Page 4
Properly Assessing Risk
Risk assessment is not what you think it is.
Most people think to themselves, “I’m risk averse and I don’t take risks.”
Then they tell me what they do for a living and, of course, they are charting a course that will strike an iceberg and sink their Life Ship. They believe they are living a low risk life when in reality they are putting their entire future on the line without even realizing it.
Let me give you an example.
Imagine someone works at a job that pays $80,000 annually.
They’ve been there for 10 years.
That means they are truly an expert at their job and they are earning $80,000 for better or worse.
They already found out that they can’t earn $80,000 annually and build wealth. Life expenses, taxes and health costs shred your paycheck.
Perhaps in the past decade this person saved 12% of their pay and have stashed $100,000.
While experiencing the past 10 years go by, they weren’t building wealth, they were building a rainy day fund. A rainy day fund is something that can be raided when one of life’s disasters knocks on the door. Wealth is what you take into your retirement with you. Retirement years are the years when you simply don’t have the means or ability to produce what you could produce when you were 25, 35, or 65.
No one needs to be a genius to know that $100,000 pays for 1 – 2 years of living in retirement.
The 401 k is taxed as the saved money is withdrawn so that $100,000 turns into $75,000 almost instantly. Nothing wrong with a 401k. It’s simply a tool in the tool chest of building wealth.
Growing wealth in one real view is about planning on when you are going to stop breathing.
Whether someone has tucked away $50,000, $100,000 or $150,000 is not so important. Any of these amounts are helpful for that year or two but then they are vanquished.
What Has to Happen to Create Wealth?
The individual who has recognized that their life will outlive their savings therefore needs to learn SOLUTIONS. The most effective solutions require effectively implementing their knowledge, interests, loves, fascinations and then maintain the eventual successful implementation.
Some wealthy people simply stop their $80,000 lifestyle and jump directly to A POTENTIAL SOLUTION. I’m not in favor of this approach for the average human.
Most people working with most POTENTIAL SOLUTIONS will not succeed in throwing a touchdown pass in their first appearance as a quarterback.
But the ONLY way to begin to create wealth is to THROW that first pass. Then a second and third and fourth.
In fact, if you think about it, when you bring on non-experts and insert them into slots where the expert (The skilled starting quarterback for example goes out of the game and the back up is brought in, what happens most often is A TEMPORARY FAILURE TO SUCCEED.)
There are always exceptions, but people should assume they will give every POTENTIAL SOLUTION 100% of their effort and that there is some probability they will “succeed” and there is some probability their project will fail.
The determining factor over the course of time is almost always the ABSOLUTE COMMITMENT to the POTENTIAL SOLUTIONS that will factor into calculating the real risk factor.
If I estimate a 100% ABSOLUTE COMMITMENT for some POTENTIAL SOLUTION is about a 30% chance of success, I’d be happy to know that I have three strikes before my plate appearance in a ball game is suspended until my next at bat. Most baseball players fail to reach base about 65% of the time. Failing 65% of the time and having people come from miles around to cheer you on is a pretty cool feeling.
You could estimate that a 50% COMMITMENT for the same potential solution would only yield perhaps a 3% chance of success. Maybe 3%. This is why so many wealthy people have a story that goes from rags to riches. They had nothing. They worked their way to absolute zero or deep debt.
Then they did EVERYTHING DIFFERENTLY. They threw away the life vest and didn’t wait for the rescue ship but swam to shore. But there are just as many people who BRIDGED from their OLD LIFE to their NEW LIFE. Those bridges obviously take longer to complete because the individual still is giving many hours to their OLD LIFE and there aren’t as many to have ABSOLUTE COMMITMENT TO SUCCESS for the NEW LIFE.
But there is a stable “feeling” that is useful and constructive for many individuals.
Either approach can be effective for someone. I prefer people to use bridges even though other alternatives are typically faster to the end result. Those alternatives also have greater downside risk and are less interesting to me.
The Creation and Preservation of Wealth Requires Learning New Ways of Thinking.
People who become and remain wealthy look at money in very different ways than the vast majority of those who don’t.
People who become and remain wealthy look at money as something to protect, very much like you would your own child.
You’re reading this article online. 25 years ago you would have found it in Entrepreneur or Success magazine. Today it’s in Coffee with Kevin Hogan.
Not everything in the world happens online. But to not utilize the opportunities that being on line GIVES YOU is foolish.
Marketing online in contrast to marketing offline is a gift to the poor and middle classes. It would have been VERY difficult for me to have done much of anything in life without the Internet.
Learning to have a productive online world is the smartest, most predictable, most controllable and fastest way to go from zero to wealth in the world.
Don’t misunderstand. It’s not necessarily easy or simple. But it’s ALL predictable and controllable and that means it is a DECISION as to whether you will build wealth online. The timeline is also a DECISION. Specifically it is a daily sequence of choices.
25 years ago, opportunities like this didn’t exist. The young author in 1990 couldn’t connect with anyone. Today the author, the speaker, the coach, the investor, the broker, the professional, can connect with the world.
Make one decision and consider having access to the most comprehensive course for building wealth utilizing the most friendly avenue ever to come into existence.
There are other ways to accomplish what you want in life, but none will be as predictable or as controllable as this world.
