Getting Rich and Not Being Poor
This past weekend I took a one-day course called Financial Crash Course, So You Don’t have To. It was a whirlwind financial tour that touched on everything from self-examination of your personal values to Warren Buffet’s investing strategies.
There was one basic concept that I liked that I want to pass on. It was that you should have two financial plans:
- Plan A – Is the plan for becoming rich.
- Plan B – Is the plan to keep you from becoming poor.
Plan B is focused on defensive measures, so it covers: budgeting, debt reduction, life insurance, having a will, disability insurance and having an emergency fund in case you lose your job.
The goals in this plan focus on risk mitigation and putting yourself in the best possible situation should anything unexpected occur.
Plan A is your offensive plan. It is where you craft and execute a plan to get wealthy. It involves a commitment of time and energy to educate yourself financially and then apply your knowledge to the creation of a sizeable net worth. It can be applied in areas like: investing, building a business, real estate or even mlm.
The goals of this plan are the fun ones; financial freedom, to not need to work anymore, and to have the means to enjoy the finer things in life.
Overall this is an excellent approach and one that I generally follow. Even though I think I could accelerate my wealth building if I didn’t do it, I still make my regular RSP [that's about the same as a 401k for US readers] contributions and invest them in dividend stocks or other ‘safe’ investments. I have life insurance that will pay my wife some money in case I die and my government job pretty much covers all the rest of Plan B.
The rest of my energy goes into Plan A as much of what I write about on this site will demonstrate. Somehow having Plan B taken care of allows me more ease and freedom while executing Plan A. Plan A doesn’t always feel good and can get downright scary. Knowing that the worst case scenario is covered allows me to sleep a lot better at night and ultimately increases my chance of success.