In Bad Times The Rich Usually Get Richer
As Stuart Wilde says, In Bad Times The Rich Usually Get Richer. There are reasons for this. Quite a few. Firstly, the rich do not acquire things, they acquire investments. People associate the wealthy with lavish things like cars, artwork, and large houses. What most people don’t see however is that very few of those things are depreciating assets. The house, the art, and many times the cars are all assets that are going to increase in value over time. The rich know that while it’s nice to look at a great painting, the underlying value appreciation of that painting makes it twice as nice.
Debt vs Leverage
The rich do not acquire debt, they acquire leverage. The middle and lower classes treat debt like a piggy bank. Whenever they can’t afford something they simply get out the credit card or worse yet the home equity line of credit. They have a live-for-today mentality that is shortsighted and ultimately ruinous to their financial future.
The rich use debt too, but they use debt exclusively to purchase things that will produce income. They see debt as leverage, to increase gains made on investments by using other people’s money. And as long as they debt interest they are paying is lower than the interest rate, dividend, or price appreciation they are gaining, then they’ll keep doing it.
Buy Sell Buy Sell
Those who truly know how to make money though, make it very easily. Buy, sell, buy, sell. They don’t mess with borrowing money. These people play the game a different way. They get involved in high return deals, based on their sixth sense which always knows how to determine if the deal is going to come off or not. Not everyone who is a multi-millionaire borrowed their way there. In fact, some stayed right away from banks because of the temptation to use bank ‘money’ (which really is just numbers on a screen) ahead of time. The truly crafty millionaires didn’t borrow a cent to get to where they are.
Compound Interest is the eighth wonder of the world. He who understands it, earns it…. he who doesn’t, pays it. Albert Einstein
No ‘Herd Mentality’
The rich do not follow the herd, they forge their own path. The rich buy when everyone else is selling. They’ve prepared themselves for a downturn not because they knew when it would happen, but they simply knew it would happen eventually. And they were ready to jump on the opportunity. They went against the herd and took advantage of the opportunity.
The rich know that trying to time the market is a fool’s game. They are simply prepared when the inevitable peaks and valleys in markets occur.
In bad times, the rich usually get richer. Stuart Wilde
Non-Traditional
The rich do not limit themselves to traditional investments. The rich know that stocks and bonds are nice investments, but they will never offer the kinds of returns they are used to seeing in their own businesses. So they might have a stable foundation of stocks and bonds, but they spend a good deal of time researching and investing in alternative investments and often their own business. They know that real estate, hard assets, art, options, and currency trading offer superior returns, while also limiting risk during down markets.
How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case. Robert G. Allen
High Returns
The rich do not believe that high returns equal high risk. The rich understand ‘asymmetrical’ risk. This means that the downside does not equal the upside. A stock can go up 100%, or it can go down 100%. That risk is symmetrical. A real estate investment, or a stock investment with an option to protect the downside, can only go down so much. Hard assets will always have some value even if markets crash, but can become incredibly valuable markets move upwards. The rich understand this and invest in assets that protect the downside; they exploit asymmetrical risk.
Don’t Spend Just to Spend
The rich do not spend their money for the sake of spending their money. We’ve all seen the photos of the wealthy jet-setter coming off a private jet, decked out in expensive watches and Italian suits, jumping into a sports car and tearing off to dinner with a gorgeous woman. For the most part, this is not the reality of a rich man or woman. It is often the reality for their children, but not for the one that worked her way up from nothing to a high net worth.
No – the rich are nearly all frugal to their core. They know that every dollar wasted on frivolous exploits is a dollar they could have invested in a money making enterprise. They enjoy life to be sure, but even their expensive purchases are a tiny fraction of their income. And, because they came from humble roots, they know that it can all go away at anytime. So they protect it, and work at it.
The philosophy of the rich and the poor is this: the rich invest their money and spend what is left. The poor spend their money and invest what is left. Robert Kiyosaki
Specialise Rather than Diversify
The rich do not diversify for the sake of diversification. Middle class investors believe that diversification is essential to have a ‘balanced’ portfolio. The rich know that there is little point in having a ‘balanced portfolio’ across all asset classes. Doing this will invariably drive returns down to market averages.
Diversification is a tool to mitigate risk, and it is often used to hedge heavy bets. They are protecting the downside, not following some financial industry pie chart. They know that specialisation is the path to real wealth and simply investing in everything will provide lackluster results.
Diversification is protection against ignorance. It makes little sense if you know what you are doing. Warren Buffett
Manage Your Investments Yourself
The rich do not outsource their money management. It’s a common misconception that wealthy people simply hand over their money to highly paid money manager who then takes over every aspect of their wealth. This couldn’t be further from the truth. Wealthy people, especially self-made millionaires, know that no one cares more about their wealth than they do. They also know that even if they have the smartest money manager available, that manager can never know about every investing opportunity. So rich investors take an active approach. They are constantly on the lookout for high returns with relatively low risk. They treat growing their money like an extremely high paying hobby, because that’s exactly what it is.
Continue to Learn
The rich do not think they know everything. The rich have an insatiable thirst for knowledge. They are constantly reading, investigating, asking, and poking around new things. They know that money is made on the edges of knowledge, the new frontiers. And to discover those frontiers you have to be constantly searching, constantly learning. For the wealthy, education is power. And their education never ends. They know their greatest investment is their own knowledge.
The Rich Don’t Make Rushed Decisions
The rich do not invest from a place of fear. They are not prone to knee-jerk investments based on a news story. The rich will look at news stories and look at global implications. They invest on a macro-economic scale not a micro-economic scale. Bad news is often an opportunity with the right mindset. The rich believe there is money to be made in almost any situation and position themselves to do so. They are not pessimists or optimists, they are realists. And they know that making mistakes is part of investing and business. They own their mistakes, learn from them, and move on.
Have Long Vision
The rich do not invest for today, they invest for 5 years from now. It has been said that “Most people greatly under-estimate what they can do in one year, but even more greatly under-estimate what they can do in 10 years.” Millionaires think, plan, and set goals at least one year out. Billionaires think and plan what they can do over a decade, but the middle-class think in terms of month to month, and the poor think in terms of week-to-week, or even day-to-day.
Isn’t it amazing what happens when you start setting one-year goals, and then see what you need to do each month and quarter to hit them. It’s even better if you can stretch this out into what do you need to do each year to hit your 5 year goals. Sit down every quarter and make plans for the next quarter, and update your goals one year out. Plan to have very specific 5 year (and lifetime) goals as well.
The man who starts out simply with the idea of getting rich won’t succeed. You must have larger ambition. There is no mystery in business success. If you do each day’s task successfully, and stay faithfully within these natural operations of commercial laws which I talk so much about, and keep your head clear, you will come out alright. John D. Rockerfeller
It Isn’t the Love of Money that Gives You Abundance
The rich do not ‘love’ money, they love what money can do. You’ve probably heard that ‘money is the root of all evil’. That quote is from the bible and it’s one of the most common misquotes in history. Here is the actual quote from Timothy 6:10: For the love of money is a root of all kinds of evil.
Notice what it is really saying: loving money CAN lead to many kinds of evil. That’s it. The rich know that money is not evil, but it is not the source of happiness either. Wealthy people understand that money is a tool. It just so happens to be the most useful, versatile tool on the planet. It is also a means of keeping score. So the wealthy don’t pursue wealth for the sake of being rich, but for personal freedom and a sense of accomplishment.
Wealth is not about having a lot of money. It’s about having a lot of options. Chris Rock
Let Your Ideas Motivate You
The rich do not talk about things, they talk about ideas. Those that talk about and focus on others, things, and even to some extent events have their focus on things that will not lead to wealth. Thinking and talking about the new car you want to buy, about how good/bad so-and-so is, or the big snow storm “back East” do not lead to wealth. True wealth comes from new ideas, the “bigger picture,” and collaboration. By thinking in terms of ideas, the rich build wealth. Think about any of those “rags-to-riches” stories. What were those heroes focused on? Usually some new idea. They talked to others about it. They asked what others are investing in.
Celebrate Other People’s Wealth
The rich do not disparage others who have made money. Have you ever noticed that those who have a lot of money, aren’t critiquing others with money? Instead, they are valuing and commending others hard work and great ideas. It’s difficult to make money when you are “bashing” those that do. You can never be in psychological alignment with your goals if one one-hand you want something, but on the other, you are negative towards others that have “made it.” The rich have an abundance mentality, not a scarcity mentality.
Many Streams of Income
The rich do not have one source of income. All of my really wealth friends have multiple sources of income. Most do not even have “regular jobs,” but some do. Those that have jobs, work at their job during the day, and then set up other income streams on evenings and weekends. Usually, once these income streams of alternative investments start spinning off cash, they reinvest that money into more investments. Before long, they have 5-10 sources of income. The middle-class and poor usually just have one income stream – their job.
Make The Best of Every Moment
The rich know that money is renewable, time is not. The rich know how to make money. They know that owning a business and investing wisely are the surest path to wealth. But they also understand that their most valuable asset is their time, not their money. Money is abundant, time is not. So they strive to not waste a single day. Even when they pursue leisure, they attempt to make it meaningful. You will not often find the wealthy sitting idly in front of the television, lamenting what could have been.
Being rich is having money; being wealthy is having time. Stephen Swid
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Free From the Gilded Cage is the education arm of the Loving Heart Foundation Australia . We teach the basics of self-employment, how to save money wherever you can, and basic budgeting skills. This is so that women can learn the skills needed to manage their own lives. So that they don’t feel trapped in a relationship with a man who is beating them up. With these skills they can easily leave him
Update: The first novel in a series of seven has now been published. Written for teenagers who don’t fit in, the story gives hope to those who aren’t enjoying school. Along with those who don’t want to go into a profession that school prepares most for. It is also the courageous account of a young teen growing up in a dysfunctional home filled with domestic violence. Read about how she manoeuvres her way through such a difficult situation.
Click here if you’d like to know more about this novel.
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