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Getting Rich and Not Being Poor

by SMD 


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:

  1. Plan A – Is the plan for becoming rich.
  2. 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.

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Comments

5 Responses to “Getting Rich and Not Being Poor”

  1. Halli on June 13th, 2007 2:39 am

    This is much like in Roberts book “Guide to investing” except there were 3 plans.A)Plan to be secure B)Plan to be comfortable C)Plan to be rich.

  2. TDG on June 13th, 2007 2:40 am

    Interesting post. I intuitively have always done this, but never really thought about it. I liked the offensive/defensive analogy you made. Both are equally important. The trick, as you eluded to, is deciding which to focus more energy on. I am curious about your statement about accelerating your wealth faster than if didn’t do it – what do you mean?

  3. Jon on June 13th, 2007 2:40 am

    TDG, what I meant was that if I didn’t put 20 – 30 % of my monthly surplus into RSP and other safe investments, I could use that money to purchase other businesses or re-invest it in my own business. But, that becomes high risk – to have all the eggs in one basket and I value being able to have that comfort zone.

  4. mmb on June 13th, 2007 2:40 am

    Sounds interesting. I liked the defensive/offensive analogy as well. It helps me see what I am doing right and what I can be doing better. I started as a Plan B-er and I am slowly transitioning to Plan A. Nice!

  5. K on June 13th, 2007 2:41 am

    What I like about the Not Becoming Poor Plan is that this plan once up and running, it’s so basic and simple that it can be put on autopilot, freeing creativity up for the Get Rich Plan.

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