The Wealthy knew 7 Things: They did not Panic from the Coronavirus

Would you like to know what the rich knew that others did not know during the Coronavirus? Having more knowledge can help keep your finances together even when economic storms arise and cause massive damage. The wealthy did not panic during this pandemic because they:

 

-Practice Crisis management

-Are in Complete Control of their Finances

-Have Multiple Streams of Income

-Take Insurance Seriously

-Adopt to Changes in the Economy Fast

-Have Accumulated Strong Assets

-Hoard Large Amounts of Cash

Regardless of where you are in life you must understand it is possible to apply some of the techniques the wealthy use to your own life and situation.

• Crisis Management

Crisis management deals with the general guide by which an organization or business reacts to a disruptive and unexpected event that threatens to damage the business or its stakeholders.

The history of crisis management goes back to the 1980s when numerous events were taken place that threaten to cripple businesses extremely.

There are usually three elements involving crisis management which are (1) a threat to the business (2) the element of surprise, and (3) a short decision time.

Many of the rich have their own businesses so I will provide an example of how they use crisis management as well as how an everyday employee could do the same.

Lets say a business owner name John has a retail mega store chain that buys most of their inventory from suppliers over seas in a high-risk coronavirus zone. Thinking back before the coronavirus the business owner John knew that it would be a threat to the business if inventory couldn’t be bought from their overseas supplier even if temporary.

In advance before all of the operations began they would asked themselves “what if” questions then decide on a choice of action way in advance. We will use the three elements to show you how the rich have used crisis management and do not panic at times of uncertainty.

-Threat to Business: John’s Retail stores unable to buy their inventories from overseas nations due to a critical event such as the coronavirus or any such thing

-Element of surprise: John knows it is possible a critical event may cause a challenge to his business operations so he plans in advance to have multiple suppliers available in different parts of the world but not only one or very few suppliers.

This decreases his risk so he does not panic compared to other related business owners who have one or few suppliers in foreign nations. If John is caught by surprise and an event like the Coronavirus occurs he leverages his available option supplier lines and continues business.

-A short time decision: John may not have much time to respond when a critical event occurs so having a plan in place in advance helps keeps his mind at ease.

John can revisit his crisis management plan and work the plan when uncertainty comes knocking on the door.

Here is how an ordinary person could have use crisis management. This scenario will include a 31 year old woman, name Sarah, who is married and has two kids.

-Threat to Financial security: Sarah makes $40,000 a year but understand that this is her only income so to protect herself from financial devastation she decides right after college to start a reserve account and build it to 8 to 12 months of expenses even if it takes more than a year.

She knows that anything could happen that may stop her income so she makes the reserve account to protect her against critical events that stop income like a job layoff or getting fired.

-Element of surprise: Sarah knows a layoff could happen at any moment. She does not want it to happen, but she plans as though it may happen to her.

Sarah has the money in an account that is easily and fast accessible.

-A Short period of Time: Sarah would not know how long it would take her to recover from a layoff or being fired so she has the 8 to 12 months of expenses as a reserve to hold her until she finds another opportunity to make money.

 

• Complete Control of their Finances

The rich are in complete control of their finances, so this means they know how much is coming in and how much is going out.

Because the rich are in control of their finances when pandemics arise, they are cautious, but they do not panic.

Check out this article that shows 15 signs you’re good at managing your money. If you are good at managing your money that is great and this puts you a step closer at mastering control of your finances.

When the rich deal with major changes in the economy like a pandemic they simply adjust their money managing and continue on with what they are working on.

 

• Multiple Streams of Income

People with one income stream are in more danger then a person with multiple streams of income.

The rich has multiple income streams often from their own businesses, real state, and investments as well as things such as these.

The average millionaire has at least seven income streams so if a critical event occurred that cut off three income streams they still have four other income streams.

This multiple income stream does not just sound nice it helps you in times when you most need it.

It is important to note that the income streams are not weak but are in total producing or can potential produce enough cash to pay for monthly expenses.

The recommendation is to focus one at a time on one source of income until it becomes stable then you can move to the next source.

Before searching for multiple streams of income make sure you understand how to create wealth in total which you can read here “How to Build Wealth: The Complete Guide to Wealth Creation”. This guideline will help you as you pursue making multiple streams of income.

-Stabilize one income stream

-List 20 income streams on paper worth pursing

-Circle one of the twenty streams then make written plans to achieve it

 

• Take Insurance Seriously

Insurance is one of the best decisions you could make in your life. During the pandemic if a person was not already on life insurance it could be more costly to obtain insurance and in some cases almost impossible since deaths soared.

The difference is that the rich already had life insurance before the pandemic so if a person died during these times, especially if the deceased person was the breadwinner in the family, life insurance covered expenses.

Often the rich have numerous life insurance polices or at least a big one that covers the cost of burial and more plus money for the beneficiaries. Notice the expenses are paid for plus money to the beneficiaries in a surplus.

This is to ensure the well being of the ones they deceased has left behind. People who do not learn from this and decided to avoid getting life insurance before they need it or tries acquiring it after needing it set themselves up for failure and financial distress.

It is wise to take insurance seriously and obtain it when you don’t need it.  For those who ignore this it may breed a more difficult life if not prepared for.

Read here about the reasons to have life insurance. To get started follow this process:

-What type of insurance do I need?

-What is my budget for insurance? How can I find ways to afford insurance?

-What are my insurance options?

 

• Adopt to Changes in the Economy Fast

The rich have many advantages over non-rich people in many ways not sure in cash but in mind set and ability.

Here is an example, even if a rich person was not rich but had a rich mentality, they train themselves to act fast when situations change especially in the economy. When the pandemic was spiking and jobs were being lost the rich, like their second nature, went immediately into ways to protect themselves fast.

The rich adopted to pandemic fast because they could travel using private jets, had healthcare concierges, and vacationed in cabins or waters far from huge populations.

Being rich gives you more cash and resources to make moves that ordinary people could not have done. Ordinary people may have still be limited to their options due to lack of money but mostly because they did not react as fact as rich people to the current pandemic.

The takeaway here is that regardless of whether you are rich or planning to become rich you can use and behave like the rich to avoid panicking in times of critical events like the pandemic.

A person can learn how they would react to life changing events by having a system in place to help bring your stress levels down. Consider a general strategy like this:

-Identify and clearly write down the issue

-How is your life impacted by the issue and in what way exactly?

-What would I need to do to keep me at peace of mine?

-Make place to keep yourself at peace of mind

 

• Have Accumulated Strong Assets

The rich have accumulated powerful assets that have given them momentum so when the pandemic occurred it may have slowed down economic progress but often the assets still kept producing cash flow.

There are normally four common categories of assets that make people rich which include a highly profitable business, real estate, commodities, and paper assets like stocks, bonds, and mutual funds.

Understand the wealthy are often in multiple asset categories and are protected even if some assets are not as profitable as others.

The difference between a person who has $1 million in mutual funds only verses a businessman that makes 100,000 a month from real estate holdings, business revenue, royalties, and other investments is significant.

The wealthy have over time developed strong assets that continue to pay them every month. Also, the wealthy understand to not rely fully on the market because it fluctuates.

During the coronavirus markets took a huge dip and so the person with only mutual funds who had one million dollars could have easily had his one million reduced to around $400,000.

Plus, with mutual funds they do not always have the same benefits as other assets like real estate which can pour money into your pockets every month.

Here is how you can find and acquire your very own strong assets moving forward:

• Identify assets that are income-producing
• Choose one income producing asset to focus on
• Raise money or find ways to fund the investment
• Manage and grow investment

 

• Hoard Large Amounts of Cash

Wealthy people are wise because they hoard cash. Hoarding cash takes place for many reasons such as a safety net or cash for reserves or waiting for opportunities to present themselves. During the coronavirus, the wealthy did not panic because they had enormous amounts of cash from hoarding.

The hoarding of cash kept their mines at ease so they could use the money for opportunities that may not present themselves again. For example, a property that is being foreclosed on because homeowner not being able to pay the mortgage due to owner getting laid off during the pandemic.

The homeowner is selling the house way below the market price so the wealthy person can buy it and rent it out long term or renovate it and resell it for moderate profits. Basically, the wealthy person was able to buy this real estate at a big discount.

One property may not seem like much money but imagine numerous properties. Here is how you can get a jump start on your personal finances and protect your self in the future:

• Get one stable income stream
• Set a goal on paper to save a $1200 cash reserve fund then another fund of 8 to 12 months of expenses
• (Optional) Have a fund or add to the 8 to 12 months of expenses fund bring it to 3 years worth of expenses

 

Conclusion

If you are wealthy, then you may already know this information. If you desire to be wealthy, then you can still apply the techniques of the wealthy to your own personal situation regardless of how your personal finances are looking. You dont have to be wealthy to use wealthy peoples’ techniques. Observe the lessons from successful people such as: (The following people may or may not be wealthy but shows people you can start from where ever you are)

Jessica– An extraordinary women who paid her own way through college and has more then one stream of income.

David– A successful author and businessman that shook off his 9-5 to start several other ventures.

Corinne– Passionate woman who escaped bad debt in here 20s and has a multi-property portfolio.

Ashley– A amazing woman and mother who is experienced at being frugal and saving money.

Eric & Janet– Both founded Otterwize; Eric has background in but not limited to capital markets and private equity while Janet is a lawyer with a data analytics background. Both are competent at personal finance.

Jada– A knowledgeable woman about personal finance that adds good value to anyone wanting to learn more about finance.

Ling– Successful woman blogger with a stream of income and has learned from many hours of personal finance study.

Taylor– A woman how started using basic personal finance tips and saw a dramatic change in here personal life so she shares how she did it to others.

 

Leave a comment below on how you plan to use these techniques or what happened if you have already used them?

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