In freedom I touched on the subject of assets by briefly talking about the upper classes or the landed gentry as we tend to think of them in the UK.
In using the term “landed gentry” I mean people from the supposed upper layers of society who own large swathes of land, usually in the form of a large sporting estate which will include a few tenanted farms, shooting grounds, fishing waters, forestry land and maybe a few diversification projects such as wind farms, farm shops and/or gardens or houses that are open for the public to view.
I don’t want to dwell on the dubiousness of feudalism or indeed any form of land ownership, as this was usually bestowed on a far distant ancestor of the current owners and it’s not that easy to work out how this should be reformed. My guess is that it will all work out for the best at some point, but I won’t be holding my breath while I wait for it to happen.
Anyway, this land was almost certainly bestowed upon the original owner in return for his or her (usually his) allegiance to the incumbent king or queen. This made it easier for a monarch to rule the whole of the country without having to worry too much about being usurped from his or her throne by any Tom, Dick or Harry. By lavishing land, resources, a knighthood, a seat in the Lords and as many peasants as they wanted, on anyone sufficiently in-bred and with a love of brown nosing, the incumbent monarch was assured of, not only their loyalty to the crown, but also their willingness to round up the strongest and youngest of said peasants to be used as cannon fodder in any number of wars against any number of enemies for any number of dubious reasons.
So, based on this forced division and nepotistic redistribution of large parts of Britain we still have essentially the same system of government, loosely wrapped up in our pseudo democratic electoral system. The granting of a vote to the peasants might seem generous but this was merely a trick to allow the ruling elite to tie us into their rules and regulations; we voted for them so we must agree to the terms of the contract.
Anyhow, for much of history, right up until very recently, we just had to lump it; this was the order of things and attempting to change them would be futile. However, we are extremely fortunate to live in more enlightened times and it is entirely possible for us to change our lives’ around and for us to enjoy our life, doing what we want to do and to survive to tell the tale.
The key is a little bit of self education about money.
So what is one to do if one’s father isn’t the Earl of wherever and one doesn’t have any peasants to boss around and send off to make money for one?; well the answer lies in the secret education the toffs seem to get about money. It’s not actually secret of course; it’s just that if our parents (for reasons mentioned already) didn’t have any assets they are unlikely to have spent a great deal of time teaching us the subtleties of asset management and the avoidance of liabilities; an asset, being of course, the opposite of a liability. They might have considered it better practice to go out to work to make sure there was food on the table and we can’t and shouldn’t blame them for that, because it’s highly likely that this was what they were taught also. In this respect most of us are peasants, the chattering classes who are doomed to do all of the hard work and reap absolutely none of the benefits.
In freedom I talked about the propensity for the landed gentry to drive old land rovers and have patches on the elbows of their tweed jackets and that they will meantime never sell any of their land or other assets. This seemingly mean spirited and tight fisted behaviour stems from the fact that a land rover is a liability, as is a tweed jacket or a pair of wellies. Because they are essential items none the less, the toffs will buy the very best and make them last forever. They won’t replace the land rover with a cheap Japanese car, or the tweeds with a modern man made fibre, and the wellies will always be by royal appointment; they cost more but they last longer and can even be sent back for repair if needs be. Liabilities are just what they sound like and they should only be tolerated in extreme circumstances. Liabilities eat money.
Forests, farms, wind turbines, shooting grounds, salmon rivers and holiday cottages on the other hand are assets and these will never be disposed of because rather than eating money they can actually be programmed to spew it out in great wads if managed correctly, leaving you plenty of time (and money) to go off to St Moritz, Juan les Pins, Aspen or wherever is hot this year.
So it’s alright to invest both money and effort in developing and maintaining assets, but not such a good idea to do the same with liabilities.
But…what if I don’t have any assets? Well, I suppose I could buy some, but oh yes…I don’t have any money!
Well, I can create some; and we are lucky to be alive at a point in history when this has rarely been easier. In the past, even to within the last 20 years it was very difficult for a peasant like me to create or hold onto assets. Physical assets cost money and intellectual assets required literacy and/or money; two things that peasants didn’t have in abundance, but that has all changed.
I’ll short circuit this by detailing a little challenge I have set myself for 2012:
Create a new asset every month so that by the end of 2012 I will have a minimum of 12 new assets.
Now, I’ve given myself a little leeway on this and have stipulated that some of these might be constituent parts of bigger assets that will necessarily take longer to create, but the rule stands that even these components must generate true value individually also.
I’ve also allowed myself the luxury of some of these only earning their stripes as assets at some point in the future; in other words they don’t have to generate cash as soon as they are created, but they do have to make real money appear within the year.
Now here is the good bit if you are wondering how you could ever set out on such a task with no capital; I am stipulating that all of these are zero capital creations. Now again there has to be some leeway here; I already have some of the resources in place that will help with these projects such as a web hosting account, a small office/workshop/studio, a laptop and an internet connection; but that’s not to infer that these are all going to be airy fairy web based dreams.
The really interesting part is that I probably only have the ideas ready to go for the first 4 months, but I am confident that the others will arrive as and when required.
Just so you know and to provide some inspiration if you need it, here is a list of the assets I will create in January 2012:
Month one:I worked for a while in a particular niche market place (my main career before I dug my tunnel) and I have continued to maintain a blog for that market place for over a year now. On that blog I sell 3 self penned eBooks and a monthly membership package where people can sign up, pay a monthly fee and receive premium content that I produce from thin air. The nature of membership websites means that no new content = members cancel their subs.
So last week I created a digital product that will teach my members exactly what they need to do to achieve a particular result in their chosen field in January. I will now add the same product relevant to what they need to do in February at the end of the month and I will continue this throughout the year. I am counting this 12 month series as only one asset.
I am of course being deliberately cagey on the exact details here, because I don’t particularly want to mix that blog’s audience with this one at the moment.
This asset will help me to grow the membership of the site and increase my income from that asset.
Month two: I have already begun to develop a website to serve a niche online community in the tourism business and this will be completed and launched in February.
This will help to build a new industry specific network which I can promote digital products to, particularly my business eBooks.
Month three: As part of my previous career I acted as a business development facilitator for a particular business niche in the sports sector.
By detailing the methods and tools I used for this work, I created an eBook aimed at helping struggling businesses turn around their fortunes and published it for the Amazon Kindle last year.
In week 3 of my challenge I will re-write the eBook to reflect a new website I will create to support the eBook in week 4.
This asset will generate income from direct sales on Amazon.
Month four:In week 4, I will build and launch a new site to add value for the readers of my eBook on business turnaround.
The re-written eBook will direct readers to the new site which will offer further help with business turnaround basics as well as offering a premium membership element which will require a monthly fee for access to premium content.
From there I can build a list of users and begin to offer them more and more premium content related to their specific needs.
This asset will generate income by offering added value premium products to existing readers of my eBook mentioned above.
Month five: In month 5 with 4 new family money generating assets created from thin air I will move on to the launch of a real, tangible product that you can touch and feel.
A while back I started learning how to make and repair books and month 5 of 2012 will see the launch of a new brand of premium notebooks aimed at artists, writers and freedom fighters.
This asset will generate cash from direct and wholesale sales of our premium, handmade notebooks: watch this space for more details soon.
Later projects are already being pencilled in and I am looking forward to have grown my assets hugely by the end of the year by doing things I like doing and by creating new income opportunities out of my lifestyle and in many cases straight out of thin air.
The times we live in make most of my scheduled projects possible, due to communication technology being what it is now, but there is no need for your projects to be web based and certainly no need for you to have access to capital to get started on projects that can change your life around.
So, that sounds easy doesn’t it? Just create a few carefully chosen assets around your chosen lifestyle, sit back and wait for the money to start rolling in…well, not quite.
To illustrate let me introduce a well known phenomenon. The seemingly incongruous mix of being asset rich and cash poor; a bleat you will hear echoing around the largest of the country piles once gifted to the toffs.
Now things have to get pretty desperate before these guys start to buy their wine at Tesco, but a lot of them do struggle to hold on to or at least keep up the maintenance on their estates and grand houses. They essentially end up being asset rich and cash poor because they don’t work their assets hard enough. Their assets then turn into burdens because instead of generating surplus cash, they start to consume it.
So, failure to maintain the salmon river results in fewer rich anglers coming but the upkeep costs remain; drop the upkeep spending and even fewer anglers come and the whole thing spirals out of control downwards.
Let the forest get overgrown and out of control and suddenly the timber isn’t of high enough quality to attract top dollar, so the forestry business drops off a cliff.
So it’s not good enough to simply create assets for your self you also have to be prepared to market your assets to the people who will buy from you and provide your cash flow. You can think of marketing as being a bit like promises; you essentially promise to deliver a certain experience, product or service to your customers.
The thing about promises though as we all know, is that you need to keep them and in business it’s actually better not just to keep them but to beat them; to over deliver in other words.
All of this activity; of creating, and then marketing, and then delivering can be summed up in one word “implementation” and it is this activity, this commitment to implement, to get on and finish things that is most noticeably missing in almost every “just getting by”, struggling or failing business.
So even though it’s good to create assets out of thin air, I must be prepared to do the follow up work or I will become one of the asset rich and cash poor.
For me the decision to make my life my business so that everything I create and do is not only a joy, but also a cash generator has been a truly big revelation. Creating diverse assets, lighting the fuse on each of them and collecting the cash is amazingly satisfying. However, I still have to be careful not to launch a project I can’t support fully in terms of time, energy or cash as it might turn into a burden and I ain’t doing that stuff anymore.
Most importantly for me is the care needed so that none of these projects turns into a monster. Let me use an example; one of the cash generators I have started is a second-hand book business. I buy second-hand books, list them on Amazon and people buy them…easy. However, if you look on the Amazon Marketplace for any second-hand book you will see the same merchants’ names springing up over and over again. That’s because a few people have turned this method into a big business, some of them stocking millions of books. My current inventory is about 3000 books.
Now, I can easily get my hands on enough good quality, second-hand books over the next year to get my inventory up to 10 or even 20,000 books…but; I would need to spend almost all of my time on this one project, I would need more storage space, a cataloguing system, possibly some help from other people and I would have huge packaging and postage overheads. Most annoyingly…I would have a JOB again and that is not the intention of this life change around. As an aside to this, if I made this my entire cash generation mechanism I would be in a very precarious financial position. This business relies completely on Amazon and they can switch my account off anytime for any reason without compensating me. There is no current reason why they would or should do that, but if it happens now…so what I’ve got plenty of other stuff going on.
Finally just a little explanation about my use of the terms “earning money” versus “generating cash”; I like to make a distinction here. Here are my definitions:
Earning money = bringing in a predictable amount of pay by doing things you don’t like doing (or at least don’t want to be doing) for a rate of payment that is below what you’re worth, at a time when its not convenient for you, at a place you don’t want to be and with people you don’t want to be with; it can be summed up as drudgery or misery and is usually referred to as a job!
Generating cash = automatically accruing money on a repeat basis from work you have already done (and enjoyed doing) in creating assets that go on to generate cash whether or not you are there to supervise the activity; with generally only pre-known, fixed inputs required to maintain the system of cash generation in the future.