Exactly a week ago, I dared write bad about Mr Komura, one of the prophets of quick getting rich. According to the Orthodox method, the secret of getting rich is hard work and thrifty life.
Applying for a loan and investing it in money-generating investments
The unorthodox method is to get rich by applying for a loan and investing it in money-generating investments that make more than the cost of the loan. The best known way to do this is to buy a home from a loan, then sublease it and repay the loan from the rent.
There is a whole library of literature on this technique, many of which are also available in Hungarian.
As a rule, these clever tips ignore one thing: risk.
Because if you are in debt, in order to buy something that makes money, you take a lot of risks that these people do not understand.
The prime example of financial nonsense, which has been high fashion in Hungary for a few years now, is thanks to a well-trained company agent. They persuaded people to buy Japanese yen-based loans for their house at 5% interest rate, investing in Chinese equities through unit-linked insurance, which yields 40-50% a year and simply pockets the profits.
Thousands, if not tens of thousands, jumped into this suicide stunt.
They forgot the risk of fluctuations in the Japanese yen-forint, changes in the interest rate on the Japanese yen, the collapse of the Chinese stock market, and even the cross-exchange of the Japanese yen, as they bought yuan-based shares.
The only picture floated in their eyes: the time has come to make millions out of nowhere with the help of a clever and smart “financial adviser”.
After all, the cost of unit-linked horror is not worth mentioning. (You can read about it here.)
I’ve been saying for a long time that it’s a great luxury not to get the money. The problem is not if you do not know it, but if you ignore it.
But how easy is this suicide stunt advertised by the above prophets? It is a harmless act to take a home and lend it out of credit.
(The so-called asset price bubble occurs when the price of an asset (real estate, stock, whatever) rises faster than the interest rate on the loan, ie it seems worth buying from a loan because it pays more than the cost of the loan. But it’s always a bubble that pops up quickly.)
JP Conters beautifully described in his book how he dealt with these tips (The book’s title is Debt elimination, available from Amazon)
He and his wife were earning double the US average of $ 102,000 a year, but, drunk on the tip, took out two properties on loan to rent. They also borrowed money for their mother’s house, buying two high-yield securities to earn 12% on the 6% interest rate.
Everything you need to get rich quick
Then the big real estate balloon burst, as did the stock market. Mom’s investment lost much of its value, house prices began to plummet and tenants disappeared.
They were there with three mortgages on their necks, without enough income.
First they had to pay all their salaries, then the children’s life insurance, and then when the burglars took the copper pipes from one of the houses, they suddenly had to make thousands of dollars to replace the stolen pipes so that the property could be rented out again. As a result, credit cards were drained.
As usual, the burglars came back and took all the pipes again.
They tried to sell the houses because they could no longer afford it
Their lives were completely upset, they lost their creditworthiness, they saved their kids’ savings, then they could forget about their retirement, they were overwhelmed with credit card debt, and even their mom’s credit cards were discharged. The real estate could eventually be sold with a huge failure, and they also had to file for bankruptcy. That was the price of their greed and financial stupidity. By the end of their lives, they would have been able to live abundantly on twice their average salary.
If you are interested in how they finally got out of it, read their book. What I want to talk about right now is that there is no sure-fire tip for getting rich.
If you seem to be working or are being claimed by high-end authors, then all you have to do is not understand what is at stake, and the authors have no idea. That’s why I dared to criticize them in my previous post.
Learn from their example and forget about these silly tales about getting rich quick
The only sure-fire recipe for getting rich is to slowly get rich. If you work hard for success and spend much less than you earn, nothing can stop you from becoming a rich person, even in the short term.
Do you need real financial advice, are you tired of agents? Click the link for more information.