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What wealthy people know that others do not? November 26, 2008

Posted by shaferfinancial in Uncategorized.
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Let’s be clear, the wealthy aren’t smarter than the herd.  They aren’t luckier, nor do they have some special advantages.  What they do have is a basic understanding of how money works.  Additionally, they believe and practice the following items:

1.  They can’t be experts in everything, so they become experts in very particular areas;

2.  If they behave exactly like everyone else, then they will end up exactly where everyone else ends up;

3.  Common wisdom should really be called “The Madness of Crowds;”

4.  Nobody will look out for their money except themselves; and

5.  Financial knowledge is one of the most important types of knowledge to acquire in a capitalist economy.

These ideas lead them to act in certain ways:

1. They read about money and finance, find mentors and coaches, and remain diligent in their approach to acquiring wealth;

2.  They approach wealth creation simply as a problem to be solved;  

3.  They learn to manage risk;

4.  They learn to minimize unintended consequences;

5.  They create systems to minimize taxes owed;

6.  They learn to use leverage;

7.  They create a formal wealth building plan; and

8.  They consistently and diligently apply the knowlege they have acquired, refusing to be waylaid by naysayers or structural economic issues or periodic personal issues.

90% of people admit they have no wealth building plan in place.  The same 90% do not believe they are “very knowledgeable” about financial ideas.  90% of people are dependent upon the government and/or family/friends for part or all of their retirement income.  The median (half above, half below) net worth for the top 10% of families was $1.4M in 2004 (Last year we have numbers for).  Families with a net worth of $1M or more were in the top 8% of Americans.  If you took that $1M dollars of net worth and annuitized it you could receive approximately $6,800/month in income.  So for the top 8% of Americans, if they turned their entire net worth into cash, they could earn $6,800/month in income.

Defined benefit pensions once protected 65% of Americans from the requirement to understand finance enough to create their own retirement plan.  That number is down to 35% and moving lower every year.  The majority of defined benefit pensions are now government sponsored.  Governments are now being stressed to cover these pensions, with their only choice to raise taxes.  Raising taxes is now becoming very difficult politically.

Wealthy people understand all this.  Do you? 

 

 

 

 

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Creating a wealth building plan does not require advanced math.  It is not like learning rocket science.  It is not beyond the abilities of most Americans.  It just requires the will to succeed, the ability to ask for help, and some grounding in the reality of how wealth is created.  Creating individualized wealth building plans is what I do.  Consider joining the Shafer Wealth Academy now, before you end up with the herd!

Yours in wealth creation,

David Shafer, Ph.D.

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