The classic book, by Robert Allen, written in 2000. Many consider it the book that is the father of the “side hustle.” Written in 2000, the book tries to distill all the lessons and ideas from Robert Allen’s 20 years of books and seminars. He attempts to show you how to earn multiple streams of lifetime income, using a variety of strategies – each of which he goes into a great deal of detail on.
The key parts of these strategies is that they can be used:
- On a part-time basis
- Working right from home
- With little or none of your own money
- With fewer no employees
- Using simple systems that have a proven track record
Sounds like its right up the FIRE community’s alley, right?
Robert starts off with some basic explanation on the time-value of money, compound interest, and how to leverage that towards financial independence. He then covers some basic money skills you will need (valuing money, controlling it, saving it, using it to achieve financial independence). He finishes up by covering the three “great money mountains” that his streams of income are built on:
- The investment mountain (screening and filtering, timing in, timing out)
- The real estate mountain (finding, funding, farming)
- The marketing mountain (internet, network marketing, infopreneuring, licensing)
Streams of Income
- Stock Market Success: Here Allen goes through some basic lessons on investing (invest for the long haul, how index funds beat 4/5’s of money managers, and how you should start investing sooner, rather than later). His thought is to place at least 50% of your investment dollars in index funds, and just let them grow. He provides links to common index providers (vanguard, TRowePrice, etc.) as well as additional reading on the subject.
- Accelerated Stock Strategies: For 30% of your investment dollars. Here Allen goes into more aggressive stock strategies, He covers four basic systems to gain enhanced returns above & beyond index strategy, and goes into detail on each of them. They include:
- Invest with Warren Buffet
- Select Mutual Funds with the longest-term track record
- Select Financial Advisors with the longest track records
- Consider high-powered sector funds
- Options trading: For the final 20% of your investment dollars. This covers the highly leveraged strategy of covered calls, and call/put options. This particular chapter might be worth the cost of the book, as this particular type of investing can be very confusing. Allen takes the time to explain how to do it in detail, and provides links and methods to performing the trades. If you’ve ever wanted to find out about this type of investing, here is a short and simple 28-page chapter that can get you started.
- Real Estate: This chapter covers the basics of real estate investing, both for those who are looking to be landlords, and those trying to fix& flip. Excellent chapter to provide the basic tools and techniques for real estate. Allen divides the chapter into three areas:
- Finding: How to do the research to find bargain properties in the right area
- Funding: How to fund your real estate investing with minimum up front money
- Farming: How to create cash from your real estate, primarily through buying & holding/renting
- Foreclosures and Flippers: Allen discusses short-term bargains here, primarily gained through foreclosures. He discusses some of the methods to acquire foreclosures (pre-foreclosure, Post-foreclosure, tax sales, etc.). He then discusses the benefits to be gained with quick flipping of properties. Much of this has been written of in much more detail on the internet and through TV shows, but he does cover a lot of the basics and pitfalls of the strategy.
In the next chapter, Allen goes into more refined real estate strategies, providing a good summary view of them (though you will want to do your own research on some of these complicated plans). They include:
- Wholesale real estate (you identify and setup deals, then pass off to another)
- Angel real estate investing (you provide capital)
- Bird dogging (another investor provides capital)
- Split for cash (splitting property up and selling portion)
- Conversion (converting from one class of real estate to another)
- Paying other people’s taxes: In this way, Allen shows how you can purchase tax lien certificates on other people’s property for pennies on the dollar. You can then use the leverage of these liens to either get your full payment of tax funds, or repossess the property. Often this amounts to 16%, 20%, 25% or greater return. Depending on your state and local laws, the profits can be very good
- Network Marketing: Yes, network marketing can be another tool in your toolbox towards reaching a continuous stream of money. Allen goes through some of the problems in the past with network marketing, and some of the issues to be on the lookout for (need to buy inventory, etc.). He provides a list of questions to ask for potential markets you might get into, and strategies to select the right company, compensation plan and marketing system. Network marketing has proven itself to be lucrative for some in the past, so it should be something to consider.
- Infopreneuring: This is one that the FIRE community is very familiar with. It involves using your expertise/passion/hobby and turning it into a lifetime cash-flow stream. It could be a book, a how-to series of podcasts/videos or other mode of information. They key is to identify and research a market, produce a useful product, and market it. Allen provides some good questions to ask and methods to develop your opportunities. I think this is also a very useful chapter.
- Licensing: This is a step beyond Inforpreneuring and Network Marketing. The concept is to license your ideas to others, and let them do the hard work of brining them to market and generating income. You will simply take a cut of the hard work. You can also license others idea and do the work to profit from them, while paying them a portion of the income. Either way can work to generate another income stream for you.
- Internet marketing: Obviously, with the book written in 2000, this was a “new thing” and a new way to generate an income stream. Allen goes through a wide variety of ideas, most of which have become common place in our modern world. Still, its good to see Allen’s marketing mind go through all the potential uses of the internet.
Allen finishes his book with ideas on how to shield your income streams from others, including legal tax strategies, ways to protect your intellectual property, and methods to continue the streams past your lifetime, so your heirs can enjoy them as well.
All in all, and excellent book, and well worth a read.
So what have you read lately that you find interesting?
Mr. 39 Months