What Should You Do with $10,000?
What did school teach you about money? For most people, the answer is, “not much.”
If you did learn anything, it most likely was how to save money, balance a checkbook, and use a credit card responsibly. For others, it means teaching how to invest in the stock market and manage a 401(k). And while those things have their place, it teaches you nothing about how money works.
The lack of ﬁnancial education in our school systems is a cruel and evil shame. In today’s world, ﬁnancial education is absolutely essential for survival, regardless of whether we are rich or poor, smart, or not smart.
A real financial education levels the playing field. The road is still rough, and becoming wealthy is not easy. But real financial education offers everyone greater control over your financial future. In other words, real financial education puts your financial future in your hands.
There was little chance of me earning a million-dollar salary as a CEO, climbing the corporate ladder to success, or becoming a major sports star, movie star, singer, or famous entrepreneur. Yet, with my rich dad’s financial education, I was able to take control of my financial destiny.
Below are what I believe is not being taught in our schools today:
How Money is Created
When the Federal Reserve was created in 1913, a deal was cut between the bank and the U.S. Treasury—a government-sponsored cash heist. Without a solid understanding of history and how money is created, true financial education is not possible. To simply say to a child, “Get a job, save money, buy a house, and invest for the long term in a well-diversified portfolio of stocks, bonds, and mutual funds” is a script right out of the central banker’s operating manual. It is a success myth propagated by the super-rich.
Money is created when the U.S. Treasury issues a bond in the form of a T-bill. The Federal Reserve writes a check for the bond, and the check is deposited into commercial banks, which then issue checks to regional banks, which then issue checks to smaller banks.
The rich then are able to borrow money from those banks in the form of debt. Kim and I use debt to buy assets. In turn, when we buy assets, it flows into the economy.
The financial crisis that we are seeing across the globe is simply because people are ignorant of how money works.
“What Should I Do with $10,000?”
I get this question often. And I believe one of the biggest disservices that financial experts can do for a person is to give a person the answer to that question. People have come to expect quick, easy answers, and they expect the “experts” to have all the answers. But the truth is, when it comes to investing, there is no one-size-fits-all answer.
The answer to “what should I invest in” is a personal decision based on what type of investments you are interested in and your analysis of specific investment opportunities. A piece of quick advice—even from the most knowledgeable experts—should never replace your own research and decision making.
Turning your money over to someone else to invest or acting on a tip from someone else means that you are leaving the fate of your money, and more importantly, the future you want to create with that money, in someone else’s hands.
Wouldn’t you rather be the one in control?
So the next time you have the opportunity to speak to an investor, whether it’s a well-known expert or simply someone who is actively investing, don’t just ask what they are investing in, ask why. Get to know their thought process, the way they analyze a deal, what factors they take into account when choosing an investment.
By increasing your financial education this way you will gain the knowledge you need to make sound decisions regarding how to invest your own hard-earned money.
Bubble Economics 101
“We’re probably in a global credit bubble, global debt bubble,” Paul Tudor Jones II, the founder of hedge fund Tudor Investment Corp. and one of the industry’s pioneers, said at the Greenwich Economic Forum in Connecticut in 2018.
All over the world, in every country rather than paying bills, they print more money. When the Fed prints more money, as they did in 2008, eventually the economy stabilizes as it has over the last 10-12 years. On the other hand, the debt grows and grows.
Unfortunately, people don’t realize that while the real estate markets look good, the stock markets look good, and the economy is inflated with artificial money, it’s one needle away from another bust.
Learn From Real Teachers
At the age of nine, I became an apprentice to my rich dad. Apprenticeship is one of the oldest methods of real education. Apprenticeship works because most apprentices learn from real teachers, not fake teachers. For example, in medieval days, if you wanted to learn to be a blacksmith, you learned from a real blacksmith.
But most academics have never done the real thing. We all know academics are out of touch with the real world of money. That will never change.
The good news is that this makes life easier for people like you, people who seek, read, and learn from real teachers from the real world of money.
How the Rich Get Richer
Without financial education, most people are financially ignorant about taxes. Many of these people vote for politicians who promise to “tax the rich.” Then they wonder why their taxes keep going up. The problem is not taxes; the problem is spending.
One of the reasons for wealth and income inequality are taxes. Simply stated, the rich know how to make more money and pay less in taxes than the poor and middle class—legally. The rich are not always smarter, they simply prefer not to be ignorant.
Just as I explained above, the rich borrow from banks via debt. And because the rich use that money to do what the government wants them to do—like create jobs or buy real estate, they pay fewer taxes—sometimes even zero taxes.
Taxes are the number one reason the rich get richer.
Don’t be Average
If you do want to be an average investor, you need to work hard on building your financial intelligence through financial education.
Out of your financial education, you will then need to develop three, main skills.
#1 Find an opportunity that everyone else missed.
See with your mind what others miss with their eyes. For example, a friend bought a rundown old house. Everyone wondered why he bought it. What he saw that we did not was that the house came with four extra lots. He discovered that after going to the title company. After buying the house, he tore it down and sold the five lots to a builder for three times what he paid for the entire package. He made $75,000 for two months of work. It’s not a lot of money, but it sure beats minimum wage. And it’s not technically difficult. It just took a different mindset.
#2 Raise money.
The average person only goes to the bank to get money. When a good opportunity comes around, they say, “The bank won’t lend me money,” or “I don’t have the money to buy it.” The average investor’s mindset about money and investing holds him back.
If you want to be a creative investor, you have to learn to do that which stops most people—raise capital. The creative investor needs to know how to raise capital, even when the bank won’t give her money. The good news is there are plenty of ways to get money that doesn’t require a bank.
There are many times I have bought an investment without a penny in the bank. I once bought an apartment house for $1.2 million. I did what is called “tying it up,” with a written contract between the seller and buyer. I then raised the $100,000 deposit, which bought me 90 days to raise the rest of the money from investors. Why did I do it? Simple. I knew it was worth $2 million.
#3 Organize smart people.
Intelligent people work with or hire people who are more intelligent than they are. When you need advice, make sure you choose your advisors wisely.
When it comes to being a rich investor, there are a lot of skills to learn and practice. But the rewards are astronomical. If you don’t want to learn those skills, then being a package investor is highly recommended.
At the end of the day, what you know is your greatest wealth. And what you don’t know is your greatest risk. But there is always a risk, so learn to manage it instead of avoiding it. Invest in your financial education so that you can then grow to be a rich investor through creative investing.
Editor, Rich Dad Poor Dad Daily