After years of investing and talking with many self-made wealthy people, I am convinced that we all get about 3-4 big financial opportunities to make quantum leaps in building our net worth. In order to reach F.I.R.E. we need to leverage each one of these opportunities. I am an optimist, so perhaps we live a long time and get a couple more, but not many more.
The sooner you catch them when they come, the faster you can achieve F.I.R.E. The bad news is that once these opportunities are gone, they are lost to the sands of time. The good news is that another one is always brewing around the corner. Are you preparing now to be able to jump on the next opportunity?
Prepare For Financial Opportunities
These opportunities can come in many forms. It can be out of the ashes of economic disaster or through diligent and disciplined investment over time. But the key factors are planning, timing and time. I can prove that this is a real thing. The world’s greatest investor, Mr. Warren Buffet of Berkshire Hathaway, is currently sitting on over $100 Billion in cash.
Let that sink in for a minute. He isn’t buying more stock with it right now. Why would he be sitting on that much cash? It is simple, he is waiting patiently and preparing for the next big opportunity. And I believe as individuals we should also be preparing and waiting patiently, because it will come.
I am a solid middle class guy with a decent white collar job. I live with my wife and our child in Southern California. I had been saving diligently in my 401k and dabbling with side hustles and other investments for my first decade in the workforce, making steady but not amazing progress. Then the financial shock of the Great Recession hit around 2008-9. Over the course of the following couple of years the real estate market imploded. I am going to make this very simple. Because I was not living the high life during the good times, racking up debt, buying expensive cars and neglecting my savings, I was therefore well prepared to take advantage of real estate investments on deep discount.
FREE TOILET PAPER
During the run up to the great recession the good times were rolling and everyone was “getting rich” off real estate. I could have been spending money on big toys, lavish vacations, expensive meals out or even taking out million dollar loans to buy expensive real estate. But I wasn’t. On business trips I would bring home the extra roll of toilet paper from the hotel in order to use the TP at home. You get the picture. I was living within my means, not racking up debt and without knowing it at the time, preparing.
I actually did not think I would ever be able to afford a home before the real estate collapse. Although lenders were doling out millions of dollars to people without jobs, I was not comfortable with racking up so much debt. So after real estate imploded and bottomed out, I bought a nice house in an upper middle class neighborhood with great schools. That house is now an income producing rental property with tons of equity.
Opportunity #2 is not as dramatic but was just as powerful at transforming and growing my wealth. When the Great Recession hit, stock values were virtually lopped in half. I did not have a lot of money at the time, but I continued to max out my 401k, and now 9 plus years later of continual growth every single year, these accounts are looking pretty good.
Again, I seized an opportunity to continue to contribute as things seemed bleak. I knew people who cashed out at the bottom and swore off stocks. Some people gave up on the stock market at exactly the wrong time to do so.
I AM NOT HERE TO HUMBLE BRAG, I AM HERE TO PREPARE YOU!
My point is not to brag, who cares about my luck, timing or choices, right? My point is that opportunities like this will come around again. So, now that times are really good (all time stock market highs, high real estate values, low unemployment, etc.) it is time to prepare for financial opportunities. What could go wrong?
The answer: ANYTHING COULD! ARE YOU PREPARING?
HOW TO PREPARE FOR FINANCIAL OPPORTUNITIES
My wife calls me a planner and I really appreciate the compliment. Because something will happen again that we do not expect. Real estate could hit a snag, an economic crisis could begin, there could be terrorism or international conflict. Something could happen to beloved stocks that Wall Street loves. Look at what has happened with Facebook lately and will continue to go on. So here are some things people can do to be prepared for the next opportunity:
Reduce the Debt
Needless to say, people that are in extreme amounts of toxic debt are the opposite of prepared. In fact, they are most at risk when the next shock comes. I know the recession was hard on everyone, but the people in huge debt had major life disruptions.
Have Cash & Assets
Why not be like Mr. Buffett? Start a cash stash for when the next opportunity comes. Maybe a great stock gets hit with a scandal. In the short run it could go on deep discount. You will only be ready if you have the cash to pounce on the opportunity.
Diversify Income Streams and Asset Classes
Now is the time to develop side hustles and skills. Now is the time to develop different income streams. Now that times are good is the time to think: what if I lose my job? Our primitive brains live in the moment and have a hard time understanding that things could be different in the future. Different is not necessarily bad, it is just something we have to be able to absorb and adapt too. In addition, we should be thinking now about our exposure to various asset classes. Are we prepared if stocks take a dip?
EVERY DOG HAS HIS DAY
Everyone’s opportunities are unique to them and their situation, age, location, etc. But, I truly believe they come in some form or another to each of us at various times in our lives. The main question to ask yourself is are you as prepared as you can be?
What can you do today to be ready to jump on opportunity tomorrow? Perhaps it’s a business idea, a hobby turned into a money making venture, a special skill, an economic condition that changes, etc?
Perhaps it is as simple as saving a couple hundred bucks a month that adds up so you are prepared for the unexpected. That unexpected could be one of your 3-4 big opportunities. I am waiting and preparing today for my next one, are you?
Greg Magnuson is the co-founder of The Money Vikings. The Money Vikings are a couple of regular guys named Greg and Jerry that live in Southern California. They are dads and personal finance bloggers sharing ideas and inspiration to achieve “true wealth” in life; a balance of health, family, friendships and money.