Clason really goes in depth in this chapter about the essence of ‘good luck’ and what exactly that might mean. One of my favorite quotes that he gives is “Good luck waits to come to that man who accepts opportunity.”
I think that these words are just so true!
He touches on the fact that so many people are quick to blame an unfortunate situation on bad luck but a great situation is simply because of perfect execution. I think that is just super unfair but we all do it!
I mean think about it – if you go into a test that you studied hard for and fail, you’ll likely say it’s bad luck, but if you don’t study and you get an A, you’re going to say that it was all because you just knew the material well, right?
I’m not attacking you – I’m saying that’s the type of mentality that I used to have when in all honesty, good luck is created by those that are prepared for it.
A quote that I really love that I have lived my life by is “Luck Is What Happens When Preparation Meets Opportunity.”
If a great situation occurs and you’re not ready to take advantage of the situation then things are going to go off silently into the sunset just as quickly as they came. If you are prepared to take advantage, then that opportunity could turn into a life changing event!
Maybe you’ve been wanting to move but you decided to go on multiple vacations instead of saving for that next home down payment. Now that the coronavirus has started to decrease the price of homes on the market, you have finally found your dream house that’s in your price range, but you don’t have enough to put down on the house!
So, what do you do? You can simply borrow more, maybe take out a second loan for the mortgage with a piggyback loan, or consider a different great mortgage option, but the fact is you weren’t prepared. Now you’re left scrambling trying to come up with a plan.
You had great luck and your lack of preparation squandered it!
Along the same lines, a quote from the chapter that I really like is, “To attract good luck to oneself, it is necessary to take advantage of opportunities.”
Of course, you have to be prepared to take advantage of opportunities, but something that is just as important as physically preparing is being mentally prepared! Taking advantage of an opportunity by having the finances in place, such as to buy a new home like the example that I used above, is great but you also need to have the mindset to be able to actually pull the trigger and take advantage!
If all you do is hold onto the money in a savings account but then never use it when the opportunity presents itself, you’re basically just holding onto cash and not only are you not being opportunistic, you’re not being efficient with your money!
I am all about having an opportunity fund for things that might arise. I’ll be honest, I have an emergency fund that I let myself use as an opportunity fund to essentially “borrow” from future earnings to use if I find a good value. Sure, this might seem like it’s timing the market, and it is in a sense, but I also use the saying that “time in the market beats timing the market” and by doing this strategy, I can put my money in sooner, so win-win!
Sure, it’s risky if something was going to happen, but I will “borrow” some money from my emergency fund, say $1000 for round numbers. Then, if I normally put in $200/paycheck, I would just slowly pay back that amount that I “borrowed”. Maybe it’s all $200, or $100 at a time, or the market keeps dropping so I “defer” my payments back to myself so that I can keep taking advantage.
The thing is, whether you agree with my strategy or not, I had a plan to take advantage of a market drop and I acted on it!
A plan without a mindset prepared for action is nothing less than creating your own BAD luck!
I really, really love these chapters that are lists because I feel like I am just able to get so much more out of the chapter, and this one is no different!
You might think that with some of these chapter titles that the advice in the book is old and outdated, but it’s the exact opposite in my eyes – it’s ageless advice that is good at any point in your life and at any point in the future. Sure, we’re not buying anything in gold, but the 5 laws still apply perfectly to us all, with one of my favorites being:
“Gold slippeth away from the man who invests it in businesses or purposes with which he is not familiar or which are not approved by those skilled in its keep.”
Andrew and Dave always talk about investing with a margin of safety – emphasis on the safety on their podcast and this is exactly what they mean! If you just blindly put your money to work in the market, or anywhere else for that matter, then you’re likely going to be very disappointed with the results.
The first example that likely pops into your mind is with investing. I know it was the first thing that I thought of! If you don’t take the time to do the due diligence by understanding the company, reading the 10-k, knowing the financials, making sure that they have a sound management team and all of the other important factors, then can you really be upset if you don’t get the results that you’re hoping for? NO!
Of course, this is a daunting task, especially for someone that’s newly started on their investing but I have four pieces of advice for you:
- Consume as much content as you can, whether it’s a podcast, blog, Instagram account or by reading this free PDF for a great view of how to invest
- Take advantage of tools that are out there on the market such as GuruFocus, QuickFS, Seeking Alpha, and especially the value trap indicator!
- Start with something you’re familiar in! This will not only help you get a good feel on a company sooner rather than later but also will keep your interest strong!
- Avoid paralysis by analysis! I know it might seem backwards, but do enough research so you have a good idea and then jump in. When you’re first getting started, it’s very overwhelming. I have learned that it’s easiest to learn when your money is actually in play, so don’t shy away from that!
This law of gold is also in play with other areas, too! For instance, real estate. You wouldn’t blindly buy a property, would you? NO! You would do a ton of research, talk with various realtors, know the market, understand the costs of taxes and potential repairs, get an inspection done, and the list goes on and on!
It’s imperative that you’re prepared so you can make the best decision with as much knowledge as you can gather upfront.
What about your personal savings account? This sounds simple, right? Well, my first savings account with Fifth Third was earning me .01% interest. Awful! But I had no idea until I had an idea. I know that sounds obvious, but I should’ve known that before I even opened the account.
Instead of doing research, I just opened an account for where I always had my checking account as a kid and never knew how much I was missing. Now I have a high-yield savings account where I’m earning 1.25%, which is very low, but still 125 times higher than Fifth Third!
The key in all of this is to do the research on the front end! Any time that you spend is well worth it so you’re not just wasting money.
The Camel Trader of Babylon
This last chapter that I reviewed was probably one of the most motivating chapters that I have ever had. I didn’t walk away with some incredible advice that I had never heard before but instead a super easy action plan to really accomplish your financial goals and get out of debt. Ready for it?
- Set Aside 10% of Income
- 70% is used for a home, clothes, food and extra spending
- 20% will be paid to those I owe money to
Is your mind blown? Probably not! That’s why it’s motivating.
You see, if you can just live your life with this simple plan, you’re going to be able to get out of debt at a fairly fast rate. It doesn’t take anything extraordinary or anything that’s super complex – just a plan, motivation and dedication.
In the chapter, Clason talks about a man that owed a ton of money to a ton of people, and after a few really hard years (you know, like becoming enslaved), he was able to finally correct his behaviors and work towards his own financial freedom. I don’t want to give away the entire story, so either read it yourself or just checkout my recap of it!
If you’re able to follow the simple plan that I listed above, you’re going to find yourself in a situation where 30% of your money is being put to work to make you financially free! I love that.
Getting out of debt might seem hard but it’s not…. if you have a plan. Creating that plan isn’t hard either if you have the right budget in place going into it.
If you’ve enjoyed this Book Summary, and some of my individual chapter recaps, I truly would recommend buying the book and giving it a read. It’s not even 100 pages and like I said, it’s very readable and will capture your mind pretty easily. Even if you think you’re “above it”, consider giving it to someone as a gift that might get something from it.
And no – I don’t earn any commission or anything if you buy the book. I just want to spread financially literacy!!!
