Okay, so if you want to be financially successful in the new world... consider the source of your wealth education. Depending on how long you've been trying to learn about "financial things", you may have been indoctrinated already by mainstream financial wisdom. All with good intentions, but potentially out of date.
Why is it so wrong to avoid debt, especially when using it to buy property? Why are "alternative" investments ... alternative? Why do I feel guilty for wanting or achieving more?
We know the world's changing faster than it used to, but we still cling to the "wisdom" of our parents' generation.
If the new world is going to be different from today's world, why are we almost exclusively listening to yesterday's guidance?
A couple of areas highlight the growing divergence between the old and the new financial paradigms.
Interest rates: Since the Global Financial Crisis, interest rates have decreased considerably, which put upward pressure on property prices.
In a sense, owning property, even if it's your own home, could be one of the best ways to build AND store wealth, especially if low-interest rates persist. If you believe that interest rates would stay low for five to 10 years at least, what should you do?
If you own property with the goal of building wealth, increasingly you're frowned upon though. If you buy it, someone else loses? Add to this a constant message, usually from baby boomers that "debt is bad". It was for them, so it follows it is for you too right?
Let's say property grows in value by 7 per cent each year and this could be evidenced over 40 years. Roughly every 10 years the price doubles. If you've owned property over at least a decade, especially around big cities, you would have observed this. A $1 million home growing in value by 7 per cent per annum will be worth $16m over 40 years! Our parents modelled linear growth, but we're living in an exponential world.
The rise of cheap money worldwide, and more of it, is financial adrenaline. The intent was to create inflation but instead, it's created dependency and the only inflation that happened was in property and share markets. Why? Because those who can access cheap money don't spend it, they invest it. They know the value of the currency is always at risk, so best to translate it into other forms of value as soon as possible, like property, precious metals and shares.
So if the "already wealthy" leverage off this trend, why don't we everyday people do it? Because interest rates always go back up again? Do they?
Bitcoin: The digital currency for the digital world. Yes, there's been a lot of change in the money world, but we're still living analogue, with a digital assist. At some stage, it will be the other way around. How then do you build wealth when it's denominated in some worthless outdated currency?
Increasingly, it isn't a bridge too far to understand that Bitcoin may have a future. Still, If you understand a bit around the current monetary system, it's hard to see how Bitcoin is ever going to be a "real" thing. Still, if people are currently willing to put their "good" money into Bitcoin, maybe it's time to open your mind a bit. If in the future there's something that all wealth will now be built on/with, how will you know of its legitimacy if you're never open to new things? You're still busy trying to figure out how Trump got elected!
There's far more to Bitcoin than price speculation - yet this is what we're all stuck on. As we've learned over the last few years in the political realm, every now and then democracy decides to do something "we're" not comfortable with. Shouldn't we allow for that in the currency space?
Along with a more "liberal" attitude towards debt, our openness to blockchain-based digital currencies like Bitcoin may increase the likelihood of being able to build wealth going forward.
I'm not entirely sure that Bitcoin or another cryptocurrency will the way of the future. I'm not entirely sure that interest rates will stay low for a considerable amount of time to follow. I am sure of the fact that they might and if they do, there is a strategy for me to build new wealth in the new world after all.
First, they ignore you (been and gone), then they laugh at you (happening now). Remember what happens next?
Darcy Ungaro is a financial advisor based in Auckland who produces the NZ Everyday Investor podcast.