- Dispassionately understand the real risks and avoid getting confused by fear, discomfort, and opinion.
- Have the courage to expose yourself to good risk when others are unwilling or unable to do so.
- Maintain personal responsibility; never rely on the crowd—or anyone else for that matter—to make up your mind for you.
We aren’t satisfied risking X in hopes of making a fraction of X. Instead we want to risk X for the potential of receiving 2X or 5X or 10X. We want to leverage our assets to increase our reward disproportionately to the risks we are taking.
Every dollar and every cent can be used in one of two ways:
- To support you, your family, and lifestyle.
- As a tool for making more money.
Wealthy people use a small percentage of their net worth to live on.
Living on less changes everything
My philosophy is that when life puts a fork in the road the riskier choice is most often the most rewarding. To reach where you want to be in life, it's highly unlikely that a series of simple risk-free choices will lead you where you want to go.
When you owe money to someone, whether a bank, corporation, or an individual, they own you and the rights to the fruits of your labor (your production) until that debt is repaid.
If you’re in that small minority who owns their house outright, doesn’t carry any debt and has cash in the bank—we know what you’re saying to yourself right now: I don’t owe anything to anyone, so I’m free. Sure you are. What about income tax? Sales tax? Property tax? You will still owe those, no matter what. If you choose not to pay the IRS for long enough, they’ll take that house and haul you off to jail.
There is also inflation to consider. The Federal Reserve puts more and more money into circulation every year, making your cash worth less and less all the time. That means that unless your assets appreciate faster than the rate of inflation, they are worth less and less all the time, too. So you can see that no matter what your net worth is and no matter how little debt you have, you are continually swimming upstream as debt, tax obligation, and inflation eat away at your assets.
The most important and pervasive reason the American Dream has become more dream and less reality is a fundamental lack of real value creation.
Live on the Margin