This time is different. Returning to the familiar would be a mistake. A recent dental survey asked this question: “Are you going to change your practice model post-COVID?”
Only 17% said they will change to a different model. 83% are planning on going back to “business as usual.” They believe that all will be well, and we will return to normal in a short period.
Seriously? 83% are denying the fact that the world and their personal economy will be vastly changed when the doors open back to business? It’s a “head in the sand” mentality that will force a very uncomfortable reality on the majority. But as I’ve often said, “The majority is almost always wrong.”
The majority sure was asleep at the wheel when it came to preparing for this black swan event that has become the trigger for the next great recession. The corona virus was a surprise, but just because the event was unanticipated, does not mean that we couldn’t have seen this reset coming, or that we need to grope in the dark to find our way in the post-COVID economy.
In fact, the virus has made some things clearer than ever: It exposed many weaknesses of our government, our businesses and our reliance on income or cashflow from our work (trading time for dollars).
When the economic engine restarts, many leaders will fall back on an idea once espoused by Machiavelli, who wrote: “The great majority of mankind are satisfied with appearances, as though they were realities.” They will try to reduce the anxiety in the air by restoring familiar routines, procedures and traditions. The problem is that business (as we knew it) cannot be recovered. It will need reinvention.
No one has been untouched by the pandemic, personally or professionally. Even those fortunate enough to have stayed in good health have likely experienced adverse financial effects, losing money in retirement and investment accounts, as well as equity in businesses. Some may lose their entire business and with it, their life’s work.
Let me ask you these questions: 1. Have you accepted the reality of the situation?
2. What is your strategic response, not only for re-entry to work but for your long-term future?
3. How do you want to recover?
The Need for Plan B Revenue
The worst number in business is the number one: one revenue stream, one doctor responsible for “producing” as the economic engine of a practice. You now are experiencing—maybe for the first time in your career—how fragile that income can be. In normal times, it might be a change in personal circumstance that keeps you out of the office; in this case, it was a virus and a government-mandated shutdown, factors far outside your realm of control.
So how can you create stability and reduce risk in this volatile economic landscape? Through diversification and multiple streams of income.
As a first-year dental student in 1980, I began building my Plan B revenue streams with a single rental property. After growing my portfolio, my properties produced enough cashflow that I could choose to leave dentistry to be with my sick daughter, survive a divorce and withstand a failed practice sale. I know the importance of multiple streams of income. I know how to create them based on alternative investments (capital assets vs. financial assets).
The traditional financial model is designed to get you exactly what you have. It’s the default plan, sold by Wall Street marketing and well-meaning, but ineffective, financial planners and advisors. Relying on the law of averages, they tell their citizenry of investors, “Let us manage your wealth for you because you can’t do it.”
This outdated plan is how most people construct their financial lives. They use the traditional model by default because “everyone else does it.” There’s something about safety in numbers that creates complacency. Unfortunately, too many don’t realize this until it’s late in the game.
Income is Not Wealth
If the amount of money you earn is limited by the number of hours you work, you will never be wealthy.
From a young age, we are taught by society to learn to “do something” well: get a job, begin a career, enter a profession. Our parents, our education system all emphasize the importance of “doing” – in other words, generating active income. It is 100% transactional.
True to their upbringing, most small business owners wake up every day, focused on creating more current income, with no thought of how vulnerable this leaves them.
As long as you show up every day, you generate income. You stop, it stops. That’s risky. Too many practitioners earn a high income but have very little net worth. They are like hamsters on a wheel, running as fast as they can just to keep up.
Capital assets—real businesses and real estate that produce annuity income (independent of your labor) set you free. You move from working harder to working smarter by acquiring and increasing the value of those capital assets.
Ever since I built my Plan B through real estate investments, I’ve been teaching others how to do the same—in up and down markets. Substantial benefits exist with real estate investments not available through other financial products.
Financial reset creates massive opportunities to grow substantial wealth through alternative investments. And now that reset is here.
The Great Wealth Transfer – Herein Lies the Opportunity
Market cycles are part of life. Since 1854, there have been 33 such cycles, with the average time from peak to peak just over fifty-six months. Four cycles since 1960 have lasted nine years or more. The most recent economic expansion lasted 126 months until the coronavirus appeared out of nowhere.
Markets—including real estate—are made up of billions of transactions. Those markets comprise the overall economy. And the economy goes up and down in cycles over years and decades.
What do these cycles do to our long-term wealth and Freedom planning? (You’ll notice I don’t call it “retirement” planning, because the point of all our hard work is to give us options.)
Every recession produces winners (the minority) and losers (the vast majority). Most people, despite their formal education, understand next to nothing about money and business cycles. It’s like a beginner surfer who gets pummeled time and time again by the waves, not realizing that there is a timing issue and that just doing the same thing over and over results in a sound beating.
In a reset, wealth (equity) changes hands. Those who have little or no margin become overexposed to debt and experience liquidity (cash and cash flow) problems. Banks tighten up lending criteria and decrease or remove access to lines of credit. The only way for the “losers” to survive is to sell assets and investments at a discount.
And guess who will be reaping the benefits? The select few who took steps to prepare for the business cycle that has repeated over 33 times since 1854. A recession is not new news to them. They have the capacity and liquidity (cash) to buy desired assets and investments at a discount from the motivated sellers.
The majority of practitioners remain focused on the income game, which often causes them to miss the best opportunities in life.
In contrast, the high net worth members of Freedom Founders (my Mastermind community) are focused on creating liquidity in their most valuable asset class: TIME. Their Plan B income gives them options, choices, in a word: Freedom. Freedom to be with their family, to follow their passions, to build their legacy. Their wealth is working for them so that they don’t have to (if they don’t choose to).
Their Plan B is not tied to the Wall Street guessing game. They don’t talk about day trading, beating stock indexes, avoiding taxes or achieving the highest possible return on their investments. They have moved beyond those schemes.
What they seek is: 1) preservation of capital, 2) recurring annuity cash-flow indexed to inflation, and 3) the ability to pass on to their heirs not just monetary wealth, but the ability and resourcefulness to create it in a highly volatile environment.
Money is not the goal – it’s the currency you use to achieve the goal. Until you realize that, you’ll never feel settled. You’ll never find Freedom.
It’s All About Relationship Capital
Life is difficult as a solo venture. Learning how to collaborate is the key to success and freedom.
When I created the Freedom Founders Mastermind, my goal was connection, so I brought together a team of experts to serve as a board of advisers for our members. For the past ten years, we’ve used our collective knowledge to select and leverage the best investment opportunities. This means we have access points to assets that will soon sell at substantial discounts. It’s the same plan we used coming out of the 2008 recession that more than doubled our net worth (and annuity cash-flow).These downturn opportunities appear only a few times in our life. Can you afford to miss this one?
There are four kinds of people: • Those who make things happen • Those who watch things happen • Those who wonder what happened
• Those who anticipate what may happen and act before it does
Which one are you? Are you prepared to take advantage of the Great Reset?
“There are two types of pain you will go through in life: the pain of discipline and the pain of regret.
Discipline weighs ounces, while regret weighs tons.” – Jim Rohn
Change is inevitable. And you can respond to it in one of two ways: You can embrace it, modify your investment strategy around it, and reap the benefits from the opportunities that present themselves. Or you can fear it, refuse to adapt, miss out on the opportunities that come your way, watch your profits shrink, and your wealth stagnate or decline.