I started saving just a tiny bit, and then as I made more cash online I started saving a lot and I spent very little. This was the total opposite of what I had done for 30 years. My savings grew, I made some investments and I started building wealth.

Then…I started investing in my little Internet operation. I started hiring people to do things and grow, which was smart. But! And this is a big but, in the process I started losing my newly formed habit of saving - the reason being that I reinvested every last cent and never accumulated anything in my business account.

This worked well for a while as traffic grew but I always assumed whatever I was investing in would keep bringing me greater returns, or maintain the returns. I never thought that all my investment could be rendered worthless or worth much less at the flip of switch. Therefore, I never saved in my business any of the good returns I had for a while. So now I’m left with much less cash flow and no business savings.

My lack of discipline saving in my business also corroded the good habits I formed with my personal expenses. I saved much less than I could have and I stopped keeping my cash flow sheet.

So my lesson is this: I must always save something; hold on to some wealth and let it accumulate. Even if the intention is to invest and grow, a portion must always be carefully saved (not necessarily in cash). I think even the governments of the world could apply that lesson.

Several months had gone by and I didn’t see how I would have the money to pay them in the near future and I wasn’t feeling good about the delay. So at the beginning of this month I unintelligently paid that money I couldn’t afford to shell out. Then I get hit with some unexpected charges, the unexpected always happens at the worst time. Isn’t that Murphy’s Law?

So I’m stuck short several thousand to start the month. I figured maybe some creative juices would kick in if I put myself under pressure. A few did, but not enough! I launched a Halloween special to my list selling all my ebooks (5) for just 12 euros. I guess it was like what Internet marketers like to call a fire sale. The courses didn’t sell much anymore anyway. It generated around 2000 euros, about 1700 net after Clickbank takes its cut. Nothing major, but I was happy with the result. Now I’m trying to figure out what else I can cook up.

All of our efforts to recover from the Google Panda update have been in vain. We’ve thrown away a lot of cash trying to recover but Google won’t budge on our main and most important site. It’s got a traffic lockdown on it despite continued link building, fresh content, etc. Even our article directory is starting to grow again, which technically should be the most penalized since it has so much duplicate content.

Well, this is a great challenge for me. I’ve been somewhat comfortable financially for some time, until now. But I feel up to the challenge and I think the whole mess is an opportunity to get me out of a rut.

In the words of the great Winston Churchill:

“The pessimist sees the problems in every opportunity. Whereas the optimist sees the opportunity in every problem”

“Never give in, never give in, never; never; never; never - in nothing, great or small, large or petty - never give in except to convictions of honor and good sense.”

Such great advice can’t be ignored!

Recently we had disturbances with the one flat that was rented. The renter started fire to the bush in the backyard and had been playing loud music and causing general ruckus. The neighbors wanted him out. Sally usually gets really stressed about these things but even now she’s getting used to it. That flat has been a problem magnet!

We contacted his tutor and it seems things have calmed down. Our other flat was empty all spring, summer and early fall. We rejected a possible 3 month renter; I mean why pay all the agency fees for such a short time. Finally, instead of a student (this flat is right next to the university) the agency found us another ‘social case’. These are usually young people with problems and/or slight mental handicaps.

When they proposed this new renter we initially thought of the problems with the other one. But our second in thought was, at least the other one always pays rent (paid by the tutor) and he is been there for a while, he doesn’t come and leave every school year causing at least 3 months empty plus one month for agency fees. So we just laughed and said sure, why not, at least we’ll get paid. We’ll become a social housing company! So let’s hope both flats stay rented for a while and we don’t burn any more cash on this bad investment we made.

As for as our Internet Business, I believe I mentioned we got hammered by the Google Panda update. We lost half of our overall traffic and half of our income. We laid off a bunch of helpers. Finally, several months later one of our sites is showing signs of growth again but the biggest money winner is not. Google has it bottled up and won’t budge an inch. The site that is showing traffic improvements is a work in progress, as I’m attempting to totally shift user content with a new design and imposing new rules.

We can’t really save much of anything now, since we’re down to bare essentials. I never save much anyway, since I always wanted to invest every last sent. I managed to pick up some more silver as the price has gown down quite a bit. Now the whole market seems a bit confused, they don’t know where to put their money. Even Gold has stopped it ascent.

Once again we have put to rest the idea of acquiring properties from repossessed homes. The banks won’t offer decent flat rate interests rates. We would have to find owner financing or some kind of other financing. Anyway, the market will continue to rot and go down here so we’ll see how it unfolds.

We have started a second company and a new project. The partners are Fred, Sally and Cousin Jerry (that’s not his real name of course!) This strategy allowed us to pay cousin Jerry without all the social security and extra expense of having an employee and now he can be officially an entrepreneur too.

We spent a lot of time thinking about this project, trying to figure out a ‘blue ocean strategy’ where we could have a competitive advantage. A key think we wanted also was to build a well known brand, based on a Web site (and something else but I don’t want to give details yet) that people come straight to, something that has no dependency on Google. Basically we’re taking something people already do to a whole new level and doing it from an angle no one else has, it’s something no one has ever done before in this area. So we really believe in this project if we execute well our strategy.

2- Encouraging the jobless to go freelance…
…and depriving them of the right to look for a normal job again unless three years have gone by. If their business doesn’t work, at least they won’t inflate the unemployment rate before a while.

3- Offering special incentives for the creation of companies…
…and imposing conditions that nobody in their right mind would accept. And the few jobless who will accept them will have their hands tied for a while (see item #2).

4- Taxing businesses more heavily
We desperately need money for our lifelong salaries, spaceships, translations into Huttese and candidacy to the 3025 Apocalyptic Games. Since some Jedi Knights still know how to use the Force, let’s take advantage of it.

5- Openly promoting job creation…
…while really blowing hot air. The other planets in the galaxy are stuck with us; they’ll end up coming to our rescue …right? Oh well, we’ll soon be out of office anyway…

It is a period of world crisis.

Outraged people, striking

from a bivouac in the capital city, have shown

signs of frustration to

the evil Catastrophic Empire.

During the summer camp, Outraged

spies managed to steal secret

plans about the Empire’s

ultimate solution, the DECEPTION

STAR, an absurd space

station with enough crap

to destroy the entire planet.

Pursued by the Empire’s

sinister agents, Princess

Sally races to her computer aboard her

rolling office chair, custodian of the

stolen plans that can drown her

people and maintain

chaos in the galaxy….

The most interesting finding of the day was what appears to be a warzone (see photo!). It’s actually located in a very good neighborhood. The previous owners were investors trying to turn it into 2 properties but the building community wouldn’t allow it so they left this mess.

The bank is asking for 220,000 which of course is overpriced as always. I am going to check with someone I know who does building to see what the cost would be to develop the interior. If the bank would accept a much lower offer we could make it a 4 bedroom flat (it’s 100 sq usable meters), rent out each room for 350€ for a total of 1500 month. If we could get a fixed interest rate of 4% our mortgage would come out to less than 1200/month over 25 years (borrowing 160,000 to purchase and 60,000 to renovate).

Anyway, I’m a novice and this is just a rough estimate. It seems like it would be a fun project to learn from if the bank accepted a fair offer and the renovation could be done. In the meantime, the search continues. Now I’m going to start filtering out shady neighborhoods that I’m more familiar with from our visits.

I setup a Google Doc to keep track of properties and visits, also to keep tabs on the better ones to see if they are still around in several months and possibly cheaper offers would be accepted.

Google Panda - He's not as innocent as he looks!

This big hit has taught me once again not to have a business that depends 90% on Google, they can wipe out years of work and investment in a heartbeat. Although we are doubling up SEO effort on the short term because we need to recover some cash flow, in the long term we will work 100% towards offering utility and value to users. Our efforts will be to get a large percent of direct traffic although I cannot realistically say that we will be 100% free of Google.

We are leaving the office to cut expenses and we have also cut down our investment in content. We’re hiring a new programmer starting in September to speed up site improvements and development.

For years, really we have been playing the SEO game, links and content for cash flow. I think we needed a good kick in the rear, because to achieve great results we’re simply going to have to do much better. We have to build something of great value for users, not play to Google’s ranking system for generating income.

Years, months, and days much later I finally have something to say. We have begun work on our second company, the equivalent of an LLC for property holdings.

The banks are filling up with properties they have to get back out into the market, find buyers and get them off their books.

If you want to buy just any property, good luck! It’s nearly impossible to find financing in current economic conditions (where we are, in Spain). But if you want to finance a bank held property they are trying desperately to get of their hands they’ll give you 100% and in some cases even more.

This was confirmed by an agent we talked to yesterday who was showing us some properties. Our goal now is just to find the first. Get 1 property, no money down and make positive cash flow. It’s really a tall order; nevertheless, from the first 5 visits yesterday there were 2 that were decent, but still too expensive to reach our goal. The prices on the bank owned flats have really come down, but they need to be a little more desperate, bring them down a little more, for us to find what we need.

We learned so many things from all the mistakes we made on our first 2 purchases in France a few years (where we actually put a lot of money into them) ago that we’re determined not to repeat any of them. Here are some of our main things:

• Don’t just go for cheapest and often tiniest. When all is paid and done the property has to bring a cash flow that merits all the paperwork, management and expense for each individual property. Small properties generate the same work and similar expense to larger ones, even though they bring much less money.

• Buy close to home. Know the market you’re buying in, study it, get immersed into it. Real estate is not an investment, it’s a business. There are cheaper places but we’re working Madrid because we live here. Also, when you own something far way there is not much you can do but rely on a management company. Management companies only care about their bottom line, not yours. They don’t go out of their way to get your place rented in record time and they make more money when you change renters. Unless you have someone awesome to manage your property and make it a great investment, keep it close where you can do everything needed, when needed.

• Don’t lose money! Sounds obvious right? We’re not going to buy anything that will lose us money. It’s not worth it. Don’t buy rushed, or buy on a whim, be 100% sure you found a property that won’t lose money. There’s no point in investing in Real Estate otherwise. We’ve lost quite a bit on the first ones because we rushed into it and for other reasons stated here.

• Protect yourself. Always have insurance against non-paying renters.

• Use a business entity. This way your renters don’t know the people who own their property, they just see a business. This protects your privacy. If you get shady renters you’ll appreciate this more. Also having the property in an entity will protect your personal assets if you have business problems and on the other hand protect your property if someone sues you personally.

• Be sure to accurately calculate ALL expenses before buying. Mortgage, taxes, vacancies, community repairs, etc. Anything that can go wrong will go wrong; take this into account when doing your calculations.

• First check the building and the neighborhood. You can fix the house up but you can’t change the people that live there. If the neighborhood looks bad or the building looks bad forget it. You don’t want to own property in a building where the people who live there don’t keep it in good conditions.

Those are the main things of the top of my head. Now I know simply don’t invest in property to invest. Do it right or don’t do it at all.

Tomorrow we’re visiting more properties from another bank. Yesterday I discovered that one neighborhood was quite crappy that I thought was good. I’m anxious to become more familiar with the whole northern part of the city. We also picked up some insight from the person who showed us the flats. I’m sure each new person we deal with will bring something new knowledge. I’m looking forward to it!

Some people think it’s in a bubble. I don’t think so. After all it’s priced in dollars and the value of the dollar is dropping as the FED continues with QE2, in other words, money creation. Soon we’ll know if QE3 will come, if that happens then metals will continue to jump up. If they don’t stimulate more then precious metals and everything will probably drop, especially the US stock market. So I have my eye on the FED to see what’s coming. Everything has been going up against the dollar, but silver is the leader.

While the US keeps printing the ECB is being more cautious and sturdy. They are raising interest rates to prevent inflation. This of course will make it harder for businesses and the economy because borrowing money will be more expensive. It will also be harder on households as the Euribor goes up raising house loan payments with it. I don’t want to see anyone hurting but I do hope the added pressure will help push housing prices down. They are still ridiculously expensive in the country. I really don’t know what it will take to get reasonable prices for housing, as if 20% unemployment and low wages weren’t enough.

When I see properties in the United States in great spots like Florida for only $40,000 USD, yes only 40,000, and in dollars, that’s like nothing in Euros, it drives me nuts. I am also an American citizen and could move there and buy a house pretty much outright but I really don’t want to leave Europe and have to fly back and forth to visit family. I can imagine that seasoned investors are making a killing right now in the states. There are so many cheap spots all over, not just Florida and Nevada.

Who knows, maybe someday the government will stop giving money to the banks and they will finally drop the prices on the glut of houses they have on their books here in Spain.

I got together with a friend the other day expressing an interest to get back into the real estate game and asked him about the market. I thought maybe, just maybe, it was time to start learning and researching. First of all, he called me a masochist for wanting in real estate. I guess he sees my cozy little internet setup and must be thinking, “Why in the world get into such a mess of a business as Real Estate?” He painted a pretty bleak picture. He said it was nearly impossible to get loans and to get 100% loans it was only possible on properties banks needed to get rid of but they asked for way too much. They still overprice the properties. So I left his office a bit discouraged and decided to wait for things to get worse in the market.

Speaking of buying properties my good friend Michael from Paris is buying his first. Not sure if he mentioned it on his blog. I told him, I hope it goes well and if it doesn’t then you’ll learn a lot!

In the end I caved in to desire and we did buy a car. It was a used car just 2 years old and the price was half that of the new model, which was the same design. We had a little money left over to invest but not that much. I’m very happy with the purchase and I feel we spent our money wisely.

We have bought more silver since my last post and that is paying off nicely as the price has more than doubled since we started buying.

Sally quit her freelance work and just last month started working as part of my Internet company. There is actually quite a lot she can do and use her professional skills. We are progressing with some of our sites but not nearly as quickly as I would like. Actually a large company is preparing an offer for one of the Web sites but I doubt it will be enough to give up the cash flow it brings each month.

Our flats in France have been pleasantly silent. Both are rented and stable for a change. Other than a request to change the TV because of the blackout of analog antenna signal all is quiet.

My financial education has been quite stagnant the past year I’m sad to say. I’m a practical person so I don’t like reading about something too much without being able to be actively involved. I don’t like idea of putting any money in stocks because I consider it too passive and a gamble. If I invest in something I really want my money to go to work to produce cash flow, that’s why most of my investing has been limited to the website business.

I recently read Richard Branson’s autobiography. That guy is absolutely amazing. Has anyone else built billion dollar businesses in several different sectors? I also read previously his two other books, Screw It Let’s Do It and Business Stripped Bare. I still have Warren Buffet’s Snowball autobiography sitting on the shelf at home. It’s just so big and intimidating I don’t get started on it!

I was watching a Rich Dad video a few nights ago and it reminded me that I needed to get my butt in gear and work on my financial knowledge again. So -for the few readers on here- expect some new posts coming soon!