Many Americans today are worried about their financial future. This isn’t a surprise to most of us because we can all see the growing economic challenges that are hurting a significant portion of the population.
It’s difficult to find a job, and even more difficult to find one that pays well enough to afford today’s rising cost of living. Wages haven’t moved much, and when adjusted for inflation, they’re barely up more than 4% while inflation has driven prices of everything up by as much as 30% for some products and services, and by double digit percentages across the board. And between talk of tariffs, supply chain issues, and tightening credit guidelines, people are becoming increasingly fearful about the future of our economy.
Noted financial expert, Dr. David Phelps, wants to help alleviate some of that fear and help Americans develop the skills necessary to create long term financial freedom with his latest book, Building Your Financial Ark: How to Survive and Thrive During the Next Economic Storm.
For a little background on Phelps, he ran a successful dental practice in Texas until a family crisis put him in a position where he had to step away. He sold his practice to handle that, and invested the proceeds from the sale into real estate. While this provided some cashflow, it was nowhere near what his practice was generating, so he initially took a financial hit. But he managed to make a few more good investments and before long, he was back to his previous revenue. This eventually turned into a real estate empire and an investing community filled with fellow dentists collaborating on deals.
Phelps went on to give back, launching a similar community for children to learn the same financial principles he was using in his own business, becoming a prolific content creator to teach economic topics, and even worked with the Florida Department of Education to develop its financial literacy curriculum that was implemented in all Florida schools just a few years ago.
He says the economic problems we’re facing today are due to a lack of financial literacy.
“We have a serious financial literacy problem in America today because it really hasn’t been taught for a long time. I remember learning the basics in school when I was a kid, and then I learned a lot more from my father as a teenager and young adult. Still, today, only about half of our states have any kind of financial literacy curriculum in schools. Most of the economic challenges we’re facing now are the direct result of decades of not teaching this, and that’s evident in the fiscal policies we see people supporting, as well as record low savings and record high debt,” he explains.
Most people don’t realize how bad things really are because our economy has seemed strong for so long that most Americans haven’t seen a real recession. The last major decline was in 2008 with the collapse of the housing market. The Dot Com crash was eight years prior in 2000, which was preceded by the oil crisis that crushed our economy through the 1970s and early 1980s.
With 57.76% of the U.S. population younger than 45 years old, most have never experienced a major correction first hand so they don’t know how to operate in a recession. He believes this is a recipe for disaster.
“Things are relatively easy when the economy is good, but when layoffs start stacking up, credit underwriting gets more stringent, and consumer spending plummets, it becomes a completely different world. And not only do things get more difficult, but many things that used to work in a good economy no longer work in a declining economy. A systemic change in our underlying economic foundation also necessitates a significant change in our strategies,” he explains.
Building Your Financial Ark is a no nonsense blueprint that skips the glorified academia mindset that comes with most financial books. Instead, he breaks down exactly what’s really going on in the economy today in plain language that anyone can understand.
A core focus of the book is reducing risk. He explains how to choose the right assets based on current economic conditions, and how to adapt as they change. More importantly, he explains how to identify when change is coming by tracking key economic indicators. He also explains why we need to adjust our goals based on these changes to further reduce risk.
“When the economy is firing on all cylinders, all asset classes generally do well, even to the point of creating bubbles,” Phelps explains, “But when we face an economic correction, the financial markets tend to become volatile and often correct sharply, due to investor sentiment. Tangible assets that have intrinsic value, however, perform less erratically. While they may not be as exciting, their relative market stability offers significant downside protection from loss.”
Phelps addresses another critical component of risk management—due diligence. This is the art of digging into the details of an opportunity, beyond just the technical factors, to help ensure you aren’t blindsided by unforeseen circumstances. He says this is often skimmed over, but can have a disproportionate impact.
He advises, “As investors, we can never get too comfortable with the status quo. When we fail to keep up with evolving markets, it’s easy to get blindsided, no matter how experienced we may be. I’ve faced that myself, so I make it a point to review our due diligence process regularly and look for opportunities to improve it. This is critical because a single bad investment can wipe out years of financial progress. You’ve probably heard the phrase, “pigs get fed, hogs get slaughtered,” and that applies to investing, too. My philosophy is that it’s far more effective in the long term to seek reasonable returns and minimal risk rather than swinging for the fences and risk striking out.”
I am someone who has some investment experience, but I definitely wouldn’t consider myself an expert by any means. That being said, I was pleasantly surprised to see how easy it was to understand the complex topics he explained. I was also impressed by his analysis of previous economic cycles, connecting dots that I had never considered. This gave me a lot of insight into why we’re seeing the economic conditions we’re facing today, and I feel more prepared for future changes with what I’ve learned in this book.