I think that reasoning makes sense in some ways. For example, the fact that gold continues to rise indicates that investors are betting that inflation will become an issue, despite what the feds are telling us. It also makes sense that as our aging population moves wealth from the young to the older people in our society, the large percentage of “savers” rather than “spenders” in the U.S. population will slow any recovery.
All the talk of “the worst is yet to come” and the “next financial disaster” reminded me of a book I read — “Emergency,” by Neil Strauss — earlier this year.
Now, I firmly believe there is opportunity to add to wealth during these tough economic times. Don’t get me wrong. But I also believe there are steps we can take to prepare for the worst, just in case. I am big on backup plans. So amid talk of the next financial disaster coming, ask yourself: Can I survive a financial disaster? In Neil’s book, he details his own story, how he went from fearful of events largely beyond his control to self-confident in his preparation for such events — controlling what he can.
Instead of remaining in this fearful state, he decided to prepare himself for what he feared. I found this to be very educational. Today, many people are worried about their financial futures.
However, they don’t seem to be taking any action to prepare themselves. They worry about their jobs.
They worry about their retirement. They worry about having enough money to pay their bills. They worry about funding their children’s’ college education. They worry, worry, worry…. I certainly understand this fear. What I don’t understand is the lack of action to mitigate these challenges. Why don’t more people do more to prepare?
Think of this in a different way. Let’s assume that for some reason some deadly gang were out to get you and your family. Would you just sit in your home and wait for them to come crashing through the door? Probably not.
You would probably take several precautionary steps to prevent or avoid their attack. You might get an alarm system. You might get new locks. You might arm yourself and have the police department watch your home more closely. You might go on an extended vacation. Hell, you might even move.
If you felt this concern for your safety, you would take action, wouldn’t you? Well, how come people don’t take the same action when they have the same threats to their financial well-being?
I honestly don’t know.
The only way to eliminate worry is through preparation. Neil Strauss learned skills that would help him in the event of a physical crisis. He is now prepared.
Here are a few questions you should ponder: 1. What skills do you need to survive a financial crisis? 2. What would you need to be able to do in order to have complete peace of mind over your financial situation? 3. What would you do if you lost all of your money tomorrow? You need to ask yourself these tough questions. And come up with answers. I predict that, like Neil Strauss, doing so and being prepared for the worst will give you the courage and confidence you need to make your current situation better. I personally would also recommend taking the Dave Ramsey course Financial Peace. Focus on investments you control Control is a very, very important part of wealth-building. There are lessons all over right now about what happens when you don’t control your investments. The Bernie Madoff ponzi scheme and the failing of some 529 college savings plans are a couple of recent examples of what can happen when you give up control.
Let’s start out with my definition of control: Investing Control: The ability to influence or impact the future value and net income of the investment. Investing control is important for almost any type of investment.
For the stock market, this means controlling a majority of a company’s shares. Now, this is extremely difficult for average people, like you and me. This is why we should invest a smaller portion of our money into the stock market.
However, you could invest and obtain control of smaller, non-public companies. By having control, you can directly impact the growth, income and expenses of your investment.
For real estate, the best investors want active control over their properties. Active control can be obtained in partnerships and individual investments alike. Most people would rather be passive real estate investors. The tiny few who grow wealthy prefer to be active investors.
The majority of families focus their investments into assets they do not control. This is why they struggle to accumulate “real” wealth. This is also why many people will not have enough money accumulated when they retire.
In fact, it boggles my mind that most people prefer not to be in control of their investments. They would much rather have a mutual fund planner, stockbroker or someone else control their money. “Done for you” wealth is not available. You are going to have to do much of it yourself. You do it by controlling assets.
It is perfectly fine to invest a small portion of your money into investments you do not control. But I would be very careful investing large sums of your money into uncontrollable investments. I have investments into assets that I do not control. However, these investments represent a small portion of my net worth. I have control over the assets in which the majority of my money is invested.
These same assets also represent the largest portion of my net worth.
If you study wealthy people, you’ll quickly see that they do the exact opposite of everyone else. They desire, fight for and cherish control. Everyone else desires, cherishes and pays big money to have no control. Notice the difference.
I remember reading a biography on Kirk Kerkorian, a billionaire. In every single investment Kerkorian made, he fought for control. When he didn’t have control over an investment, he quickly divested himself of the investment. Same goes for Wayne Huzienga, who built three separate billion-dollar companies (Waste Management, Blockbuster and Republic Industries).
I believe most people prefer passive investments because they are easier. Passive investments allow the investor to invest without having to take any responsibility. Passive investments do not require the investor to be decisive. Passive investments do not require the investor to get his hands dirty.
Control requires that you take responsibility for your investments. Control requires you to be active.
Control requires that you pay attention. Control requires that you be decisive. Control requires you to roll up your sleeves and get dirty every once in awhile. Some believe control is risky. I believe lack of control is risky.
Once you have control of your investment, you should work hard to increase its value. You increase value by increasing its income.
One of the most valuable wealth-building skills you can have in life is the ability to increase the net income of your investments. With this skill, you can literally write your own ticket.
For example, Kerkorian purchased enough stock to control MGM Studios in the late 1960s. By the early 1970s, he had built the MGM Grand hotel in Las Vegas. This hotel and casino dramatically impacted the value of MGM’s stock. Guess what happened to Kirk’s wealth? Within three years, his wealth was in excess of $100 million.
This is how powerful control can be. Could Kerkorian have created $100 million if he wasn’t in control?
You must strive for control over your investments. Control is critical for true wealth. Don’t be lazy.
Don’t copy the masses and happily turn over control to your hard earned money.
I highly recommend Jim Pockross’s book titled “Confessions of a Real Estate Mini-Mogul.” In the book, Jim shares his journey building an apartment-building empire, encompassing more than 270 units.
He details his first few investments, how he raised the funds to acquire each one and the results of the investment. In addition, he shares stories of challenges with building inspectors, pit bulls, ghosts and more.
Jim started investing in the 1980s when interest rates were in the double-digit range. Sellers were motivated, and buyers and investors weren’t interested in real estate. In other words, it was a down market, somewhat similar to today’s real estate market.
The properties he acquired during this time turned out to be enormously profitable for him and his partners. He bought when others were selling. In many of his investments, he got partners to help raise funds to buy the property. He also had sellers finance purchases so he didn’t have to qualify for a loan with a lending institution. Something investors today should consider doing, too!
If you’ve ever thought about real estate investing, or if you just want an entertaining and educational look at real estate, pick up a copy for yourself.