‘I only know what I read in the paper.’ That’s a cliche line I heard in a movie once. And, for me, it’s true. I don’t know much about stocks, bonds and investing. And, after reading about the 150 year prison sentence for Bernard Madoff, I don’t want to know much about investing right now. I feel badly for the many people who trusted this man [what about his “minions?”] and lost so much.
Many years ago my grandpa...my dad’s dad, gave me three pieces of advice that he said I should always remember. I was in the eighth grade at the time and thought my grandpa was the wisest man on earth – besides my dad. His first piece of advice was: “Never let anyone punch you in the stomach.” I thought that was very wise. His second was, “When someone takes you out to dinner, don’t dishonor them by ordering the cheapest thing on the menu, order the steak or the lobster.” And his third piece of advice was “Never put all your eggs in one basket.” As an eighth-grader, I didn’t quite know what he meant by that one. At that point in my life, I could get my brain around the first two. In the years since, I can see his wisdom in the third.
It is a tragedy when people lose their entire life savings from a swindler mishandling their funds. My thought though, is why would anyone put all of their assets in one pot? My little brother and his wife – who also happen to be my and my husband’s best friends – recently told me that they’ve been doing some reading about wealth building. And one of the items of interest is that the wealthy have at least 7 streams of income. Seven. Not one. Not one all-inclusive fund…but rather 7. Right now I have three. One of them I’m actually working to get rid of at some point…the other two I’m working to build. What would be 7 streams of income?
Okay, here’re some of my ideas for 7 streams of income [I’ve numbered them, but not ranked]:
- direct selling business that brings in residual income
- real estate [income from rentals, buying and selling]
- mutual funds
- savings accounts
- a home business like selling on an auction site
You’ll notice I didn’t include a traditional job in this list…although it is an income source. I guess the message I take away from the Madoff thing is 1)do heavy due diligence before giving up any of your hard-earned money into the hands of someone else; 2)never put all your financial eggs in one basket – the basket could be made of rotten twigs; 3)diversify; and 4)be creative. As other wise people have oft quoted: if it sounds too good to be true, it probably is.