If You Do These 3 Things, You Will Survive The Next Market Crash
I meet many investors who are new to the world of investing. They have been investing for less than 20 years. Most have never been through a market crash or owned real estate worth much less than they paid for it.
First of all, it’s no big deal to predict booms and busts. All markets boom and bust. It’s just easier to predict a bust because the signs are so obvious—like excess euphoria, easy access to money, huge profits, and scores of happy amateurs entering the market.
Rich dad said, “There may or may not be this giant stock-market crash, but I can assure you that there will be booms and busts. There always have been booms and busts in the past, and there will always be booms and busts in the future. Predicting that booms and busts are coming is not much of a prediction.
One of the reasons so many millions feel less secure about their financial future is because they lack control of many aspects of their lives. Most people have very little control over a 401(k)—the investment choice of the American middle-class.
By taking greater control over your investments, you may also slowly take back more and more control of your life and your freedom. Warren Buffett said, “I’m the luckiest guy in the world in terms of what I do for a living. No one can tell me to do things I don’t believe in or things I think are stupid.”
It’s this simple insight that explains why those with a low financial IQ are still poor even when they make a six-figure income. They have no clue how to move their money into assets that make them more money.
Control Over Cash Flow
Most people understand that it’s important to have cash flow coming in every month. The problem is that they don’t understand the difference between good cash flow strategies and average cash flow strategies. Good cash flow strategies provide passive income that is taxed as little as possible and that you can control. Average cash flow strategies provide passive income that is taxed at the highest income bracket and that you have little to no control over.
In March of 2000, millions of employees in America found out that they have no control over the cash flowing out of their retirement plans, what they were led to believe were assets. To rich dad and to me, that is one of the greatest flaws of these new DC pension plans. The worker puts money in, hoping that the money grows. But instead, what workers are finding out is that they do not have much control over their cash flow once their cash buys a stock, bond, or mutual fund.
“One of the most important life skills to develop is to learn to gain control of your cash flow,” said rich dad. This is one of the most important lessons I learned as a nine-year-old boy. As I grew up, I had to gain more and more control, not less, over my cash flow.
Kim and I were able to retire early in life because we took control over which direction our cash flowed. When the stock market went up, we made money because we had control over our cash flow. When the market crashed, we made even more money because we had control over our cash flow. We do not sit around watching our money flowing down the drain doing nothing as most people did after the March 2000 crash.
If you want to be financially secure and possibly rich, you will need to know how to control your personal cash flow as well as monitor the global flow of jobs, people, and money.
Control Over Yourself
If you’re looking for someone to provide you with security and the life you want, start by looking in the mirror. The best way to reduce risk and survive the next market crash is by taking control. And that starts with your financial education. The more you know, the greater the control you have over your life and finances.
The most important control of all is to take control over yourself and how you manage your money. The lack of financial education in our schools has resulted in millions of free people who are willing to let the government take more control over their lives. Because we do not have enough financial intelligence to solve our own financial problems, we expect the government to do it for us. In the process, we surrender our freedom and give the government more and more control over our lives and our money.
Today, you control your future, and now is the time to educate yourself—to teach yourself the new rules of money. By doing so, you take control of your destiny and hold the key to playing the game of money according to its new rules.
Prepare for the Crash
A large market crash only frightens people with limited financial education. A large market crash is the best time to get rich for those with a strong financial education. As rich dad often said, “If you have a strong financial education, you are not worried about markets going up or down. You’re just happy they are going up and down.”
I want to restate that the advice of, “Invest for the long term, be patient, and diversify,” is solid advice for those who have limited financial education and investment experience. The point I want to reinforce is the idea that you as an individual have three basic choices.
- Do nothing
- Follow the same old financial planning advice to diversify
- Get financially educated
The choice is yours. Obviously, I recommend long-term financial education. Today, many other people are joining the chorus.
Editor, Rich Dad Poor Dad Daily