along the way and I'm sure many more will result from my investing adventures but that's life!


----------



## marina628 (Dec 14, 2010)

That is sick amount of profit on that house , please don't tell us the new house cost 2.5 million lol.Hope you took some of that profit off the table


----------



## indexxx (Oct 31, 2011)

Assetologist said:


> Bought a house for $835 and sold for $1.7+ four years later
> 
> 
> You must live in Vancouver!


----------



## Assetologist (Apr 19, 2009)

It was actually Calgary!
It consolidated my belief that money can be made at the edges of crowd mania and depression as well as just studying classic fundamentals of a product or business.
Swing trading seems to make sense but I park the proceeds in 'things' with strong longterm fundamentals.
Vancouver seems prone to a pop if one assesses Canadian support numbers but the reality is that as long as out-of-country money supports the floor it should hold strong. Once the mainland Chinese money flows elsewhere then the market will pop.


----------



## marina628 (Dec 14, 2010)

I am very surprised with these results in Calgary but very good for your balance sheet


----------

