I just finished reading an article about how 3 men are in jail, each with bail set at $5 million due to a $200 million dollar scheme they had going on. (Click here if you want to read the story). Now what got me the most interested in this story is how they were doing it and how many of us probably do similar things.
Now I truly do not know the entire story here, but from what I can tell is these three guys started gathering investors for real estate investments. They would actually buy the real estate but what happened (and this is just my interpretation), is they got greedy and started spending the money they started to make instead of reinvesting it in the maintenance and upkeep of the properties.
Now over time, the properties started to depreciate because of lack of maintenance and some had to be closed down but what the three guys did was they recruited more investors to then pay the interest to the original investors.
Basically they where getting themselves in more debt, to pay off the original debt.
So here is my question for you… well actually a couple questions.
1. Do you focus in on your business and ensure you reinvest a proper amount of your profits to maintain current investments?
What I mean is, do you just build and build and never reinvest and maintain?
I see so many people put so much time and interest into a blog or something else and then once done, they just move on to the next one. They stop promoting, stop adding new content, stop updating and all that good stuff.
What ends up happening, is the original investment dries up and they continue this cycle, they never actually grow their business but just barely maintain its current level because they are simply building a new one in place of an old one they let die.
It is like trying the fill a bucket that has a hole in it. You can never sit back and relax because you have to keep working to keep at least some water in the bucket.
2. Are you paying debt with debt?
OK, this one is not so much a business question as just a very important one.
Did you know that the average American saves “-1%” of their income, compared to “+10%” fifteen years ago.
I know of people that actually pay off debt by just transferring it from one credit card to another. I am not talking about transferring a balance from a higher interest rate to a lower; I mean just making the min payments.
Finances seem to be one of those things that we so easily say…
“I will take care of later”
Whether it be investing, saving or getting out of debt, we seem to think we have plenty of time and have nothing to worry about… until it is too late!
The problem is the majority of us do this all our lives and then retire with nothing and look back crying that we were so stupid.
I wonder if those three guys really intended for this to happen or did they actually want to start a legitimate business but let greed and the “take care of it later” take control?
Do not be one of the sad statistics… step back, look at what you are doing and then do the things that will put you in control.