Lessons From My Mistakes
“I didn’t start writing because I did everything right. In many ways, I started writing because I made mistakes before I fully understood what I was doing financially.”
Johnny ArnezHe bought a red Ferrari F430 Spider in 2006 for about $320,000 because, at that point in his life, he could afford it. He sold it for around $200,000.
“The Ferrari was never the problem. The order in which I bought it was.” Build the assets first, let them create cash flow, and let the cash flow help pay for the luxuries.
At twenty-four he bought a townhouse, rented out the upstairs rooms and lived in the basement. Rent covered the mortgage, but there was no cash reserve, so every vacancy was stressful.
Assets are useful, and so is borrowing, but only with enough financial cushion behind them.
A private investment projected a 19 percent return and failed to deliver.
Management quality, due diligence and the ability to recover principal matter more than the projection. Ask about financing, liquidity and the downside first.
For years he personally handled customer complaints, inventory questions, employee decisions and daily problems, and believed that being indispensable meant he was doing his job well.
A company that cannot operate without its owner can trap that owner. Procedures, trained managers and clear decision-making authority give time back, and make the business more attractive to a future buyer.
Losses in passive real estate investments: an attractive projected return was not enough when another party controlled the investment and the money was difficult to retrieve.
Ask not only “How much can I make?” but also “What happens if I’m wrong?” Preserving the ability to recover from mistakes is part of preserving freedom.
“I knew how to make money long before I really understood how to manage it. I worked extremely hard, built businesses, and generated income, but I also spent a lot of money on liabilities because I associated those things with success.”
Income creates surplus, surplus buys assets, assets create cash flow. “Don’t try to impress people with what you can afford today at the expense of your future.”
He left his son Adrian’s soccer game at halftime to help a customer, even as Adrian asked him to stay.
Financial freedom must include the ability to be present for the people you love. “You can make more money. But you cannot go back and repurchase yesterday.”
The Ferrari, the townhouse, the 19 percent promise and the owner trap are told in full in The Business of Buying Time, with their numbers and their turning points.
