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But has that Wealth made Him Financially Independent?
Wealth and Capital Lessons from Donald Trump – Are you Ready to Be an Apprentice?
For a lot of people the name Donald Trump invokes numerous images: The hair. The pout. The Tower. The gambling establishments. And, naturally, The Apprentice. He is definitely one of our society’s most recognizable characters, and given that the 1970s he has built up enormous wealth. But has that wealth made him financially independent? Not necessarily, at least not up until just recently. To see why, let’s take a brief look at how his monetary investments and concerns have developed over the years.
1970s to 1980s – The Asset Accumulation Years
In 1971 Donald Trump relocated to Manhattan, where he quickly developed a name for himself as a leading New York City property developer. At first, he focused on multi-unit domestic complexes however then expanded into business homes, including hotels and office complex. By the 1980s Trump’s properties from realty holdings, development activities, and residential or commercial property sales had actually grown considerably. There were liabilities (home mortgage debt) connected with these possessions, but at first they didn’t seem extreme, and as a result Trump had significant net worth, or wealth.
1990s – The “Bad Wealth” Years
By 1990 Donald Trump had actually widened his financial investment interests to include football, airlines and casinos. It was the latter, in specific the Taj Mahal Casino in Atlantic City, that together with increasing debts on his other residential or commercial properties resulted in a severe financial obligation problem. In fact, by the early ’90s his individual debt had grown to $900 million and his service financial obligation was nearly $3.5 billion.
The problem? Despite having considerable possessions, the liabilities were excessive. To make matters worse, the properties weren’t creating sufficient capital to cover the financial obligation payments. On paper, Trump might have still been a multi-millionaire, with overall properties several million dollars more than overall liabilities; so he had wealth. But unfavorable cash flow implied he was far from economically independent. In fact, he was on the edge of personal insolvency. Hence, the “bad wealth” years.
Donald Trump’s different financial ventures
illustrate the difference between
bad wealth – which creates financial obligation – and
good wealth – which generates .
2000s – The “Good Wealth” Years: Apprentice to the rescue
In 2003, NBC released The Apprentice, a truth TV reveal hosted and produced by Trump. During the very first season Trump was paid $50,000 per episode, or approximately $700,000 for the year. Now, given the program’s massive success, he is supposedly paid $3 million per episode. Calling this venture a money cow would be an understatement. It is a great example of “excellent wealth”: a property (in this case a business) that generates considerable favorable capital.
But “The Donald” knew how to take a good idea and make it much better. Starting with his genuine estate activities and specifically now with his media success, Trump has actually established and fully leveraged the branding of his name. And he’s done so with a particular focus on reasonably low cost (and therefore low debt) endeavors that create several income streams. Some examples:
Books and tours
The Apprentice souvenirs and video game products
Speaking engagements, where he supposedly receives approximately $1.5 million per discussion
Allowing (for a fee) his name to be shown on buildings owned by others
These specific types of activities are typically beyond our reach. But the monetary concepts they illustrate are simple and relevant to all of us: Seek to develop a portfolio of assets that create favorable capital. And, by all means, do not let your debts spiral out of control.