As you guys know, my business is problogging. I make my living as a blogger, and more recently I am making a business of showing other bloggers how to do the same.
However, it is really easy to get so involved in MAKING money that you forget to figure out how to KEEP it.
At the same time, it is really easy to get so involved in the business that you forget to look at the world around you and see what’s happening. After all, this stuff is a lot of fun! I really enjoy learning new ways to make money and improve the business. I enjoy following the world of technology.
If we look at the offline world, however, I see a storm brewing. I see a federal government increasing in size. I see a volatile economy and a government which seems quite insistent on doing the wrong thing to fix it. After all, no economist in the world can justify the logic of spending more money and raising taxes on the producers in society in order to avoid an economic downturn.
The “stimulus” is anything but, and is just putting another huge nail in the coffin of the U.S. economy. The U.S. debt is now totaling around $600,000 for every family of 4 in this country. All signs point to a period of high inflation ahead, and some are even wondering if we’re facing a new Great Depression in the years ahead. If that happens, some are going to use the confusion to seek to institute anti-capitalist policies which will only seal the fate.
I’m just telling it like I see it. That said, I am not a doomsday kind of guy. I am, however, an “eyes wide open” kind of guy.
The answer to this lies in understanding economics and in practicing sound fiscal policy on yourself, your family and your business.
Over the last few weeks, I have been spending a little time thinking about my long-term financial security. After all, I have a family and I am responsible for them. I have been able to provide a good living for them thus far by blogging for a living, but there are bigger things to consider than just my own business when it comes to future.
After all, all of us who work online also operate in the real world. And that world is changing. The economic environment ebbs and flows and it affects our online businesses.
In this article, I’m going to provide my advice. At least as I see it.
You’re Not a Consumer, You’re a Producer
Partly because of the fact that most people completely lack any understanding of what makes an economy tick, people have become used to being called “consumers”. That’s ridiculous. If we have a nation of consumers, the country fails.
You should think like a PRODUCER, not a consumer.
Your entire financial bedrock is based on the fact that you need to CREATE more than you consume. You produce more than you consume.
Those people out there interested in just getting by, in milking as much as they can from the system… those people are looking at certain financial ruin, even if they don’t know it yet.
The valuable final product of whatever you’re doing for a living should be something which is exchangeable with others for money. This could be in the form of a physical product, a service, or information.
As bloggers, our valuable final product is information. Information is valuable because it can be exchanged for money. After all, people will pay for information they can use. Therefore, it is a product. So, create more value than you need to live. My job, then, as a problogger, would be to create more value than I need to live. It would be to help other bloggers collectively build more wealth for themselves than I would need to live. This would be value to others.
I could sum this up like this:
- Never forget that your business needs a valuable final product, exchanged with others for money. A lot of bloggers tend to forget that this is how you actually make money in this business.
- Focus on providing maximum value to your “customers” (whether they be paid customers or simply readers of the blog). By providing maximum value (more than you need to live), while also doing #1 above, you’ll always have enough money.
Converting To Assets and Preserving Wealth
It is one thing to make money. It is another to keep it.
Now, I’m not one that preaches the virtues of saving. Keeping money in your bank is actually pretty stupid as a long term strategy. Here’s why…
The biggest problem here is inflation. Those dollars we work so hard to earn are based on essentially nothing but our confidence. The dollar is no longer based on gold or anything else which is tangible. When you combine that with the fact that the government is printing money like crazy, inflation is inevitable. It is happening right now, and I believe we are looking at a hyper-inflationary period very soon because of the HUGE deficit spending by the idiots in Washington.
What this means is that those dollars become less valuable. And that means you can’t buy as much with it.
The unfortunate thing about all this, too, is that most Americans are trained into the idea of saving. We’re trained to think in terms of IRAs, 401(k) plans, and building a nest egg for retirement so that we can ideally live off the interest when we’re old. The problem is that inflation is happening faster than these savings vehicles can work.
Here’s a video from Robert Kiyosaki (author of Rich Dad, Poor Dad) where he claims that “Savers Are Losers!”:
So, as we make money with our online businesses (or however you go about it), it is smart to think about how to preserve that wealth, and how to hedge against loss. By doing this, you maintain the value of your assets and keep what you build.
Now, I am not a financial planner. However, here is my view on how to do this…
- Invest in metals. Gold and silver are traditional hedges against inflation and an insurance against economic crisis. There is a finite amount of supply in the world, and gold is an asset which has intrinsic value independent of currency. Especially right now, gold is increasing in value tremendously. Now, realize that gold is also a commodity and that means it is subject to market forces of supply and demand. Purely as an investment vehicle, there is an argument to be made about how well gold works. However, as a hedge and as a way to preserve wealth, I believe it is unquestionable.
- Consider real estate. Real estate is a good place to have money – IF you do it right. The thing to consider about real estate is that it is not a liquid asset and that, in a deflationary period, you’re going to be more likely to be in a position where you can’t get rid of it. Case in point, a lot of people’s homes have lost value in the last couple years and, due to oversupply and other issues, cannot sell the home. When the market is bad, buyers disappear. So, the thing about real estate is BUYING LOW. Then, you can turn it into a rental property. As more and more people cannot afford to buy houses, they will need to rent.
- Invest in income-producing assets. A car is an asset. A computer is an asset. Yes, we need these things, however they depreciate and are no way to preserve wealth. On the flip side, buying an asset which can produce wealth is very smart. For example, buying up defunct web properties which you can then turn into income-producing websites might be a good idea. Buying information which you can then apply to produce more money would be a good idea (an investment in yourself). Think in terms of creating new income streams.
- Be Smart With Debt. It is probably pretty obvious that having no debt is ideal. That said, the use of credit is actually a very helpful thing – IF you practice sound financial planning. Never use credit based on the HOPE of being able to pay it off. In my case, I use credit solely for the purposes of turning a purchase into a payment stream. Instead of forking over a large chunk of cash at once, I split it up into payments using credit. But, I NEVER use credit for short term gratification when I don’t have it exactly laid out where the money is going to come from to pay off that debt. It is short-term thinking with use of credit which has gotten so many people into credit trouble.
How I’m applying this:
- I am making moves to transfer some of the wealth I have created with my online business into gold and silver. I am doing this strictly as a hedge against the hyper inflation I think is coming. I have a CD with my bank which I have used in the past to invest business financial reserves and overcome inflation. The problem is that interest is really low right now and inflation is higher. So, the actual purchasing power of the money in this CD is decreasing. For this reason, I am planning to liquidate the CD and invest a large portion of it into metals and other types of assets.
- My wife and I are seriously considering selling our home and renting instead. First and foremost, we want to live somewhere else and closer to the beach. 🙂 At the same time, though, this house has already lost value due to deflation of real estate prices. We could either move out and rent this house out and be in the likely position of having to spend more money to keep it than I could make in rent…. or we could sell it, cut losses, and therefore be independent of further deflation in the market. I think the next few years are going to be even HARDER to sell a property than it is currently. For a few reason, I’m really seeing the virtues of renting for the next few years rather than owning.
- I’m working my ass off to build my business and produce new income streams. This is no time to get conservative and wait anything out. This is high time to bust some ass, build assets, build the customer base, build a brand. By doing that, you will take over where other people in your market drop the ball.
The overall point of this article can be summed up by these few points:
- Make as much money as you can by providing a valuable product in exchange for money, and producing more than you consume.
- While making as much money as possible, keep your eyes on the economic climate we operate in. Do what you think is smart to maintain the value of the wealth you create and realize that we work and operate in an ever-changing world that you need to plan for.
- Focus on building online assets, building your brand, and giving as much value as possible. The people who do that will be the ones at the top of the food chain as the economy finds new equilibrium.
As one last thought, let me say this. This digital economy we have here on the Internet is fairly new territory. The idea that information has value (even though, in the real world, it is just a collection of bits on your hard drive) is a new one, but that doesn’t obviate the fact that people are paying for information and seeking it out each and every day. The Internet, and businesses which operate online, are poised to do incredibly well during any economic peril.
Case in point, 2009 has been my best financial year to date since I begun working online. This while the fundamentals of the economy I live in are getting much worse.
So, for readers of this blog, there is every reason in the world to delve into this stuff and get busy with it. This is no time to worry. This is a time to get things done.
So, what about you?
What are you doing to manage and preserve your wealth? Are you even giving it some thought?