Disclaimer: None of the following is legal advice in anyway, and legal advice should be sought from a legal professional.
This one is a bit harder to start. Despite what I write about and the intention to educate [you] the reader about value of financial education and literacy, it has to be honestly said that what I promote comes from sources before me. Just like the skillset I promote in teaching for profit. What I know – I learnt from someone else.
To that end, I tend to keep my ear relatively close to the ground when it comes to learning what some of the ‘bigger’ players out there do when it comes to their money, lifestyles and success. After all, learning from those before us, is the ultimate shortcut, and education right?
Of course it is, but paying attention to those ‘ahead’ of us, can sometimes do more than just educate … sometimes it can taint our perspective on the bigger picture … Especially when the people that we choose to learn from seem keep hitting the bulls eye, each and every time they seemingly do … anything.
I’m talking about people who practically s*** unicorn dust … and then sell it to their hordes of Instagram followers, who probably never ‘followed’ them for any legitimate ‘commercial’ reason.
Back on track
Anywho … I digress. This post isn’t about jealousy, envy or bitterness. It’s about how some people seem to always get it right, get more, and get it more often than the common person can ever dream of and then finally, as if never being satisfied they are already on the lookout for their next kill.
2020, has been a trying year to say the least. 20% of the work force was effectively stood down with the stroke of a pen and a press conference. But despite all of the uncertainty there are a [smaller] number of people in the background, not only screaming at the tops of their lungs telling people not to panic, but they’re harvesting massive gains from the turmoil.
So do and are the Rich getting Richer & are the Poor getting Poorer?
Of Course they are. 2020 created 56 new Billionaires in the USA alone, and there are many reasons as to why this happens, and despite already writing far too much by this point, I’ll try to highlight 5 (Not the top 5) of biggest reasons why the rich are getting richer, and give you an insight on how you can get your share!
When it comes to Wealth and Lifestyle it turns out that success has very little to do with luck or conspiracy. Sure there are the fast burners out there, with massive insta profiles who call themselves ‘influencers’ but real value comes from creating and maintaining a business or what I call a personal success model.
Long story short, identify something that earns and that you can do for the next decade, and stick with it.
Slow and steady wins the race … there is literally nothing more to it than that. Even some of the biggest names in global wealth, had to let time play its part in their success, and that means consciously choosing to have less today for a better tomorrow. It means investing and not spending.
Buying Power, Scale & Equity
Getting started in your wealth and success journey is often the hardest part, a process I go into greater depth in an article about Seed Money. But when it comes to the Rich seemingly never getting it wrong, what gives?
Firstly – Rich and successful people have and do make mistakes. In fact they make more than most people will ever know about. The difference is that they extract the lesson from each and any failure, and use that lesson for future considerations. In essence they make so many mistakes they all but immunise themselves from future failure, all while the ‘layman’ is only ever able to survive or have the stomach for a single set back, before taking themselves off the field for the remainder of their lives.
One such situation is where a business is established with full knowledge and expectation that it will run at a loss for no less than 12 months, accrue over a million dollars in debt, but that it will also yield a 100% return over 5 years. This is called ‘Swallowing the Fish’ and requires deep pockets to support early on. The rich, who have the buying power to get what they need, and the scale to back themselves while taking extended losses, can readily do what seems rampantly unfair and scandalous to most.
Related: Setup for Life – What is Seed Money?
What they buy
It seems pretty obvious to say that the Rich people would be or are rich because of the things they buy or have anything to do with their spending habits. Especially when we consider the above topic of being able to support and sustain what are considered, absurd expenses and liabilities. The Rich don’t get that way by spending less than the layman.
Although there are ‘the exceptions’ where some extreme wealthy people still live quite conservatively, the majority of the financially independent elite don’t necessarily do so nor have to.
Make no mistake – the Rich spend, and when they spend, they spend big. They often spend more than what most people could imagine. Absurd, glutinous and greedy most would call it, but the major factors of their spending come down to two things.
Where their money comes from & what they spend it on.
Fortunes built or stolen?
Many will think that fortunes are built on the backs of the poor, and in the global economy there is (yes I said it) an element of truth to this. However far from dissecting the entire value chain of countless business models, the Rich most importantly are diversified so that their money comes from more than one source—and this means their incomes and cash flow come from places such as the stock markets, property and business or businesses that they own.
There is obviously far too much to do on ones own and they certainly don’t work regular hours trading time for a pay-cheque, hence they have other people do it for them. See … fortunes are made on the backs of others.
The second thing is what they buy.
Everyone needs a hobby, something to engage with in order to disconnect from the stresses of the real world, but it can be an issue when the hobby is also a drain on the lifestyle. Here it is also where the rich make money when they buy, not when they sell.
You can’t make money when you spend all of your hard earned on a wardrobe full of shoes, but you do make money when you buy a well researched asset, that provides a yield over the years, paying itself off, and providing cash flow to get more in future.
The rich and financially independent don’t buy a ten, twenty or forty million dollar mansions in an exotic location so they can live there! They buy the mansion to get away from work for a few weeks a year, and then rent out the entire estate with fourteen bedrooms, for 6 figures per week and use it to pay itself off.
The rich make money, from things they don’t use themselves, but from the same things other people, need or want to have or experience.
When it comes to wealth and financial independence a massive factor that comes into play is protection. Gaining wealth is one thing, but keeping it is another. For the vast majority of people out there, financial protection isn’t something we think about, and when we do, it often involves the word ‘insurance’.
Financial protection has other sides including preventative and ultimately deeper more complicated measures.
When it comes to the preventative side of things, The Rich spend more time looking at risk mitigation and how to prevent losses, rather than looking at how much they can gain. This means, sniffing out b******* wherever it is and walking away from anything that looks remotely wrong.
When was the last time a billionaire responded to a Nigerian email?
Think I’m wrong? Ever applied for a bank loan? Think about how much evidence & documentation you have to provide about who you are and that you can support your loan. Banks—don’t—take—risks!
Furthermore in addition to taking measures to make sure the rich don’t get into losing situations in the first place, the second is far more complicated and harder to define. Many of these protections are legally based and binding, and often involve the legal ‘separation’ of the person and the entities which generate wealth for them.
As said earlier, these are measures which most people won’t ever think about, and I’ve seen the hands go up when experts ask. But by the time you add a few zeroes to your total financial position, protection becomes a top priority, because as history shows, the more you have or let people know you have, the more likely that someone will creep out and try to take that away from you. Protection from this type of threat is something that is almost certainly legally ironclad.
Finding the next deal
At a certain point financial independence and wealth isn’t just something that people have—it’s what they do!
Getting to the point of initially replacing an income, regaining your time & supporting the lifestyle of your dreams isn’t something that simply happens in a single event, stage or deal.
These milestones take time to achieve, and the rich don’t get there by letting some fund manager do the work for them whilst only returning 8% per annum so they can gain access to the rewards at the age of 60.
Tomorrows Rich and independent are today’s highly motivated action takers who are involved, take control and drive their own results.
Today’s action takers who are involved and present in their own strategy look for assets that gain high cash flow, and assets that can yield double-digit growth year on year.
These aren’t things that happen for a few years before they back off and coast through life. These are things that are done out of drive, desire and protection from the instability of the job. These are things that are done by the few who understand, that nothing is set in stone nor permanent.
These are things that over the course of breaking free, have become habit, and simply become what they do. While the world stresses about volatility and downturn, the rich see and seek opportunity and secure what the majority of the world ignore, and this search never stops.
The take away points
Do the Rich get Richer? Of course they do. Does that mean that poor are getting poorer?
Well … yeah! Indirectly at least they are. Whilst the value of money decreases and wages from jobs stall, the poor are effectively getting poorer as their money does less and less.
Although there are well known cases of people lucking into wealth, the majority of successful and independent people out there (Not just billionaires or millionaires, but scores of early independent retirees) actually have to work for what they have and what they have earned.
The vast majority of the successful ‘elite’ and seemingly ‘privileged’ have worked incredibly hard for what they have. Particularly for the 1st generation high achievers, they have to learn, work, plan and protect what they have and what they get up to and including the sacrifice of their today for a better tomorrow.
The Rich are getting Richer, and for the vast majority it has nothing to do with luck or conspiracy. Just know that there is more than enough to go around and for everyone to get their share.