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Monday, January 2, 2012

Money, Do You Work For It, Or Does It Work For You.?

In the last month or so I have had several conversations with people who are near retirement. Many see no way that they will be able to do so. Even young people I talk to seem to have a negative attitude. They expect the system to be broke before they reach retirement. Then on the other hand I have a grandson who is a sophomore in high school who has two houses and plans to retire by age twenty-five. The whole thing is about attitude. If a person is only willing to work an eight hours day and makes no effort to get out of the rut of life they will die there. For those who do not know the definition of a rut let me tell you. A rut is nothing more than a grave with both ends kicked out. It just goes on and on.

If you want more out of life you have to drag yourself up out of the ditch of life and make something of it. No one is going to give it to you. You have to grab hold of it and take it. It is not my intention to start this off by preaching but there are some nuggets of truth in the Bible that confirms that attitude. Joshua says, in 1:8-9

" This book of the law shall not depart out of thy mouth; but thou shalt meditate therein day and night, that thou mayest observe to do according to all that is written therein: for then thou shalt make thy way prosperous, and then thou shalt have good success. Have not I commanded thee? Be strong and of a good courage; be not afraid, neither be thou dismayed: for the LORD thy God is with thee whithersoever thou goest. "

Notice in the underlined part it says "thou shalt" or more modern "you will" Who does it say will make your way prosperous? Not God, but you. The catch is you have to do it God's way and you have to apply the effort. Many will argue with me on this but, God will honor his word even if it is to a heathen. The difference is they will not know why they are being blessed. The reason they succeed is they are doing what God says to do even if they do not understand or know that they are doing it. The Bible says the rain falls on the just and the unjust. So do blessings to those who are doing what God says to do.

When you look at some of the wealthiest and most successful men in history they were not necessarily religious men. Andrew Carnegie made his fortunes in steel and then gave them away. The same is true of John D Rockefeller who made his fortunes in oil. In this day and age it is Bill Gates that could be an example. The easiest one to show how and why he made it big though is Henry Ford. His goal was to build cars anybody could afford.  He also paid his employees a wage above average for the time so they could buy the cars they built. None of these men is noted for his faith except maybe Carnegie. The thing that made each of them rich was that they provided jobs and met the needs of the societies they lived in. The common bond of all these men is that none of them started out wealthy. They all made their fortunes in the course of their lives. They all shared several characteristics. They were all tenacious, determined, frugal, focused and energetic men. The traits required of anyone who really wants to succeed in life.

Many, if not most, people go through life with no goals, no direction and no plan for what they would like to get from life. They live life one day at a time and let events steer their lives. Certainly things happen that the average person has no control over. Terminal illnesses and disabilities, even death is sometimes unavoidable. Many times though people just let the flow of life take them where it will. When dealing with the issue of wealth in life this is especially true. Most people I meet know that if they had a savings account life might be a little easier. Savings requires discipline when dealing with issues of money. However their are two things even more important than discipline even though indirectly they are tied to it. First is a budget. Without a budget discipline is useless. Without a budget you do not know how much you have and where it is going. You may argue that you do know. You pay your bills and there is nothing left to save. Over the course of my life I have often seen two men making the same money. One lives a very comfortable life and has savings and enjoys life. The other is constantly in debt and constantly coming up short. What is the difference. A budget, without one you can not account for your money. A good budget accounts for every penny and knows which ones do not need to be spent and which ones can be turned into savings. The second one is a plan of what you want and how you can accomplish your goals. This requires using your budget and managing it to get the things you want out of life.

How do I know this works. Well after 65+ years of life I have had the opportunity to see it in action and experience it on a first hand basis. I have been through bankruptcy and I have run my own businesses. I have been virtually debt free three times in my life and I have managed to get back into debt. Early in my business life I went bankrupt and had barely $15.000 dollars in debt. Yet later in life I had over $100,000+ dollars in credit card debt alone and managed to pay it off. At one point my total debt business and personal debt was almost a half million dollars. Fortunately by the time I died. (They managed to bring me back) my debt was low enough that when I was forced out of business for health reasons I could almost pay the balance off by getting rid of my equipment. That was strictly from being blessed, not from any great planning or skill on my part. The point of telling the above was not to brag but to show I have been down the road I am talking about. While I was always willing to take chances and go where I felt life and God was leading me, my wife was just the opposite. She graduated college, got a job for the college and stayed in the same job her whole working life.

A short sidebar: The Bible says that gray hair is a sign of wisdom. Well my hair is all gray and so is my beard. As I am the type person who only learns from their mistakes you can see I made quite a few. My wife also has a beautiful head of gray hair, but hers came from all the things I put her through in life.

Getting back on track my goal is to share some of the things I have learned over the course of my life that hopefully will enable someone else to do like my grandson and retire young. Not after being beaten down by the burdens of life. Why is my grandson in that position at such a young age. The mistakes of his grandparents and parents have been shared. We all cared enough to help him see that there was a better way to live life. Will he succeed in his goal. As long as he stays focused and continues work diligently toward what he wants out of life. Hopefully I can break this blog into several parts that will all be helpful and that make sense when put together. It will be far to much to put it all in one blog. Well I guess it is time to get started. Some of this will make sense and some you may already know. This is written for the person who is just coming to the conclusion there has to be more to life than starving to death on an eight hour a day job or working two or three jobs to get what you want out of life.

The first thing the average person needs to learn is a Bible verse. That is Proverbs 22:7 and it is true whether you are a Christian or an Atheist. " The Borrower is the Slave/ Servant of the Lender" Remembering this truth will help set you free. It is one of the greatest truths ever told. Why is it true? Because for every dollar you owe, you need to make two dollars. You still need the dollar you are giving the lender to live on. Therefore to pay him back you need to make two dollars. One for the lender and one for yourself to live on. Lenders even rip you off when you are saving your money. I am not advocating using a mattress to hide your money, but it will help you to understand some of  these things and how they work.  Then you can use them to your advantage. The lender/savings bank holds "your" money because you let him. He may pay you a pittance for its use. Today a savings account is lucky to pay 1% on your money. Yet while it is in the bank the banker will lend it to some one else. If it is something like a mortgage he may get 4% to 6% on your money. He gets five percent just for holding your money. If he lends it for something riskier like a personal loan or a used car loan he may charge 9% to 12%.  You still just get 1%.  Are you starting to see how banks work. Well how do you beat the system? There are two ways to do it. Invest your money in things that may make you more money.  I prefer physical assets that I can control and do not evaporate with the fluctuations of the markets. Even holding assets you need to be careful. If it can not be converted to cash or something you need it may really be costing you in the long run.  Stocks and retirement accounts are not necessarily going to make you money. Why do I say that? I watched my wife through no fault of her own watch her retirement account shrink by almost 50%. Over fifty thousand dollars just evaporated during the housing crisis and there was nothing she could do about it. The state was looking out for her interests? Short of quitting her job which was not a viable solution at the time she just had to bite the bullet and bear it.

      If you have no control over your money that is one thing. However with a little research you can find far better alternatives to a regular bank. You might try and find a local Credit Union you can join. They have some far better programs. Aren't they going to charge you money to borrow money just like a bank? Yes but they usually pay a little better rate on your savings. They also have a unique program that not many know about. You can get an account secured loan. How does that work. Well you take out a loan but you put money from your savings up as security.  You can not spend the money while it is securing your loan, but if it is your savings you probably did not intend to spend it in the first place.  Say you want to buy a new car and you have the money to cover it in your savings account.   The loan rate for a new car is three and a half per cent.  The credit union charges you interest on the loan, but they also still pay you interest on your savings.  If they are paying two per cent on savings you end up paying only the difference which is maybe one and one half per cent.  Can you see how it works.  The good part is that as you  pay the loan down they lower the amount they are holding as security.  So when the car is paid off you still have the money in your savings account and you have a paid off car you can use as collateral to get a loan if you might need one. This can put you in a much better position than dealing with a regular bank.

    Hopefully you now see why banks are so eager to lend you money and give you credit cards.  Especially if you are a responsible person who pays their bills when they are do.  You are their dream client, but if you are really that responsible you owe it to yourself to break out of the debt cycle and learn how to live debt free. It can be done but it takes discipline and will power.  It will not happen over night but it will happen a lot quicker than you anticipate.  Especially when you start taking control of your life and you start making decisions based on a sound understanding of how money works.  The trick is learning to make it work for you.  It can and it will.  You have to be the one who not only has a budget, but the one who controls your budget.  You also need to have goals you can aim for to keep you focused.  Next time I hope to explain how to budget and how it helps you.


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