Building Blocks

’28 For which of you, intending to build a tower, does not sit down first and count the cost, whether he has enough to finish it— 29 lest, after he has laid the foundation, and is not able to finish, all who see it begin to mock him, 30 saying, ‘This man began to build and was not able to finish’? 31 Or what king, going to make war against another king, does not sit down first and consider whether he is able with ten thousand to meet him who comes against him with twenty thousand? 32 Or else, while the other is still a great way off, he sends a delegation and asks conditions of peace.’ Luke 14:28-32 (New King James Version)

‘Where there is no vision, the people perish ….’   Proverbs 29:18 (King James Version)

’12 Now if anyone builds on this foundation with gold, silver, precious stones, wood, hay, straw, 13 each one’s work will become clear; for the Day will declare it, because it will be revealed by fire; and the fire will test each one’s work, of what sort it is. 14 If anyone’s work which he has built on it endures, he will receive a reward. 15 If anyone’s work is burned, he will suffer loss ….’  1 Corinthians 3:12-15 (New King James Version)

“There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.” Warren Buffett, speaking to Ben Stein

“You only find out who is swimming naked when the tide goes out.” Warren Buffett in Berkshire Hathaway’s 2001 Chairman’s Letter

Some of the foregoing quotes are from the Bible, but all those quotes have profound impacts on our day to day well being as middle class folks.

The easiest plan (path of least resistance) to fail is by failing to plan. Whether middle class folks realize it or not, we are each building (or failing to build) a financial structure on a daily basis. To those who have so far failed to build, there is an urgent need to start today and at least, use the right building blocks. To those who have been building for years, this would be a good time to check whether your materials are resistant (gold, silver, precious stones) or vulnerable (wood, hay, straw) to fire. The recent global market meltdown (like a fire) revealed to many (unfortunately, middle class folks are significantly overrepresented in this category) that their financial structures were largely built using wood, hay, and straw (when the dust settled, they were poorer). For some people (the wealthy few are equally overrepresented in this category), the meltdown confirmed that their structures were built using the highest quality fire resistant materials like the gold, silver and precious stones earlier referred to.

The dimensions (depth, breadth and height) of our financial visions would determine the quality of our financial well being as well as those of our children and the middle class in general. How well we each develop a personal financial vision (or fail to do so) would determine our future. For many in the middle class, the totality of their vision is to hold down their jobs until they are either too old (or sick) to work or qualify for a pension (only a lucky few can look forward to such) – such a vision is fundamentally faulty and the visioner may be suffering from financial tunnel vision. Why? This kind of vision leaves control of all the variables to forces beyond the individual’s control – it may not be possible to control all the variables but you should seek to control as many as possible (like the wealthy few). What guarantee do you have that your job would always be there? Working for the government used to be very secure and predictable but not anymore – governments all over the world have sought to reduce their workforces, cut benefits (for both current and retired workers), introduce furloughs, and do whatever it takes to stay afloat. The only thing you can count on is that no jobs are sacred (if your family owns a business and is committed to keeping you on the payroll, that could count for an exemption as long as the business remains profitable and the family retains control). Employers don’t hire you because they love you; if at any point, the total cost (monetary and otherwise) of cutting you loose becomes less than that of keeping you, they would not hesitate to cut you loose.

As one of the foregoing quotes suggests, we need to count the cost of the financial structure we are building (or failing to build) – what would it translate to in terms of living standards or well being in the present and future? Whether we think of it in those terms or not, there is an ongoing (class) war (if in doubt, refer to Warren Buffett’s quote above which applies to the United States specifically but is broadly applicable globally). How? The wealthy few have written the rules to fasten the burden of running the government securely on the backs of the middle class (the poor get few breaks and the wealthy few get a lot of breaks – nothing for the middle class by the way) in terms of tax policy. Any subsidies or tax credits that would benefit the middle class are considered unnecessary, the poor would continue to get some crumbs (the bars are set so low and you have to be so dirt poor to qualify that even the crumbs wouldn’t do you much good) and the rich would always get hefty breaks quietly through the tax system (sufficiently masked and disguised as to be invisible to the largely uninformed masses).

Are you in the middle class (with your limited resources) able to successfully engage the wealthy few (with their seemingly unlimited resources)? If not, what alternative plan are you working on to negotiate a truce like one of the quotes above suggests? One way would be to use the various building blocks (cash flow, intergenerational wealth transfer, personal equity buildup, taxation, multiple streams of income and so  on) available in the Middle Class Wealth Builders’ Club to develop a robust, sustainable and enduring financial vision, comprehensive costing and sound strategic war plan for your financial well being and that of your heirs. If you try to build your financial structure using the traditional tools endorsed by conventional wisdom (retirement savings, a job, pension plan, personal residence and so on), you are by default trying to fight the wealthy few (not the 10,000 to 20,000 [2:1] outmatching in the quote – something in the order of 10,000:1 or more disparity in resources) in a battle you cannot win. Why? The decks are stacked against you, the wealthy few have no interest in seeing you build wealth (it would reduce how much is left for them to amass) – one way to stay on the winning side is to begin to play the game in the same way that the wealthy few do. Don’t do what they suggest (or say) you (in the middle class) do, rather do what they (the wealthy few) are doing – the Middle Class Wealth Builders’ Club would be an ideal vehicle to achieve that end.