Process: Old School Wealth
There’s a lot of talk concerning whether or not it is ethical to tax the 1% a bit more to provide for the whole, despite the fact that they pay 37% of the taxes brought in. I’m not going to discuss whether or not this is ethical, but I was rather curious how someone gets into a situation where they make above 400,000 dollars a year. Yes, if you make this much, you are in the 1 percent! So, I sat down with someone, who didn’t want to be named, and the following is the method for which Mr. Smith told me:
I lost my Daddy when I was still in school. Me and my brothers split the money and I bought a small home just outside the college I went to. After graduation, I rented the place off, paying the mortgage with the rent while I moved in with my wife. After about ten years of making no money from the place, also adding in some of our savings to paying the mortgage, my old college house was paid for. My wife suggested that I could make some extra money if we bought another rental home; so, after about a year of saving from the income received from the rent, I took the plunge. I kept the same process, taking no money and using the income to pay off the second house. Five more years go by, and now we have two houses drawing us money.
I got a promotion at the local bank, so I could afford to see if I could make more money from renting to college kids. This time, I bought two more houses, still not drawing an income. At this point, I noticed that it became easier and easier to pay off my property. So, another ten years or so of me repeating my process, I was forty-four with ten properties to my name, all paid off, and was drawing me enough money to focus on doing this full-time. After a couple of conversations with my wife, we decided that it would be better for us if our son aided me in my business. I told him to help me with three things: help me increase my income, focus on quality properties and in maintenance of the old ones, and REDUCE THE TAX BURDON! (he laughs), I made sure that he focused on that one!
We kept this system going for another twenty years. Much to my wife’s, and my Mother’s dismay, we managed to create Smith’s Realty Company what it is today. I don’t know how many hours I spent working, but I do know that I would enter the office at 5 AM and would come home for dinner around 6 PM. In total, it was a 46-year process that has had many headaches all along the way, but I am glad that I have something I can pass off to my kids when I am gone. Nowadays, I mostly catch up on all of the sleep that I missed all these years!
After this conversation, I began to have a much greater respect for those who start their own business. This may be inaccurate, but if we go by the metrics that he gave me for the twenty-year span for how much time he put in when Mr. Smith began working on his company full-time, that would be 57,200 hours working towards being wealthy enough to enjoy his golden years with financial security. I respect that discipline.
So I end with a question: if you were in this position, would you be willing to have everything that you worked so hard for being taken away from you to give to those who didn’t take the risk, make the sacrifices and put in the effort that you did?