When I am talking with people about money, friends and clients, the most common question I get is ‘how can I make money in today’s economy’…
It’s a question that could take hours to answer, there are so many different variables to consider. However, after having answered the question a lot lately, I have come up with some tips that will guide you toward better money outcomes.
It is important to note that I always suggest that you invest your money for the long term. This provides some protection against current market conditions…
Nevertheless, I recommend that you are aware of what is happening now, so you can make the best decisions to make money.
The type of issues that I suggest you keep an eye on include interest rates, of course, unemployment levels, potential political instability, changes in lending conditions, company earnings and population growth.
Now you don’t need to be an expert in any of these issues. Just knowing what is going on at a high level is enough. For example, if you here company earnings are falling or below expectations, that is a signal for the stock market.
If the threat of a trade war or worse, a nuclear war, is prominent, that will affect almost all markets.
Knowing a little about these issues will guide you when it comes to where to place your next investment dollars.
Each of these issues effectively increases the extent of uncertainty in the markets. The good news about uncertainty is that it creates opportunity…
Here are my six tips you need to make money in today’s economy
- Pay the Price of Education
This may sound obvious and simple, but consider the reality…
I speak to many people who have spent hundreds of thousands of dollars to buy a property based on not much more than something they heard on television or in a magazine.
Unfortunately, this is a recipe for disaster. The media unfortunately is not the best place to get your investing research and education.
This tip is about ensuring that you invest in yourself first. Spend the time and money to gain some expert knowledge, get a coach or mentor, who can guide you and upgrade your skills.
When seeking knowledge, be sure to check that you are getting information from someone who has been there done that…
This is the best way to ensure that you learn from their mistakes and save yourself the cost and time of making mistakes along the way.
Emergency Buffer Comes First
I know I know, this is so boring, but you need to have your emergency buffer in place before you take the next step.
As I mentioned earlier, there are going to be times of uncertainty, and despite the opportunities this presents, there will be some bad times.
Interest rates have been low for a long time now, this won’t survive forever…
The smart investors, and that includes you, right… will have protected themselves by having an emergency buffer in place to support them in the difficult times.
Use a Proven Strategy – To Make Money
Investing based on something you heard on reality television or in a magazine is not a strategy…
It might scare you to here that most people spend more time planning their next holiday than they do their financial future.
Like a holiday, if you don’t have a plan on where you want to go, what you want to achieve, how do you expect to get there???
A proven investment strategy is the road map. It is what will keep you focused and on the path to financial freedom.
Following a proven investment strategy will give you more predictable results, and will help you make more consistent and less emotional decisions.
A strategy will also help you to avoid making decisions based on ‘hot tips’, or the latest trend. Let’s face it, these things don’t get the results they promote anyway.
Investing is Your Business
When you start getting into investing, the first thing you will notice is the amount of paperwork that comes with it…
This should be a signal to treat your investing as a business.
The reality is, you are investing to make money, to replace your paid employment, so why not treat it like a business.
There are many aspects to investing that need your attention, including finance, tax, ownership structures, legal and insurance.
Successful investors treat these matters seriously, getting the right advice and following a system to ensure they are doing everything efficiently and correctly.
By treating these matters with a business like mindset, you will be more effective and be taking advantage of the various opportunities available to investors, like the tax advantages.
Remember the Rule of Five
What is the rule of five you say?
The rule of five states that you are the average of the five people you spend the most time with…
So when it comes to your money, based on this rule, you will be the average of the five people you associate with the most.
My tip for you then, is to ensure that you are not the smartest person in the room.
When it comes to success in investing, if you are the smartest person in the room, you are in trouble.
Success in investing comes from surrounding yourself with a good team.
We’ve already talked about getting a coach or mentor, which is a great start.
Other people that you want on your team include a good accountant who understands what you are trying to achieve, a lawyer who can support your strategy, and a good finance broker who can get you funds when you need them.
A word of warning though, investing is your business, don’t hand over control to someone else. I’ve written before about the cost of financial advisors – no one can do it for you.
You are the master of your financial future.
Know When to Do Nothing
I often look to Warren Buffett for investing inspiration. He has many great quotes, and this one is the basis for this tip:
“The trick is, when there is nothing to do – do nothing.”
Sometimes it is just as important to do nothing, to wait for the right opportunities to make money.
While I recommend that you have a consistent plan to invest. That is, a regular monthly allocation to your investment portfolio…
It is important however to know when it is right to do nothing.
Both the property and stock markets move in cycles. There are times in these cycles when you are best to sit and wait for the right opportunities.
Having the knowledge, skill and patience to do nothing is one way that successful investors distinguish themselves from everyone else.
In investment circles, they say that wealth creation involves the transfer of money from the impatient to the patient. Warren Buffett sums it up in his quote.
There you have my six tips for how to make money in the current economic climate. They may not be what you expected, but they are exactly the tips that will guide you in the current, and for that matter, any economic climate.
Let me know in the comments below which one resonates the most for you.