The Millionaire Maker's Guide to Wealth Cycle Investing

By Loral Langemeier

RIDE THE WEALTH CYCLE

with stronger investments, stable assets, and sure-and steady cash flow—for life.

Maybe you own your home, have a few stocks or CDs, or contribute to a 401(k) plan that you barely pay attention to. According to Loral Langemeier, the bestselling author of The Millionaire Maker, that’s more than you need to tap into the wealth-building power of direct asset allocation. What’s that? It’s a proven system of financial strategies that the smartest (and richest) investors have been using for years. You don’t need tons of money. You don’t need special insider knowledge. All you need is The Millionaire Maker’s Guide to Wealth Cycle Investing.

Think of this as your personal investment toolkit-packed with step-by-step instructions, worksheets to organize your assets, and sure-fire secrets to making money. You'll learn the fastest ways to supercharge your portfolio and make the most of whatever assets you have. You'll discover how to build cash in your own Wealth Account, scout out new opportunities, and invest in a wide range of asset classes through direct asset allocation. With financial expert Loral Langemeier as your guide, you can

• Take control of your assets-and generate new income
• Profit from nontraditional investments
• Use real estate and private equity to accelerate wealth
• Balance your risks with even bigger rewards
• Earn more money than you ever thought possible

Believe it or not, anyone can take advantage of these powerful investment strategies. All you need is the desire to succeed, the basic building blocks of wealth, and The Millionaire Maker's Guide to Wealth Cycle Investment. No matter what your age, no matter what your income, you hold the power in your hands.

• Language: English
• Publisher: McGraw-Hill Education
• Release date: Oct 17, 2006
• ISBN: 9780071631402

Book preview

1

All about Assets

Jed Stone was a classic Type 1. Young and single, he had a decent job, rented a small apartment in a big city, and had accumulated significant credit card debt. In the first four months of his Wealth Cycle, we helped Jed to create an additional $1,000 a month of income, structure his tax strategies to retain it, build funds for investing, manage his debt, and start creating assets. The first investment he made was in real estate. He bought a small house that put cash in his pocket every month. Soon, Jed was leveraging his money with other people’s money in order to begin investing in more properties and other assets.

Allison Connor was in a similar boat. A Type 2, she had some money in her IRA and a mutual fund that she’d created right out of college. After meeting a mentor who bought and sold small businesses, Allison became interested in private ventures. Later she bought a Laundromat and invested in other businesses.

With a primary home under his belt, Mick Buchanan thought he was in good shape financially. A Type 3, he had several mutual funds, an IRA, and money in his 401(k). But his wife, Mary, couldn’t understand why they weren’t able to take a few vacations and ensure payment of their children’s college tuitions. After working with me, Mick and Mary discovered and then invested in several assets, including private equity ventures that generated thousands of dollars of cash flow each month and increased their net worth.

And then there was the Type 4 cash-poor millionaire, Dee Newton. Dee, a single mother, had more than one million dollars in net worth—most of it as a result of the appreciation of her California home. She also had money in a stock market fund, a 401(k), and IRAs and money in the bank. Yet she never had enough cash at hand, and she had built up significant credit card debt to cover her monthly expenses—proof that today’s millionaires are like yesterday’s middle class. Most of these cash-poor individuals are actually shocked when they find out that they have a million dollars in net worth. Once Dee initiated her Wealth Cycle Investing program, she was able to shift her lazy assets into cash-flow-generating investments while, at the same time, building and accelerating her net worth.

These four examples represent the classic types of investors I run into. In each case, my team and I were able to educate and train these individuals so that they could make more money, build their assets, and accelerate their wealth. It took time and effort and education, yes, but most of all it took desire. I will show you how each of these investors built a Wealth Cycle and deployed a Millionaire Maker plan. You’ll see how Jed bought his first house, Allison invested in a small business, Mick bought into private equity, and Dee played in the oil and gas market.

Wealth Cycle Investing involves direct asset allocation, also known as direct participation programs. Let me break this down.

1. Direct. There’s no middleman. You seek out the type of asset you want to purchase, and you put your money directly into that asset. If it’s a commercial property, you put a team together and buy that property. Instead of owning an anonymous stock in some public company, you buy a piece of a private equity venture where the managers know you and you know them. You don’t put your money in some fund or stock and hope for the best—what I call the park and pray model, where you park your money in an investment and pray that someone manages it well enough to earn a profit.

2. Asset. I recommend investing in hard, real assets that you can see and touch, such as properties, business ventures, and even private debt instruments. There is no limit to the range and spectrum of what qualifies as a high-reward asset. It takes creativity, resourcefulness, and initiative to find or develop these assets. With an experienced team and knowledge of the asset, you can minimize the risk associated with these high rewards.

In Wealth Cycle Investing, you put your money directly into an asset, with no middleman.

3. Allocation. Diversification is an age-old investment strategy that works very well. It’s important to include diversification in any approach to wealth building. In Wealth Cycle Investing, you allocate your assets across many different classes and types with various growths, yields, locations, teams, and time frames.

Direct asset allocation begins with a plan. To create and execute this plan, you must

Know your investment criteria; these are your Money Rules

Get your cash ready for investment by

Converting lazy assets into cash

Making more money

Scout out opportunities

Collect knowledge

Put a team together, because

Someone has done what you want to do

You don’t have to reinvent the wheel

Other people’s experience lowers your risk

More help means more speed by flattening the learning curve

Pursue field partners, experienced professionals who

Act as point people

Provide access to the direct asset investments

Help manage the asset

Conduct due diligence

Make decisions and take action

Investing to create real wealth requires action and the pursuit of higher-than-market returns. Risk is continuously minimized through knowledge and a team. By consistently managing risk through knowledge and a team, the wealth builder can venture into more rewarding deals and investments. Historically, high-reward deals were reserved for the wealthy, but Wealth Cycle Investing creates an opportunity for anyone to become wealthy.

Accredited or Not Accredited, That Is the Question

In the past, the best investments—those with the highest returns—were reserved for accredited investors. These are investors who already have a high income or more than a million dollars in net worth. Originally, this barrier to entry was established to protect those who had little to lose from losing it all. But to me, it seems that the practice did just the opposite; it made investing solely the playground of the rich and left those with little money with no skin in the game. People who wanted big returns had to wait until they met the minimum financial requirements established by the Securities and Exchange Commission (SEC).

While it’s an interesting political comment to say that the rich get richer and the poor get poorer, the truth is, the rich and the poor aren’t even having the same conversation, let alone accessing the same wealth-building and tax strategies. The investing opportunities that await those who are considered accredited investors offer much higher rewards than those that are available to everyone else. That’s why when you engage in Wealth Cycle Investing it’s important for you to reach accredited status as soon as possible.

The good news is that the term accredited investor was defined by the SEC in 1933 during the Depression, when the dollar, and certainly a million dollars, had a lot more value than it does now. In fact, according to the Consumer Price Index (CPI) conversion factor, a million dollars in 1933 was equivalent to almost $15 million in 2005.

Yet, the definition of accredited investor remains:

1. You and your spouse have $1 million net worth, or

2. You have an income of $200,000 yourself or $300,000 together, or

3. You represent a trust with $5 million in assets.

Again, that’s not as daunting today as it was in 1933. There are many who would not consider themselves wealthy who have a million dollars in net worth. Of course, to many of you, these numbers are daunting. Wealth Cycle Investing helps you work your way toward them, so that you can eventually accelerate your investments and get in on the high-reward deals.

The smart financial planners, brokers, bankers, and fund managers know that this model is the way investing will be done in the future. No matter who you are, you can bring something to the table. Maybe it’s money, maybe it’s credit, maybe it’s ideas, maybe it’s experience, maybe it’s people, or maybe it’s your time and energy. All these things are valued by the financial community.

The importance of being an accredited investor can’t be emphasized enough. If you are accredited, you are eligible to invest in more direct asset allocation opportunities. When I work with people who have little in the way of assets, income, or anything else, but who want a quick acceleration of their Wealth Cycle, I suggest that they put together a team, make more money to qualify for accreditation, and do that by first getting in on diversified high-risk, high-reward deals that don’t require accreditation.

Get a Team

Smart investors build and work closely with a team, because having a team reduces risk. By gathering a team of mentors—whether industry professionals, colleagues, or friends—you can

Efficiently collect information and knowledge

Enjoy the advantages of other people’s experiences

Hear about new deals

Gain access to deals

Leverage your money or credit with other people’s money or credit

Further diversify your investments

And that’s just the beginning. Seeking and finding the best professionals in your asset class, gathering like-minded peers with whom you can join forces, and hiring the support you need to make the best use of your time are all essential to building assets.

Building a team makes sense, and it’s not that difficult. For example, if you’re involved in a lucrative real estate deal, you’ll need a good lawyer. You’ll find one by calling people who have done large real estate deals and asking for recommendations. You don’t have to know these people personally; you just have to have the confidence to pick up the phone and ask them the question. This is one of many action steps that wealth building requires. If you’re shy and nervous about taking this step, that’s okay. But don’t let your fear stop you from moving forward. Make the call. It will be easier the second time and a walk in the park the tenth.

When people tell me they don’t have time, I tell them they need a team. Having a team reduces your risk and affords you extra time, added support, and more access.

Make More Money

If you don’t meet accredited investor status, you need to find ways to make more money. Look at your current assets, if any, and figure out how they could perform better. Then consider your skill sets and devise a business venture. In the Wealth Cycle, this is your Cash Machine. The Cash Machine is not a dream business, but a practical money-making operation that will start generating revenue immediately and is pursued in conjunction with your current job. For example, I suggest that teachers start a tutoring business on the side, or that a craftsperson consider selling his or her furniture on eBay. Additionally, I suggest that you structure entities, such as corporations or partnerships, around these businesses to support tax strategies that allow you to retain more of your income. By making and retaining more money, you can begin to fund your Wealth Account and accelerate your journey to becoming an accredited investor.

Start with Deals You Can Do

There are investments and deals with higher-than-market-average returns that do not have accredited investor requirements. Real estate is one area where there are opportunities for those who have not yet made their million in net worth. There are many properties that can generate real cash and provide quick growth. Real estate is a great way to work your way toward the accredited investor requirements. From there, you can get into more lucrative deals. There are also ways to get in on the deals that do have accredited investor requirements even if you’re not yet accredited. The SEC allows privately placed investment opportunity to offer up to 35 nonaccredited individuals ownership in the venture. Many of these investment opportunities are put together by entrepreneurs and small businesses through private placements. While there are deal managers and entrepreneurs who won’t even talk to unaccredited investors, there are many more of these small-business ventures that are legally allowed and willing to let you in on the deal. Of course, you’ll need to research these small-business ventures carefully, just as you do any direct asset allocation deal, big or small, in which you can invest. Your team can help you find these.

Moving Up to a Bigger Life

Making the commitment to pursue a bigger, better life takes strength and self-confidence, absolutely. Your conditioning, those messages you’ve absorbed since childhood, might need to be upgraded. You do have wealth-building muscles; they’re just atrophied, and we’re going to pump them up. What you need to understand is that everything I am sharing with you in this book is doable. What you need to do is make the commitment to live out loud when it comes to money, to be open to a new way of thinking about and approaching your finances. When you live out loud, you say what you want and take action to make it happen. This is the best approach I know of for ultimately getting what you want—and it’s why I named my own company Live Out Loud.

Wealth Cycle Investing takes you to your want-to life and away from a have-to life; it allows you to differentiate real risk from perceived risk and reap the highest rewards. Somehow, we’ve spiraled into a permission-based society, where people sit and allow others to control their fate. They settle into a routine, do things by rote, and work hard to get an A. In Wealth Cycle Investing, you control your own life.

In Wealth Cycle Investing, you control your own life.

The ideas that I share here are based on an educational platform that I have used to create millionaires. I want to make it very clear that these ideas do not reflect my portfolio or suggest what yours should be. When you engage and initiate the Wealth Cycle Investing approach, you are responsible for your own wealth. Investing is personal, and the choices you make must be in sync with the needs of your current situation, your financial objectives, your vision, and your values.

I know people who invest in real estate, oil and gas, and stocks. I also know people who like only Laundromats or video arcades or mobile homes, others who put their money in other people’s businesses, and still others who prefer purely passive investments, such as promissory notes and private equity funds. I always recommend an asset allocation strategy that has a diverse, carefully chosen blend of assets in which you have direct control of your investment. The allocation itself is up to the individual—that’s the point of being in control and leading one’s wealth.

Wealth Cycle Investing takes you to a want-to life and away from a have-to life; you differentiate real risk from perceived risk and reap the highest rewards.

When you decide to initiate and develop a Wealth Cycle Investment portfolio, you absolutely must

Do your research on each and every investment

Continuously improve your financial awareness

Seek expert advice on each and every investment

Build a team to maximize capacity and minimize risk

Never park and pray, but always control your own money

Live a corporate life with tax advantages managed through entities

Stay in motion, because wealth takes action

Sequence—do the right thing at the right time, every time

Work toward building a bigger, better life

Live out loud to learn, teach, and help others

Assets to Assets to Assets

Good investments go beyond pensions, 401(k)s, IRAs, stocks, bonds, mutual funds, insurance vehicles, your primary home, and even your second home. Here’s what I look