Do You Have A Financial Plan That Can Survive Bad Times?

Do You Have A Financial Plan That Can Survive Bad Times?

New Rule of Money #4: Build a financial plan to withstand the hard times

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.

Are you prepared for trouble?

As many found out, 2020 brought a big, bad wolf to the world in the form of COVID-19. Millions were infected, hundreds of thousands died, and millions more have been financially devastated.

In the US alone, 47.1 million Americans have filed for unemployment. Untold numbers of small business owners have gone out of business. People are losing homes and their way of life. Layer on top of this the fact that most people only have financial houses of straw and sticks with very little money saved and no investments to speak of, and you have a lot of people with their financial houses fully blown over by the big, bad wolf of COVID-19.

Bad times are always coming

The truth is that the global pandemic is not the first financial big, bad wolf to come, and it will not be the last. Bad times are certain to come. The only question is will you be ready for them? Will you have a financial house of bricks, or will you have a financial house of straw and sticks?

Today, unfortunately, most 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 prepare for trouble and change, and build a financial house of bricks.

Build a financial plan made of "bricks"

My rich dad said, “Those who are financially 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.

Building a financial plan takes different education

If you want to build a financial house of bricks, you need a different kind of education than most people get.

There are three types of education:

  • Academic education: This is your traditional school where you learn how to read, write, and do math. These are important things, but you do not learn how money works. You can be one of the smartest people in the world, academically speaking, but be very stupid when it comes to money. Lots of very academically gifted people have financial houses of straw and sticks.

  • Professional education: If you want to be a specialist, like a doctor or lawyer, you need a professional education. This is also important, but again, you do not learn how money works. You can make a lot of money with a professional education, but you won’t know how to manage it. There are lots of professionals with financial houses of sticks and straws.

  • Financial education: It is important to have academic and professional education, but if you don’t have financial education, you have an incomplete education. There are very different lessons you need to learn about money in order to have a complete financial education. Those who master the lessons of money are able to build financial houses of bricks.

How can you get a financial education? Not from a traditional school. You have to find alternative ways to learn. I’ve written a lot about the importance of learning by doing and playing games, for instance. Games like CASHFLOW are designed to teach you valuable lessons about money in a fun and interactive way. You can even play CASHFLOW for free online.

Other ways to get a financial education are to read books, listen to podcasts, take classes from real investors and business owners, find a coach, attend seminars and networking events, and find a mentor.

Building a financial plan takes a different intelligence

those who are financially intelligent make money in any market

It is not enough, however, to have just head knowledge when it comes to financial security to keep you safe during bad times. You also have to have a different kind of intelligence.

A while back, I wrote about the seven types of intelligence as developed by Howard Gardner, a professor at the Harvard Graduate School of Education, in his book, "Frames of Mind: The Theory of Multiple Intelligences."

While many people think of intelligence one-dimensionally, Gardner believed that there were many types of intelligence that need to be nurtured and accommodated.

Over the years, I’ve generalized these intelligences into the four types of intelligences below.



Mental intelligence is what most people equate with intelligence. It is head knowledge. It is very important, but without the other three intelligences, it is lacking.

Some people excel at learning physically. They have to do, not hear or read. I was like this as a child. This is what we call physical intelligence.

Spiritual intelligence is not just something you get in church, but rather it is the intelligence you gain when you are inspired by something. For instance, there is a spirit that is created when you watch special olympic athletes compete and push their bodies to the limit. That inspires something inside you.

Emotional intelligence is the maturity to keep a cool head and master your emotions to respond the right way in all situations, including very difficult ones.

If you want to be rich and be prepared for bad times, the most important intelligence you can develop is emotional intelligence.

Layoffs: 1.48M workers file for unemployment amid COVID-19 signaling slow recovery.

USA Today

I firmly believe that financial intelligence is 90% emotional and 10% technical information about finance and money. The reason for this is that most people struggle financially because of fear. They are afraid to take the leap to a new business idea. They are afraid that they will lose money in an investment. They are afraid of what they don’t know about money. They are afraid that they won’t survive bad times.

If you want to build a financial house of bricks, you need emotional intelligence to overcome your fear. Only then can you thrive in times of change and trouble.

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, oil, and cryptocurrencies, 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.

Original publish date: June 14, 2016