But has that Wealth made Him Financially Independent?

Wealth and Cash Flow Lessons from Donald Trump – Are you Ready to Be an Apprentice?

For a lot of people the name Donald Trump invokes many images: The hair. The pout. The Tower. The casinos. And, obviously, The Apprentice. He is definitely among our society’s most recognizable personalities, and considering that the 1970s he has actually collected massive wealth. But has that wealth made him economically independent? Not always, at least not up until recently. To see why, let’s take a quick take a look at how his monetary investments and concerns have actually evolved throughout the years.

1970s to 1980s – The Asset Accumulation Years

In 1971 Donald Trump moved to Manhattan, where he rapidly developed a name for himself as a leading New york city City realty developer. In the beginning, he concentrated on multi-unit residential complexes however then broadened into industrial properties, including hotels and office complex. By the 1980s Trump’s assets from property holdings, development activities, and home sales had grown substantially. There were liabilities (home mortgage debt) connected with these assets, however at first they didn’t seem excessive, and as a result Trump had substantial net worth, or wealth.

1990s – The “Bad Wealth” Years

By 1990 Donald Trump had broadened his investment interests to include football, airline companies and casinos. It was the latter, in particular the Taj Mahal Casino in Atlantic City, that together with increasing financial obligations on his other properties led to a severe financial obligation issue. In fact, by the early ’90s his personal financial obligation had grown to $900 million and his business financial obligation was almost $3.5 billion.

The problem? Despite having significant assets, the liabilities were excessive. To make matters worse, the assets weren’t generating adequate cash flow to cover the financial obligation payments. On paper, Trump might have still been a multi-millionaire, with overall possessions numerous million dollars more than total liabilities; so he had wealth. But negative money circulation meant he was far from economically independent. In reality, he was on the verge of personal insolvency. Hence, the “bad wealth” years.

Donald Trump’s numerous financial endeavors

highlight the difference between

bad wealth – which generates debt – and

excellent wealth – which produces cash circulation.

2000s – The “Good Wealth” Years: Apprentice to the rescue

In 2003, NBC launched The Apprentice, a truth TV show hosted and produced by Trump. During the very first season Trump was paid $50,000 per episode, or roughly $700,000 for the year. Now, given the program’s huge success, he is supposedly paid $3 million per episode. Calling this endeavor a would be an understatement. It is a great example of “great wealth”: a possession (in this case a service) that produces significant favorable cash flow.

But “The Donald” knew how to take an excellent thing and make it better. Starting with his property activities and particularly now with his media success, Trump has developed and fully leveraged the branding of his name. And he’s done so with a specific focus on relatively low cost (and for that reason low financial obligation) ventures that generate multiple earnings streams. Some examples:

Books and tours

The Apprentice souvenirs and video game products

Speaking engagements, where he apparently gets approximately $1.5 million per presentation

Allowing (for a charge) his name to be shown on buildings owned by others

These specific kinds of activities are usually beyond our reach. But the financial concepts they show are basic and appropriate to all of us: Seek to develop a portfolio of properties that create favorable capital. And, by all means, do not let your debts spiral out of control.