Poor, Rich & Wealthy: The Difference No One Tells You
The Poor trade time for money. The moment they stop working, the money stops too. It’s a paycheck-to-paycheck existence.
The Rich also trade time for money, but at a higher hourly rate. They’ve built a rainy day fund, maybe six to twelve months of expenses saved. But their financial security still depends on their continued effort.
The Wealthy, however, play a different game. They make money even while they sleep. They don’t exchange time for income; instead, their investments work for them, creating streams of passive income.
Getting wealthy is the easy part. Staying wealthy is the hard part.
Everyone knows about Warren Buffet and Charlie Munger. But 40 years ago, there was a third partner in their circle: Rick Guerin.
Investor Mohnish Pabrai once asked Buffett what happened to Rick. Mohnish recalled:
"[Warren said] “Charlie and I always knew that we would become incredibly wealthy. We were not in a hurry to get wealthy; we knew it would happen. Rick was just as smart as us, but he was in a hurry.”
What happened was that in the 1973–1974 downturn, Rick was leverered with margin loans. And the stock market went down almost 70% in those two years, so he got margin calls. He sold his Berkshire stock to Warren – Warren actually said “I bought Rick’s Berkshire stock” – at under $40 a piece. Rick was forced to sell because he was levered.
Charlie, Warren, and Rick were equally skilled at getting wealthy. But Warren and Charlie had the added skill of staying wealthy. Which, over time, is the skill that matters most."
However, Wealth comes with its own problems
Wealth beyond a certain level can become a burden, especially if it brings constant worry about preserving it, protecting your family, and its impact on the next generation.
As Chuck Palahniuk wrote: ‘The things you own end up owning you.’
Take it easy until next time.
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