There is a story about Einstein and his assistant. Einstein gave a test to his science class. As he was collecting test papers his assistant came to him. “Dr. Einstein, wasn’t that the same test you gave to the class last year?” he asked. “Yes, indeed” said Einstein. Puzzled and confused the assistant asked, “But Dr. Einstein, how can that be?” Einstein laid back in his chair and smiled as he replied: “Because the answers have changed.”

That’s the point. The answers have changed. Answers are changing all the time. This is just a fact of life to every investor. Our life is different from what it was five years ago. So is everything else.

As the world is changing, we need go back to the basics. Now is the time to revisit everything we thought we knew about money and investing. Basic financial education has never been so important to us than it is right now. We have to dispose our old paradigms and crystallize our thinking. The following are the areas I am currently working on:

1. How do we make money?
2. How do we budget money?
3. How do we allocate money?
4. How do we leverage our money, time, systems and knowledge?
5. How do we protect our wealth?
6. How, when and under what circumstances do we exit?
7. What asset classes are likely to gain most in the upcoming years?
8. How may we serve more people with less effort?

There are a lot of people who are expecting us to deliver our views about the things I outlined above (which I will do to support your education). The problem is that these people have what is called the quick fix mentality. They want the quick fix. Quick weight-loss, quick buck, quick lunch. These people would want to go to heaven if it didn’t require dying.

The truth is that quick fixes never work. Only extensive working on anything produces a significant result. We have to commit to learning.

That doesn’t mean it has to be difficult. It can be super simple. It can be the easiest thing there is. Drinking water is easy and yet most of us don’t drink enough water. Raising financial education is like drinking water. It has to be over and over again. Like fluids in the body that eventually come out, out-dated financial education has to be disposed. Take everything you knew about money and investing and mentally destroy it. Kill it. Let the toilet swallow it. Why? You guessed it! The answers are changing.

Becoming financially independent has never been easier in the history of mankind. Some people think that the depression will last forever and that all hope is lost. Don’t you believe it. The sun will shine again. It’s not what happens to us but how we respond. So, let’s get back to the basics. Resolve now to take time to re-educate yourself and answer at least the questions I outlined above. This work will pay in huge dividends. Forget what you thought you knew about the world. Test assumptions. Re-educate yourself as soon as possible. That is, of course, if you wish to become financially independent. In today’s world, that is not optional. Don’t expect anyone else (the government included) to support you.

Take the time. Put it in your calendar. If you’re still just looking for another quick-fix, you’re better buying instant coffee than investing. See you on the next wave to wealth!

Jaakko - Vagabond Investors

For a decade, I’ve been obsessed with the question: What makes a person wealthy? I confess that although I think that in order for one to be truly wealthy, money comes after excellent health and deeply fulfilling relationships, I am a big fan of money. Philosophical attributes about wealth aside, I am going to talk about wealth in terms of the raw and almighty dollar (or any currency for that matter).

So does money make you rich? We all know people who work 40-60 hours a week, in other words they work hard for money, but fail to become rich. Ironically, many only get deeper into debt with each dollar they get their hands on. We have all heard stories of people who invested in commodities, stocks or real estate and lost it all. Maybe you are one of those people

Money alone does not make a person rich. Hard work does not make a person rich. Businesses, stocks, real estate, commodities or any investment does not make a person rich. You read that right. The explanation is very simple, yet something most people, my former self included, miss.

I’ve seen people win and lose with the same stock in the same market. I’ve seen people buy excellent investment properties and turn them into nightmares (foreclosed investors note). I’ve seen people own profitable businesses only to lose everything the next year. I bet we have all seen people who work hard and never get ahead financially.

So, it’s not the business, investment or hard work that makes you rich. It is information, knowledge, wisdom and know-how, in other words financial intelligence, that makes one wealthy. The asset is not valuable, it’s the information relative to the asset that is valuable.

Too many people invest with little financial education. Partly this is because they have to (remember, arbitrary low interest rates encourage speculation). Many people are also becoming to realize that Social Security and Medicare may not be around when they retire.

I think it is absolutely necessary for average people to learn the basics about money and investing. I am astounded that schools teach little to nothing about money and investing. Instead, people are funneled into jobs and encouraged to spend everything they make. If anything is left over (there seldom is), they are told to hand over their money to strangers who wear suits and sound intelligent. Most people work hard for money for 40 years and never learn the basics of making their money work for them.

It’s no use to blame others or justify the situation. It is time to take responsibility and get educated. Read books, attend seminars and learn the basic language of money and investing. You will soon realize that you know more than your financial planner and you are on a high-way to lifetime financial security, and if you dare, total financial independence.

Best

Jaakko - Vagabond Investors