The 4 Stages Of Wealth Building As A Homeowner

One of the primary objectives of owning a home is to let the home appreciate over time and become a pillar of a family’s financial strength.

But before we can discuss “wealth”, we need to identify the stages to get there.

Stage 1

Having “Emergency Cash” is the first stage. It’s having $5-7,000 liquid for life’s inconveniences (the boiler breaking down, the car needing work, etc). When faced with the inevitable challenges that arise, many people are forced to run to their credit cards to make it through. They become stuck with high interest rate, non-tax deductible borrowing.

Stage 2

The second stage is the elimination of “Bad Debt”. We define “Bad Debt” as any debt whose interest is not tax deductible. Obviously, those high interest rate credit cards must be the first to go. But we also want to divest ourselves of the borrowing associated with car loans, boat loans, student loans, and personal loans because it typically can be done cheaper.

Stage 3

Shockingly, when you arrive at stage three, you will be considered in the Top 5% of Americans in terms of financial security. Stage three is accomplished when you have 3-6 months of your total expenses in reserves. The average homeowner (who is logically financially better off than the non-homeowner) has less than one month’s expenses in reserve! When life shows them more than a minor inconvenience (like a job loss, an illness/disability, or worse), most people are in a panic situation. With 3-6 month’s reserves, you will have time to weigh options and make better choices.

Stage 4

True financial security is attained when you become “Debt Free”. But not without debt. We consider our clients “Debt Free” when they have enough liquid assets to pay off whatever mortgage they have outstanding. Wealth building almost requires utilizing the tax benefits of having a mortgage in combination with strategies that utilize The 3 Miracles of Money…

The 3 Miracles of Money

1.       Compound Interest – The impact of money left to grow upon itself can be dramatic. If you had $1 on Monday and you could double it every day ($2 on Tuesday, $4 on Wednesday, etc.), by the end of 20 days, you would have $1,048,576.00!!! Now, you can’t double your cash every day, not even every year, but the concept holds true…..compounding interest is a good thing!

2.      Tax Free Growth – The ability to accumulate assets without giving Uncle Sam a third of it (in the form of Federal and State Income Taxes) is how the $1 became $1 million. If the growth was taxed at 33% ($1 on Monday gave you $1.67 on Tuesday – instead of $2- and so on), your $1 would only grow to $28,466.20 after 20 days!!! THAT IS NOT A TYPO! You would have “lost” over $1 million.

3.      Leverage and Arbitrage – If you can put up a minimum of cash and take title to a significant asset (like a down payment on a home….the smaller the down payment the better), you can leverage that cash investment to large returns. At the same time, if you can take the cash that you don’t bury in home equity and effectuate a spread between your “after tax cost of money” (mortgage payment) and your investment options (hopefully, in a tax free environment), you can gain the exponential growth that creates wealth.

Special thanks to Dave Cook for providing this information.  

Want to know more about home ownership?  Call me, Laura at 303-726-1051.

The New Wealth

Last night I watched a Tony Robbins’ interview with Eben Pagan, Internet marketing wiz kid. I say "kid" because he's only 38 and yet he's generated millions from internet marketing of his products. His products? He started with a "how to" on dating and is now into business development, how to hire the best employees, mastermind materials and all manner of improvement e-books. The product isn't what caught my attention. What snagged me came at the end of the interview and upon hearing it all that came before slammed into place.

Eben operates from a true abundance mentality. He talks about the 80/20 rule. Traditionally this concept addresses the notion that 80% of one's income comes from 20% of one's activities. Pagan's use is radically different. Having coined the concept of “moving the free-line”, Pagan promotes the idea that by giving away for free the value that I have to offer, I still retain that value and now another person has what I gave them AND I receive more in return. For instance: I have a lit candle, which I use to light your candle. My candle is still lit and now yours is lit AND there is MORE light because 2 candles are burning. Make sense?

So how does this translate into generating Wealth? The trick is to break out of the “scarcity mindset” (there’s a finite amount of money in the world and I’m going to get my share) and re-focusing attention on creating and then providing value. Once you are providing genuine value the money will follow. How do we know what’s of value? Look for a “yes” answer to the following 3 questions:
1) Does what I’m offering alleviate a pain my target client is experiencing?
2) Is my target client actively looking to alleviate that pain?
3) Does my target client have few or zero perceived options for alleviating that pain?
If you get 3 “yes” answers then you have a product that will sell itself.


How do I come up with a product/service that provides real value? Pagan’s answer: “Seek first to understand”. Talk to your client/people in your target market and find out where their pain points are. Dive deep in the conversation with an authentic intention to discover what their needs are. Once you know what they are in search of and cannot find then you insight into what you can create/offer as a product/service.

So what is “The New Wealth” and how is it created? New wealth is money made from a product or service that provides real value and the money is generated by the principal of – when I give it away I still have it and now you have it and I’ve gained from the act of giving. The key: SEEK FIRST TO UNDERSTAND!