Blog | Commodities, Paper Assets

Are You Getting Used to the Crisis?

meet your own rich dad - start your quiz now

I'm amazed every morning when I get up and read about how BP hasn't fixed the oil leak in the gulf and how oil is still rushing into the ocean. Oil has spilled into the water at the rate of thousands of barrels per day since April 20, 2010—over two months. Currently there's no fix in sight as top engineers and scientists work round the clock to come up with a solution.

The devastation caused by the oil spill is tremendous—both to the environment and the economy. The cost of the spill has exceeded $3 billion, and the pictures of oil-marred beaches and oil-covered birds and animals are incredibly sad.

Yet, I'd be willing to bet that many people have begun to forget about the oil spill. Life gets busy. Breaking news becomes old news. And in the process you begin to accept things as status quo. Certainly the people who live in the gulf—whose lives and businesses have been ruined by this spill—think about the oil disaster continually. But the overwhelming majority of Americans probably have little-to-no thought about the spill during their normal, daily routine. They've become used to the crisis.

The people in Texas probably did the same—until yesterday. Yesterday, oil landed on their shores. Now the oil spill is their disaster too. They're part of the crisis.

Stay Alert

If you're not careful, the global financial crisis can sneak up on you the same way the oil disaster did for Texas. It's easy to get caught up in the day-to-day struggles of life and lose sight of the large economic crisis looming over each one of us. Even worse, sometimes it's easier to just ignore it and hope that it doesn't affect you.

Unfortunately, ignorance isn't bliss. It's dangerous.

As I wrote last week, the signs that the economy is crashing are all around us. The government and the ultra rich don't want you to wake up to this fact. They want you living in blissful ignorance, spending more money, and accumulating more bad debt. They want to profit off your blissful ignorance. That's why they tell you that the job market is getting better in headline catching ways. And why this week's news that employment isn't better, but actually getting worse, comes as a shock to many.

Those jobs Obama was celebrating in June? All government census jobs—and now all gone. The US Government laid off 225,000 people in June. The private sector added only 83,000 jobs. Despite this the unemployment rate dropped from 9.7% to 9.5%. Why? Not because of a better job market but because of the growing number of people who have been unemployed for so long that they are no longer counted as part of the labor force.

Our leaders are betting you won't connect the dots. They're hoping you only read the headlines. They're hoping you get used to the crisis.

Don't let your guard down. Stay alert and vigilant. Continue your financial education and look for the opportunities this crisis will bring. While others are living in blissful ignorance until the crisis takes them out, you can begin preparing now to not only survive but thrive when the economic collapse hits in full force.

Start Diversifying

The old rules of money tell you to invest for the long term in a well-diversified portfolio of stocks, bonds, and mutual funds. The problem with that logic is that it's not really diversification. It's just a diverse range of products in one category—paper assets. If paper assets go down, like they are now, you go down too.

True diversification involves all four of the major asset classes: Business, Real Estate, Paper Assets, and Commodities.

Personally, I'm not worried about this crisis. I'm excited. It's the biggest wealth transfer in history. For me, it's a great time to buy investment real estate: Prices are low, debt is available at some of the lowest rates in history, and as you know I love cash flow.

I'm also investing in my business. I understand that there's no time in history where financial education is as important as now. I built my company for such a time as this—to help people just like you to come out on top.

Though not my preferred investment vehicle, I've also bulked up on some paper assets like shares in gold and silver mining companies.

And I've increased my holding of both gold and silver. (For those commenting last week on my COR article on the price of gold going down, the point was not that it was a bad thing but a good thing. In the long term I'm still bullish on gold. But in the short term I plan to take advantage of the dip to buy even more gold at lower prices.)

By being truly diversified, I'm much more secure than the average person. But to invest this way you must have a high financial IQ. I encourage you to continue to read books, take seminars, invest in coaching and mentoring, and to surround yourself with like-minded people.

By staying alert and continually aware of the coming crisis, you'll prosper while others perish.

Original publish date: July 06, 2010

Recent Posts

Three Investment Values
Personal Finance

The Rich Dad Guide to Investing Values: Defining Your Path to Financial Success

It’s important to know which core values are most important to you, especially when it comes to the subject of money and financial planning.

Read the full post
Risky vs. Safe Investments
Paper Assets

Smart Investing: Understanding the Difference Between Risky and Safe Options

What you may think is a “safe” investment, I may see as risky. For example, many financial planners advise their clients to get into so-called “safe” investments — such as savings plans, mutual funds and 401(k)s.

Read the full post
Mastering Money
Paper Assets, Personal Finance

Mastering Money: The Key to Achieving Financial Freedom

Begin the path to making money work for you today, not the other way around.

Read the full post