Two-Stepping Your Money

We want to share an idea with you about a different way of thinking about wealth—from enhancing your assets, generating excess income, all the way down to paying bills. Maybe you've heard this before—two-stepping your wealth. This means using money, cash, assets, or whatever, to solve your financial needs, but in a two-step process. Here's a scenario. Gloria has tremendous needs for money. She's behind on everything, and some of the creditors are getting forceful.

But help is around the corner. She is getting a gift from Aunt Emily of $10,000. That's enough to make a big dent in her obligations, and definitely will keep the wolf away from the door. However, it's not quite enough to pay off everything. She thinks and thinks. It's better to pay some now, even though she can't pay it all. That's the way most people think. Soon the money will be all gone, and that's it. It's gone. She will feel good for a few weeks.

Let us share another way of thinking: using assets, and the cash it can produce to get out of this problem. It's what we call "cash-to asset-to cash." We like it because it lets you grow out of your problems. And on the other side of the next couple of weeks, Gloria won't be left with receipts and still a lot of problems. Grow. Do More. Be More. In short, put your money to work for you.

I love writing covered calls. It gets assets producing income. You can make cash dollars of about 5% to 12% per month. Yes, per month, and maybe more as you get more skilled. I won't explain the whole process here, as I've written much elsewhere, especially in my book, STOCK MARKET MONEY MACHINE. Plus, I load up these articles with real deals that Gloria can copy. With $10,000 you can buy $20,000 worth of stock. It's called margin investing. The broker puts up the other half and uses the stock as collateral. Gloria doesn't like margin, so she'll use it sparingly.

She buys 1,000 shares of FAS (A Exchange Traded Fund in the financial sector). The options are nice. She pays out the whole $10,000 as the stock is $9.80 now. That's $9,800, plus she'll have commissions. Now she sells the November $10 call options, giving someone the right to buy her stock at $10, or $10,000. Those options were $1.85 to sell. She has 1,000 shares so she can sell 1,000 options, taking in $1,850. These are real numbers, though a bit old as of this writing. She now takes out the $1,850—all of it or part of it—and pays the urgent bills. This transaction took about 3 or 4 minutes—and it all happened on the day she received the $10,000 and put it into her account. The option money—that great amount of $1,850—hit her account the next day. She can pick up a check, have it wired to her account, whatever. It's her money to spend.

The other bills? Well the $1,850 went along way to paying the emergencies. In fact she has enough to take her husband and the kids to a nice night out. My advice: Don't spend the principal, spend the profits. She has 20% of her bills paid and she has an asset, this time a stock, still in to account, ready to go to work next month. We do this with several stocks—many are household names.

Now what happens? Without explaining the buy-back an all the other great "covered call" strategies, suffice it to say, she waits until the third Friday of November. She either sells the stock at $10 or not. Either way she gets to keep the $1,850 and she has the stock in her account or the $10,000. She does it again.

This month, for December and Christmas, she takes in only $1,600 for selling the option. She pays off another $1,200 in bills and lives to fight another day. At this rate, all of her bills will be paid by April. AND SHE WILL STILL HAVE THE $10,000 (maybe more) IN HER ACCOUNT GENERATING MORE MONTHLY INCOME.

Grow out of your problems. Spend the profits, not the principal. Get assets producing income. Why don't more people do this? (1) They do not know what is available. This may be the first and only time they have heard of writing covered calls. (2) They only think of traditional bank accounts. Take $10,000 and put it in the bank at 2% and you get $200 for a whole year, NOT $1,850 or so every month. (3) No matter how safe and good this strategy is, many people feel inadequate when it comes to financial things.

That is why I teach, trying to help. (4) They have already mentally spent the money before they ever get it. They don't think of using the money to produce immediate, large and consistent profits. (5) The clamor for action is "NOW" and they grab at straws, not realizing the straws are temporary. They don't think ahead to permanent solutions.

Here's your problem, my dear readers. If you don't do something like this the money will be gone. It will not be available to work for you on a continuous basis. It is a wise person who realizes a need for an extra source of cash flow. Imagine what retired people can do with an extra $1,600 coming in every month. Imagine a young married couple, taking all their wedding money gifts and putting it to work this way. It's a way to put financial problems in your rear-view mirror.

John Wooden said: "Discipline yourselves and others won't have to." Many people lack the discipline to two-step their money, and their lack of knowledge and discipline exacts a very high price. Think of the life changing strategy that makes money for you so you won't have to keep working and stressing.

"If you think education is expensive, try ignorance." ~~Derek Bok

Is there anything here that piques your interest? Yes, you'll have to learn, but you are just three to four hours from understanding the basics. There is help available. We spend a lot of time helping people get through the learning curve. Also, we do not get anything out of what you do. We can teach in an unbiased way. You learn, you earn. We get nothing out of what you do.

You'll also soon realize that there are power-strategies to help you make even more. A quick example: If you had purchased 2,000 shares of the preceding stock, you would have done so with the same $10,000, now some on margin. You could have sold double the amount, generating $3,700 on you $10,000. Okay, does this get you interested to learn more? A little more risk, a substantially greater reward. And you do all of this in your pajamas while taking care of the kids.

Opportunities come and go. We all need education that gives more than it costs. Many people however hang on to their past so tightly that their arms tire and the fail to grasp these new opportunities. This is your time for your own economic stimulus program, your own economic recovery. Please don't judge this process by your knowledge level now. Judge it by us and what we can teach you. "When the student is ready, the teacher appears." We're ready, are you?

Henry Ford said: "If you think money is your hope for independence you will never have it. The only real hope that a man or woman will have in this world, is an abundance of knowledge, experience and abilities." To us, these translate into skills, and we're here to help you develop yours. Our success is not determined by what we put into people, but by what profits they get out of what we teach.

Share this article

Comments are closed.