Remember the “we are the 99%” slogan? It was everywhere just a few short years ago.
It’s about income inequality. The richest 1% of people, with 25% of the income and 40% of the assets, making decisions through the financial crisis that hurt 99% of the people. A lack of regulation leading to the mess, bailing out banks, quantitative easing, and more.
The Occupy movement peaked in 2011, but Bernie Sanders (and Donald Trump to a lesser extent) showed it is a powerful message that won’t be going away any time soon.
Movements are difficult for me to wrap my head around – What do you think you are accomplishing by living in a tent in the park?
Maybe I’m just too rational, but I do know extreme income inequality is unequivocally bad for the average person. Taken to an extreme, it leads to a class system – haves and have-nots, with little mobility between classes.
Things are getting worse. The rich are getting richer.
What if we are responsible? What if the actions of the 99% are the reason the 1% keep getting richer?Tweet this
Voting with Your Money
We have been told our votes put people in charge to act on our behalf. Wouldn’t that be great, but unfortunately it isn’t true.
In today’s world, the economy is king. Every elected official, no matter how powerful, bends to the will of the economy.
Do you think the president is going to make a decision based on your vote or the fact that a bank failure will kill jobs?
Do you think your opinion is more important than the dairy lobby’s opinion, who represent the interests of far more people?
Your real power lies in how you spend your money and your ability to make noise. We have seen a small vocal minority get recognized because of how much noise they make, but I’m not the type to join a movement any time soon.
Let’s take a closer look at voting with your money.
The Hypocritical Environmentalist
“I care about global warming, I am an environmentalist! I can’t believe the government isn’t doing something about this! Rabble, rabble, rabble!”
But what about:
- Amazon Prime delivering you packages multiple times per week in unnecessarily huge boxes?
- Flying your family somewhere for a long weekend?
- Eating red meat often enough to average over an ounce a day?
It is easy to have a disconnect between your view of yourself and your actions.
No judging, me too. It is natural to not dwell on the actions that contradict your view of yourself. If it does pop into our heads, we brush it off with ease. It’s called cognitive dissonance.
Perhaps your indignation about the lack of government action should be directed towards your locus of control. What changes can you make to your life, and how can your actions influence others around you to do the same?
Do you think there will continue to be hourly flights to Cancun if they are only half full? Nope. It is a business, they won’t lose money just for fun.
You are one small part of the economic system that is causing the issue.
Tiny Impact, Why Bother?
Small changes in behavior don’t have much impact on their own. So why bother?
You have more impact on your close friends and family than you think. Simply talking about your change in action (without forcing your beliefs on them like a teenage vegan) has the potential to change their behavior.
That’s where the multiplier comes in. Now your neighbor Carl is a disciple spreading the gospel of your cause. He knows other people, has a different family, and impacts those around him.
With any luck, the impact becomes exponential.
Back To the Rich Getting Richer
We took a detour looking at hypocritical environmentalist, but let’s look at something causing the rich to get richer.
We complain about Wall Street, we complain about corruption, we complain about CEO pay. Yet there is a mental disconnect with our actions.
Wall Street has that power because of the money. Why do they have so much money?
First, they are huge companies with huge revenues. You can switch from Walmart to your local grocer, paying a little bit more, but circulating more money in your town rather than the pocket of a CEO. That is a tough action to take as you are often sacrificing something (like paying higher prices or less selection). I want to explore another area that is win-win.
You are an investor in Wall Street. You are propping up stock prices with your retirement savings.
We all do it actually. Somehow it became the default way to save for retirement. “We have this mutual fund – give us your money and we will take care of the rest. Perfectly safe, nothing to see here.”
Some of us do index funds, but it is all the same. There is a fund fee, transaction fees, high frequency traders get their cut, and the money that actually makes it through that fee funnel boosts the power of the corporation. Empowering Wall Street every step of the way.
Why do we all do this? We believe it is in our own best interest and don’t know about any alternatives.
Some of it is effective marketing: telling us we can expect solid returns. Some of it is corporate trickery: 401k plans at work with limited options. Some of it is government intervention: tax breaks that influence our behavior.
But what options do we have?
Controlling Your Own Investments
An investment is giving money or other assets to earn a greater amount in the future.
This fundamental concept is obfuscated in the stock market. We don’t know why we get a greater return, we just hope it does. And it usually works out. Sounds a little like gambling – but that’s why we do index funds, to remove some of the risk.
What if you didn’t shotgun your money around Wall Street, and actually took your money to Main Street?Tweet this
What would that look like? Peer to peer investing, investing in local businesses, starting your own business.
Wait a minute – starting your own business is investing? Yes – you are investing both your money and your effort.
If you are willing to put your own effort in, whether identifying a non-default investment or creating your own, you have the potential for greater returns. If you do the same as everyone else, you can expect the same result as everyone else.
Does that sound too difficult? What would you even do and is it worth it?
The Easiest Local Business
Investing in rental properties is the easiest way to become a local business person.
Just about everything involved with the rental is local – the tenant, the property manager, the handyman, the taxes, and more. Sometimes the mortgage and insurance too.
What makes rental properties an easy business? Everyone understands it and as long as people are living, they need a place to live. There is cashflow along the way, not just a black box of asset appreciation. It is a proven model.
There are an incredible number of ways you can be a rental property investor. You can invest a lot of your effort-asset, or practically zero.
Me? I pay for someone else to do most the work and consider my rental portfolio fairly passive (1-2 hours a month). And my properties aren’t even local – they are on the other side of the country. I believe I can earn a 20% yearly return, and I’m well ahead of pace so far.
Even though the properties aren’t local to me, I am still investing in small local businesses, not Wall Street. Someone found the deal on the house and referred it to a flipper rehab company. The rehab company used a team of contractors to fix it up. The title company does the transaction. The property management company is anywhere from a 1 to 100 person business. If anything breaks the handyman or plumber gets a call.
Each step along the way, a local business gets their cut. With index funds, Wall Street gets their cut at every step. Who would you rather support?
Is it Worth It?
That is for you to decide. It is hard doing something against the crowd. There are common objections that pop up, like it being too risky.
Is it really riskier? For a comparison you have to understand the risk of the default approach. Everyone with paper assets that can see their value disappear over night. No control in the decisions of the company. Huge exposure to lawsuits that drain profits. Not even producing cashflow, just hoping the stock price goes up. Do we believe there is no risk because everyone is doing it?
Understanding the investment and having complete control keeps the risk in check. Diversification is still important. It is possible with different markets and property types.
Hopefully rental properties can be your gate-way drug into more local business down the line. Maybe you want to take on responsibility and cut costs by managing the rehab yourself. Or starting a small property management company. Or even something outside of real estate entirely!
Start with the easiest business and go from there.
You have the power to stop the rich from getting richer.
I want to hear what you think.
What holds more power – your vote or how you spend your money? Do you agree changing the default way to save for retirement would remove some of the power from Wall Street? Would it halt the rich getting richer?
Do you agree rental properties are an easy local business to invest in? What are your objections? Too risky? Too much work?