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.
There are, however, several challenges with financial education in schools:
Schools are gears toward getting students to be proficient in subjects they are tested in: math, reading, writing, science, etc., NOT subjects that are classified as electives.
The main reason schools are gears toward tests and these subjects is that they aren’t so much looking at what helps create a successful human being but are focused on getting a certain percentage of their students into college because most schools, like most adults, are brainwashed into believing that college is THE way to success rather than simply A way.
Schools also focus on the tested subjects because most of the time, schools funding is tied to how well their students do on those tests.
When a school or individual teacher makes a commitment to start teaching their students about money, the programs that are ‘affordable’ are only not the best financial education program available and you do get what you pay for.
Free financial education programs, most made available by financial institutions, are boring…they use boring workbooks, boring curriculums, aren’t taught in a relevant way (i.e., students have no connection with the material) and well, all in all, this makes the programs pretty ineffective. Here’s an interesting article from Kiplinger that reflects the point.
Let’s say that schools start really making a place for financial education in their classrooms…for whatever reason: legislation, demand by parents, demand by students, new goals by the administration…it’s going to take it all.
Teachers and administration will go out and start looking for the best financial program they can find.
And if cost is an issue, which it so often is, they end up searching for free…and this is what they get…a curriculum focused on a lot of the right things and one that is completely void of lessons that teach kids the real truth…what it takes to become financially free in this day and age.
This is what they’ll study, and generally be bored studying it:
Budgeting: The lesson is generally that you must spend less than you make and live within your means rather than simply planning your spending. There is a subtle message of ‘not enough’ when teaching budgeting. In Camp Millionaire and The Money Game we teach kids that ‘a budget is a tool to make their dreams come true’ rather than the idea that they always must be on a diet with their money.
Saving: The lessons usually revolve the idea that we have short term and long term goals though the long term goals are often college and buying a car. We teach kids that they have two Savings Jars; one for saving up to buy something (for cash…not borrowing to buy it) and one for what we call “just in cases.” Savings in Camp Millionaire isn’t tied to different types of goals but what you use the money for instead.
Credit Score: The lesson is that they WILL borrow money so they better make sure they have a great score when they go to buy it rather than teaching them that borrowing money isn’t mandatory in life. But you’d hardly know that with the way everything is offered credit from about every type of company imaginable these days. Let’s teach kids that they don’t have to ever borrow to buy something if they don’t want to (and then teach them how…I’ll get to that in a second).
Debt: The lesson is often to learn to use credit cards wisely rather than not using them at all. Some of the richest people in the world use debit cards because they don’t want to ever use other people’s money the wrong way. Then again, others use their credit cards to accumulate points to use for mileage, trips, bonus products and more. A better lesson is learning the difference between Good Debt (debt other people pay down…using from investing in assets) and Bad Debt (debt YOU pay down…usually from buying piddlyjunk, aka liabilities).
Miscellaneous lessons including insurance, buying cars, saving for college, borrowing money for college (yikes), retirement accounts like IRAs, and a few other things.
Financial Literacy – The Critical Piece That Gets Left Out
Let me ask you a question…
Why do you want your kids to learn about money in the first place?
So they’ll end up with plenty/lots of money when they’re older?
So they’ll be able to retire when they’re older?
So they’ll be able to provide for themselves and their families?
So they’ll never move home because they’re in debt up to their eyebrows?
All of the above?
Financial Literacy Education Must Teach Students How To Invest
It’s a rare financial literacy curriculum that teaches investing as one of the core principles…but without it, it’s like teaching kids how to brush their teeth but never showing them how to use the dental floss…or worse.
Investing is putting money (or time or resources) into something with the expectation of some type of gain from that.
Why is the idea of investing so critical? Because it’s darn near impossible for people to ‘save’ their way to retirement…that is IF you want to wait until you’re pretty old to retire.
The idea behind investing is learning to send your money to work in addition to, and then instead of, you!
Investing means you put money into real estate so you can live on the rental income, put money into the stock market so you can live dividends and interest and put money into business ventures (yours and other people’s) so you have profit cash flow from continued profits to live on.
Learning to invest wisely takes time. The challenge is that everyone on the planet has learned different things about investing…including developing different beliefs about different types of investing.
For example:
Some adults grew up with parents who invested in real estate and did well so that’s their focus.
Other adults grew up with parents who lost a ton of money in real estate and wouldn’t invest in it if it were the only way to make their money grow.
Some adults grew up with parents who taught them about the stock market and made great investments.
Others grew up with parents and/or grandparents who constantly said, “the stock market is too risky.”
Some adults grew up with parents who were entrepreneurs, experienced the freedom of being able to call their own shots and create their own lifestyles and wouldn’t dream of getting a job.
Others grew up with parents who always had jobs and talked perpetually about the securing of going to college and getting a good secure job. We all know where that has gotten our population.
What’s the point?
The point is that the world we live in has changed. Kids need to learn the difference between Earning money and Making money.
Getting a job isn’t easy and isn’t necessarily the most safe and secure thing to do.
Saving alone is almost never going to create financial freedom for anyone.
Financial Literacy Solution
If your kids are in a financial education course at school, make sure the curriculum includes investing. If it doesn’t, volunteer to teach the missing piece yourself. Don’t know how to teach it? Call me…I’ll show you how easy it is to teach kids the importance of investing for their financial futures.
Want to make sure your kids learn about money and investing in a fun and highly effective way?
Invest in their financial future…and the financial future of every one of their classmates…by giving their teacher The Money Game.
Even if you can’t afford to do this, let the teacher know they can apply for a Get One, Give One™ Grant to receive The Money Game for free.
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.
Living within your means doesn’t equate to living less well.
You not only save money by not buying candy, sodas, coffee, alcohol, or cigarettes, but your body will celebrate!
Maybe you bike to work to save money on gas. Again, you’ll find an added mind and body benefit.
That 20 year old sweater—if it’s a classic, it’s still in style. If it looks nice, and still fits, why would you part with your money to replace your sweater with a trendy, poor quality version?
There are so many opportunities and temptations when we venture into the store.
Do you have a shopping list? Not just for grocery shopping, but to keep you on task when you stop at the garden center, or the mall?
If you’re looking for something to compliment an outfit, or room decor, do you bring a color or style with you to ensure it doesn’t become an unnecessary purchase?
Suggestions:
Have a self-made list of agreements:
If something isn’t on the list, but begs to come home with you, you’ll leave the store for a cool down period before buying.
If you buy something BUT remember when you get home that your priority or goal is more important to you than what you bought, keep the tag on the item, dig through the garbage if needed for the receipt, and return it to the store as soon as possible. (Ladies…sometimes UNshopping is as fun as shopping in the first place!)
Don’t shop when you’re bored, upset or lonely. Go out into nature, instead! It will help shift your attitude.
If getting outside is going to cost you, weigh the cost of the activity. Maybe you really want tennis lessons. Once you learn tennis, the game can be free.
But it’s not about not spending money. It’s about being aware of what you have, and the purchases you make.
YOU have the power…not the money and certainly not the stores.
Stand tall and continue to live within your means. It takes backbone.
And if you don’t like your means? Change it by choosing differently!
