It’s time for a sob story. Mine, to be precise.
Some of you already know it, in which case, feel free to skip on through. But for those of you who don’t know my background, please understand that when I say I know what it’s like to hit rock bottom…
I really, really do. A few times over, in fact.
The first time was around 15 years ago when my real estate empire – the one I’d worked so hard to build from the ground up – collapsed in front of me. I could say it was all thanks to my business partner, but I guess I was the one who picked him.
Regardless, I was the one who ended up paying for so many of his mistakes. He made sure of that.
Back then, I ran the actual real estate business while he was in charge of the finances. And since he was a more experienced and wealthier individual, I didn’t question his authority in the matter.
But I clearly should have. As it turned out, he wasn’t paying the mortgage on our properties. Worse yet, he’d taken out millions of dollars of loans without my knowledge.
Millions of dollars with my name attached.
I had to sell our mutual properties as a result, though that didn’t come even close to covering the damage done. I had to sell two of my franchise businesses as well, which caused me to lose millions more in rental income.
And still, it wasn’t enough.
That’s how I found myself sitting across from “Ricky” one day, asking his advice. One part of me was desperate for solutions; the other was certain he couldn’t help.
Yet when I asked him what I should do, his response wasn’t anything like I’d expected.
It was, however, exactly what I needed to hear.
No Pity, Just Sound Advice
I hate to pile onto my sob story. But you have to understand how desperate my situation really was by the time I spoke with Ricky.
At my peak back then, my net worth was more than $20 million. So to see all that evaporate in a matter of months, leaving me on the brink of bankruptcy?
That was bad.
But worse still, I had a wife and five children to feed, clothe, and shelter. My youngest was in diapers. My second-to-youngest hadn’t yet started kindergarten.
And I had no money whatsoever when the creditors knocked down my door.
It didn’t take long for my circle of friends to shrink once I lost my fortune. I could count my confidants on one hand, with two of them being my mom and brother.
Thankfully, one of the other two was Ricky, a man I’d known for maybe 15 years.
Like me, he’d had to claw his way to the top. There were no silver spoons in either of our cases.
He’d made a fortune in commercial real estate, turning himself into what I call a one-man family office. And let me tell you, that office did well.
The man had money to spare.
That’s not why I went to him that day. I just needed a friend with good advice; I didn’t expect him to bail me out.
Which, he didn’t. There was no get-out-of-jail-free card for me when I told him how I’d listed all my debts on a whiteboard… and the only option I could see was to file for bankruptcy.
There was no way I could see to climb out of my deep, deep hole.
But Ricky did, which is why he simply told me to “keep pedaling.”
At first, I didn’t know what he meant, so he went on, asking, “Brad, what happens when you stop pedaling your bike?”
“I fall over,” I replied, still confused.
“Precisely.” He nodded. “You have five kids who are depending on you. So get up every day, and just keep pedaling.”
So I did just that… for the next 15 years, paying off bit after bit after bit as I could. I’m talking about $100 increments at times.
That – and a whole lot of prayer – is how I paid back every creditor I could. And, incidentally, that slow but steady concept is exactly what helped me make all of my money back.
Compounding Dividends to the Rescue
I know I talk about the power of dividends often enough. But that’s because it’s such an important concept.
And I want everyone to know it… no matter what “sob story” they’re dealing with.
I know of other people – including members of the Wide Moat team – who lost everything but built themselves back up with reinvested dividends. It really does take just a little bit of money to get yourself started.
Then, with time, patience and more “little bits” added on a consistent basis, your small amount can turn into something big. Even something humongous!
As I write in my latest (but not last) book, REITs for Dummies:
Most people are familiar with the concept of the so-called snowball effect. It’s the idea that a small sphere of snow rolling down a hill gets bigger and bigger as it hoovers up more of the white, sticky stuff. That’s also a good description of how compounding can help you grow more money…
Put simply, compounding happens when interest (or dividends) gets added to the principal amount (or investment account). Over time, this can lead to exponential growth.
Let’s use some very easy numbers here, where you invest an initial $100 and make sure to add $50 per month into a dividend stock, plus the payouts it offers. Its shares appreciating a conservative 4% a year. (The average S&P gain is actually 10%). And they come with a 4% dividend yield that’s growing 4% annually.
Even with so little invested, you could have $654 saved up by the end of year one. By the end of year 10, that amount would increase to $8,461.66. The two-decade mark puts your money at $26,340.09.
And if you’ve got another 20 years to give, you’ll have $145,580.92.
Now, that’s without taxes. But it also assumes that your situation doesn’t improve from your initial ability to contribute just $50 per month into your portfolio.
Think about what you could accomplish if you apply that kind of discipline when better days come along!
For my part, again, I don’t have to think about it. I’m living it. And I want my readers to live it too.
So the next time your financial outlook appears bleak, just keep pedaling.
Chances are good you’ll find yourself in a better place before too long.
Regards,
Brad Thomas
Editor, Wide Moat Daily