Technically we’re all going to be millionaires because of inflation.
Money is becoming worthless.
One dollar used to buy you a whole lot more. When I was a kid growing up in Australia, $200k got you a great home. The same home now costs $2m. This is what inflation does. It distorts the value of money.
Here are some short money lessons to get you closer to millionaire status sooner.
Volatility equals growth
Most people run from risk.
They shout from the rooftop “Bitcoin is a scam.” They don’t get it. The point isn’t to bet the house on a cryptocurrency. The point is to have a few assets like Bitcoin in your investment portfolio to add growth.
I once heard the head of a large US financial planning firm speak on the Real Vision Youtube channel. He said his clients added 1% of Bitcoin and Ethereum to their investment portfolios.
If they lose 1% of their wealth it won’t do anything to them. But by adding 1% of crypto to their portfolios they got, on average, 20% higher returns across all their investments.
Lesson I got from Ray Dalio
Take asymmetric risks — where the downside is capped but the upside is excellent.
Master the subtle art of leverage
Gotta admit, I’m relatively new to the concept of leverage.
I first heard about it in banking. When you put down 20% deposit to buy a property you’re unwillingly getting leverage.
Let’s say the property costs $500,000. A 20% deposit is $100k.
As the property goes up in value over time (because land is scarce), not only does your $100k go up by, say, 10%, but so does the other $400k you borrowed from the bank.
Writer Shane Parrish has a great definition: “Leverage is achieving results significantly greater than the force you put in.”
The internet is a leverage-creating machine.
Use leverage to amplify the results of your effort. Over time, less effort will be required to generate greater financial output.
It doesn’t take money to make money, it takes leverage to make money — Naval Ravikant
Always commit to the long term (or get wrecked)
The short term is for dumbasses.
Anyone who says “Tesla is down 40%” or “Bitcoin dropped 70%” isn’t worth listening to. All you want to know is, what’s the long-term performance?
Everything else is a clickbait dog and pony show.
Long-term investing creates automatic millionaires.
Buy assets during recessions
We’re likely facing a dog fight with an upcoming recession.
Things are going to get worse before they get better. No surprise here. A bat virus from 2020 was always going to wreak financial havoc.
We just managed to postpone it for 2 years by creating lots of money out of thin air and giving out stinking stimmys.
Remember: we live in a buy now, pay later financial system.
Spend like mad now. Get into debt. Worry about it later. Recession comes? Kick the can down the road.
Central bankers and politicians: Make it Gen Z’s problem. Suckers.
Recessions are when people on their way to becoming millionaires can get a free boost. Everything goes on sale. All one has to do is sort out the golden opportunities from the rotting carcasses.
Certain developments in technology can make you wealthier, faster.
Billionaire Mark Cuban says to watch these:
- Artificial intelligence
- Life extension
- Space tech
- Electric cars
Tech companies have taken a beating of late. But over the long term this exponential trend of tech can’t be beaten. This is where humanity is heading whether the unpaid critics like it or not.
Invest in what is obviously the future to get out-sized rewards.
Diversify like a badass
Listen to your granny. Never place all your eggs in one basket.
Expect some of your assumptions will be wrong. Plan for it. Hold investments in all the major asset classes: real estate, gold, commodities, stocks, Bitcoin/Ethereum.
That way if something goes wrong, you don’t lose the hot pink Hawaiian shirt off your back.
Cultivate a crafty inner circle
If you hang around the sky-is-falling-in crowd you’ll never make enough money to make life easier.
Belief is a powerful wealth tool.
If everyone around you thinks we’re screwed and America will become no better than Antarctica’s economy, it’s impossible to build wealth. Bad opinions will drown out your good judgment.
Investing requires you to believe in human ingenuity. To trust that big problems like climate change can get solved — and will get solved. Ruthlessly surround yourself with people who show optimism.
Leave the pessimists in the gutter.
Believe in the higher power of multiple income streams
Size doesn’t matter. It’s about having a portfolio of small bets that diversify your risk away from any one income source.
The riskiest is a salary.
In hard times, like recessions, corporations slice and dice salaries for breakfast. It’s not about the human cost. It’s about profits and keeping shareholders happy. This is just how business works.
Compassion and profits, unfortunately, don’t go together in the current global economic model. I wish it weren’t true. But it is.
Learn about online passive income
The internet created many lazy millionaires. Again, it is what it is.
These laptop-life humans figured out passive income. They set up websites, generated affiliate links, launched software on subscriptions, published evergreen content, etc.
Now they don’t have to work as hard because some of their income comes from active work they did years ago.
Learn about online income. See if you can add some to your income.
Focus on execution or drown in procrastination
Nothing in life comes easy.
Becoming an automatic millionaire is the result of the daily actions you take. Some talk. Some have ideas. Some think.
But automatic millionaires just do. They learn about finance, business, and investing and then put the knowledge to work.
You learn how to make money in new ways by doing it. Read that again.
Add compounding for free returns
Assets like dividend stocks can generate earnings.
People get tempted to take out their profits and live large. If you funnel the profits of your investments back in, they’ll produce more earnings over time.
The investment will generate earnings from both its initial principal and the accumulated earnings from preceding periods — Investopedia
This form of growth isn’t standard. This is known as exponential growth. It’s what Einstein called the 8th wonder of the world and it’s what billionaire Warren Buff-man is obsessed with.
The law of compounding produces the fastest automatic millionaires in history. Use it.
This article is for informational purposes only, it should not be considered financial, tax or legal advice. Consult a financial professional before making any major financial decisions.