The Courage To Build Wealth

The following is a guest post from The Shark Investor.

Just imagine you had no mortgage or rent, no debts and bills to pay, health care was free and food was cheap.

How would this change the financial decisions you take? Would you build your wealth better if you had no fear?

"If money is your hope for independence you will never have it. The only real security that a man will have in this world is a reserve of knowledge, experience, and ability." - Henry Ford used to say.

I live in a country which survived a hyperinflation in 1997. I was still just 18 but I had already saved an amount of money which most of my friends couldn't imagine.

The hyperinflation nuked my savings. Simply erased them all to zero. But I am thankful for that. It didn't nuke my self-discipline, knowledge or talents. It just gave me a lesson.

Making mistakes is not scary. Losing money is not scary. But we are all taught the opposite - don't take risks, get a safe job, invest wisely in a retirement fund and you may eventually get wealthy at 65. Uh.

The fear of losing money is your main enemy, and it's a strong enemy. It's the fear of getting broke. The fear of having to leave your home and move to a smaller one. The fear of changing your job. The fear of asking for salary raise. The fear of starting a business. The fear of your friends reaction when they realize you are in bad financial situation.

If you can fight this fear, you will be able to get rational investment decisions. You will be able to work on exciting projects, to try starting a business or playing aggressively at the stock market.

To beat this fear you need to go through several steps.

Step One: Evaluate your current financial situation

Many people rate their monetary situation as "OK". If you are like them, that's probably because most people around you are in similar situation. Chances are if you think your financial situation is OK, it's actually mediocre. If you are just one salary away from a financial trouble, then your situation is not OK. It is horrible.

Your real wealth is measured by the time you can live without having to work. How long is that? One month? Three months? You are almost broke - right now.

Step Two: "There is no spoon"

Like in the Matrix you must realize the problem isn't really a problem. It is not nice to be broke, unemployed or overworked because you've made a bad investment or financial decision. But after passing Step One you'll most probably realize there is not much to lose. If you are almost broke like most people from the middle class are, you have almost nothing to lose.

Wouldn't you prefer to risk almost nothing hunting for a real, fulfilling and wealthy life? Or, like most do, you would prefer mediocre life because of a false financial security?

Your money, your home and your job aren't your real assets. Even if you lose them, you will still be the same person with same knowledge, talents, self-discipline and courage. So is it really wise to waste your talents, knowledge and skills on unfulfilling job just to save your home and money?

Step Three: Start little actions

The courage to build wealth will not come suddenly and in a day. If this article raise some awareness in you, then great, but I don't expect you to sell your home and start a business or invest in forex tomorrow.

Build your financial courage step by step. Define the things that scary you the least and try to do them first. Don't worry about the exact outcome. Losing small amounts will be useful to build more awareness. Then grow further by taking more risky steps and trying with biger projects and bigger changes to your financial life.

Times of recession are best for training your financial courage. In such moment it is much easier to see how fake the ordinary assets are and that the only real value is in your internal resources. It's much easier to risk now rather than at times good for the economy - when just placing your money in mutual funds would bring you sweet income.

Don't let your dreams die because you have a mortgage to pay. If you have a business idea start working on it. If you want to make a high risk investment, evaluate and jump. The only sure way to never build your wealth is to never take action.

Comments

[Trent Hamm]

It's all about the little things for me. I make ten minor moves that each save me $1 a month, that's $120 after a year. That's enough to start investing with, and it comes from things like making your own laundry detergent.

[rwh]

I think I'll stick with trying to build my wealth slowly.

[Zook]

It all depends...If you are 25 and enjoy your work and are saving NOTHING and are in debt, than maybe this article will speak to you...But as far as building wealth "slowly", If that is what you call investing/saving 20-25% of your income, with no credit card debt and paying down the mortgage, call me "slow" all day long...

[Trent D.]

Is anyone else surprised to see this article on FMF?

[rwh]

Yes, that's my definition of slow. Save regularly in a diversified portfolio, eliminate debt and keep working.

[FMF]

Trent --

Just for reference, this blog is dedicated to offering a variety of viewpoints on various money-related issues. I write from my own point-of-view, but that doesn't mean I don't allow others (in both posts and comments) to express contrary views.

So with that said, there's really very little that should surprise anyone here.

[Trent D.]

Okay, fair enough - typically the advice I've seen here is more conservative, "slow and steady wins the race" advice, which is more up my alley. There are certainly other valid viewpoints, depending on one's aversion to risk (or lack thereof).

I was just a little surprised because this article seemed to stick out more than some others.

[The Shark Investor]

Hey mates, thanks everyone for the comments and the contra-arguments :D I don't think someone sell their house tomorrow being "enlighten" by the article. But I do think people need to be more courageous in their life and their finances. I know I am trying hard to do it myself and I am making a lot of mistakes on this path - but each of them just makes me smarter. You should not get satisfied with mediocrity, that's what I am trying to say. If your life is not fulfilling now, strive for achieving your dreams even if losing assets is part of the path.

[rwh]

"You should not get satisfied with mediocrity, that's what I am trying to say."

So does that mean no index funds?

Personally I think it takes plenty of courage to stay invested in the market during these trying times.

[Michael Blackburn]

Interesting article. I think some people are concerned that this is investment advice, that they should get out of index funds and grab a couple slices of sub-prime debt.

I think this is not so much what you should do with your money, as what you do with your life & your time.

[The Shark Investor]

Hell no, I am not qualified to give an investment advice and wouldn't give. You got it right, Michael, thanks for the comment.

[Dr. Artfredo C. Abella Ph.D]

The primary reason I believe that a person could not start building his wealth is because of the fear factor. Persons who are timid enough even to venture in their thoughts in building their wealth is as good as a warrior being defeated before the battle starts. First, you must have the courage to even entertain the thoughts of building your wealth. Secondly, persons who attempt to become wealthy quickly are doomed. Wealthy people like Warren Buffet, Bill Gates and Donald Trump built their wealth through times. Invest time, hard work, persistence and consistent savings and investing are the starting points of building your wealth. Money easy comes, easy goes. Money won abruptly like in the lottery and sweepstakes are short lived since the one who won it is incapable of managing the huge sums, so the following weeks and months, he/she is back to square one again. Have the courage to build wealth for what it will make of you - courageous, prudent, frugal,hard working, having integrity, savekaholic, investment conscious and above all God fearing. Have the courage to build wealth and build it gradually. Fashion and gradualness are the key points to building your wealth. Forget about the get-rich-quick schemes because they are panacea that will never be attained. Seek for the Utupian Wealth beyond your imagination but build it through times or in other words. invest or buy time to have it.