BawldGuy Video Podcast

When investing for your retirement, having real synergy at work for retirement income is a real turbo charger.

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Transcript:   Today we’re going to talk about what really is the concept of synergy as it relates to real estate investing. First of all, let’s start out with I’m with you, synergy is a marketing term that has come to mean almost nothing, and have no value whatsoever. It’s the most over used and abused concept there is in marketing today. I’m with you on that. We’re on the same page. However, my test is pretty down and dirty. It must do 1 of 2 things if not both, or it’s not synergy. It either gets you to retirement more quickly, or it gets you to retirement with more retirement income. Hopefully it does both, but if one or those 2 rules aren’t met, you did not use synergy, you used a marketing term. Let’s use an example. All synergy is in my world is to be able to use more than 1 strategy at a time. Sometimes we use 3 or 4 at a time. Yeah, first of all, the buy and hold real estate investment strategy. Doesn’t mean you buy and hold forever. It means you’re not buying low to sell high immediately like a flipper might. The second strategy you might involve is a particular type of depreciation if you’re a high incomer, or $150,000 a year household income or more, or your might bring in cost segregation as a depreciation strategy. I’ll bring these together when I’m done. In order to make the long term investment and cost segregation strategies work even better, you might bring in discounted notes as a long term strategy. Even that as a standalone strategy will do 2 things, both short and long term. Short term it brings in cashflow now, and it will continue to. Long term you make profits because you’re buying these notes at a discount while at the same time you have more income per month coming in after tax then you would have had you not bought those notes, and this is income you don’t need to live on, so it’s like cashflow from real estate, you get to use the income from the notes like the real estate to advance your retirement plan. Let’s take the strategy of buy and hold, cost segregation, and discount note investment to see how that can enhance and maybe push your retirement date much earlier. You buy a couple of pieces of real estate, and let’s say those pieces of real estate costs you $80,000 for down and closing a piece. You paid maybe $300,000 give or take for them. What you do is your use cost segregation, because you guys make a couple hundred thousand a year, and that means the IRS does not allow you to take any left over depreciation from your properties after sheltering the properties cashflow against your ordinary income. You might have, in this scenario, a $5,000 a year annual cashflow per each of these 2 properties, and each of these 2 properties in cost segregation might have a $20,000 a year depreciation dollar figure. You would have $15,000 left over per property per year. $20,000 depreciation, minus $5,000 a year cashflow. That $15,000 per property, should be according to normal thinking, be able to be used against your ordinary income, but since the tax code says you make too much money, it must simply go onto the shelf and gather dust until you no longer own those properties. Let’s turn lemons into lemonade. You buy those properties knowing that you’re going to use cost segregation as a second strategy to your buy and hold approach. Each year both of those properties combine to generate a total of $30,000 of useless, unused depreciation. Well that goes on for say 5 years, and 5 years you’ve now stockpiled $150,000 of unused depreciation, and you say, “Why on earth would I do that on purpose?

What investors really enjoy is a real world case study. Here’s one using a couple for whom I just generated a Purposeful Plan.

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Transcript:   Let’s do a case study today and talk about people that actually exist, what they’re going to do and what is probably going to be the outcome for them, and how long of a period of time. We have Millie and Jim. Between them, they make about a hundred thousand dollar a year or maybe a little bit more. They have about twenty thousand dollars in the bank, and they have the ability to make payments of about a thousand dollar a month, depending on what they’re doing. That would be the max. The first thing I told them was that based on their ages, they’re thirty and they’re thirty-one years old, that David Shafer said that for five hundred dollars a month, they will get at age sixty and sixty-one a tax-free income of about a hundred to a hundred and ten thousand dollars a year until they’re ninety. Again, that’s tax-free. Now, they live in California, and to get a hundred thousand dollars a year after tax in California, and remember they’re going to be retired when they do this, so they won’t have deductions for kids. The IRS hasn’t given us deductions for grandkids yet so that’s off the table. They will have paid off their house. At least most people try to, right? They really don’t have any tax shelter or whatsoever. At least we have to look at it the way it is now and project that to be the case thirty years from now, which means that if they wanted to get that hundred thousand plus after tax, they would have to make somewhere between a hundred and thirty-five and a hundred and fifty-five thousand gross. Well, this will get them a hundred to a hundred and ten thousand dollars tax-free for the first thirty years of retirement. That won’t include any note investments they might make. It doesn’t include anything they’ve done in their IRA or 401(k), or maybe they have a small business later in life and they have a solo 401(k). We’ll talk about that at another time. The bottom line is what this will do is it will give them a base retirement income over and above anything else of around eighty five hundred to nine thousand dollars a month, all of which, again, by Internal Revenue Code definition, is tax-free. Now, what they can do over time is that they’re going to be like everybody else. They’re going to start a family. They’ve already got a house. They’ve only had it for less than three years. They’re making those payments. They can grow a family in there before they decide to move on. What they’re going to do is they’re going to save their money. Now, let’s fast-forward ten years. They’ve got two or three kids. They’re feeling a little cramped. They’re in a three-bedroom but it’s a small three-bedroom. They’ve got two baths but again it’s small, and they want to move to a little bit more square footage. Now, Jim’s making a lot more money than he was. Molly quit her job and she’s using her degree in childcare that she got in college to open up a home-based business of taking care of kids. Now, between them, remember, they’re forty and forty-one now, they’re doing around a hundred and thirty to a hundred and fifty thousand dollars a year. He’s been saving, saving, saving. They established, both of them, Roth IRAs back when they first me when they were thirty and thirty-one. They don’t have an employer-based 401(k) between them. They got rid of that. Do you know how I know they got rid of it? Because that’s the way Jim financed the down payment for their house a decade earlier. All right. For ten years,

Between their less than inspiring 401k performance, and not knowing all of what’s on their ‘options’ menu, most folks are hungry to more clearly understand various investment vehicles.

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Transcript:   Today let’s talk about various investment vehicles. I want to talk about the difference between buying discounted notes or maybe an EIUL, Equity Index Universal Life. It’s an insurance policy that is geared towards income while you’re still alive in retirement instead of a death benefit once you’re gone. That’s the only difference. What’s the difference between betting on the stock market the next 30 years or betting on notes on an EIUL for the next 20, 30 years? It’s already been proven over the decades that if you get good advice, and of course, we see with 401Ks that apparently most Americans are not getting that good advice because they’re arriving at their 65th birthday with 100 thousand or less in their 401K, right? Of course, they all have matches so it’s even less impressive. If we’re told that you can make seven, eight percent over the really long haul, let’s call the long haul 15 to 30 years, in the stock market. Let’s assume that is the Lord’s truth for today’s discussion. What we both know is that when you buy a stock from a brokerage firm, they don’t give you any security for that stock. You’re just buying a slice of ownership of that company. When you buy a piece of real estate, that value can go down, but you’re always going to be able to rent that house out or those four units, whatever that is, for something. Where when things go really bad in the economy, it’s not just that dividends go down, generally speaking, they go down to the floor or disappear completely. Then you get to notes and you say, not only do I have security more than just buying real estate, I actually get a piece of free and clear real estate if I foreclose on a first position note. If I bought that note at the BawldGuy Note Fund, I not only don’t have to foreclose if I think it’s better not to, I can just invoke my warranty. Everybody, let’s stop right there. Let’s have a show of hands across America. When was the last time your stock broker offered you a warranty on your Apple stock? Yeah. I didn’t think so. Let’s get real about what’s going to happen and what’s not going to happen in the next 15 to 30 years with your investment dollar for retirement income. If you’re buying notes, you’re not only getting a security that’s tangible, a piece of freaking real estate that’s free and clear when you foreclose, but in my case, with my fund, you’re getting a warranty that’s going to keep you whole. If you put X amount into it and somehow it goes south on you- and they will occasionally, don’t let anybody tell you they won’t because they will. 38 years doing it myself, they go south at times. If a note in my fund goes bad and you’ve received 20,000 in payments and you put 60,000 in it, the fund’s going to make up that other 30. You put 60 in, you got 60 out. That’s the way it’s going to be. You don’t get that with the stock market. Let’s compare it to EIULs. You put a certain amount in just like you do in your 401K. You put a certain amount in every month, every quarter, every year, however it’s structured. It’s after tax money. You don’t get any tax break like you do on a 401K sponsored by your employer. Those are mostly not Roth, right? When you put this in, 250 a month, 500 a month, 1,000, 2,000, 3,000, whatever you can afford and you do it for 15 to 30 years, two things are going to happen.

The BawldGuy Note warranty is something you just don’t get on the street.

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Transcript:   When you go to the BawldGuy Note Fund and buy a note, what you’ll be happy to learn is that these notes come with warranties. The warranty says this. It doesn’t guarantee that the note is going to perform like a champ. What’s going to happen is this. If per chance the borrower defaults, and you decide, for your reasons, it doesn’t matter what the reasons are, that you don’t want to foreclose yourself … Listen, foreclosure, in my experience, a lot of times, you end up with more money than was actually owed. There are times that when I foreclosed because frankly it was foreclose or lose everything I had in it … You have to do what you have to do. However, with a warranty, that’s not the case anymore. What happens is this. Let’s take an example of a note, let’s say a $75,000 note that the investor paid $50,000 for. He sails along for a while, and before he knows it, it’s been two years. He’s collected … let’s just make up a number … $10,000 in payments. However, the borrower defaults, doesn’t want to foreclose. That warranty then, if they can’t rehab that note again goes to the warranty which says: You’ve rehab $50,000, you’ve received $10,000, we’re going to give you, at your option either fund credits to buy another note, which you’ll use if that’s what you’re going to do anyway, or just tell us where you want us to wire $40,000 cash, we’ll give you that. What that really means is they’re going to keep you whole. You spent $50,000. You got $10,000 in cash flow, here’s $40,000. We’re not there to cover any other losses that you would have made. Those aren’t really losses. Yes, you might have made more money if you would have gone here instead of there. That’s true in every investment. There is no investment I know you’re not going to buy anything where they say look, you’re going to end up with the same amount that you put in. That’s what the warranty does on these notes. It replaces your principal. You put X in, you get Y amount of payments, and the warranty will cover the difference between what you put in and the payment you received. It’s just as simple as that.

I love the BawldGuy note fund. It allows my clients to remain safe and secure while adding a stand-alone source of retirement income.

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Transcript:   I have the BawldGuy Note Fund, and it sounds very simple. But the average investor in America really doesn’t know what buying a discounted note really means. They’re a little bit fearful of it, and I understand, because we all are fearful of anything we don’t completely understand. I know I am. Let’s start out with notes 101 here today. All a note is is what you sign when you bought a house, when you buy a car that you finance. It’s an IOU. I sign a piece of paper that says, “Jeff owes money to this lender.” That’s all a note is, an IOU. Now, in real estate, those loans are secured, so in case somebody … the borrower doesn’t make the payments, they’ve got that security, which is almost always real estate. What do they do? There’s another document. Now that document sometimes is called a trust deed, sometimes is called a mortgage. They’re pretty much interchangeable. They have different meanings in different states on the margins, but all it is is evidence that there’s a piece of real estate. For our discussion needs today it’ll be a house, a simple house that the borrower’s going to move into. He signs an IOU pledging that house as collateral. In case he doesn’t pay, they can take that house from him. Now he has a grant deed or a warranty deed, or any of the other flavors of deeds in the 50 states. It’s his property as long as he pays his monthly payment. Now, if that note somehow goes into default, that borrower loses his job or some other … it’s usually some other cataclysmic event. People aren’t deadbeats. Things happen. Right? That’s why we have the bumper sticker. The bank then may be forced to take it over, but what’s happening now is that groups like my BawldGuy Note Fund take massive amounts of capital, in my case, millions, and they go to lenders all over the United States, we’re in about 27 states so far at least count, and we take these loans off their hands at a deep discount. Now, they’re not performing. Okay? That means, in plain language, the borrower is not making payments and hasn’t made payments for several months, usually at least three. We buy that for pennies on the dollar, usually 20, 30, 40%. Sometimes less, but usually in that range. Then what happens is, the fund manager, which in this case is PPR Note Company … It’s founder is David Van Horn. They have a staff of almost two dozen full time specialist. Their whole mission in life, from eight to five, every single work day of the year, is to rehab these notes such that they’re … the borrower is making payments again. Now, do they bat 1000? Not even close, but the ones that they are successful in returning to performing are then available to buy by the people that are inside the fund as members and investors. Now we call those people accredited investors. It’s not complicated. The definition is twofold, and you don’t have to qualify for both, just one, either as a single person you make $200,000 a year, or married you make $300,000 household income. If you don’t qualify under those, then you go by net worth, $1 million, not counting your primary residence. That includes cars, everything you own, any silver and gold, your paintings, your 401s, your IRAs, you name it, it has value, it’s part of your net worth. Okay?When you buy a note, you’re buying a bank’s IOU that John and Mary Smith signed, and now it’s re-performing again, and you’re paying probably 55 to 80 cents on the dollar. If you have $100,000 to buy notes and you’re an accredited investor, you can be inside the BawldGuy Note Fund. Now, we’ll talk about that note fund later, and the warranty that comes with those notes, at a future date.

What does synergy for your timeline even mean? It’s a core principle of Purposeful Planning. Combining strategies to coordinate with your personal timeline is what often makes the difference between a solid retirement and a fabulous retirement.

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Transcript:   When it comes to strategy, one of the things that we’ve talked about many times before is how long do you have to accomplish what you want to do and point B. If you’ve got fifteen years, and you’ve got a boatload of cash, three, four, five-hundred thousand dollars, at least, you can do a lot in ten years. Do you make a household income of seventy-five or do you make a household income of two seventy-five? That also dictates what’s possible. Let’s take somebody who has a quarter million dollars of capital available, by whatever means, and they have about five-thousand a month from the family budget to expend. Now, they may have already bought, say, a couple of two to four unit properties and they’ve been paying them off diligently and they say, “Well, Jeff, what should we do with this quarter million dollars? Well, let’s say the first two that they bought, they owe about four-hundred thousand on. Well, that’s four-hundred thousand we have fifteen years to pay off, so we have to, first of all, check it out. If we don’t buy anymore real estate, how much extra do we need to put on those payments, every month, in order to get at fifteen year free and clear properties. They’ve got two of them, we’re talking four-hundred thousand dollars, so we do that. Well, let’s say it comes out that if we buy one more, but now stop buying real estate, because we don’t think in fifteen years we’d be able to pay off, say, more than six-hundred thousand, six twenty-five, so we put on that extra two, two and a quarter, with a third one. Now they take, maybe a hundred and fifty of that two-hundred and they go out and buy notes in their own name. Now, that hundred and fifty is going to give them somewhere in the vicinity of fifteen to eighteen-hundred dollars a month in income. It’s going to yield twelve to fifteen percent cash on cash. Now, I keep throwing around cash on cash, and for those who are not sure of the definition, it’s very simple: take the amount of money that you put in to any vehicle that’s going to produce income, let’s say it’s a hundred-thousand, and if you make twelve-thousand dollars a year on it, you divide the hundred into the twelve-thousand and your cash on cash is twelve percent. That was an easy one. That’s all that is. If you’re buying real estate, you want to see what your cash on cash is, don’t forget to include the closing cost to your down payment and then divide that into the first year cash flow to get your cash on cash. Cash on cash does not include any profits down the road, increase in rents down the road, or anything like that. It’s just what are you going to do right away your first year and then every year you can do it. Maybe the took a hundred and fifty and they’re coming up with somewhere in the vicinity of maybe eighteen, nineteen, twenty-thousand dollars a year. Well, even if they got the highest, twenty-thousand, not likely. Let’s back it down to eighteen, I can’t help myself. We’re going to take eighteen and we’re going to say, “You know what, that’s probably a whole bunch of twelve-thousand after tax, state and fed, and if you live in a tax free state, God bless you. Now they’ve got a thousand dollars a month after tax. Well, they can take that thousand dollars, they don’t need it, they can add it to the five-thousand from their family budget, now it’s six-thousand.

Everyone wants to talk about real estate investment strategies. However, strategies that fit YOUR timeline are the only ones that matter.

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Transcript:   Today let’s talk about strategies. Not strategy in the sense of, “I’m going to be a buy and hold guy,” or “I’m going to be a fix up guy.” Strategy in terms of the long term, how old you are, how many years total do you have on your timeline before you actually get to retirement. That’s the real timeline that matters. If you’re looking at 65, but you want to retire at 55, lost last 10 years don’t matter. You’re already on the late bus if you wait until 65 wanting to retire early. One of the things you have to look at with strategy is, given the number of years you have left before that fun day happens, and you retire what do you have to have accomplished? One of the things that usually people have to do is retire debt. Now, is it retire debt on your primary residence? Is it on your rentals that you bought? What is it? For most people it’s both, but for now let’s talk about what happens when you want to retire your debt. Debt on rentals at retirement is not a good thing, because I don’t care how many months you how to go, or years, that’s cash flow you’re not getting that the lender is. If you’ve got 10 years to go, or 20 years to go, it doesn’t matter, because the guy with 20 years to go has twice as long, but he may have 3 times to properties. How many can you free and clear of all debt by the day before your retirement party starts? That’s one thing to look at. The other thing is, maybe you’re going to buy notes too, and that’s going to be part of your ultimate strategy. If you’re buying notes too, are you buying them in your own name? Are you buying them in an IRA, or a 401K envelope that you control? Is it traditional, or is it Roth? Why isn’t it one or the other? What are you thinking? All that matters. People tend to want to pull, aim, and shoot, and that’s where people get in trouble, and that’s why we call it “purposeful planning,” not, “I just got up, and this sounds like a good plan planning.” When you look at strategies, the timeline dictates what you can, and can’t do most of the time. When you’re 53 years old, and you owned your primary residence, and you have money in your 401K, and maybe an IRA or 2 between you, and your wife, you can’t willy nilly go out and buy 6 pieces of real estate, and acquire a $1,000,000 plus of debt simply because you can afford it. If you’re going to retire at 65, you’ve only got about 12 years to go. Can you retire 2 commas worth of debt in only a dozen years? I don’t know. Can you? If you had enough capital to buy those 6 small pieces of property, did you have any extra for cash reserves? Did you have any extra to buy notes? What did you do, why did you do it, and what’s the timeline you have to accomplish all the goals? Arriving at retirement just because you can, but with debt still on everything that you own makes no sense. Sure, you might be able to squeak by, but the point is, every time a property free and clears itself, usually the cash flow from that property goes up 3, or 4 times overnight. When you’re doing this, you’re strategies matter, and the timeline almost always dictates which ones you will pick. Latter on we’re going to be talking about exactly which strategies for which people, and what timelines matter the most.

What the heck does attacking the perfect storms even mean?! First, assume it’s all positive.

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Transcript:   Recently I spoke at a special event where I was asked the question: I speak a lot of this so-called positive perfect storm. Doesn’t this mean we should all go out and buy, buy, buy real estate like crazies until this perfect storm goes away? Well yes and no, but let’s define what the perfect storm in the first part. You go all these storms, and by the way, they’re all positive from the view point of the real estate investor. One storm is low interest rates. Another storm is very attractive rent price ratios. Another storm is the ability to buy new or newer rental income properties residentially in great locations without paying the premium we used to pay before the bubble burst. Then there’s that last part of that perfect storm that says not only are they very well located, but like I said earlier, they’re new or near new, where people around the country in most markets, including my own in San Diego, where we consider a 30 year old building just comfortably broken in. We haven’t had new construction of, say, two to four unit buildings, which is what most investors buy, Reagan was in office the last time they built significant number of those buildings in my county. Now you’ve got low interest rate, rent price ratios that are very nice, well located buildings that are not old. Should you buy as much as you can then? Out of ten people, I might give three different pieces of advice because, like I said earlier in many of these videos is that different set of circumstances for Fred makes him do something totally different than Mary should be doing. Let’s say you have a bunch of capital and let’s take something a little bit out of the ordinary. You’re 52 years old. You know you’re going to retire at 67. You’ve got 15 years. That doesn’t seem like very long but you’re a high income earner. You’re averaging $250, 300,000 a year and you know that for the next 15 years it’s going to be that or a little bit more. Here’s what you do. If you can buy all that real estate you have to weight it against I can have a Roth IRA or I can move things into a Roth IRA. Do I start buying discounted notes from inside that Roth IRA. Do I buy notes in my own name? What do I do? Here’s what I tell people. How much a month in cash flow from all the properties you own, and family budget money that you can comfortably set aside to service your retirement plan every month … You can just spend like you don’t care. Then the other thing is, Do you have other sources of income in which you’ve invested? Of course the main source would be note income outside of a qualified retirement plan. In other words, you bought it in your own name. The plan would be, how much real estate can I buy, put 25, 30% down, and retire the debt on all of them by the day before retirement hits 15 years from now? Can you do that in 15 years? I have clients who, because of their note portfolio, they own a small business that is a big producer, and they have cash flow from many properties, but if they buy more property and acquire more debt they have their real estate portfolio’s cash flow, which is impressive and significant, they have the note payments coming in where they have to pay taxes on them, they own them in their real name, but they take that and add it to the cash flow. Then they have their family budget that says they can take x dollars a month, add it all to that, and then they start attacking those loans. They can buy one, two, three. I’ve had people buy six, eight, 10 properties in a six month period and they’re able to retire all five, three, eight,

Defining capitalization rates by looking at local listings won’t help you at all. Most cap rates are fantasies at best.

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Transcript:   Let’s talk about cap rates today and what that means as capitalization rate. Let’s define it. All that is, is a net operating income of a property, divided by what you’re going to pay for it. What makes up a net operating income, NOI? All that is, is gross scheduled income, GSI, which is the income you expect for the year, real rents not projected. You take away a vacancy rate that you know is pretty spot-on because you researched it or your professional did. By the way, when you take away vacancy and the vacancy rate, from a gross scheduled income for the year, what’s left is what’s called gross operating income, GOI. Most people don’t even know that exists. Most pros don’t know that exists unless they’ve really been educated and trained at our old school. What comes after that is all the operating expenses are then subtracted, and you end up with a smoke-cleared, net operating income. That doesn’t take into account any loan payments you might have, so don’t get sucked in by that. A loan payment is not an operating expense. It’s what we call debt service. A payment is debt service. You’re servicing that loan. Let’s take a property that is selling for $100,000. The income from that property is $17,000 for the year. You look at vacancy rates, and you look at all the operating income, and you say you know what, we’re going to have a $10,000 net operating income for the year. You say that will give us a 10 percent capitalization rate, because remember, you’re taking that net operating income, $10,000 in this case, you’re dividing it by the purchase price, $100,000, and you get 10 percent. If you don’t get a percentage, you divided the wrong numbers. I know because I’ve seen you do it. Here’s the thing. Arriving at a cap rate is easy. Arriving at an accurate cap rate isn’t so easy. Here is the problem. Sellers all over the country will put their rental properties for sale, sometimes by owner. Sometimes, they hire Larry from their local real estate brokerage that sold their house for them. They think that he knows about investment property because he once bought a duplex back in ’89. What they do is they put an operating statement that says yeah, we’ve got $17,000 of gross rents, and we know this because here’s the leases. Okay, so far so good. When it gets to vacancies, they say that this neighborhood is so good that there are almost no vacancies. You can’t accept that. Even if it’s true, you can’t accept that. My rule is, when I used to teach analysis to other pros, is that you just chose 5 percent when you know it’s 5 percent vacancy rate, or anything less including almost 0. Use 5 percent. Nobody’s ever upset when it’s less. Here’s the deal. You’ve taken away your vacancy rate. Now you’re going down all the line items of the various operating expenses that apply to this property. One of the big ones is real estate taxes. That’s easy to get right down to the dollar. You just research it. There it is. The guy shows you his tax bills. If you know that they’re going to be reassessed upon sale, you know the formulas they’re using. It’s usually very transparent at the City Hall. You take care of it. Then you have property insurance. How hard is that to find out about? You talk to the Farmer’s Insurance or whoever you do business with, and you get a bid, and you compare it to the other guy and you take the one you like. Then you have repairs. You have maintenance. You have property management if you’re going to use that. You look at all those things, and you add them all up. You combine them with a vacancy rate figure, okay? What if the vacancy rate is 10 percent? That just means that your $17,000 a year scheduled rent is going to inflict $1,

Plan on purposeful planning means just that. Have a plan — execute it on purpose. Oh, and ya might wanna add, ‘be boring’.

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Transcript:   You know, nothing has had more traction and more of a draw to the average investor than what I call Purposeful Planning because it hits people where they live, because they want to do things on purpose and they want to have a plan that points out what they should be doing. I want to just talk now about the most important part of anybody’s plan as far as I’m concerned as an advisor. You should look at your plan as not being exciting. The results should be very exciting. Retiring maybe sooner than you thought was possible or at least was maybe more income than you thought you might be getting, that’s exciting. On the journey to retirement, you want everything to be as boring as yesterday’s mud. You don’t want things to be exciting because 9 times out of 10 in my experience, and I’ve been doing this for a lot of years, excitement isn’t fun. It’s because things went awry. Things that Murphy brought into the picture. Now we all know what Murphy said: “If anything can go wrong, it will and at the perfectly wrong time.” It was a buddy he had named O’Toole. O’Toole’s corollary to Murphy’s Law was even better and I think more realistic. O’Toole said that Murphy was an optimist, and I think he’s right. In almost 45 years of being licensed, I have learned that not only if it can go wrong, it often will and at the most horrific time, but that a lot of times, even though you might have anticipated that possibility, you never really anticipate the potential consequences for how horrible they might be. When you’re boring in plan, everything’s vanilla, never any chocolate topping even, it’s just ice cream in a bowl with a spoon and you alone in the room. That’s the kind of boredom you want in your retirement plan. You’re not trying to be a pioneer. God forbid you’re being on the bleeding edge. Lord, I hate that, and this whole thing about well yeah, we’re thinking out of the box. Well, when you’re out of the box a lot, you’re alone. There’s the box because the box works. Nobody’s going to really ask you how you got to your retirement until they find out the income you created with your plan was way more than the average. When somebody says, “Well, you’re going to retire in six months, huh?” “Yeah, I am.” “Well, what’s going to be, if you don’t mind, I’m a good friend, what’s that going to be?” “Well, we’re going to be doing around $16,500 a month.” All conversation stops at that point, doesn’t it? Now they want to know how you made that happen. Make your plan boring but just make it dynamic. Use synergy whenever you can. Stay away from the cliff’s edge. Don’t walk close to any red lines, and just be boring. You do that for long enough and you’re going to retire better than 98% of Americans.