Lack of Financial Education In Our Schools
Renegade thinking is required in today’s type of financial environment. Money itself is debt. We need to stop saving money with interest rates being virtually at zero for close to ten years now. Many people are living in an outdated system with poor mindsets. Interest rates are not at 4%, 10% or 15% anymore as Robert Kiyosaki would say. So why are people saving their way into more debt? Do you know what good debt is? Do you know what bad debt is? We must continue learning by reading more quality books about finances.
As I’ve said before, “When the student is ready the teacher will appear”. How many lifelong learners do we have out there? Did you know that student loan debt is the number one source of income for the U.S. government. Think about that one for a second.
I’m at a coffee shop watching Warren Buffet, Mark Cuban, Tom Bilyeu and Robert Kiyosaki videos as I’m on my lunch break. It’s one of those things where I have no idea how I ended up here. But I can’t stop watching because the philosophies are so simple and raw and I love them.
I go further down the rabbit hole and start reading articles about boxing. I learn Floyd Mayweather keeps $123 million in his savings account. Yes, a savings account.
Now I’m wondering if he keeps his $123 million in a savings account because when you’re rich investing doesn’t matter. So I Googled if he invests but find his Instagram and it’s a remarkable glimpse into his spending and far from duplicatable lifestyle.
There’s the $4.8 million for some supercar I’ve never heard of, $400,000 for Hermes bags, $10 million for jewelry, and $6.5 million for a couple Bugattis. And then I find out he does invest:
“I’m blessed to wake up every morning, certain that my bank accounts are growing. Making 7 figures monthly without moving a finger, just further proves that I’ve made brilliant investments and decisions that allow me to walk away from the ring, comfortably.”
Okay. This means he’s generating at least $12 million a year from his investments and it could be around $100 million. And I start feeling better because so many professional athletes work, get money, spend money, work, get money, spend money, and when they stop working they go broke.
Look at Mike Tyson, who went broke after making hundreds of millions of dollars from boxing. 50 Cent, made millions off of deals with Vitamin Water, then went bankrupt. I could list off many more individuals…
I think we can all relate to this cycle. Let’s use Sales Manager A as a quick example. Say he’s in his late 20’s buying a Mercedes, living in a fancy condo, and flying airplanes for fun and travel. He’s working, getting money, spending money, and working again because he has to pay for all that fun stuff. Do you think he or she ever questioned those lifestyle choices?
Most people will do this their entire life. But what if they changed their mindset so instead of working to spend all their money, they were working to save, and saving to invest, so they could stop working?
Well, that’s what time and financial freedom is. And it doesn’t matter if you’re not rich. What matters is the relationship between your numbers. For example, you can make $100,000 a year, spend $100,000 a year, and have nothing to show for it like 46% of adults who can’t come up with $400. Or you can make $75,000 a year, spend $50,000, and save $25,000.
Did you know that 75% of America people live paycheck to paycheck? Did you know that in 2008 and 2009 an additional $300 per month could have saved so many individuals from foreclosing on their homes? That’s not a lot of money. People spend $300 on dumber shit day in day out.
I’m sure in your late 20's and 30’s it’s nice buying stuff because I never had nice stuff before. But now that we’re approaching our late 20’s and 30’s, we’re starting to realize the nice stuff was mostly about external validation. And it’s hard to see this because we’re all trained to want external validation. I mean as kids that’s what school grades are about. It really shouldn’t matter if we do or do not fail an exam. It’s a learning experience. It shouldn’t be a slap on the wrist or cause us to feel even more depressed about our lives. We need to start giving less of a shit about external validation. Period.
When I stopped measuring myself against other people and decided what was most important to me was having enough money to walk away then everything just fell into place. I was measuring myself against what I cared about and my behavior started aligning with my goals. My numbers got better.
Now, you might love your job and can’t imagine not doing it forever. But you still need financial freedom and education you just need it later in life like when you’re in your late 50’s or 60's and you have to quit. Retirement is the same thing as financial freedom. It’s simply unfortunate that not enough people are educated about the subject. When’s the last time your financial advisor or CFP actually took the time to have that conversation with you? A very small percentage of people are out there doing that with their clients.
So if you decide you need to be saving and investing you should know it’s okay if you’re starting out with small amounts. You can start with $50 or $100 a month because what’s more important is starting and building the habit. When I first started putting away $100 per month I was petrified by the thought. What was going to happen to that money?
Too many people out there live for the weekend, which is a very poor way to life your life. Stop getting so distracted. That’s why so many people freak the fuck out because they have absolutely no clue what’ll happen next week, let alone 5, 10 or 25 years down the road.
And that saved money? Sure, you can keep it in a savings account. The very best savings accounts grow your money at 1% so if you’re saving $50 a month in an account that pays 1% then after 30 years you’ll have roughly $21,292.
You can do better than that by investing it. Because when you’re investing you can get a 7% return over the long term. Where does the 7% come from? For one, Warren Buffett. He says:
“The economy, as measured by gross domestic product (GDP), can be expected to grow at an annual rate of about 3% over the long term, and inflation of 2% would push nominal GDP growth to 5%. Stocks will probably rise at about that rate and dividend payments will boost total returns to 6% to 7%.”
And the data backs that up. Because from 1871 to 2016 the annual return of the S&P 500 adjusted for inflation is 6.88%. *Note this chart from Robert Shiller dates back to January 1921, not 1871.*
You might be worried about losing money when you invest. Yes, you will lose money. Because on average the market goes down by 10% every 11 months, 20% every four years, and 30% every decade. Investing isn’t a straight line, instead it looks like this. It goes down sometimes! But then what happens? It goes right back up. These are called business cycles. If you can deal with the short-term volatility you’ll be rewarded over the long term. Be patient.
The difference between 1% and 7% can change your life, and that’s why investing is so important. However, before you invest your own hard-earned money, invest in yourself first and foremost.
If you want financial freedom it’s not about working harder, or smarter, or longer. It’s about making the shift from working for money to having your money work for you, and you can’t do that by saving you have to invest. Risky has and always will be the new safe. Detach your negative emotions from the outcome. Stop trying to be perfect. No one is perfect. Simply act and start now!
My Very Best,