What Can Trump's Financial Moves Teach You About Managing Your Finances?

Few would dispute that Donald Trump has had plenty of financial successes — and financial failures. As onlookers, we can learn lessons from both to replicate the wins without suffering the losses.

Take Bold Risks Today, Make Adjustments Tomorrow

“I’m a self-made millionaire who worked with Trump years ago in the commercial real estate space,” shared Brenda Christensen, serial entrepreneur and founder of Stellar PR. “It’s highly competitive, cutthroat even. The world got a glimpse of this on ‘The Apprentice’ long after I collaborated with him.

“Everyone in that sector, but especially Trump, is aggressive with investments. My experience working with him is that he is the ultimate risk taker.”

Trump earned hundreds of millions by stepping forward when others shied away. However, bold risks can sometimes backfire. “It’s not surprising that he even went into the gaming industry, opening a casino and ultimately filing for bankruptcy to restructure debt,” said Christensen.

Calculated risks often pay off, and you can always implement Plan B if circumstances change. Taking bold risks means being ready to pivot and adapt to new conditions. It’s essential to weigh potential losses against the possible gains before making significant financial decisions.

Leverage Works, But Cuts Both Ways

In business and investments, leveraging other people’s money and time can amplify your returns and income. Anthony Termini, a seasoned investment advisor and expert contributor for Annuity.org, has seen this play out repeatedly, citing Trump as an extreme example of both rewards and risks. “Trump has leveraged all of his real estate projects to the maximum — most of them successfully. However, his overuse of leverage led to no fewer than six separate bankruptcies.”

Leverage can be a powerful tool for growing your wealth, but it comes with significant risks. The key is to use leverage wisely, ensuring that you don’t overextend yourself. Balancing debt and equity and maintaining a margin of safety can help you navigate through economic downturns without resorting to drastic measures like bankruptcy.

Negotiate from Strength — or the Appearance of It

Christensen noted that Trump truly does negotiate better than anyone else. He knows how to portray strength, which later endeared him to many voters. “I’ve worked with titans like Mark Cuban, Bill Gates, and others, and no one, and I mean no one, comes close to his expertise in the ‘art of the deal,’” she explained. “He was born of the commercial real estate crucible, which is even more competitive than tech.”

To negotiate effectively, shore up your disadvantages, double down on your advantages, and never hesitate to walk away if negotiations don’t go your way. Confidence and the appearance of strength can significantly impact the outcome of negotiations. It’s about creating a perception of power and control, even if the reality is different. Understanding the nuances of negotiation, including when to push and when to retreat, can give you an upper hand in various financial and business dealings.

In Business and Investing, Knowledge Trumps All

Money is just a tool, and only as effective as the person wielding it. Long before becoming a controversial political figure, Trump swam in the shark-infested waters of finance, private equity, and commercial real estate. “In making big money, knowledge is far more important than any other ingredient, including money itself,” Trump tweeted in 2013.

Don’t invest in anything you don’t understand, and don’t make crucial business decisions without gathering the necessary facts. Act from a position of knowledge and expertise, and if you don’t have it, find people who do to help inform your decisions. Continuous learning and staying informed about market trends, economic indicators, and industry-specific developments can provide a solid foundation for making informed decisions. Leveraging expert advice and conducting thorough research before committing to any investment can help mitigate risks and enhance potential returns.

Underwrite Investments for Risk First

Trump took bold risks in his real estate business, but they were always calculated. Trump balanced potential losses against gains. “How much money can you stand to lose? That’s how much risk you should assume,” Trump wrote in his 2005 book, “Trump: Think Like a Billionaire: Everything You Need to Know About Success, Real Estate and Life.” “If you can’t afford to lose it, play it safe.”

Before diving into any investment, it’s crucial to evaluate the potential risks and determine if they align with your risk tolerance. Assessing worst-case scenarios and having contingency plans in place can provide a safety net. Diversifying your investment portfolio and not putting all your eggs in one basket can also spread risk and increase your chances of achieving steady returns.

Think in Decades and Generations, Not Months and Years

Termini puts it bluntly: “The best way to get rich in America is to inherit wealth. Trump inherited more than $400 million from his father and was the beneficiary of his grandmother’s trust, which made him a millionaire at age eight.” Regardless of how much Trump received from his family, we can learn a lesson about generational wealth. The shrewdest among the wealthy plan not just for their success, but for their descendants’ as well.

Building wealth is a long-term endeavor. While short-term gains can be enticing, focusing on sustainable growth over decades and planning for future generations can create lasting financial stability. Educating your children about financial literacy and instilling good money habits early on can set the stage for their financial success. Establishing trusts, setting up estate plans, and making strategic investments with a long-term horizon can ensure that wealth is preserved and grows over time.

Final Thoughts

Brian Meiggs, founder of My Millennial Guide, aims to take a nuanced look at Trump. “Donald Trump’s financial strategies and bold investments often yielded significant gains, highlighting the benefits of taking calculated risks and leveraging favorable policies,” he said. “However, his high-profile bankruptcies and legal troubles underscore the importance of diversification and careful financial planning. From Trump’s experiences, we can learn to balance ambition with caution, ensuring that our financial decisions are well-informed and resilient against uncertainties.”

By studying both the successes and failures of prominent figures like Trump, we can extract valuable lessons that can be applied to our financial strategies. Whether it’s taking calculated risks, leveraging opportunities, negotiating effectively, or planning for the long term, these insights can help us navigate the complex world of finance with greater confidence and wisdom.