New Rule of Money #4: Prepare for bad times and you will only know good times
How you can build a financial house of bricks to withstand the hard times
This is the fourth in a series on the new rules of money. I lay the foundation for this series in my post “The Real Reason You Feel (and Are) Poorer .” I highly suggest you read that post in preparation for this and the following posts on the new rules of money.
More than likely, you’ve heard the story of the three little pigs and the big bad wolf. It’s a great fairytale with lessons for people at all walks of life. As the story goes, there were three little pigs. One built his house out of straw, another out of sticks, and the third out of bricks.
The first two pigs finished their houses before the third, who was building a brick house that took longer to finish. They were laughing and playing, enjoying life while the third pig worked. Eventually, the third pig finished and joined the other two pigs to laugh, sing, and play.
Then, one day a big bad wolf came along and saw three tasty meals. He quickly blew down the houses made of straw and sticks. Thankfully, the pigs were able to run to the brick house, which the wolf, try as he might, could never blow down. The two pigs learned their lesson and eventually built their own brick houses. They lived happily ever after.
Financial houses of straw and sticks
Today, unfortunately, many people have financial houses made of straw and sticks, and there are all sorts of wolves that live out there in the darkness ready to destroy those houses.
The problem of the two pigs that didn’t build their houses out of brick is that they didn’t think bad times would come, so they put in little effort. Of course, trouble did come, and when it did, only the pig who built a house of bricks was ready. He prepared for the bad times.
Today, if you want to prosper financially, you have to build a financial house of bricks.
Build a financial house of bricks
My rich dad said, “Those who are finically intelligent can make money in both up markets and down markets.”
During the last great recession, many people lost almost everything. Sadly, people lost homes, retirement funds, and more. Some even took their own lives. For my partners and me, however, the story was different. We made more money than we’d ever made.
We understood the new rules of money and had prepared for the bad times. We knew they were coming, so when they did, we were ready.
Again, money is knowledge
This goes back to the first new rule of money: money is knowledge.
By knowing how money works and that it’s always flowing to new places, I continually educate myself about what is happening in the markets.
For instance, when the Fed began lowering interest rates, I knew that it would put pressure on the dollar, making it worth less and less. So, Kim and I moved into commodities like gold and oil, which usually gain in value when the dollar’s purchasing power is less. We were then able to sell those investments at a high profit and move that money into multifamily properties as interest rates were at record lows and when property values were low. Today, those investments are paying off.
All of this was because we invested for years in our financial education, knew the new rules of money, and were prepared for the bad times to know only good times.
You can do the same. It starts with financial education and continues with putting what you learn into practice. The old rules of money, like saving and getting a solid job, will never hold up during the bad times. Today, it’s time to start building your financial house of bricks so you too can know only good times.