I was recently reminded of an important lesson – courtesy of a really, really old guy.
He's known to history as King Solomon. Maybe you've heard of him?
King Solomon is a well-known and widely respected historical figure. This guy wasn't just a storybook character you heard about in Sunday School, he was a real person who had a major influence on the world when he was the King of Israel from 970 – 931 B.C.
Back in his heyday, King Solomon stood at the helm of the most prosperous nation on earth. He was the kind of leader that most of the civilized world looked up to. He also wrote several books that were both theologically and historically significant. There are common phrases we still say today because this guy wrote them 3,000 years ago.
According to some sources, Solomon may have been the richest man who ever lived. When adjusted for inflation, he was essentially the world's first and only Trillionaire (II Chronicles 9:13-28). Through some very fortunate circumstances and wise decisions, this guy was loaded.
And Solomon wasn't just a rich guy – he was also known throughout the world for being an extraordinarily wise person. His wisdom was so deep that rulers and leaders of other nations would travel across the world just to hear what he had to say (I Kings 10:1-13). People hung on his every word because his mind worked on a level that was above everyone else (if you read anything in Proverbs or Ecclesiastes, you'll see what I'm talking about).
Wisdom in Diversification
The other day, a friend of mine pointed out something he'd read in Ecclesiastes. After reading it, I have to admit… it seemed like very relevant advice for real estate entrepreneurs, so I wanted to share it with you too.
Send your grain across the seas,
and in time, profits will flow back to you.
But divide your investments among many places,
for you do not know what risks might lie ahead.
When clouds are heavy, the rains come down.
Whether a tree falls north or south, it stays where it falls.
Farmers who wait for perfect weather never plant.
If they watch every cloud, they never harvest.
Just as you cannot understand the path of the wind or the mystery of a tiny baby growing in its mother’s womb, so you cannot understand the activity of God, who does all things.
Plant your seed in the morning and keep busy all afternoon, for you don’t know if profit will come from one activity or another—or maybe both.
Do you see what he's saying here? As I read these words, there are two key messages that stand out:
1. Don't wait too long to get started.
2. Don't put all your eggs in one basket.
I think both points are equally important, because they underscore the importance of taking action, just as well as the importance of diversifying your investments.
Have you ever heard someone RAVING about one particular business opportunity, like it's the ONLY thing a sensible person would ever pursue?
“Real estate is the best way to make money!”
“Invest in THIS mutual fund and you'll retire rich!”
“Want to succeed? Then work hard for that promotion, move up the ladder and make more money!”
Now, I'm not saying any of these statements are particularly wrong, I just don't think they tell the whole story.
What “Diversification” Really Means
To have a well diversified investment strategy – we're not talking about investing in several different kinds of mutual funds (or fill-in-the-blank)… we're talking about investing in several different kinds of assets.
The first step in this process is to develop your expertise in one area (e.g. – for most people, this starts with their day job). Whether you love or hate this “area of expertise”, this is a critical first step in building the foundation of what will eventually become a well-diversified portfolio of income.
When your first source of income has been firmly established, this is where the real work begins.
A full-time job is a great tool to have as a springboard to jump into bigger and better things. This source of income is a solid first step, but it's not the only step (and please, don't EVER confuse this source of income as “secure”, because it's not). Jobs can disappear in the blink of an eye – I don't care who you work for or what union you may be part of. Nothing in this world comes with 100% certainty. Remember that even if your job is sufficient to cover your immediate living expenses, this isn't the end game. The job is your launch pad to start pursuing the REAL opportunities.
The second step is to develop your expertise in another area. This time, you have the luxury of choosing something that you love (in case you missed the mark with your day job). In my case, I chose land investing. I loved it because it was simple, easy-to-understand, involved very little risk, had virtually no competition and came with massive money-making potential.
This video explains how my story progressed…
What I love about this model is that I don't have to depend on any ONE source of income to keep living a life I enjoy.
Being a slave to one source of income is never an ideal scenario – but for most of us, that's exactly the kind of situation we've created for ourselves. I don't care what your source of income is, how large it is, or how “stable” it seems… when we rely 100% on that pay check, it creates a mentality of dependence. If that stream of income ever disappears (for reasons within or outside our control), we're in serious trouble!
Like any normal human being, I think it's really fun to make money – but there are few things I despise more than a source of income I can't live without. It's definitely NOT fun when you realize you're just one paycheck away from financial disaster. Even if you do have a great job, and even if you make a lot of money from it… what if you were suddenly forced to leave that career forever? It can happen to anyone, and most of us rarely see it coming.
I see nothing wrong with a long-term plan of staying employed in an 8 – 5 job. If that's what you love, why not keep doing it?!
What I do have a problem with is failing to diversify your sources of income. That's why I've worked so hard to build SEVERAL sources of income into my life – so that if one if them ever disappears (either unexpectedly, or because I've intentionally decided to pull the plug), it's okay! I've created an environment where I'm allowed to jump ship at a moment's notice and life doesn't end, because I have several other “bosses” who will keep paying me just the same.
Be Prepared for Anything
The fact of the matter is, none of us can predict our future with pinpoint accuracy. As much as we'd all love to think we're the master of our destiny, it's impossible to predict when opportunities will come or go with little (if any) warning.
Working in the banking industry (one that has historically been very safe and secure), I saw thousands of painful examples of this in the recent economic crisis. I knew dozens of highly experienced bankers who were good people and good at their jobs. They didn't deserve to get the ax when things got tough… but they did. Not surprisingly, none of them saw the storm coming.
Regardless of what the world and economy looks like today, we're going to see more of these storms in the years ahead. When the storms of life come, is your house going to be built on a solid foundation?
If the richest and wisest man in history was insightful enough to recognize this – maybe you and I ought to pay attention too. Don't you think?