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The Biggest Lie: "It Takes Money to Make Money"

By Dr. Steve Sjuggerud
Monday, November 5, 2012

"Congrats Steve, you just made $100,000 today," a lawyer said to me this week.
 
I just bought a property... cheap. The lawyer thinks I could sell it for a six-figure profit right away.
 
A friend of mine heard about this deal and said, "Well... it takes money to make money." 
 
I was surprised he said that, actually... To me, this little phrase is one of the biggest and most dangerous lies out there... It is a convenient excuse to simply not try to succeed.
 
It's like the old joke: 
 
"Lord, I've worked hard all my life, why couldn't you have just let me win the lottery?" 
 
The Lord replied, "Why didn't you just buy a ticket?" 
 
You've got to try. And it doesn't "take money to make money"...
 
In my last real estate deal, one of my business partners put up no money at all... Instead, he's putting in "sweat equity." 
 
He's doing most of the work on this project, adding value to our investment. I'm certain he will come out with a six-figure profit when we sell. He could even make a couple hundred thousand dollars! Remember, he put zero money in.
 
So in his case, it didn't "take money to make money." 
 
His situation is not unique in real estate... A common deal goes like this: 
 
A young guy comes up with an idea to make money. He finds a property he can buy for $100,000, put $20,000 into, and sell for $150,000. The problem is, he has no money. So he finds an old guy with money, and they agree to split the profits 50/50. If the deal goes according to plan, they both walk away with a $15,000 profit.
 
He had the only two things you need: 1) an idea, and 2) the willingness to roll up his sleeves and make it happen... He did everything from finding the old guy and convincing him to invest, all the way through to selling the property.
 
In both examples, the young guy didn't even have any risk in the deal.
 
Real estate deals are an easy example. But it doesn't "take money to make money" in other areas, either...
 
A young friend of mine came up with a simple idea. He launched a website that focuses on – get this – forklifts! It's like a Hotels.com, only for heavy-duty equipment. If you need to buy or rent heavy equipment, you can locate... through his website... the pieces you need that are closest to you and at the best prices.
 
It's not the sexiest-sounding business... But it's a great idea. It cost him next to nothing to set his website up and call equipment owners to get them on board.
 
Now he earns a commission from every sale or rental. Life is good. He doesn't work for "the man" anymore and hasn't for years. And he's making more money than ever.
 
It doesn't take money to make money. You just need two things: 
 
1.   A great idea.
2.   To roll up your sleeves and make it happen.
 
You can't underestimate either of those things. The amount of effort and commitment required will be extraordinary. But that's the way it goes. You're trying to break out of the ordinary. So an ordinary effort won't cut it. You will need to sustain an extraordinary effort.
 
This is hard. But it's how you make money.
 
It is much easier to give up. It is much easier to say, "It takes money to make money" and never try. It is much easier to complain that you'll never win the lottery, without buying a ticket. (You know what I mean.)
 
Don't ever catch yourself saying it takes money to make money.
 
It doesn't... It takes a great idea, and the willingness to make it happen.
 
Now get to it! You can do it...
 
Good investing, 
 
Steve




Further Reading:

You can find more common-sense investing advice from Steve here...
 
"If you're guilty of this, it will keep you from making money," Steve warns. "Worse, it could cause you to lose a lot of money. And if you don't change this behavior, you will lose money for years."
 
"If you want to get rich investing... if you want to make a fortune... you must learn this simple lesson..."

Market Notes


NEW HIGHS OF NOTE LAST WEEK 
 
AFLAC (AFL)... insurance 
H&R Block (HRB)... taxes 
Capital One Financial (COF)... credit cards 
Discover Financial Services (DFS)... credit cards 
Visa (V)... credit cards 
Mohawk Industries (MHK)... paint 
Pier 1 Imports (PIR)... furniture 
Williams-Sonoma (WSM)... kitchenware 
CarMax (KMX)... used cars 
Whirlpool (WHR)... appliances 
Toro (TTC)... lawnmowers 
Agnico-Eagle Mines (AEM)... gold stock 
Yamana Gold (AUY)... gold stock

NEW LOWS OF NOTE LAST WEEK 
 
Exelon (EXC)... utility stock 
Permian Basin Royalty Trust (PBT)... royalty trusts 
Western Union (WU)... money-transferring services 
Hewlett-Packard (HPQ)... "Death of the PC
Xerox (XRX)... office technology

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