A lot of money is changing hands right now. There are those who understand what is happening and those who are snoozing their way to having a large portion of the value they’ve created eaten for breakfast by a stranger in a red devil suit. The biggest wealth transfer in history is explained as a result of US$16 trillion going from one generation to the next. This is logical. The wealth transfer I’m talking about is of a different variety. It’s the result of the way money, and the assets it can buy, being completely turned upside down. Record unemployment and record highs in the stock market are the first bright red flag. As an investor and somebody who has spent 9 years working in finance, I’ve learned to be fearful (in a good way). Fear translates to selling while everybody else is buying. Fear translates to not believing the hype. Hype will destroy your financial future. I’ve talked about the trillions of dollars the US is printing right now to place a band-aid over an economy that was showing huge cracks before the global health crisis in September last year. In short, the REPO Market blew up. This REPO market in really simple terms is where hedge funds, banks, and brokers engage in short-term lending between each other. The significance of this event is straightforward: The financial system in the US ran out of cash. What followed was a health crisis that fast-tracked this already lingering problem. The solution: print trillions of dollars out of thin air and hand some of that free funny money out as stimulus checks. Whenever I think of free money from the government I always trip over the phrase “there’s no such thing as a free lunch.” Where did these trillions of dollars go? To the people who understand them. The result of the cracks in the REPO market and the printing of trillions of dollars helped contribute to the largest wealth transfer in history that is happening right under your nose. Here’s the unconventional approach to being on the right side of that wealth transfer.
Money Education Will Change Your Financial Future If there was ever a time in history to understand the basics of the financial system it’s right now. Money is being thrown around all over the place. The way money works is not hard to understand and you don’t need a financial degree from a prestigious university to get it. Once you understand money you get a chance to take advantage of the wealth transfer. The part that has always stuck out to me is that we bust our chops to go to work each day and earn a paycheck. We give up our time for money, so we better understand how it works. The quicker we do the less work we have to do in the long run, and the more time we can spend with our families. A lot of the value you create through your job is taken away from you without you knowing. The magic trick that takes your money away is hidden behind the smoke and mirrors of money printing, inflation vs. deflation, M2 money supply, loans issued by banks that effectively create money out of thin air, and the tax system you auto opt into when you get a salary or start a business. I will continue to spread financial education in ridiculously simple terms to help you understand these concepts that automatically work against you. Your Psychology Many investors think they are invincible at the moment. They’re high on their own ego. They can’t see reality hidden amongst all the false data that tries to say “we’re fine” while unemployment and bankrupt businesses act as a burning backdrop. How you think determines your ability to access the wealth transfer. The world will be fine, of course — but the world will look different. Some people will walk away with huge amounts of wealth for doing very little. Others will walk away with less than they had before this monumental event began last September. Abundance is everywhere around you. All you have to do is fine-tune your psychology. Here’s how I do it:
Practice stress relief daily (meditation is my best friend).
Challenge your beliefs.
Seek out diverse opinions. I consume content from people who agree with my point of view and, from people who think the world is ending. Both sides of the argument contain keys to your financial future.
Dare to see things better than they really are. Delusion is helpful when seeking out opportunities. Delusion tells you why not me?
The Way You Make Your Money A wealth transfer happens when you understand diversification. Diversification protects you. The trouble is many of you don’t take the idea of diversification and apply it to earning a living. You bet your future on a single company to make a direct deposit into your bank account every month/fortnight. The biggest wealth transfer in history requires you to put your money to work and ensure that your wealth has more than one side to it. You have your main source of income; you hopefully have a return on the money you invest; then you have your side projects that drip feed a little extra money in your pocket. Betting on one source of money when even the casino has no idea what’s going to happen is dangerous. Content Creation as a Job The final part of this wealth transfer is happening online. Each of you has the ability to exploit your knowledge worker ability and create content. Everyday events have enormous value when they are released as content in the form of writing, videos, audio or images. Content is how you attract ideas and people into your life. Those two things help you create wealth. All of us will be content creators in the new world. Expect a future employer to request a copy of your social media posts to see how you think, and how you’re moving your industry forward. Transfer some of the wealth that is created by sharing what you know and using it to solve real problems.
Final Thought Your life has value. Your work is given dollar signs to represent its value. Make sure the value next to your name is a true reflection of your capability and the endless possibilities that exist, thanks to this upside down world of finance that will inevitably change forever.
Author Tim Denning from The Ascent.