Financial Self-Reliance: Building Bulletproof Wealth®
Economic self-reliance: the ability of a person, place or nation to endure successfully without additional financial support from government or other agencies.
From earthquakes in Nepal, tsunamis in Indonesia hurricanes in the South, mudslides in Northwest, and drought in Africa (and now, California), it doesn’t take a weather report to convince the average person that life is full of surprises and challenges.
There will be personal storms and economic ones too. We’ve weathered severe economic storms in the recent past, and, coupled with challenges on the political and international fronts, our economy has taken a beating. The housing market tumbled, the stock market dove, and for awhile, it seemed the only things on the rise were inflation, unemployment, and financial stress.
Now in 2015, it may feel a bit like the calm before (or between?) the financial storms. And so it probably is. The same hedge fund managers and economists who predicted the 2008-2009 stock market crash are sounding warnings again of an impending crash.
So, just how do you prepare for a variety of possible economic tempests, squalls, blizzards and gales? Here’s how, in four steps…
Self-Reliance Solution #1: Take Control of your Personal Income
Research confirms that those who are entrepreneurial-minded are more likely to accumulate significant personal wealth. Simply put, self-employed people and business owners – accountants, lawyers, physicians, the woman who owns a popular boutique – are more likely to be millionaires or multi-millionaires than those who work for others.
Bert Whitehead, a financial specialist and writer, conducted a study which found that only 20 percent of our working population are self-employed or business owners. However, three-quarters of millionaires who work are self-employed or business owners.
There’s logic to this finding. First, those who have built their own work are protected from unemployment because they create their own income source. And with no boss to impose a glass ceiling, they can rise as high as they want in their own business.
As financial author Kate Phillips wrote in an ode to self-employment, “We’ve put our faith and trust in the wrong places, counting on an employer or a company to sustain us, when we should have been developing our own value in the marketplace. We can no longer count on jobs to sustain us, rescue us or bail us out.”
Successfully self-employed people also learn valuable money-making skills and principles out of necessity. They develop an aptitude for sales and service, attracting customers that return. They learn how to tough out the slow growth times, and bootstrap when necessary.
Many business owners become skilled managers of both people and business. They may become adept with finance, marketing, public relations and networking. It’s often been said that success breeds success and this is clearly the case with entrepreneurs.
Do they need a traditional job? Not with their own source of income. Furthermore, consider their ability to achieve the next solution…
Self-Reliance Solution #2: Develop Multiple Streams of Income
Once you have regained control of your own income, you want to make sure that you do not trade ONE job for ONE source of business or self-employment income! You must diversify your sources of income.
Smart business owners diversify their income. Rather than trading dollars for hours doing one thing, they leverage their time and offer multiple products and services, ideally, in a scalable way.
Economic self-reliance also means not relying on one business or investment alone. Many wealthy people own investment real estate (even if it’s not their primary business), receive dividends from participating whole life insurance, and make investments such as tax liens, bridge loans, peer lending, or businesses with which they have expertise. They put their money to use and concentrate on cash flow rather than accumulation.
And the next step separates the self-reliant from the spenders…
Self-Reliance Solution #3: Save Money Like a Millionaire… or a Duck!
Remember Scrooge McDuck, the cartoon character renowned for his gold? Donald Duck’s rich uncle, Scrooge McDuck is an industrious duck with an somewhat Scottish accent. According to Disney, McDuck is the richest duck in the world, having gained massive wealth from hard work, multiple business endeavors, and saving all he can.
Well, according to the work of Thomas Stanley and William Danko which formed the basis of the book, The Millionaire Next Door, our millionaire friends follow a similar formula as McDuck. Many millionaires and multi-millionaires describe themselves as honest and frugal, squirreling away on average more than 15 per cent of their incomes every year. Most could live on their savings for 12 or more years at their current standard of living.
Interestingly, Stanley and Danko, discovered that most millionaires did not inherit their wealth, don’t fancy upper-crust foods such as caviar, and don’t reside in homes in the most expensive neighborhoods. They don’t ‘dress to kill,” maintain a host of fancy vehicles, or spend untold thousands on diamonds or other luxuries. Self-made millionaires prefer to save their money that spend it on high-priced status symbols.
But how do you ensure the safety and therefore, durability of wealth? We’ve heard way too much in the past few years about instability in government… real estate… the economy… investments.
Self-Reliance Solution #4: Grow Your Money Safely
Remember the old adage: a fool and his money are easily parted? It’s still true. Those with wealth don’t rely on luck or subject their dollars to the whims of the market. They don’t confuse saving with investing, or investing with gambling. Investing your dollars is not the same as speculating with them.
Prosperous people don’t hand their assets over to someone else’s control without knowing they can expect predictable, even guaranteed results. And when they pay fees or commissions, they are sure what they are getting. Simply put, the truly wealthy leave little to chance.
Unfortunately, too many people don’t save enough, so they try to make up for their lack of savings by taking larger risks, chasing unrealistic rates of return. They try to “beat the market” (even though the professionals rarely can). Some even entrust their security to software that chooses their stocks for them, which could be particularly tricky in this brave new speed-trading world.
The wealthy choose solid investments over quick-buck schemes or the ups-and-downs of the stock market. They choose consistent savings, solid growth, and the principles of prosperity over market hopes and promises. Often, their portfolios consist mostly of business assets, real estate, and guaranteed assets such as cash value life insurance. In fact, most millionaires don’t go near the stock market with more than 20 per cent of their assets, according to Stanley and Danko’s findings.
Those who live by the Principles of Prosperity don’t cross their fingers in the hopes that a stock doesn’t fall or that they’ve chosen just the right moment to sell high. No, they spend their energy creating value, which leads to wealth, not worrying about the Dow Jones or the prices of commodities.
Are you financially self-reliant? If not, decide to develop your own financial stability through taking control of your earning power, developing multiple streams of income, saving all you can, and concentrating on reliable investments with known or guaranteed returns. That way, even in times of stormy economic weather, you will find yourself on solid ground.