Everywhere you look, companies are still offering people the opportunity to be irresponsible with their money. Even PayPal has gotten into the ‘credit’ game recently with their new BillMeLater service…but don’t do it and here’s why.
Painful Credit Lessons Don’t Last Long
The past several years has brought a huge percentage of Americans to their knees financially. The continued wrongful use of credit cards and the ‘mortgage’ situation should have taught us a thing or two about buying ‘stuff’ with other people’s money, but no…we’re still tempted and enamored by the idea that we can have all the ‘stuff’ we want today and pay for it tomorrow.
STOP THINKING THIS! Thinking that you can pay for things later is what keeps getting this country into the problems it’s in. In the US government only spent money it had, we would NOT be in debt…we couldn’t be.
Think Like People Who HAVE Money
Here’s the thing…
Wealthy, financially free, rich people are wealth, financially free and rich because they practice some very important, and simple, time-tested financial principles. Principles like Pay Yourself First, Put Your Money To Work for You and others.
Paying for stuff with other people’s money isn’t one of those principles.
Question: if you want to learn how to play the flute, do you learn from a concert flutist or a soccer player? I know…stupid question, huh. The fact is, if you want to have money, you MUST do what people who have money do.
In all of our financial literacy programs, we teach participants that the ONLY reason to borrow money (and that’s what using a credit card is) is if you have the opportunity to MAKE money by using it. (Caveat…I’m not talking about an emergency like a medical expense or something life-threatening.)
In other words, borrow money to invest in assets that are going to MAKE you money like rental property, parking lot, a business and other assets that have the opportunity to create a cash flow for you.
I would venture to say that most things paid through PayPal are NOT asset-like!
Financial Principles You Can Thrive By
Two of our Creative Wealth Principles (aka…Rules to The Money Game) that go hand in hand with this financial strategy are as follows:
Only Borrow Money When It’s Going To Make You Money
We’ve already discussed this one…
If You Can’t Afford To Pay Cash For It, You Can’t Afford It At All
This principle is quite simple. If you don’t have the cash, i.e., REAL MONEY, to pay for something right now, you can’t afford it. This is where we need to go back to saving up for things we want to buy. Something happened to the whole idea of delayed gratification years ago when credit cards were introduced. People no longer had to save up for purchases…they just went and bought whatever they wanted…and this was the beginning of what has become a huge issue for a huge percentage of Americans.
What You Can Do
The most important thing you can do is to learn a little self-control and the way you do that is have a big enough WHY for not buying everything you think you want or need.
In other words, learn to tell yourself, “NO, because I’d rather….. (fill in the blank).
Here’s an example of what I’m talking about.
Imagine you’re in your favorite clothing store and you see a shirt that you just have to have. Instead of buying the shirt on impulse, you say to yourself, “Self, I’m not going to buy that shirt because I’d rather feel more secure with an extra $60 in my savings account this month.”
We must learn to look further into the future when it comes to making personal decisions in regard to money, health, relationships. We all want things right now, whether it’s a new iPhone, piece of cheesecake or hugs and kisses. Learning how to best assert personal self-control, i.e., self-disciple, gives you the tools to create the future you keep saying you want for yourself.
WealthWork*
Answer the following sentences and then go look into the nearest mirror and say them to yourself. You won’t believe how powerful you’ll feel.
“I’m not going to buy this today because I’d rather experience……”
“I’m not going to eat this today because I’d rather experience……”
“I’m not going to say _______ to ________ because I’d rather create _________ type of relationship for the long term.”
And feel free to make up a few of your own.
As always, hope this information was valuable. Please leave your comments below and please share this post on your Facebook wall to share with your friends.
Elisabeth
The Financial Literacy Lady
Just helping you think differently about money www.ElisabethDonati.com
* WealthWork is what wealthy people do in their spare time to create wealth for themselves.
Plastic…it’s everywhere. We have come to accept its insidious use in our lives…but should we?
If you think I’m talking about plastic bags or plastic food containers or the plastic used in almost every toy known to man, think again.
Nope…I’m talking about plastic money!
If you listen to most financial experts they’ll tell you you must get a credit card to start building your credit. Why is that do you suppose?
So you can borrow money later! In other words, you can more easily use ‘other people’s money’.
Now there may be reasons to use other people’s money (OPM) in the future, but the fact that kids and adults are indoctrinated into this culture of using credit cards to pay for things from the time they go into college or leave home, tells you where our ‘money minds’ are.
We are focused on the wrong side of this transaction. Instead of thinking about, and preparing to, borrow other people’s money, we should be thinking about how we can ‘loan’ our time, energy and money out to others to create assets that then produce a cash flow for us. But more about this another time.
What I’m talking about in this short article is something much more dangerous and risky than other types of plastic. Read on…
Credit Cards and Technology
The newest technology known as RFID (radio frequency identification) isn’t nearly as cool as the credit card companies might have led you to believe. Watch this video to learn how YOU could be vulnerable and have your credit card information stolen from you without even taking your new card out of your wallet or purse. Kinda scary if you ask me!
OK, now that you know, go check your wallet to see if your cards are at risk. If they are, either cover them or call your bank to have new credit/debit cards issued with out this new technology.
Of all of the financial principles we teach in Camp Millionaire and The Money Game, this principle alone would have kept Americans from getting into debt they couldn’t get themselves out of.
Making Money Borrowing Money
If you don’t understand the world of money, then you can’t understand how your could actually make money by borrowing it.
Borrowing money in and of itself isn’t what makes you money. It’s what you DO with the money you borrow that makes you money.
Good Debt vs. Bad Debt
Think of it this way…when most people borrow money, what do they use it for?
Answer…buying liabilities. You know, those things that go DOWN in value. Things like:
Cars
Houses to live in (stay with me)
Phones
Boats
Clothes
Electronics
Garden tools
and everything else that goes down in value
If you borrow money to buy these things, YOU are then liable for paying back the money you borrowed, be it from a friend, a relative or your all too friendly credit card company. This is why we call them Liabilities.
What if, instead, you used the money you borrowed to buy something that went UP in value. Things like:
Real estate that brings you a positive monthly cash flow
Creating a profitable business
Inventing or creating a product you could sell for years to come and maybe for the rest of your life
We call these things Assets and sssets are things you buy that bring make you money on a regular basis.
Yes, stocks and bonds are also considered assets but you generally wouldn’t borrow money to invest in stocks or bonds because the risk is too high and/or the return probably won’t out perform the interest rate you’re paying on the money you borrowed, i.e., the loan.
The cool part about good debt is that ‘usually’ someone else is paying down the debt.
In the case of rental real estate, your tenants are paying your mortgage down.
In the case of a profitable business, your customers are paying down your business debt.
In the case of investing or creating a product or service, you can sell the entire thing to a business for a profit or turn it into a business yourself where again, your customers/clients are playing down the debt.
All of this is a very good thing when it comes to making money work for you.
And now you see, debt can be a good thing or a bad thing…it’s all in how you use it.
Good debt is debt you use to invest in assets
Bad debt is debt you use to spend on liabilities, aka piddlyjunk.
Only Borrow Money to Make You Money
So, next time you think about borrowing money to buy something, ask yourself this very important question:
Do I have to pay this debt down myself or will someone else be paying down this debt?
If it’s you doing the paying, you might want to think twice before borrowing the money.
It’s often that we think we just have to borrow money to buy a certain thing but in reality, we don’t have to borrow money to buy anything.
But What About a House to Live in or a Car to Drive
Well, what about them? Here’s the thing:
That house you live in that you borrowed money to buy? It’s not an asset in the sense that it doesn’t bring you money on a regular basis, unless you’re renting out enough rooms to more than cover your mortgage payment. It’s really the bank’s asset…it’s bringing the bank regular monthly income as long as you keep making your payments.
The car you borrowed money for? My guess is that you could have driven the car you had prior to this one for a few more years and saved up to buy a car that was adequate without buying a new one that required you to borrow money. It’s just a guess mind you but I’m often right.
If you want a new car, why not create an asset that generates the passive income you need to cover the car payment?
Again, just a thought and another way of looking at borrowing money.
Every so often, I get an email that warms my heart…financial literacy wise. It’s usually from one of our Camp Millionaire instructors or Money Game instructors around the globe and often it’s from a parent who is so happy their son or daughter learned about money in our camp program.
The following came as an email from our Money Game instructor in New Zealand. She’s been teaching The Money Game to school classrooms for a while now and is being sponsored by a great company in New Zealand called New Zealand Home Loans. Congrats to them for helping Anita make a huge difference in those student’s futures.
Here’s the email…
My 10 year old twin boys made their first ‘big’ purchase today and I just wanted to share it with you!
They have been receiving pocket money since they were 5. They get half their age, and it is always split 3 ways (Spend/share/save). So at 10 they get $2 to spend, $2.50 to save and .50c to ‘share’.
They used to have a ‘moonjar’ to divide these amounts but at 10 we decided they could get a ‘real’ bank account. Today they withdrew some money from their savings, and bought a digital camera each!! They have been watching prices for a while now and noticed the camera’s were on special. So as well reaching their goal, they have learnt delayed gratification AND managed to SAVE $67 at the same time! ($50 on the camera, and $17 on the case).
WE must be the proudest parents on the planet right now!
Anita Stokes
Hamilton, New Zealand
PS: NZ just had their first EVER Money Week last week!! Exciting huh?!
Anita…thanks so much for doing what you’re doing for those kids. Their lives will be different and better because of you. Keep up the great work with your children and your students.
Money…in the worldly scope of making it and using it for whatever we need and want, there are many judgments and opinions about its use. We judge…
How it’s made
How it’s spent
How it’s invested
How it’s donated
How we think about it
Who makes how much and how they make it
Whether or not it should even be necessary
The fact is, however, it IS necessary…that is until we figure out some other way of getting the materials goods and services we need for life.
Money and The Internet
With the advent of the Internet, many people who might otherwise be out in the world, struggling to get by, found a new way to earn and make money. If they had a great product or service idea, they could now market that great idea on the internet and reach more people than traditional marketing ever dreamt of reaching…for far less money.
And if they didn’t have their own ideas, they could learn how to market other people’s ideas (we could coin a whole new acronym…OPI 🙂 by becoming successful affiliate marketers.
It’s been a great boon to college graduates who couldn’t find the jobs they thought they’d be handed after graduation, high school students who see through the entire ‘gotta get a job’ con and the 30 or 40 year olds who are exhausted from working too many hours making other people money.
The Internet has truly leveled the money making playing field and I for one am all for it! Finally, people can learn to make money from home so they can take care of their children, pets, older parents, gardens, and more. For many of us, working at home is a lifestyle we would do just about anything not to give up.
All this being said, a few weeks ago, I discovered a company called Empower Network that is teaching people how to make money on the internet…and they are doing it in the most brilliant way…by giving them, for $25/month!, a completely pre-designed, ready to work, blogging system that’s built on a platform that drives traffic just because of the system. (The explanation of this takes another blog if you don’t understand what drives internet traffic yet.)
The Empower Network is so strong that I joined myself and am thrilled with the opportunity. I TEACH people to constantly look for opportunities (and there are millions of them) that will allow them to make money and do good. I love combining those two things!
Well, this morning, I got a letter from one of my Money Game coaches who sweetly questioned what I was up to…not understanding their entire program. He didn’t understand why Empower is doing what they are doing and doesn’t realize the amazingly honest opportunity the two young men behind Empower have created for people literally around the globe, to make money and do good.
Here’s the letter I received (unsigned of course)…
I’m a little surprised you’ve taken the Empower Network approach, and I believe that you may profit from it now, probably learn a lot, but at a cost of your integrity. Of course I could be wrong, but the Empower Network has been around for a couple years and already many people are complaining at the lack of integrity ie hidden costs, inaccurate and misleading claims of profits, predictable (even comical) NLP tactics that so many people fall for, etc.
While I do support The Money Game and mission to increase financial literacy, I do not support Empower Network affiliation and their particular MLM deceptively. If I have over looked something and you can enlighten me, please do so..
Thanks…J
And here’s my answer to this letter which I’m sure you’ll enjoy…
Good morning J…
Thank you for your letter. Rest assured, my integrity is fully intact and I know what I’m doing. I spent many, many evenings researching this company, the players and their approach.
While I am not your typical MLM girl in that I do not like to do parties, sell vitamins or hair shampoo, I do wholeheartedly approve of network marketing, also known as multi-level marketing and direct selling, as a brilliant business model that works for a lot of people. And network marketing shouldn’t be confused with a pyramid scheme. They are completely different. One is illegal and unethical and the other is legal and sound.
The fact is, Empower Network hasn’t been around for two years…they are less than a year old. The people who might be complaining are people who complain about just about everything anyway…and they don’t understand the program.
Emppower is marketing a product, a blogging system, that is ready to use, and helps people build an internet marketing business brilliantly. Blogging and internet marketing are very acceptable ways of making a living in this day and age and Empower has provided the most amazing way of doing this…and I’ve seen a ton of things come and go on the internet.
The two men who started Empower Network, David Wood and David Sharp, aka Dave and Dave, are full of integrity and they want to help people succeed, not only by making money but by learning that they CAN make money and do good with their money.
We’ve already seen people earn enough money to pay their mortgages on homes they were about to lose so their familes didn’t have to move and people being able to pay medical bills (I know this one personally) and other great stories. These same people would be in a world of financial hurt if they had to go out and look for a job to pay these critical expenses.
There is such taboo around money…the making of it, the spending of it, the saving of it, the investing of it, the donating of it…it’s the most interesting substance on the planet. Making money in and of itself is critical to one’s success in life. How much money we have affects our health (food, water, shelter, medical) and our happiness.
If we make judgments about how money must be made, i.e., you must work hard for it, you must make it doing good, you must earn it from a job, etc., we spend our lives judging others and often times, are never financially successful ourselves. I have been doing money coaching for years and I see this all the time.
The Empower Network guys have created great thing. They are empowering people all over the world, literally, by giving people a decent honest way to make money and they are teaching them how to make money not just by blogging and sharing what they know but by using the marketing techniques to sell/market/spread anything they might have a passion for…for instance, financial education programs that change the world. :-).
I appreciate your concern, but don’t listen to the naysayers. I did the research. Empower Network is a great organization with a heart-filled purpose and I’m enjoying learning from these two young knuckleheads (David Wood has the silliest laugh:) very much!
Hope that helps…
Have a fabulous day…Elisabeth
The bottom line is that the more judgment we attach to people and their money, the more we judge ourselves with money and the more we judge ourselves with money, the worse our financial situations become.
It may not make total sense, but I’ve seen it over and over again in my coaching business.
Your wealth work for today is to look at your money judgments…what are they, who do they concern, where do you spend the most energy judging money and most importantly, what are your judgments about yourself and money?
I promise that if you’ll spend a bit of time looking at the answers to these questions, you might just learn why you have the money challenges you have…and we all have them…it’s just that we all have money challenges that are unique to our personal judgments.
You all know that I’m big on getting financial literacy done instead of spending valuable time, energy and money on more development of more ways that don’t work to teach money.
Here’s another example. I just got this in my email and copied it as is.
It’s a letter from our ‘trusted’ treasury department, specifically the Office of Financial Access, Financial Education, and Consumer Protection. Now I don’t know about you, but I have no desire to put my financial literacy faith in a government agency on financial education when the government itself is in HOW MUCH debt? You get the picture.
So here they are…sponsoring a contest to develop an APP! APPs don’t teach financial literacy! Teachers and experience with money teach financial literacy! Jeesh.
I would venture that if we took the $1000 from the first ‘challenge’ and the $10,000 from the second ‘challenge’ and combined that with all of the time, energy and money being spent on these two ‘challenges’ we could teach a whole lot of kids a whole lot of things about money and end up with a few more financially savvy politicians in the long run.
But that’s just me. What do YOU think? Please leave your comments on the blog. Thanks.
I am pleased to announce that Treasury will launch the MyMoneyAppUp Challenge today, Wednesday, June 27.
Background
The MyMoneyAppUp Challenge is a two-component competition:
The IdeaBank Challenge – the public will be encouraged to submit brief (140 characters or less) ideas for apps. The public will get a chance to vote for their favorite ideas on the challenge website, and a panel of judges will select the winner. The winning entrant will receive a cash prize of $1,000.
The App Design Challenge – individuals and teams will compete by submitting comprehensive design proposals for apps. Finalists will be invited to come to Washington, DC to participate in a special event in Fall 2012, where competitors will pitch their app designs to a panel of national experts and winners will be announced. The winners will receive prizes ranging from $2,500 to $10,000.
Treasury is sponsoring the challenge in partnership with the D2D Fund and the Center for Financial Services Innovation. Support for cash prizes and the administration of the Challenge by CFSI and D2D for the MyMoneyAppUp Challenge come from the Ford Foundation, Omidyar Network, and the Citi Foundation.
How You Can Help with the Challenge
We welcome your assistance with spreading the word about the challenge. Please share the attached fact sheet with your networks.
The Challenge will be launched officially today, June 27, via press releases by the Treasury, the D2D Fund and the Center for Financial Services Innovation. A special Challenge website will go live today, at this address: mymoneyappup.challenge.gov
