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 individuals the name Donald Trump conjures up lots of images: The hair. The pout. The Tower. The gambling establishments. And, of course, The Apprentice. He is definitely one of our society’s most identifiable characters, and given that the 1970s he has built up massive wealth. But has that wealth made him economically independent? Not necessarily, at least not till recently. To see why, let’s take a short take a look at how his financial investments and top priorities have progressed over the years.

1970s to 1980s – The Asset Accumulation Years

In 1971 Donald Trump relocated to Manhattan, where he rapidly established a name for himself as a leading New York City property developer. At first, he concentrated on multi-unit domestic complexes but then expanded into industrial homes, consisting of hotels and workplace structures. By the 1980s Trump’s assets from genuine estate holdings, development activities, and property sales had grown considerably. There were liabilities (home loan debt) associated with these properties, but at initially they didn’t appear to be excessive, and as an outcome Trump had significant net worth, or wealth.

1990s – The “Bad Wealth” Years

By 1990 Donald Trump had broadened his investment interests to consist of football, airline companies and gambling establishments. It was the latter, in specific the Taj Mahal Casino in Atlantic City, that together with increasing financial obligations on his other homes caused a severe debt problem. In truth, by the early ’90s his personal financial obligation had grown to $900 million and his business debt was nearly $3.5 billion.

The issue? Despite having significant assets, the liabilities were excessive. To make matters worse, the properties weren’t generating enough cash flow to cover the debt payments. On paper, Trump may have still been a multi-millionaire, with total assets several million dollars more than overall liabilities; so he had wealth. But unfavorable cash flow indicated he was far from economically independent. In truth, he was on the verge of personal insolvency. Hence, the “bad wealth” years.

Donald Trump’s various financial endeavors

show the distinction in between

bad wealth – which generates debt – and

great wealth – which generates money flow.

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

In 2003, NBC introduced The Apprentice, a reality TV show hosted and produced by Trump. During the first season Trump was paid $50,000 per episode, or approximately $700,000 for the year. Now, provided the show’s massive success, he is paid $3 million per episode. Calling this endeavor a golden goose would be an understatement. It is an excellent example of “great wealth”: a possession (in this case an organization) that produces substantial favorable cash flow.

But “The Donald” knew how to take a good idea and make it much better. Starting with his property activities and especially now with his media success, Trump has actually established and fully leveraged the branding of his name. And he’s done so with a specific concentrate on relatively low cost (and therefore low debt) endeavors that create several earnings streams. Some examples:

Books and tours

The Apprentice souvenirs and game products

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

Allowing (for a fee) his name to be displayed on structures owned by others

These particular types of activities are normally beyond our reach. But the monetary principles they illustrate are simple and pertinent to us all: Seek to develop a portfolio of assets that generate positive capital. And, by all means, do not let your financial obligations spiral out of control.