The other day I was with a student and they told me that they’d love to meet with this one entrepreneur, that I know, who recently had their third high double digit million dollar exit and who has been a serial entrepreneur for going on 40 years.
Right person at the right time
I challenged them by telling them that’s the last person they needed to talk with and they were stunned, knowing that I LOVE putting people together for discussions. I went on to explain to this student that what they needed was to spend time with someone who just scaled a business to $1 million dollars in sales because THAT’S the framework that the student needed at this point in time.
This message regarding entrepreneurship is EXACTLY the same as the message for wealth builders. As much as I think as to how it would be amazing to spend an hour chatting with Warren Buffet, the truth of the matter is that other than for entertainment value that time would be wasted on me.
The reason for that is the ‘framework’ within how Warren Buffet makes money is radically different than the framework that most of us trying to build a multi-million dollar net worth get to use.
The right framework at the right time
It’s the shear scale of the amount of money that’s in play with Mr. Buffet that radically changes the framework, tactics and even the strategies to build wealth. Besides, the framework that he plays within is so complex and nuanced that the language and context that he would need to use to describe such an effort wouldn’t even make any sense to most of us. Truthfully, it wouldn’t make any sense to me!
As it relates to wealth building, what we need is to use a framework with wealth building strategies that we understand and which takes us from where we are to where we could go with the knowledge and resources that we could accumulate in the next 3 to 5 years.
This is not to say that we don’t have a 10 to 20 year plan. We do. But the 3 to 5 year plan is the right framework for where we are now along our wealth building journey and what fits our financial situation and circumstances and what is possible with our current financial resources, knowledge and opportunities.
The right sized framework
It makes absolutely NO sense to adopt a wealth building framework that is way too big. Just as it makes no sense to adopt one that is too small or that doesn’t put us on the path to where we eventually want to be.
This ‘right plan’ is one where there are linkages. More specifically, that there are strategies and tactics that bridge one wealth building activity with the right opportunity in such a way that there’s a continuum of growth and leverage form one financial step to the next and so on.
How would it make any sense to be at around $500,000 in net worth and be reviewing a wealth building framework that is built for someone who has $5 million dollars in net worth? It doesn’t!
And the reason why it makes no sense is that if you are at $500,000 (which is awesome!) you need those next connective strategies and tactics, perhaps such as how to build a scalable small business, that has the ability to generate $1 million dollars in annual sales.
The wrong plan at the wrong time
The wealth building framework that is built for someone who has $5 million dollars in net worth is one that takes into account that that individual probably already has that ‘wealth accelerator’ such as a growing rental real estate empire or a small business that is already generating a very healthy top line that is ready to now be scaled.
As such, the strategy and tactics envisioned to move that individual onto the next step in their wealth building journey would probably even be a BAD plan for someone who is several levels below in wealth.
The direct purchase of alterative assets is an extremely advanced strategy for those individuals who have a substantial net worth and who already have a significant scaled business generating revenue and an income generating real estate portfolio.
It is not, however, for individuals who are just starting out building wealth.
The right sequence
The other element in this discussion that is as important is the sequence as to when strategies and tactics need to be utilized. Once again, it makes absolutely NO sense to have something in your plan that is completely out of order to when it would make sense to use.
For an example, it doesn’t make any sense to follow a plan that directs you to purchase individual alternative assets such as mineral resource rights when you’ve not even started accumulating income generating assets like rental income properties.
The sequencing of a plan is obviously important but so is the financial advice you get and the people you want to emulate. Again, it doesn’t make any sense to follow advice that is currently being followed by someone that is ten times wealthier than you are and at a totally different level of wealth building.
Personal finance IS personal
That is why it seldom makes sense, as much as it might be compelling, to follow someone else’s wealth building advice. Personal finance is truly that. Personal.
That’s why it’s imperative that the sequencing of the RIGHT activities is so important because the wrong activities done in the wrong order could be financially devastating.
Summary
Just like it is important to get the right sequence of activities, the first and most important thing to get right is the framework. As long as the framework is the right one, in that it has the right activities identified at the right time and in the right order, building wealth is not so much a mystery as it is a timed event. It will happen.
As I have posted dozens of times building wealth is more of a paint by numbers exercise. It isn’t an unknown and it isn’t just for certain people. It is literally for everyone and there are very well defined pathways that provide a highly probable chance of success. These pathways are borne out not only in the right framework but also in the right sequence AND at the right time.
