Growing up poor has its advantages.  When leaving the nest, you have little to lose because you have little to take.  The benefit is that the fear of failure is minimized because you don't have far to fall.  I grew up learning that poverty is uncomfortable but not fatal.  Therefore, I could hope for the best but live with the worst of outcomes.

Shortly before my 21^st birthday, I answered an employment ad for a "financial planner", which turned out to be really working as an insurance agent for an established mutual life insurance company.  To help me get my license, the company sent me to insurance sales school, where I learned something that changed the direction of my life.  Excluding the equity in their home, the average American couple had a net worth of $950 when they retired at age 65.  This shocked me profoundly.  The people in this statistic were the very people who growing up I had considered well off.  To me, $950 was basically the equivalent of a garage sale, but now I saw that you could appear well off, even when broke, provided you managed to buy a home and get it paid off prior to retirement.

At the time, the San Francisco Bay Area was no more affordable than it is today, so my hunt for my first home took me to less expensive Modesto in the California Central Valley.  I purchased a brand new 1,250 square-foot house with three bedrooms, two baths, and a two-car garage for $32,250.  My intention was to live there forever and pay it off so that I too, could appear well off.  To afford this home, I worked two jobs and lived with minimum amenities.  Fortunately, circumstances intervened and rescued me from my intended austerity.  My modest home increased 40% in value in six months after I bought it!  Everyone was talking about the escalating real estate market, so I decided to jump in.

I purchased a second house, then a third, and fourth.  By the time I was 27, I owned six houses, one to occupy and five to rent, all having a large appreciated equity and a negative cash flow.  I had based my purchases on something I had learned as an insurance agent--annuity life products.  The principle is simple:  You work, earn, and make payments for a period of time and then, upon the occurrence of an event or the maturing of the policy, you receive payments.  But I felt that rental houses were far better than any annuity policy for the simple fact that as long as you could get into title and find someone willing to rent, eventually the mortgage would be paid off and that the rent would become your annuity income.  In the escalating real estate market, the returns appeared fabulous and generated enough equity so that I was able to originate a second mortgage on each successive house to make a down payment on the next one.

And then the market escalation stopped, and the consequent negative cash flow was a nightmare.  My house payment was $800, including taxes and insurance, but I also had a $200 average negative on each of the other five houses, which ended up boosting my housing cost to well beyond my net take home pay.  I had a problem I did not know how to solve, and realized I needed to understand real estate the day before yesterday.  Circumstances again intervened in that my real estate agents decided to open their own shop and invited me to join them as a new real estate licensee.  As quickly as possible, I obtained my real estate license and went to work.  With my six houses as the price tag for failure, I was determined to succeed.

I soon discovered that there were others in the same situation as myself.  We had all purchased real estate with the expectation that it would always go up at a much greater rate than the negative cash flow needed to support it.  We had made our decisions and taken action based on a little knowledge and a false assumption.  We had made a permanent problem out of a temporary situation, because none of us had made the effort to learn the long view.  In searching for an answer, I discovered a second financial principle:  If you aren't equal to your money, you will lose it.  By that I mean that every decision and every choice has a price tag.  In the case of marriage, the price is some of your freedom.  In the case of children, it may be some of your other life priorities.  In the case of squandering your resources, it may be your dream.  Basically, there is no free lunch.  I learned that the things that "everybody knows" are only half the story and no one's judgment should be substituted for your own, because no one but you and yours bear the consequence of a wrong decision.

Becoming financially free requires that you become a student of money.  You must become a perpetual reader, ask questions of people who have firsthand experience, and diligently apply yourself to the earning, fostering and growing of your resources.  This means working harder and smarter and spending less.  You've got to lose the habit of doing what everybody does and listening to what everybody says.  Sure your neighbor thinks he's smarter than you, and he may give you a lot of advice--most of it worth exactly what you paid for it.  Take advice only from people who have what you want, because if your neighbor knew how to have it, they'd have it already.