Personal Career and Financial Security Ch 21

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Questions and Answers

What is a primary characteristic of the employee model mentioned?

  • It works well for families without children. (correct)
  • It guarantees financial success.
  • It allows for a high standard of living.
  • It primarily benefits families with children.

What trend did millions of wage earners follow in the 1990s?

  • Starting their own businesses.
  • Pouring money into the stock market. (correct)
  • Saving more money in banks.
  • Investing in real estate.

What was the common outcome of the get-rich-quick investment model?

  • Many investors suffered financial losses. (correct)
  • Increased financial literacy among investors.
  • Sustained wealth for many investors.
  • A significant economic boom.

What sentiment prevailed among the populace during the stock market rise?

<p>Euphoria about gaining wealth. (A)</p> Signup and view all the answers

What was the major consequence of speculating in the stock market during the 1990s?

<p>Time was lost that could have been invested in productive work. (D)</p> Signup and view all the answers

What is the author's opinion on achieving substantial wealth?

<p>Owning a healthy business is the most reliable approach. (C)</p> Signup and view all the answers

What does the term 'healthy business' imply in the context provided?

<p>A business that is financially stable and sustainable. (D)</p> Signup and view all the answers

What was a significant factor contributing to the failure of the get-rich-quick model?

<p>Lack of knowledge among investors about economic history. (B)</p> Signup and view all the answers

Which statement best describes the author's views on families trying to sustain both work and children?

<p>Neglect in some area is often unavoidable. (B)</p> Signup and view all the answers

What historical parallel is drawn regarding the get-rich-quick mentality?

<p>It has occurred frequently with similar disastrous outcomes. (A)</p> Signup and view all the answers

Flashcards

Prosperous Employee Model

A model where both adults work outside the home to earn money, aiming for financial success.

Get-Rich-Quick Investment Model

The 1990s trend of individuals pouring their money into the stock market with the hope of getting rich quickly, often with limited economic knowledge.

Stock Market Bubble

The period when stock prices rose rapidly, driven by the influx of investors seeking quick gains, creating an inflated market.

Get-Poor-Quick

A period following the bubble burst, when stock prices crash and investors lose their savings and financial hopes.

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Euphoria

The state of feeling extremely excited about a situation, especially about making money quickly, often leading to irrational decisions.

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Lost Time

The time spent or lost due to engaging in activities like speculation that might not be productive or beneficial in the long run.

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Healthy Business

A business that is financially sound, well-managed, and profitable, offering long-term security and wealth.

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Business Ownership Model

A model for achieving wealth and security by owning and managing a thriving business, as opposed to relying on employment or speculative investments.

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Speculation

The practice of investing in assets with the hope of making a quick profit, without a solid understanding of the underlying economics or market dynamics.

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Model Shift

The realization that the prosperous employee model is no longer reliable for achieving wealth, and the get-rich-quick investment model has failed, prompting a shift towards the business ownership model.

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Study Notes

The Employee Model and Investment Mania

  • Two-income households often succeed financially, but this model is challenging for families with children. Without children, many can afford to support them or the government, but not both.
  • Exceptions to this trend are rare.
  • Many wage earners faced uncertain futures in the 1990s, leading them to seek fast wealth.
  • The stock market boomed, fueled by the desire to get rich quick without work.
  • "Get-rich-quick" investments attracted many, leading to inflated stock prices.
  • Early investors who sold their stocks before the market crash profited.
  • Most investors did not exit in time and experienced significant losses by 2002.
  • This cycle of get-rich-quick followed by get-poor-quick is a common repeating pattern in economic history.
  • Investors lost time by focusing on speculation instead of productive work.
  • The employee model and the "get-rich-quick investment model" are now considered failed pathways to long-term security.
  • The only sustainable way to achieve wealth and financial security is to own and maintain a successful business. The key word here is "healthy".

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