Getting the highest and best use of every dollar

Exclusive: Jody Tallal starts series on how to find that extra money for investing in future
Due to the length of this article, it is being split into three parts. Parts 2 and 3 will be the content of next two weeks’ columns.

Many people today are concerned about the rising costs of providing a college education for their children/grandchildren and what it would take to retire. This can result in real anxiety over what the future may bring.

You may even be saving a few hundred dollars here and there for the kids’ education, but that obviously will not be anywhere near enough bases on the escalating cost of college. You may also be contributing a small amount to your 401k, but again, for most folks, that is nowhere near enough either.
Additionally, even those that make respectable incomes spend just about everything they earn. So the real question is: How will you ever be able to earn enough extra money to be able to invest what you need to invest to meet your goals?

It will require a lot of new money invested each year to accomplish your financial goals. It will also take real commitment and focus to keep those goals vivid as you continue to make financial choices into the future.
However, there are strategies and processes that can make this all a lot easier. The purpose of this article series is to explore some of those with you. The first thing you need to learn is a concept called “Always getting the highest and best use of every dollar you spend.”

On the last day of your life, if we had sufficient records to review, we could look back and calculate every dollar that ever came into your possession. This amount would include everything you had ever received from your allowance as a child to every other source of income, gifts, or benefits during your life; and that final amount would be a fixed finite number. Therefore, we will call this finite number of all revenues received “Your Life’s Income.”

Additionally, on the last day of your life, if you had never spent a penny of Your Life’s Income, you would still have 100 percent of it left. Obviously, since that is not possible, every time you bought something along the way, you were literally removing real dollars from Your Life’s Income and replacing those with whatever you spent those dollars on.

Now, to make a point, if we also on this last day your life calculated the value of everything you had left, we could instantly see how well you had done in utilizing all the money that had ever come into your possession.
Therefore, it is of the utmost importance that you become very aware of always getting the highest and best use of every dollar you spend, as this will determine what you have left in your estate of Your Life’s Income at your death.

“Billionaire Cab Driver: Timeless Lessons for Financial Success” is an easy-to-read financial primer from a man who revolutionized the personal financial management industry. Jody Tallal’s latest book offers timeless lessons for financial success, no matter your occupation, salary or personal savings

Every time you buy something, that is an irreversible exchange of that money from Your Life’s Income for whatever you purchased. For example, if you go down to the local electronics store and buy a new TV for $1,299, that $1,299 is removed from Your Life’s Income and replaced with the TV. Unfortunately, in this example, the value of that TV in 10 years is almost nothing, so there would ultimately be nothing left from the original $1,299.

Now, what if you shopped around before making this purchase and found that exact same TV set on sale for $999? You would then have the same TV, but you would also have $300 dollars more left from Your Life’s Income, which you could use for something else – like possibly investing toward your children’s education. If you decided to buy the same version of this TV, but in last year’s model instead, you might get it for $799; so now you would have an extra $200.

Granted, this takes extra effort and time, but how long does it take you to earn $500?
What if you became focused on the importance of always getting the highest and the best use of your money on just about everything you bought – from using dining coupons when you go out to dinner, to using the grocery store’s gas rewards program when you fill up your car? Can you see how quickly new money would be found that you are currently let slip through your fingers?

Another great way to do this same thing is to look through the ads sections in your local Sunday newspaper. The ads you will find there are called “loss leader” sales items; this is one way stores compete against one another for your business.

For example, you might see a large office supply chain advertising a $40 box of copy paper for only $26.95 (about their cost). While they do not make any money on the paper, if you come in to buy it, they have won the branding war over their competition (which is huge for them); plus you will probably also buy other things while there at the store that are not on sale.

Every time you shop for the best deal, instead of just buying on impulse, the extra money you don’t spend is now available to use to acquire something else. Learning to develop a habit of always getting the highest and best use of your money is critical in helping you find the majority of the money you need to invest to meet you financial goals. If you are too proud to use a coupon, drive to a different gas station, or look for a sale, you are squandering a portion of Your Life’s Income.

In my next column, we will discuss a new tool that will make always getting the highest and best you of your
money even easier to do.

Investing: Do you know what questions to ask?

In my previous couple of columns, we have discussed that it is no wonder why so many people lose when they try to invest. The reason is that they naturally assume that because they are good at medicine, law, accounting, or running a business, or whatever, their expertise will automatically transfer to the investment area they are evaluating. To become an expert in any field of investment requires as much time and energy as it did for any of these types of people to become doctors, lawyers, accountants or business owners in the first place.

The casino in Las Vegas did not just pick a game of chance and make up the betting odds. It did enormous amounts of statistical research to identify its exposure so it could restructure the rules. Therefore, the main function of becoming a prudent investor is learning what questions to ask and what investment parameters you must have present in your investment structure to succeed.

I would like to illustrate this by looking at someone who wants to invest in investment-grade diamonds. Granted, this is not a traditional investment for many people, but it can easily demonstrate today’s point.

Let us say this person did his homework and learned about investing in investment-grade diamonds before starting out. He learned all about the four “C’s” of diamond investing (carat size, color, clarity and cut) and that only diamonds one carat and larger are considered true investment grade. He also learned that the diamond’s color must be between “D” and “H” to be considered investment grade; with the clarity ranging between flawless and no less than VVS2. Additionally, he learned that the G.I.A. Laboratories must have recently certified all stones. These basics are covered in most investment diamond books, so next the buyer goes to a diamond broker.

The problem with selecting a diamond broker as an adviser is that he is also a dealer selling his own inventory. Unfortunately, he has to buy all kinds of diamonds (good and bad) when he gets his inventory from DeBeers (the diamond cartel). Obviously, he does not throw away the bad ones and sell only the good ones.

One of the most interesting things about diamonds is they are not particularly pretty until they are cut. Nature controlled three of the four “C’s” (color, clarity, and carat size) 20 million years ago when the diamond was created. However, only the cutting process can release a diamond’s inner beauty. Additionally, strangely enough, the best cutting design, the one that makes the diamond the brightest and most colorful, wastes most of the diamond’s original rough material.

Because diamond cutters pay for the rough stone by weight and sell it as a finished cut stone (by weight), there is a natural tendency to leave as much of the rough in the finished stone as possible. However, the prettiest (most valuable) stones waste the most rough material. Therefore, the price has to be adjusted downward if the cutter tries to cheat and leave something on the stone that should have been cut away.

Now armed with your four “C’s” as parameters, you are sitting with your diamond broker. To play it safe, you firmly state, “I want to buy at least a G.I.A.-certified one carat, ‘D,’ flawless, well-cut diamond.” The diamond broker shows you a stone certified as a 1.00 carat, “D” (color), flawless (clarity) stone. It is exactly what you requested.

Let’s assume you are smart enough to know that most sophisticated diamond investors want to buy stones only at least three to five points over the one carat size (1.03-1.05) and will discount heavily for a 1.00 exact size. This is because in the event the stone were to get scratched it could be re-polished and not risk going below the crucial one carat weight parameter.

Therefore, you say, “No, this won’t do, I want at least a 1.03 carat or bigger!” The diamond dealer immediately shows you another stone. This new stone is a 1.03-carat diamond with the exact same qualities previously requested. However, the certificate reflects the diamond has a 75 percent table (the percentage of the top surface of the stone to its diameter). Again, let s assume you are knowledgeable enough to say, “No, this isn’t good enough, either. I want a table between 58-65 percent.” The reason is that if a diamond’s table is too broad, the stone will not disperse light properly and will be heavily discounted when you later attempt to sell it.

The diamond dealer says, “OK, you don’t want a 75 percent table. How about this beautiful stone?” This time the stone has everything right including a 62 percent table, except the certificate denotes the stone has a strong blue fluorescence, also a significant discounting factor.

This game will go on until you are satisfied with a stone and buy it. It will not be until you try to sell your stone for a profit that you will find out whether you asked enough of the right questions.
Profits are made on most investments when you buy them, not when you sell. If you bought the right thing at a good price, you will usually do all right. Additionally, remember never to rely on a broker who profits from what they sell you as an adviser.


Financial manager stresses importance of positive thinking


Have you achieved all your biggest goals in life? Well, have you visualized them? Have you written them down on a note card and imagined, every single day, that you have already achieved them?
If you can visualize your goals with the same sense of excitement you would feel if you actually achieved them, you will be well on your way to reaching those goals in reality, according to personal financial manager Jody Tallal.

“All of a sudden, those things are now being planted firmly into your subconscious mind, and it will start directing you subconsciously in your normal actions, and things will start changing and those things will start materializing,” Tallal said during a recent appearance on “Stand for Truth Radio” with Susan Knowles.

Visualization is just one of the many valuable tips Tallal imparts in his book “Billionaire Cab Driver: Timeless Lessons for Financial Success.” He told Knowles it’s crucial that people program their minds with positive thoughts.

“Most people don’t understand that they have a lot of control over what occurs in the future by what they’re thinking today,” he said.

Tallal explained that although the subconscious mind is physically much larger than the conscious mind, the latter has the ability to control what goes on in the former.
“Like a general in an army, the conscious mind is the general, and you can plant seeds in your subconscious mind consciously, and then the subconscious mind goes to work on making those things materialize,” he said. “And it’s kind of an interesting process, because if you lay your goals out properly as is described in the book, then all of a sudden you have those visualized, you have those very well understood, and if you kind of place them properly, the subconscious mind is going to go to work.”

Want to learn how to achieve all of your financial goals? You can do it – with help from “Billionaire Cab Driver,” available now in the WND Superstore.

Tallal pointed out every person is constantly having a conversation with him or herself in the back of his or her mind. He recommends people stop and listen in on that conversation every now and then – they will be amazed to realize that internal conversation has a huge influence on what they do. So if the internal conversation is full of doubts, fears and pessimism, it will stop people from achieving their goals.

“If you start examining these kinds of conversations you’re having with yourself, you’ll see that your future is kind of manifesting in exactly what you’re thinking about now,” he said. “So if you’re thinking, ‘I can’t do that; it’s never going to get better for me; I’m just in my plight in life, etc.,’ guess what? You are and will be. When you change that conversation, it will change with it. It has no option but to change. It won’t change tomorrow, but if you plant properly, your field, when it’s planted and watered, will produce.”

Visualizing goals and programming the mind are techniques that can help achieve objectives in almost any area of life, but Tallal’s specialty is personal finance. He has served as a personal financial manager to several wealthy professionals, and he developed a course to train medical professionals at Baylor Medical School, University of Tennessee Health Sciences and Tulane Medical School on how to manage their money.

His book, “Billionaire Cab Driver,” takes a topic that Tallal admits is “dry” and attempts to make it interesting and easy to understand by wrapping the advice in a parable. The book is written from the perspective of a fictional journalist who wins the right to spend a day with a cab driver who became worth over $20 billion. The billionaire cab driver shares his life story and the secrets of his financial success with the journalist.

Tallal told Knowles his book teaches people how to figure out the monthly price tag of any long-term financial goal, such as saving for college or retirement. He said people generally feel intimidated by the thought of saving for retirement, which is why it helps to break it into monthly payments, like a home mortgage.

He gave an example to illustrate how a daunting challenge can be made to seem manageable.
“If I wanted to have $750,000 in 30 years of retirement, that’s a pretty awesome thought, but how do I get there?” Tallal asked rhetorically. “Even if I know that I need that in 30 years and I know it’s $750,000, how do I get that? Well, for most of us, we just sit there and think about it, because we don’t know.

“But if we were to figure out – let’s assume I can make 10 percent on my investments, just as an assumption, in the stock market – I’m a long-term investor, I’m going for growth, that’s what my goal is – then in the process of 30 years, if I were to invest just $4,500 a year – that’s $400 a month – then that will be $750,000. Now a minute ago it was beyond reach, couldn’t think about it, couldn’t deal with it. Now it’s $400. That’s a car payment. I can now make a choice: Do I want a new car or do I want my retirement? That’s what it becomes.”

Want to learn how to achieve all of your financial goals? You can do it – with help from “Billionaire Cab Driver,” available now in the WND Superstore.


Below is my latest column for WND

Exclusive: Jody Tallal explains how each venture category is ‘a science

In our last column we discussed that real knowledge is the key that makes wealthy investors wealthier and over the long run helps to keep transferring to them the assets of the average novice investor. I found this lesson very important as I entered the investment maze.

One of the biggest phenomena I have witnessed as a financial manager was the high propensity of people who earn high incomes for making bad investments. When I first started in practice a number of years ago, I decided to start researching my clients’ investment portfolios. The process involved separating the good investments from the bad.

The amazing thing was how few investments there were in the good stack. Almost no investment that I saw my clients had made, year after year, had worked out. It almost seemed that trying to find a good investment was like trying to net a rare, elusive butterfly. You take a swoop at it and when you check the net, it is empty.

It didn’t seem to matter whether my clients bought an oil-and-gas deal, real estate program, stocks, bonds, mutual funds, cattle-breeding program, or macadamia orchards, they always came up losing. The more I researched, the more puzzled I became.

Finally, it dawned on me what was the problem. All my clients were very successful people. They worked very hard and were very good at what they did. That is why they earned enough money to need my services.

Once these people earned enough to live comfortably, they knew enough to make investments for their future. However, their investments usually went sour. They assumed that because they were very successful in their individual fields, they could simply transfer their knowledge to their investment analysis and enjoy similar success.

Unfortunately, it does not work that way. Each investment area requires significant knowledge to truly succeed. I like to think of each investment area as being a specific scientific field unto itself.

If you select any single investment area and approach it as a science, I believe there are no risks to take and only gain. For example, if you decided to invest in real estate, you would be competing with the likes of Trammel Crow Company, one of the largest real estate development firms in the world, and Ross Perot, one of the world’s richest men.

Prior to making your investment, you are going to attempt to evaluate site selections, architectural design, tenant mix, rent projection, financing options and demographics. Either you are going to do all of this yourself or read the prospectus of someone who has a project for sale and is presenting it to you for decision. It should be obvious that your chances of selecting a high-quality project that can make a profit are not the same as the Trammel Crow Company or Ross Perot’s. Why can you not do it as well?

The answer is you do not have the years of experience the Crow Company has and you cannot afford to hire the experts Mr. Perot can. Their advisors know many hidden questions to ask. Questions they have learned from their experiences that prevent them from making foolish mistakes.

Each investment area is like a minefield. It looks perfectly safe to enter and you do not know you have a problem until you step on a mine. Only after you have done so do you know what not to do next time. There are only two ways to successfully traverse a minefield. The first is to follow behind someone who has blazed the way and shows you the path you are on is safe. The second is to get down on your hands and knees and carefully take it an inch at a time.

In the investment world, this translates to learning from the prior experience of others or spending years of patient research and study to become an expert in that field yourself, prior to ever investing your first dollar. I believe each investment area is a science, which in its purest state of knowledge offers no risk, with total reward. If you had enough years and enough lifetimes, you might be able to figure out all the right questions to ask. The more right questions you know to ask the more risks you can eliminate.

The Law of Risk vs Return

Exclusive: Jody Tallal warns of ‘the irrational, invisible side of the investment world’

The more I have seen different areas of life, the more it becomes obvious to me that life operates as a science. The scientist’s job is to do research to learn the secrets his particular area of science holds.

I first noticed this in the area of investments. Each investment area is like a different field of science. Stocks, real estate, oil and gas exploration, land, commodities, each has its own distinct rules. As mentioned in my last column, when I first started in practice many years ago, I started observing several very wealthy people to try to determine if there were any common denominators in their methods of operation. One common denominator they all shared was their expertise that was responsible for their wealth. They all had become very good in their chosen fields.

Most investors readily accept the “Law of Risk vs. Return.” In almost all investment opportunity, risk and reward have a direct correlation. However, many investors do not recognize this as a one-way rule. High return usually does mean high risk, but high risk does not always mean a high opportunity for reward.

One fair definition of an investment is putting your money down on the table, releasing control of it for some period, during which you can either make more or lose some or all of that money. Investing, in reality, is a form of gambling.

Using this definition, the riskiest place you could invest your money is on a roulette table in Las Vegas. Las Vegas fits all the definitive aspects under our investment definition, except maybe for prudence. When you put $10,000 down on red on a roulette wheel, in 30 seconds you will have either $20,000 or zero.

“Billionaire Cab Driver: Timeless Lessons for Financial Success”is an easy-to-read financial primer from a man who revolutionized the personal financial management industry. Jody Tallal’s latest book offers timeless lessons for financial success, no matter your occupation, salary or personal savings

Let us use this absurd illustration to demonstrate a point. I would personally sell everything I own and then borrow as much money as my signature would carry and go with any person to Las Vegas. I would let that person pick any casino and have him select any game in the house for me to play (baccarat, craps, wheel of fortune, blackjack, etc.), because it would make no difference. I would even let him select the particular table on which he wanted me to play. I would do all this and place all the money I own on that table and begin to play – if I could do one simple thing first. What do you suppose I want to do?

I simply want to take four steps and walk from the side of the table designated for the players to the back of the table and play as the house.

Why can I risk all that I have and gamble with such assurance? Because in Las Vegas the house is not gambling. They do not wake up each morning and wonder how lucky they will be.

The casino has been able to remove its risks because it has scientifically analyzed each game backward and forward. It has dissected each component of the game to determine the odds of every potential occurrence. It knows every possibility of everything that can happen.

With this knowledge, it restructures the rules of the game and the betting odds to place all those odds in their favor. For example, it pays 10 to 1 if the hard eight hits on the crap table, but the odds of its occurring are only 32 to 1. In other words, for every $10 it pays out, it collects $32. The only gambler in Las Vegas is the player who accepts the poor odds and attempts to get in just in time and get back out before those odds stop him.

To me this is an ingenious concept!

Limit the risk through knowledge and research and then restructure the game and payoffs to produce only positive returns. This is exactly what the most successful investors do. They do not rely on their intelligence, or wit, or even their rational minds to make their investment decisions. They either gain the “knowledge” personally they need through personal experience and study, or they buy it from an expert.

Because of this, I have come to view the “Law of Risk vs. Return” to mean, “The novice investor takes the risk and usually loses his money, which at the same time allows the sophisticated, knowledgeable investor to reap his returns.”

Experience gives the 20/20 hindsight needed to see the irrational, invisible side of the investment world, or to put it another way, experience allows us to ask the irrational question invisible to the purely intellectual mind.


Jody Tallal advises, ‘The more you learn, the more risk you can remove’

Probably the most difficult question in the financial world is, “How do you go about making good investments?” Unfortunately, there are no simple, easy answers. The only way to get the right answer is to either become an expert yourself or hire someone from the field in which you wish to invest.

Should you decide to select an investment expert, make sure you know a lot about them. How are they compensated? Learn how long they have been doing what they do. Look at the actual records of accomplishment of the past investments they have made and see how much they actually paid back to their investors, net of their fees. The longer the track record this adviser has, the better. Do not be fooled into accepting projections of what past programs should do with the sale based on today’s values as a substitute. Finally, ask for many referrals and take the time to check them out.

Once a wealthy Texas oilman was overheard in a conversation with a friend at the petroleum club in which the friend asked, “Jack, have you ever had that once-in-a-lifetime oil prospect where you knew it was a sure thing? You know, where the oil was kind of standing in puddles on the ground and you knew you had a winner?”

“Yep!” answered the oilman, “I’ve seen one or two of those from time to time.”

“What did you do with those types of deals?” asked the friend. “Well,” came the reply, “I have some good friends on Wall Street who have been kind of special to me over the years, and I usually give them a call and let them put up the money and we split the profits.”

“Jack, what about the kind of deal where everything looks good, like the engineering, seismic reports and all? You know the kind of the deal you feel is almost certain to hit?” asked the friend.

“In those cases I usually call my personal banker over here in town. He’s been real good to me, and as a favor I let him put up the money, and we drill the property and split the proceeds,” answered the oilman.

“Billionaire Cab Driver: Timeless Lessons for Financial Success”is an easy-to-read financial primer from a man who revolutionized the personal financial management industry. Jody Tallal’s latest book offers timeless lessons for financial success, no matter your occupation, salary or personal savings

The friend said, “Do you ever have a property where the lease is going to expire in a month or two, where the engineering’s not too hot, but you have a rig sitting idle nearby?” The oilman just laughed and said, “Yeah, all the time.”

“What do you do with them?” asked the friend. “Oh,” said the oilman, “I get a bunch of doctors and lawyers who like to say they’re my buddy. I just give them a call and let them put up the money. If we find anything, we split the deal.”

There is a lot of truth in this story. Just choosing a wealthy, successful person with whom to invest is not good enough. Look at their track-record very carefully and see how all of their investors have done over the years. The same is doubly true concerning major investment firms.

Investing is a science, and each investment field is unique unto itself. Becoming an expert in one field does not make you an expert in another. There is absolutely no relationship between having the knowledge to selecting a good oil investment verses analyzing a good stock.

Remember that investing is a science. The more you learn, the more risk you can remove as you learn to ask the right questions. Rarely does someone get rich by accident. In addition, in the rare occasion when that does happen, that someone usually loses it all through bad investments he makes after that. Do not blindly play your instincts based on knowledge from another field. That is the surest way to lose there is.


Exclusive: Jody Tallal reveals importance of maintaining modest lifestyle

A very small percentage of the people who retire remain financially independent for the remainder of their lives. What incredible odds against achieving true financial independence.

How is it possible that so many fail when we see so much apparent wealth around us?

One reason is all too simple. It matters little whether you make $50,000 a year or $250,000 a year if, at the end of that year, you’ve spent all that money and placed none of it in an area where it can accrue as future income. When your earnings cease due to older age, so will your lifestyle.

Consider two individuals who, at age 55, have seemingly identical lifestyles. Each lives in a 16-room house in the most desirable neighborhood in the city. Each person has two children who are attending private, well-respected universities, and both families own several expensive automobiles.

With all the apparent similarity, the difference is that one person is struggling each month to maintain his visible lifestyle. He has a negative cash flow and incurs more debt each month just to support his standard of living. The other person in this example supports his visible lifestyle with a solid, positive cash flow, and he is truly financially secure.

What caused this difference to occur between these two people? Let’s look back to 1985, when each person had just completed their chosen training and entered work. The first person used his new income to buy a new house and car.

In the next few years as his income increased, it allowed him to finance a boat and a more expensive car. This person continued each year to enjoy very healthy increases in income, and he used these increases to support higher and higher loan and mortgage payments to buy more expensive things. Finally, by today, the interest on the loans and income tax payments alone have overtaken his annual income.

“Billionaire Cab Driver: Timeless Lessons for Financial Success”is an easy-to-read financial primer from a man who revolutionized the personal financial management industry. Jody Tallal’s latest book offers timeless lessons for financial success, no matter your occupation, salary or personal savings

The other person developed a different pattern of lifestyle back in 1985. Instead of using all the newly generated first-year income purchasing material goods, this person began a disciplined investment program. The money not spent on new cars and clothes was then invested monthly. Each time this person realized a pay increase, he increased his lifestyle slightly and used the rest to increase his monthly investment amount. After several years, his first investments sold at a profit. He then took some of these profits to purchase a new home with furnishings. Each year thereafter, as his investments grew, he used part of the growth in improving his standard of living. In essence, he was buying the luxuries of life with his investment returns, not his current income.

Our friend’s investment pattern somewhat resembles the creation of a family. The original investments made from earnings are the parents. The ultimate profits are the children. This person only uses the children or grandchildren of the investment dollars to improve lifestyle.

As the children and grandchildren continue to reproduce, they create more and more offspring. As you can see, this individual’s lifestyle constantly improves, but at the same time so does his personal net worth. He keeps the original parents hard at work producing new offspring. In other words, this person still has a portion of every year’s income he ever earned actively producing results.

Meanwhile, the first person consumed each year’s income and has nothing left to look forward to – except tomorrow’s labor.

This illustration can give you significant insight into how true wealth is built in this country.