Did you know that about 80% of current millionaires started from nothing? Kind of squashes the idea that the rich just inherit their money, doesn’t it? This statistic alone just goes to show that it is in fact, something that the average person can achieve given the right tools, knowledge, and experience. How these people became millionaires will greatly differ, but it mostly comes down to one thing – knowledge.
Formal Education
Most people in the United States have at least a high school or equivalent degree, 9 out of 10 people. 1 out of 3 people have a college degree, which gives them some type of specialized knowledge. It’s this knowledge that prepares us to become contributing members of society by working a job. Now, not many people become wealthy by working your typical 9-5 job, but it is the way you survive in the modern world. Obviously, some jobs pay more than others, take for example a doctor vs a plumber. Both take specialized knowledge and skill, but people are willing to pay more for one than the other, hence the large difference in compensation. You want to position yourself to be compensated well, but what’s more important is what you do with the money you make. The doctor may be paid well, but if their lifestyle is brought up to a luxurious level, the plumber may end up having a better retirement!
Investment Education
What concerns me most is this, “you don’t know what you don’t know”. The world is full of opportunities to make plenty of money, but if you can’t see the opportunities, then you’re missing out. This is, I believe, where the next stage of education comes into play. Knowledge is the key to obtaining wealth. Knowledge is what allows you to see opportunity, where you were once blind.
Now, you gain specialized knowledge in college, but in my opinion, it isn’t enough. College prepares you for a job, not seizing financial opportunity. Financial opportunity is wealth gained by taking action on a perceived opportunity. How do you find these opportunities? Education. This may be more education in your field of expertise or something completely different. The key is gaining expertise in a field that provides a high return on investment. You may be the best dish washer in the world, but the odds are against you that you’ll see much of a return. So with that, here are the steps to seizing financial opportunity.
3 Steps To Seizing Opportunity:
- Formal education (get a good paying job)
- Investment education (find your investment vehicle and educate yourself)
- Take action (take action when opportunity arises)
Let’s run through an example using the two professions above, the doctor “Bob” and plumber “Todd”.
Uneducated: Dr. Bob
Bob has gone to school for years, learning to become a doctor. He has a more luxurious lifestyle, but has managed to save a decent amount of money for investing. He doesn’t have much time for continued education, so he relies on other people’s experience and expertise when it comes to investing his extra cash. His friends and colleagues making a killing buying and selling houses for a profit. Bob, with the help of his friends, decides to leverage all his investment money towards buying and selling houses. What bob didn’t realize, was that he was buying near the end of 2007. The housing market crashed, he couldn’t afford to keep the homes he had bought and had to sell at a major loss, completely wiping out his investment savings. Bob lacked the knowledge necessary to make smart financial decisions and will be working for years to make up for his loss.
Educated: Plumber Todd
Todd too went to school and learned to become a plumber. He lives well within his means and saves a good portion of his income every month. He doesn’t have much spare time, but over the years, has cut out a portion of his day to become more knowledgable about residential real estate. After a number of years, he has saved up quite a bit of money and has gained a lot of knowledge about multifamily real estate. The 2008 housing market crash hits and he watches housing prices in his area hit rock bottom. He seizes the opportunity and decides to leverage all his savings to buy multifamily real estate. He rents out all the units for consistent monthly cash flow that rivals his compensation as a plumber. Over the coming years, he makes consistent monthly cash flow, huge gains in appreciation, and raises rents to the point where he can quit his job as a plumber and retire early.
These are two very different scenarios and the difference between the two is – knowledge. Bob has a great paying job, but Todd will be laughing all the way to the bank because he was smart. He saved his money, educated himself, and took action when an opportunity presented itself.
Education is Key
As you can see, having specialized knowledge in an investment vehicle with a high potential rate of return is well worth your time. Investments can come in many different forms, from real estate, stocks, products, services, and more! Once you have your formal education, you need to spend any extra time you can learning to realize opportunities in an area of your choosing. Personally, I went to school to become a master web designer and have since chosen residential real estate as my investment vehicle of choice. I have started educating myself and will take action when I see the best opportunity. Keep in mind that most entrepreneurs run into failure, but it’s the ones that persevere who finally succeed.
What’s your investment vehicle of choice? Are you educating yourself to seize the next opportunity?
