How the Rich are Preparing for the Future

(Daddy Warbucks)

If you ask 1,000 people if they wouldn't mind having large amounts of money, most would say "that would be nice" and rattle off a list of debts they want paid off and items to satisfy their spirit. Then you might ask them how they plan on obtaining the amount of wealth it will require. At least half will respond with "the lottery." The rich who understand what it takes to make and maintain wealth do not gamble away their worth. Instead, they prepare for both good and bad economic times ahead.

It was noted in my previous article that many of us are so fixed in our paradigms that despite a basic awareness of the financial picture of the state of our economy post-2008 we still live in a box dictated by what we think we are suppose to do rather than what we need to do. Our future economic troubles are nothing to be ignored. We have no choice but to either face them head on or fall victim to our financial environment. Years ago, many of us lost a lot of value. What did we learn from it? Go back to school and get a good education to secure a great job. Then, we find that less than half of our population of graduates even lands any type of employment within the first 6 months following graduation. Do we enjoy running the wheel as a pet hamster?

College is not going to change anything. I personally have multiple degrees to my name and am the first to vouch for it. The only way anything is going to change for anybody at anytime is to open up to a paradigm shift or be forced to adapt at the whims of the market however dramatic. What will change is our abilities to learn from the rich. After all, they do control 95% of the wealth. Why? Because not only do they manage a degree of discipline and self-control foreign to most, but earn from more than one source of cash-flow (income).

For instance, the poor and middle class perceive debt as "bad." Debt is bad or a liability when we owe others. When others owe us, this is considered "good debt." Now, imagine if you owned several real estate investment properties or even a business. This is considered debt. If it is generating revenues with positive cash-flow, it is good debt or an asset. If the economy crashes into a blazing inferno, this good debt will be an asset worth more after a big bust than in a boom. Why? People will still need a roof over their head and services fundamental to their basic needs during times of dire straits.

Yours truly has sold off his stocks owned since before the millennium. Today is a market high! I would consider myself a fool not to take advantage of the markets pique performance. Had I waited by this time next year, I may not have been so fortunate. In fact, famed stock options trader Jesse Livermore became one of the wealthiest Americans in 1929 when he identified similarities between the Panic of 1907 and the stock market then. He placed bets against the market and when it crashed, he returned home $100 million wealthier (or $125 billion at today's rate). The same is true for the unidentified options traders who made many millions betting against both United and American Lines prior to the events of 9/11, but that is another story for another time.

If we are going to make it beyond market volatility in the coming years it will be critical that we keep one another abreast of the current economic climate because they only way we are going forward into the promise of the future is together.

Sources:

http://www.nydailynews.com/news/national/college-grads-disillusioned-unemployed-poll-article-1.1331346

http://www.washingtonsblog.com/2010/06/sec-government-destroyed-documents-regarding-pre-911-put-options.html