Money Lessons You Can Learn from Donald Trump
Love him or hate him, President Donald Trump likely knows a thing or two about money. While he’s had some dismal business failures, his strong successes include ventures in real estate, golf courses and clubs, and brand businesses. Forbes estimated the real estate mogul’s net worth is $3.1 billion. Here we’ll take a look at 10 money lessons you can learn from Trump’s business successes and failures.
Some of these are pieces of financial advice offered directly by Trump in books he’s written. Others are learnings we can take from Trump’s actions as well as from the outcome of the 2016 presidential election.
1. Make sure you can pay your debts
Trump once pointed to a homeless man on the street and told his daughter Ivanka Trump, “That guy has $8 billion more than me.” The lesson here is make sure you don’t drown in debt. Trump may be a billionaire, but his businesses are in debt to 150 financial institutions. His companies also owe millions to construction companies and suppliers. The best way to stay out of debt? Pay attention to your finances, and live within your means.
Next: Steak and vodka companies didn’t work out.
2. Take financial risks
A golden rule for Trump when making deals: Anticipate the worst-case scenario. “I always go into the deal anticipating the worst,” Trump said. If you can live with the worst, the good will always take care of itself.”
Trump has taken risks and been willing to fail. He has seen many business failures, including Trump Airlines, Trump Mortgage, Trump Steaks, Trump Vodka, a Milton Bradley board game, a magazine, and more. The lesson we can learn from this is don’t be afraid to take calculated financial risks. For all of his business failures, Trump has seen quite a few successes.
Next: Trump’s businesses that went bankrupt
3. Avoid bankruptcy by living within your means
Trump may be worth billions, but many people don’t realize his companies have four bankruptcy proceedings under their belts. Here are the four situations in which bankruptcy was filed:
- 1991: Taj Mahal casino in Atlantic City was billions in debt.
- 1992: Trump Plaza Hotel in Atlantic City was in the hole more than $500 million.
- 2004: Trump Hotels and Casino Resorts owed almost $2 billion.
- 2009: Trump Entertainment Resorts missed a $53 million bond interest payment.
In each case, Trump gave up some ownership in the business. It should be noted he has made it a point of asserting he has never filed personal bankruptcy. However, we can learn a lesson from his failed businesses and their large amounts of debt: Live within your means, and try to owe as little money as possible to anyone else.
Next: Here’s why Trump speaks his mind so freely.
4. Aim for financial independence
Financial independence is the dream of many yet the accomplishment of few. With Trump’s $3.7 billion net worth, his financial situation could very well be the reason behind his tendency to speak his mind freely. Case in point: When Trump was campaigning for the presidency, he wasn’t as beholden to donors the same way other candidates typically are. The lesson to be learned? There is a measure of freedom that comes with being financially independent.
Next: Be aware that black swans do exist.
5. Expect the unexpected
Where were you when you found out Trump won the presidential election, and what did you feel? Many of us could probably say we were in shock. Why? Because so many people, including many members of the media, had considered the election to be a sure win for Hillary Clinton. However, a highly publicized FBI investigation into her emails soon before the election changed things dramatically. The result? Donald Trump was the one taking the oath of office on January 20, 2017, not Hillary Clinton.
Trump’s victory can be compared to what’s often referred to in investing as a black swan – an event, positive or negative, that was considered improbable yet causes massive consequences. We can keep this concept in mind when investing our money. For instance, if you have a 401(k) account, diversify by putting money into a broad range of stocks. This way, your losses will be minimal when one industry or stock unexpectedly goes belly up.
Next: Did Trump make the Cheapest Millionaire list?
6. Practice penny pinching
In 1990, Spy magazine conducted a “Who Is the Cheapest Millionaire?” test in which checks were sent for tiny amounts of money to various millionaires across the country. The point was to see who would bother cashing them. Trump’s check was for $0.50. He cashed it. “They may call that cheap; I call it watching the bottom line,” he wrote in his book, Trump: Think Like a Billionaire. Trump also reportedly cashed a $0.13 check sent from the magazine.
Trump explained in the book he inherited frugality from his parents. “Penny pinching? You bet. I’m all for it … I still don’t like to overspend for anything, and I will always take the time to compare prices, whether I’m buying a car or toothpaste.” You could argue there is a time and a place for penny pinching, but in many instances, being careful with spending and comparing prices is part of the path to financial independence.
Next: Plan now for the future.
7. Plan for the future
“Whether you have someone managing your finances or you’re doing it yourself, money, like anything, takes maintenance & planning to grow,” Trump tweeted in 2013. This may be one of Trump’s most valuable quotes because it focuses on what you can do now to ensure a financially secure future.
For the average investor, planning for your future “means simple things like maximizing tax-advantaged investment vehicles, such as Roth IRAs or 401(k)s, and using investment losses to offset our gains in order to lower our tax bill,” wrote Jason Hall from The Motley Fool.
Next: See what Trump considers his art form.
8. Find your passion
No one really knows who first said it (maybe even Confucius), but it’s been said to choose a job you love, and you’ll never work a day in your life. Trump has said his passion is making business deals. “I don’t do it for the money,” he wrote in his book The Art of the Deal. “I’ve got enough, much more than I’ll ever need. I do it to do it. Deals are my art form.” If you want to grow your own personal wealth, consider pursuing a career you are passionate about rather than simply seeking one that pays the bills.
Next: Do name brands matter to Trump?
9. Buy generic
Most of us learn over time which items are worth buying generic, and when it’s best to stick with pricier name brands. Trump has opinions on this too, which he provided in his book Trump: Think Like a Billionaire. For instance, he recommends not skimping on products where the brand is tied to quality, namely golf equipment, jewelry, and clothing. Items he recommends buying in generic brands are aspirin, shampoo, and cereal. “Don’t throw away your money on packaging and advertising,” he advised in the book.
Next: One thing Trump says to watch out for
10. Watch your bills for any erroneous charges
Most of us at some point in time have discovered an erroneous charge on a credit card or other bill. In 2012 alone, $765.9 million in transactions were under Visa’s review, The New York Times reported. Trump has advised paying close attention to your bills to help avoid paying any charges for which you aren’t responsible.
“I always to read my bills to make sure I’m not being over-charged. There is human (and now computer) error everywhere – at restaurants, at the phone company, at the grocery store, at hotels – and you’d be surprised by how much this human error can cost you,” Trump wrote in his book, Trump: Think Like a Billionaire. “Don’t be obsessive about it, but check through your bills from time to time.”
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