The 7 Habits of Highly Effective People - a Summary

1) Be Proactive
2) Begin With the End in Mind
3) Put First things First
4) Think Win/Win
5) Seek First to Understand and then to Be Understood
6) Synergize
7) Sharpen the Saw


1) Be Proactive

Stop and choose. Never say that you don’t have a choice in the matter. Always stop, get your bearings and say “I’m going to choose how I act, behave and respond to this situation." This is the power of choice.

2) Begin With the End in Mind

What does the end of your life look like? What will your family, friends, colleagues and peers say about you when you are gone? What kind of legacy will you leave? What accomplishments will you have made? What charitable work will you have performed? How will others remember you? What does this picture look like?

3) Put First Things First

Always tend to those things which matter most and never let those things which matter least divide your time. These are the important things that make the sum of your life a reality. Identify the important but not urgent matters in your life that will not come secondary to unimportant matters of daily static. Make the conscious effort to put those things first.

4) Think Win/Win

Never come after someone with the attitude that there is not enough for only one side to win. Always understand that that there is abundance and that we truly get the most when both sides benefit. Do not allow yourself to lose either. Have the courage and confidence to stand up for a win for yourself and the other side as well. This is the principle of balance between consideration and courage.

5) Seek First to Understand and then to Be Understood

Always make it a point to understand the other side before laying out your argument or at worst, attacking someone for their point of view. To truly have influence with others you must first be able to put yourself in their shoes, to restate their side better than they can, to empathize with them and then, once they are satisfied that they have been heard, they will have trust and confidence in you and seek out your side.

6) Synergize

The highest potential of the 6 habits combined is to work freely and confidently with others with high trust levels. Ideas flow freely, productivity is high, one plus one no longer equals two but three, four, five, six …

7) Sharpen the Saw

Do not burn yourself out. At one time or another, everyone works their nose to the grindstone. Take time off to relax, meditate, walk, read, and review something you once learned but have since forgotten. Make sure to “put oil in the car” so to say. This is one of the important but not urgent, highly leveraged activities from habit three.

Humble Beginnings – The Cornerstone for all Sound Financial Planning - a basic, personal financial strategy

1) Sock away $1000 for an emergency fund and start creating a monthly budget.

This money should be kept in an easy access, liquid account such as a money market account or an interest bearing checking account. This money should not be locked away in a CD or in long term investments. This money is for emergencies only. For example, if you lose your job and you need it to pay the heating bill, not to upgrade to an HD TV.

If you have to spend out of this account, you should return to this step and replenish the account to $1000 before moving forward.

Also, you need to be tracking your monthly income and expenses in a simple budget. If you have Microsoft Money or Quicken, great. If not, it doesn’t matter. Use Excel or just write it out on paper. The point is that you need to come to the table on a recurring basis to build this budget. Be detailed and accurate but don’t overcomplicate it so that it becomes a task that you are unwilling to do.

Here are some sample entries to include on your budget:

· Income – the main source from your job.
· Other Income – perhaps you have an auction on eBay this month or a birthday coming up.
· Gas – of course you could cut back here and start taking a bike to work.
· Food – perhaps break this out by groceries and eating out food otherwise known as food-ertainment.
· Entertainment – those movie tickets are not free.
· Miscellaneous – you should always factor in a 5 – 10% miscellaneous category.
· Mortgage or rent – hopefully this won’t exist much longer.
· Utilities – gotta have lights.

You’ll probably come up with more pertinent expenses to your situation which is great. Get as detailed as possible. At the same time, don’t overcomplicate it so that you are driven away from doing this monthly.

2) Get rid of the credit cards, swear off taking out personal loans and frivolous lines of credit, stop leasing cars and pay off all of your debts, smallest to largest.

This has been named by Dave Ramsey as the debt snowball – you quickly knock out the lowest debt and then with that extra payment you attack the next largest, so on and so forth until all of your payments are attacking the largest debt and with the compiled money, you are able to pay it off quickly. At the end of this step, you will have $1000 in the bank and no debt except for your house.

3) Next, you should ratchet up the emergency fund up to 3 to 6 months of your expenses.

This step is solidifying the base of your finances a little more. With no debt, you should pour a little more conrete on the foundation for finanical emergencies. A typical number would be $6,000 to $10,000 but the exact figure will depend on your personal expenses.

To determine this number, you need to make sure you are on the budget. With this budget, you will be able to see your exact monthly expense figure. You will also be able to see a moving timeline of your expenses and you can calculate an average from this. Perhaps for half of the year your expenses are approximately $1,500. For the other half they are $2,500. Your average monthly expense and what you base your 3 to 6 month emergency fund on should therefore be $2,000. In this case, $6,000 to $10,000 would be an ample emergency fund. Your budget will tell you truly what 3 to 6 months of expenses are for you.

4) Next, you should max out all of your retirement savings, chiefly 401k and Roth IRA.

Make sure you contribute at least up to your company match – this is pure gravy and if you can, contribute at least 10%. Your 401k is pre-tax thus all of the savings you invest here get the benefit of a full dollar invested – there is no tax bite taking away from how much you can put down here. These savings grow tax free.

The yang to this yin is the Roth IRA. Here you can contribute post tax but your contributions are not taxed when you begin withdrawal. Having both the 401k and Roth IRA at retirement is a nice compliment because one grows tax free; the other is tax free withdrawals. This would be a sort of hedge if your tax bracket didn’t decrease in retirement as you probably expect it will.

5) Begin mutual fund investments.

Although this is not the only asset class to invest in, it is simply the simplest one to get involved in and relatively, one of the most passive. Yes there are market risks and yes, unless you are heavy on income producing funds you are typically investing for capital gains which can prove to be volatile in the short term. But, acclamate the beginner to the investment world and later if you wish to diversify across asset classes, such as real estate and small businesses, it will be a natural progression.

You will be knocking out your house in the next part and you are already contributing a healthy percent to your retirement savings so, 10% is a decent figure to contribute to mutual funds at this stage. Later, you will be able to ramp it up if you wish.

Select 4 funds, each with a different, diversifying investment strategy such as growth, income, value, an index fund, with a great 5 and 10 year track record (preferably 10 – 15%) and begin socking away some money in these vehicles.

6) Now, pay off the house as rapidly as possible.

At this point, you have no debt, your emergency fund is firmly in place and your retirement savings are accounted for. Scrape together everything you can, down to the last penny and attack the house. With no debt and great savings already in place, you can rapidly pay down your mortgage, far ahead of the 30 year schedule most people are on, and be in a great financial situation. In as little as 5 years you can be entirely debt free, everything including the house.

7) Now if you have a junior or a little missus junior, you should start contributing to their college savings.

The best thing going right now for college savings is the ESA – an educational savings account. Essentially, this is the 401k of college savings, pre-tax investments are made here. To determine how much you should sock away, figure out what the little one’s tuition will cost in 18 years (or whatever little time you have left), factor in the college tuition inflation rate of 4 – 6% and the rate of return you should expect. The end result, you should know how much you need to sock away each month to send junior to Harvard or perhaps a quality, state college.

Now, with the completion of all of the preceding steps, you have the ability to get rich and then perhaps super-rich. Your solid, financial foundation has been poured, you have money socked away for emergencies, you have retirement savings in place, your house is paid off. You can now study up and invest in other assets such as more mutual funds, single stocks, real estate, options, dividend stocks, small businesses and web sites. Be smart and do your homework ahead of time before getting into riskier investments. At the same time, your the foundation has been laid and you are in a great position to build wealth.

A great book to read at this point is Robert Allen’s Multiple Streams of Income: How to Generate a Lifetime of Unlimited Wealth! Second Edition. You should continue to build in your mutual funds but at the same time you should expand to other asset class horizons.

Warren Buffett says, put all of your eggs in one basket and then watch that basket very closely. I still believe in asset diversification but I do not believe that it merely means spreading your money across many different types of mutual funds. I believe you should spread your money across the major asset classes; stocks, real estate and businesses.

Another great book to read is Robert Kiyosaki’s Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money--That the Poor and Middle Class Do Not! and if you want to get the skivvy on basic personal finance, check out Dave Ramsey’s book, The Total Money Makeover: A Proven Plan for Financial Fitness.

Also, for starting a small business and investing in different asset classes, check out the other posts in this blog ranging from "Why You Should Turn Your Hobby Into a Small Business" to a dividend and call option investing strategy.

Happy reading!

DIFCCO Part 3 - CCO stands for Covered Call Options and Coco

Now for the final piece in our grand strategy - Covered Call Options.

Here’s the gist of what we are doing here …

So I'm a big fan of Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money--That the Poor and Middle Class Do Not!but I don’t particularly like real estate – I am debt averse and tenant averse. So what other options do I and other like-minded individuals have to generate monthly cash flow? Well we can go buy a dozen vending machines and see how that works out or we can look to income producing, dividend stocks. Now of course Rich Dad doesn’t like the stock market because he has no control, no leverage and the volatility make s him cringe, but we are not investing for capital gains, we are investing for income. So although the dividend can always be taken away, if it is taken away, we'll just reinvest the money in another dividend payer. This is the cost of doing business and the equivalent of vacancy loss from the real estate world.

What is the likelihood of losing the dividend? Well as part of our fundamental analysis we hopefully selected a stock that is consistent in its dividend payout and perhaps the company has reputation for raising it. If it does cut it or drop it altogether, we surf it over to another dividend payer. This will lead to higher transaction costs and taxes sure but this is the cost of doing business. What we truly lose is deflated buying paper to replace the lost income. But a) call options expire out of the money 80% of the time and b) if we are savy investors we will find an equivalent deal anyway.

Now that we have our dividend stock that we assume can gross us about $175 per 15 k invested (we’re shooting for a high payer, somewhere above 10%) that we found using sound fundamental analysis from one of the masters – the man who put Mag in Magellan - Peter Lynch.

One Up On Wall Street : How To Use What You Already Know To Make Money In The Market

Now, let’s increase the income through premiums from Writing Covered Call Options. This means more checks in the mail for us.

This piece might not as be as passive as everyone would like it … e.g. your not sitting in the lazy boy as the checks float into the mailbox while your "property manager" handles all of the work. But it is still relatively passive - you write the option once and then somewhat sit back, merely monitoring the stock, and the checks roll in. Plus, even real estate is not 100% passive.

In a real estate investment, you have to hunt the deal down, deal with attorneys, accountants, the banker, insurance people and the property manager. When you first start off, you're not going to have a property management unless you want to cashflow negatively. You are most likely going to be doing the repairs, maintenance, evictions and rent collection yourself making beginning real estate investment 100% non-passive. When you compare this with the research, analysis, buy and sell decisions and covered call option writing that comes along with DIFCCO strategy, it is fair to say that both strategies are equally passive. Plus, once you get good at it, it becomes more automatic and you can make bigger amounts of money with more ease.

I will admit up front I am not an expert at covered call options just yet but I would like to point out four things off of the bat:

1) Writing Covered Call Options is one of the most conservative call option strategies available – you own the underlying instrument so it can be delivered if the option is exercised.

2) Call options end up out of the money 80% of the time – a good thing for the writer.

3) Contracts are written for 100 shares at a time so, if you own 300 shares of the underlying stock, only one-third of your position is called away if the option is exercised.

4) You are investing for dividends on the underlying stock not capital gains. If the worst case scenario becomes true under a call write, then who cares? If you bought the stock at $60 and it goes up to $70 and you have to sell it at a strike price at $60 you lose out on a gain of $1000 – but that’s on paper! And you never invested from the get go for paper capital gains. You invested for income. You still get to keep the premium – you made money on the deal!

The worst thing that can happen to you under a covered call write in this strategy is that part of your income is called away. But a) it is only 1/3 of your income in this case b) you can buy more shares and c) you get to keep the premium. Of course your buying power for the income has been diminished - a third of your $175 has been called away and now it’s going to cost you an extra $1000 or say a total of $6000 versus $5000 out of an original $15000 investment to buy that income back. Still, there might be an opportunity to buy that income back at a lower price through another stock that is on sale and plus, calls end up out of the money 80% of the time!

Three additional points:

1) Make sure the stock is option-able from the get go by going to http://www.cboe.com/DelayedQuote/QuoteTable.aspx and see if you can retrieve a quote on the stock.

2) Most big brokers will allow you to write covered call options against an individual stock. In my account I have to indicate in my preferences that I can write options on my account and I have to call a broker to get set up. Once you open an account with a major broker (Fidelity, Schwab) poke around and dig up all the information the site offers on options.

3) Do your homework. Even though covered call option writes are the least riskiest form of options since you can deliver the underlying stock if called, stepping into options is a whole new world. Make sure to put the time in up front to really understand what you are doing read a few good books and paper-trade.

Here are some resources:

Options Made Easy: Your Guide to Profitable Trading (2nd Edition)

The Bible of Options Strategies: The Definitive Guide for Practical Trading Strategies

The Complete Guide to Option Selling

Get Rich With Options: Four Winning Strategies Straight from the Exchange Floor (Agora Series)

Trading Options For Dummies (For Dummies (Business & Personal Finance))


The estimates of a premium range from approximately $150 to $300. A call option lasts typically for 30 to 90 days. If you can work this out to a per month basis you could generate an additional, approximate 200 bucks a month.

So, to sum up the entire DIFCCO strategy (again). You are going to generate at least $175 a month in dividend income a month by selecting three stocks that generate a dividend yield in excess of 10% using the dividend screening parameters outlined in DIFCCO part 2. This initial list is just that, an initial list to be researched further using our Lynch Fundamental Analysis and other resources as described in Part 2. You will then write covered call options against your position (after becoming a covered call writing expert first). Initially, you should only write against the 100 shares, the minimum for a covered call write. This will give you some cushion for a learning curve and protect the majority of your income if your stock is called away.

From the covered call option write, you expect to generate at least $200 a month once you get up to speed - approximately one covered call write a month. This income coupled with your $175 in dividends a month gives you a grand total of $375 a month.

Not bad for zero tenants and zero debt. In my area I would have to own two 4-plexes with an approximate total of $80,000 down (4-plexes go for ~ $200k in this area with a 20% down payment nowadays.) I would be carrying loans of $320,000 – of course that is all leveraged so that is a huge trade off but if continue on the road as an options expert then you can learn to leverage stocks by buying and selling stocks - and you still won't have to carry debt.

Of course, I’m not real estate averse. I think real estate investment should be a part of any good asset diversification - and I don’t mean merely investing across multiple mutual funds. Real estate should be a part of any healthy investment plan. Especially if the giant sucking sound of baby boomers withdrawing their money from the markets as mentioned in Rich Dad’s "Prophecy" comes true. I merely wanted to present an alternative and not leave all passive income enthusiasts feeling as if they had to buy large amounts of real estate.



Thus, the alternative to Rich Dad Poor Dad.

Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money--That the Poor and Middle Class Do Not!

Rich Dad's Advisors: The Advanced Guide to Real Estate Investing: How to Identify the Hottest Markets and Secure the Best Deals (Rich Dad's Advisors)

The Standard & Poor's Guide to Building Wealth with Dividend Stocks (Standard & Poor's Guide to)

DIFCCO Part 2 - F stands for Fundamental Analysis and Fuqua

In the beginning there was Benjamin Graham and he beget Warren Buffett and he sort of beget Peter Lynch and he beget the Motley Fool’s Dave and Tom Gardner. And God looked around and said that it was good and then he asked “where the hell are my cheesy poofs?”

A great book that breaks down how one of the masters (remember that whole begetting stuff) mastered wall street, is Peter Lynch’s
One Up On Wall Street : How To Use What You Already Know To Make Money In The Market
Check it out … available at Amazon.

Peter Lynch’s success (and he did have lots of it) in the 80s and 90s came from the investment strategies he used while at the helm of the Fidelity Magellan fund. One of his biggest stipulations is that you invest in something you know – you become familiar with the product. Although he goes into more depth about getting to really know your company before buying its stock (which is recommendable) here is a breakdown of his more salient and screen-able points:

1) Institutions don’t own it, analysts don’t follow it.

This is a hard one to meet but if you can find a stock that has 50% institutional ownership and little analyst coverage, you’re in business. What he is going for here is that if not enough people are following the stock there might be a market, price discrepancy and thus a opportunity but don’t let this be a deal-killer – it’s hard to find low institutional ownership on decent stocks.

2) People have to keep buying it (drugs, cigarettes, razor blades)

3) Insider Buyers are present – management within the company is buying shares. Sellers don’t matter.

This is a very interesting point. Where I shop for stocks on Fidelity.com there is a graph showing insider buyer purchases. The buys on the graph are represented by green dots. The bigger the green dot the bigger the buy. I love seeing big green dots when I am researching a stock. This means insider buyers believe that their company is undervalued, perhaps it is due for a turnaround and perhaps they know something that we don’t.

4) The company is buying back shares.

You can see this on the company’s balance sheet under Shares Outstanding. If the number is decreasing then the company is buying back shares.

5) Is it trading at or near its 52 week low?

This is one I like to see in order to tell if it’s likely a good value or not. Of course it could always go lower but (like to zero) but if I see a company with that is trading at $11 and its 52 week low is $10 and its 52 week high is $42, then I know there is a good chance this stock is at a bargain price. Compare this to a stock that is trading at $20 and its 52 week low is $10 and its 52 week high is $22 – out of the two which one do you think has a better chance of being a bargain?

5) The P/E is low.

Ah, the good old P/E ratio – price to earnings. Generally thought of as how long it takes you to get your money back out of a stock. If the P/E of a stock is at 7, theoretically it should take you 7 years to get a 100% return on investment. The lower the better. You can compare this to three numbers – the S&P 500 average, the industry average and the stock’s 5 year P/E average. If the 5 year average is 10, the industry’s is 15 and your stock is at a 2, guess what, it might be on sale. You’re paying cheap price for the amount of earnings the company is generating.

6) The PEG is < 1

This, as far as I am concerned, is the greatest indicator of value. In general, analysts consider a PEG less than 1 to equate to an undervalued stock. This is the price of the stock divided by its earnings growth potential which although at times can be a very theoretical number, it is still a great indicator of where the company's earnings are headed. Analysts consider a PEG of less than 1 to equate to value in the stock. When I see a PEG below 1 along with giant green dots, I know this stock has great buy potential.

7) On the Balance Sheet, Current Assets + Marketable Securities covers LTD.

This starts giving you a health snapshot of the balance sheet. The stock is on sale but can they cover the debt?

8) Future Earnings.

What is their projected future earnings growth? Remember that number that is sometimes more theory than reality? The one under the P in PEG? Well this is it. How much will earnings grow in the next 5 years – 5, 10, 15%? Usually a healthy 10 – 15% is a good sign. A 20% might be a flop.

9) The debt off of the balance sheet – is it increasing or decreasing?

Again, we want to grab a snapshot of the balance sheet’s health. A company paying down debt is fiscally smart and can weather a setback.

10) Are earnings on the upswing? Have dividends always been paid?

We want to see a solid performer in both earnings and dividends, especially on our part of the plate dedicated to dividends, next to the mashed potatoes and gravy. We don’t want them to yank the dividends out from under us anytime soon, or to not pass the salt for that matter.

11) A little formula:

Add the long term growth rate to the dividend yield. Divide this by the P/E ratio. Less than 1 = poor. 1.5 = okay. 2 = great. Don’t ask, just do.

12) The debt to equity should be below 33%.

Again, this is a snap of the balance sheet health.

13) If they pay a dividend are they always raising it?

Very important to us.

14) Price to book value is low.

Compare this guy to industry average. I also take a peak at P/S – the lower the better as far as value goes.

16 ) The P/CF is 10 to 1 or 10.

The lower the better. A company that doesn’t have to spend a lot to make a lot is copacetic with us.

15) Inventory buildup is a bad sign – it’s baaaad Wilbur!

If it’s retail, they can’t move the inventory without a big markdown.

Finally …

16) Profit after taxes off of the Income Sheet.

What’s left over after all costs including depreciation and interest expenses? Are they still making money?

Well, there you have it. A quickie Fundamental Analysis from the man who put the Mag in Magellan. This is not an all inclusive Lynch Fundamental Analysis but it does include a lot of his key points from One Up On Wall Street : How To Use What You Already Know To Make Money In The Market. I strongly urge you to read through the company’s statements – shareholder’s reports, earning’s statements and whatnot. Make sure to check out Lynch’s One Up On Wall Street : How To Use What You Already Know To Make Money In The Market as well so you can flesh out the points covered here.

Also, there are other ways to go about Fundamental Analysis. Check out these books available at Amazon. Let me know what you think.

Getting Started in Fundamental Analysis (Getting Started in)

Mastering Fundamental Analysis

Fundamental Analysis: A Back-to-the-Basics Investment Guide to Selecting Quality Stocks, Revised Edition

The Fundamentals of Fundamental Analysis

Alrighty, that puts the “F” in DIFCCO so now, in our little hangman game, we have DIF which I still promise does not stand for difficult. So far we have found a great optionable, dividend stock that delivers a 10 – 15% yield. We have performed a decent Lynchese Fundamental Analysis and found a bargain deal with a sound balance sheet. Now it is time to kick up our earnings. It is time for the CCO in DIFCCO – or Writing Covered Call Options – which really makes DIFCCO stand for DIFWCCO or DIF- WRICCO for short. But I’m not changing it at this point.

Stay tuned.

One Up On Wall Street : How To Use What You Already Know To Make Money In The Market

GOALS! - How to set them, how to follow through on them… even if it kills you.

Sure for most of us in high school, goals were something that the jocks on the football team set in order to beat (enter opposing high school team name here) at (enter high school name here). But let me try to dispel some of the goal-setting stink for Joe Average off the bat.

A goal is a deadline you set for yourself in order to reach something you strongly, personally desire. If you’ve always wanted to write a book then write a book. If you’ve wanted to build a website then build a website. Run a marathon? Do it. Live on an exotic island in the Caribbean … make a plan and go for it. I will show you how in this little blurb.

A goal is not Joe Lineman's rushing yardage benchmark he set in order to beat (enter high school football team name here) at homecoming. It’s your road map to get something you strongly desire and it doesn’t have to always be grandiose or materialistic – perhaps you just want to call your mom once a week – go for it.

Step 1: Write it out

First, do a little daydreaming. What does your ideal day look like? What kind of career success will you have, how much money? What does your family life look like? I like to address these 8 main areas in goal setting:

Happiness
Family and Friends
Finance
Career
Health
Hobbies
House (mowing the yard always makes its way onto the list)
Service

Think about each of these areas. What’s the ultimate picture you hold in your head for where you will be 3 or 5 years down the road. Once you’ve got a decent picture – and don’t be afraid to shoot big or be optimistic – it’s time to write it down. Ideally you should shoot for 10 decent goals that are going to push you towards the ideal picture you hold in your head. Shoot for a list of 100 if you so desire - the sky is the limit.

Now we need to bring that picture into reality and write it down in a spot where you can review 2 to 3 times a day. The main push of a written goal is that it has a timeline and it is specific – it’s a dream with a deadline. Thus, if you want to lose weight its much less effective to say “I want to be slimmer” than it is to say “I want to weigh 170 pounds by September 22, 2009 at 7pm." In the second example we have a specific date and for that matter, a time. Be as specific as possible. You’ve stated how much you are going to weigh – 170 pounds. It’s easy to jump on the scale on September 22,2009 at 7pm and see if in fact you are at 170.

If you want a new car, describe in detail the make, model and color and perhaps all of the features of the car. If you want a vacation home on an exotic beach describe what it looks like and the sights and sounds you will see as you sit on the beach in front of it. Write it down and be as specific as possible.

In addition to this, you need to put your goal in the present tense and write it in an affirming sense as if you have already achieved it. "I am thoroughly enjoying being svelte and slim weighing 17o pounds by September 22, 2009 at 7pm. I feel healthy and great." These action verbs and feeling of present tense will help your mind close the gap faster by bringing it into reality.

Write down your top 10 – put them in a notebook, on your computer or on note cards where you can review them daily.

Step 2: Read it 2 – 3 times a day

Now that you have your list you need to put some daily action behind it . Read it to yourself 2 to 3 times a day, out loud if the opportunity presents itself. Be diligent about this. Read them in the morning and before going to bed. This one action could take up to 10 minutes a day while putting you in the top 10 percent of all achievers.

Step 3: Now visualize it

Continue on with the daydreaming from the initial setup that spurred your goals list. At least twice a day spend 5 to 10 minutes visualizing your goals that you have written down as already complete. What does it feel like to drive that ’65, white mustang, breezing down a country road? What sights and sounds do you see and hear? How does the wind feel blowing through your hair? What tunes do you have playing on the radio? Who is by your side in the seat next to you - your wife or the dog?

For that vacation home – what do the waves feel like as they lap against your feet? How warm is the water? Do you hear laid back Hawaiian music playing or Metallica? Can you smell coconut or the sun tan lotion you are wearing? Do you have a beach bungalow or a beach mansion? Can you hear the seagulls baying in the distance?

Scientists claim that the mind does not know the difference between repeated visualization and reality. In the end what you are trying to do is program yourself to look for the opportunities to move towards your goals on a daily basis. When you visualize your goals daily as already complete, your mind will strive to close the gap between reality and your daydream.

Step 4: Affirm it out loud

Okay, I don't want people to think you are crazy but if you can find a nice quiet place where you are preferably alone, you should read your goals out loud at least twice a day. This is reinforcing even further that you are closer to the reality of your goal. Affirm it out loud in the present tense – read what you have written – “I am thoroughly enjoying having a net wort h of $1million by October 31st, 2009 at 7pm. This money brings great joy to my life and gives me the freedom to travel the world.”

Read it out loud.

Step 5: Rewrite It

Also, if you have time rewrite your top 10 goals at least once a day. I’m not saying spend all of your time working on these techniques instead of your goals – but be diligent about these tactics and at the most, for your top ten, all of the steps laid out before should take no more than a total of 30 minutes a day. The rewards from the time invested are well worth it. Rewrite the top ten - keep your dreams in the forefront of your daily activities.

Well, there you have it. Five steps to get you on the path to the life of your dreams. Don't be afraid to dream big, don't be afraid to believe in yourself. Give yourself the life that you deserve. Be diligent, follow through on these steps and all of the rewards of life will arrive at your doorstep in great waves.
AB

If you are highly interested in goal setting techniques, living the life of your dreams and the spot where most of these steps came from, check out Jack Canefield's book The Success Principles(TM): How to Get from Where You Are to Where You Want to Be

The DIFCCO Strategy - Solidify that income with checks in the mail and option premiums

Alright folks, if you've been around the passive income block enough times (thank you Robert Kiyosaki for branding Asset column charts in our heads) then you know the whole name of the game is to get those checks rolling in the mail and ultimately, to outdo your expenses. Once that happens you will have obtained True Financial Independence and you can then sit back, relax and realize that you have no life since you spent all your time reading purple books on financial independence instead of spending it with friends and family.

But seriously, since you are still here and you are obviously not about to hang out with the wife or hubby, let's talk about building passive income.

The DIFCCO Strategy

First off, this is my own little strategy but it is nothing new - once you've read over a 100 books or so on Finance or Success you realize that there are approximately 3 ideas floating out there that have been re-packaged 97 times. At the same time, kuddos to me for coming up with a cool sounding name. (Order 66 was taken - damn you George Lucas!)

DIFCCO stands for Divdend Fundamental Analyis Covered Call Options - had I switched the Covered Call Options with the Dividends and dropped the Fundamental Analysis it would have been CCIDO (pronounced kiddo) which is kinda cool. Alas, I needed the Fundamental Analysis portion and the I after D in Dividends for that matter.

Essentially, I wanted to come up with a way for creating passive income without having to buy real estate and all the debt and headaches that come along with it. (Yes, I know, I can hear the masses now - leverage, leverage, leverage - but please read on) I have read and worked through most of the process as prescribed by Rich Dad in his Team Advisor book - "The ABCs of Real Estate Investing" by Ken McElroy. I can truly say that for real estate investment it is a great plan and I was able to track down some decent deals in my area. The only problems I had were in the down payment and the debt. It is not that I could not afford the down payment, I just couldn't believe how little cashflow and how much potential hassle-factor I would receive for a sizeable down payment.

In this area, I found that a $30,000 down payment would deliver approximately $175 in passive cashflow. Not bad in the grand scheme of things but this was for a 4-plex and I'm guessing that tenants need attention from time to time. So I asked myself, what's so bad about dividend stocks if I could create the same income? Yes, I know ... no control over the investment, no leverage, no phantom cashflow. But for those who really don't want to shoulder the large amount of debt as required by a piece of invesment property and the tenant headaches that come along with it, this might be a decent option for creating passive income. Read on!

D Stands for Dividend

First, let's identify a dividend stock that is going to put a check in the mail.

Below is a simple screen for id'ing a high yielder (not too high) and a link to a free stock screener.

1) Use a Dividend Yield Screen of 8 - 20% (anything above 20% is typically bad news.)

2) The Market Cap should be >= $1 billion - no small caps.

3) ROE >= 10%

4) The Fundamental Grade should be >= C (use the StockScouter link)

5) Institutional ownership >= 30%

6) Recommendation > = Hold from analysts

7) EPS Growth next year > = 1

Consider the list that you get from this screen as a research list only! Of course you should take the painstaking pangs of performing a fundamental analysis on these stocks. (you didn't think it would be that easy did you?)

Thus we have accounted for DIF in DIFCCO or at least we've started on the F.

Now, here's the link for the stock screener. I told you I would provide it - http://moneycentral.msn.com/investor/controls/finderpro.asp

You can easily match that $175 monthly from a 4-plex. Sure you lose out on phantom cash-flow but you also miss out on those pesky tenants and all the repairs that come along with the building. Who ever heard of a dividend stock needing the toilet unclogged?

Also, make sure the stock is option-able as it will play a part later in our strategy. Go to http://www.cboe.com/DelayedQuote/QuoteTable.aspx to find out. Enter the ticker symbol. If it does not come up with quotes then it is not an option-able stock.

Of course the company could reduce or cut the dividend altogether (vacancy losses) but in that case you should surf to a new dividend payer. This will contribute to higher transaction costs and potential tax consequences but will just chalk that up to vacancy loss yet again.

The resulting list you receive from the dividend screen is merely just that – an initial list … we really need to perform a fundamental analysis on this stock in order to determine if it is invest-able – if invest-table is even a word.

If you would like to read up on investing in dividend stocks, here's a great book available at Amazon.

The Standard & Poor's Guide to Building Wealth with Dividend Stocks (Standard & Poor's Guide to)

I will continue with the Fundamental Analysis of DIFCCO in another post at a later date.
Please stay tuned - same Bat-Time, same Bat-Channel.

AB