Wisdom of Rich Dad

Asha Santee loves shoes. Especially sneakers. Every time she got money, she bought a pair. Sometimes even two. While her feet were covered, her wallet was empty.

“I felt like I’d just gotten money yet was always asking, ‘How come I’m broke?’” the 20-year-old Howard University senior said with a laugh. “My biggest mistake was spending all my money on material things, like new purses and new shoes.”

To get on offense for her financial future, the forward for the Bisons’ women’s basketball team attended a seminar sponsored by a program called Playbook for Life.

Aimed at college athletes and students, Playbook for Life teaches the basic concepts of financial literacy, covering topics like budgeting, savings and investing, credit cards and credit debt, and sticking to goals.

The program is a free service offered by The Hartford Financial Services Group in partnership with the NCAA. Based on surveys of college students and their parents, as well as professionals fearing a gap in financial preparedness between young adults and their older coworkers, Playbook for Life is responding to a need articulated in the marketplace, according to Susan Coleman, the educational advisor to the Playbook program and a professor at the University of Hartford.

“It made a big difference and really gave me an in-depth explanation about budgeting, loans, and interest and how it works,” Santee said.

To make sure you don’t get left out of the game, check out some of these moves from the Playbook.

BUDGETING
It’s easy to find yourself wondering where your money went. Putting a budget in writing can show how you’re actually spending your money and what you can do to help control where it goes.

Playbook for Life gives a practical example of how a little money here and there can add up: spending $5 a day on a coffee drink comes out to $150 a month, money you could be putting toward credit card debt, a car payment, or earning interest in savings.

“I allow myself to buy shoes every now and then, only when I need them,” Santee said. “After I cut back I saw my funds lasting a lot longer than they used to.”

Yet it’s not to say that things like a Starbucks frappuccino or new pair of Nikes are out of bounds; just remember to add entertainment and shopping expenses into your monthly budget.

Don’t forget to include savings into the budget; treat it with the same importance you would utility bills, never saving what’s simply left over. In fact, the earlier you start saving, the earlier that money can start working for you.

COMPOUNDING
The best thing you can do is get off the bench when it comes to saving. The power of compounding lets your money do all the work.

“Start saving and investing as early as you can,” Coleman said. “By doing it every paycheck in your first real job, you can accumulate substantial amounts of wealth. If you wait until your 30s, that amount diminishes substantially.”

Coleman suggests participating in 401Ks, mutual funds, or IRAs.

“When I explain to students that they can be a millionaire by the time they’re in their fifties, they say, ‘Wow, I never realized that,’” Coleman said.

CREDIT
Playbook for Life not only teaches you how to sit back and watch your money grow, but also coaches defense against credit card debt.

“So many young adults see credit cards as a convenience, but don’t think about high interest rates, fees, or costs,” Coleman said. “They get students into patterns of impulse buying, which can lead to real financial difficulty.”

The program advises you to borrow on school loans or a mortgage, rather than pizza and movies, because you’re left with assets like education and a home instead of just payments. Always pay on time and as much as you can; only paying off the minimum won’t get you out of debt.

When using credit cards, factor in the cost of borrowing money. The Playbook illustrates how a price tag often doesn’t end up being the final cost. If you charge your $1,000 Spring Break trip to a credit card with 12 percent interest and only pay the minimum payments of $15, it will actually end up costing twice the original price at $2,100.

STICKING TO IT
Whether it’s a basketball shot or financial success, there’s got to be a follow-through.

“It was really hard to stick to a budget at first because I wasn’t disciplined,” Santee said. “But I didn’t want to live pay check to pay check. I have my mind set on getting my life off on a good foot – and not buying shoes!”

To download or request a Playbook for Life and get more tips on everything from taxes to insurance to evaluating job offers, visit www.playbook.thehartford.com.

Rich people aren’t smarter than “average” people, but they do make different choices on how to spend their time and their money. In fact, according to Dr. Thomas J. Stanley, author of “The Millionaire Mind,” there are five “success factors” that more than 80% of millionaires agree on as main ingredients to their success, two of which are:

1. Discipline – applying self control
2. Hard work – more than most people

Ok, so neither of these choices seems exciting, and they sure aren’t in line with the “win a million dollars as a reality show contest” school of thought. But have you ever really thought about what it’ll take to be rich? I’m not talking about “hit the Lotto” rich, I’m talking about the Steve Jobs do-it-yourself kind of rich. Read on to get some lessons on what you’ve got to do today to be rich tomorrow.

Lesson #1: Re-write Your Money Story
We each have a money story, I like to call it our “money map.” It’s the path you were unconsciously taught follow that leads you closer to or further away from money. For most of us who grew up hearing things such as, “We can’t afford that” or “I’m not made of money” or “You can’t be rich and happy” our “cash compass” is pointed to “broke.” But it doesn’t have to stay stuck at zero, you just might need to reprogram yourself to dismiss money myths you were taught that no longer serve your goal of becoming financially independent.

If a change in the way you think about money and the way you think about people who have money is in order, T. Harv Eker, author of “Secrets of the Millionaire Mind,” suggests that you make several powerful declarations. Why declarations vs. affirmations? Because according to Webster’s dictionary, a declaration is, “To state an official intention to undertake a particular course of action or adopt a particular status.” 

So, if success is the status you seek then start by re-writing your money story using positive declarations. It might seem strange at first, but you decide, would you rather be strange and rich or really cool and cashless?

Lesson #2: Curb Your Craving for Credit
The average undergraduate has $2,200 in credit card debt, according to Nellie Mae, the nation’s largest college loan lender. That figure jumps to $5,800 for graduate students. Since so many student credit cards have high annual percentage rates, the longer you wait to pay your cards off, the worse it gets. It’s hard to get out from under the weight of debt once it starts to pile on. While you don’t have to literally go cold turkey on credit you will have to curb spending and boost your balances in your favor.

Credit isn’t cash so when you borrow money today you’ll have to pay it back tomorrow with interest. Generally, your minimum payment due each month will be about 4% of your outstanding debt. If you owe $5,000 at 18% interest, your monthly payment would be $200. Now, if you only make the minimum payment, it will take 12.5 years to pay off your credit card debt – but the best part (for the credit card companies) is you’ll pay back that money plus an additional $2,916 in interest – that’s more than half of your original balance. Of course, the amount you’ll pay back assumes you don’t make any new charges on the card! Visit youngmoney.com/calculators to calculate just how long it will take for you to pay off your outstanding credit card debt, and then put a plan in place to reduce your debt.

Lesson #3: A Penny Save…
Lesson #2 is a perfect lead-in for the final lesson – saving. The time value of money says a dollar earned and saved today will be worth more tomorrow than a dollar earned and saved in the future. If you’re serious about getting rich you’ll need to tell your money where to go instead of wondering where it went. And if you’re not sure where to put your money – don’t let that be an excuse for not opening a savings or investment account.

Every day, week and month that goes by while you’re thinking about how much to save; your money could be working for you earning interest that’ll be worth thousands – if not hundreds of thousands in years to come. Even if you start with only $50 to $100 the amount doesn’t matter, the important thing is not to wait any longer.

Sanyika Calloway Boyce is the author of four books. She travels nationwide to educate, empower, entertain and enlighten students about money, credit and debt. This former debt-strapped college student shares real and relevant money messages that young adults can relate to and understand. Visit her online today at www.financialfitnesscoach.com.

 

The Hartford Financial Group offers these 10 quick tips to help young adults get started on the road to good personal finance.

1. Make a plan. Write down your net worth, listing everything you own and owe. Prepare a budget. Once you see it on paper, take control and make changes so your money is doing the most good for you. Write down your goals and review them quarterly or yearly.

2. Start saving for retirement in your 20s, as soon as possible. Small consistent savings in your 20s will compound and have a much greater impact than waiting until your 30s or 40s. Remember, a person who doesn’t save in his or her 20s might have to save four times as much to catch up.

3. Remember that interest rates put money in your pocket two ways. When investing, a higher rate of return will accumulate significantly over your lifetime. When paying interest for borrowing, shop around because a lower rate will have more significance than you think, saving you money over time.

4. Eliminate your high-interest debt as quickly as possible. This includes credit cards or any other interest that seems considerably higher than what you are earning on your savings.

5. Establish good credit. Pay your bills, including your student loans. Bad credit can prevent you from buying a house or car, or going on to higher education.

6. When evaluating a job opportunity, consider the training offered and advancement opportunities, as well as where the job is situated and the cost of living in that region. In addition to salary, look at the benefits being offered to get a full picture of the total compensation package.

7. Make sure you are covered by health insurance. Take the plan offered by your employer, even if there is a cost. Resist the temptation to save a few dollars. It is one of the most important financial decisions you can make.

8. Join your company 401(k) or retirement plan and make voluntary contributions of at least 4 to 6 percent of your income. The cash you save immediately in taxes, plus the compounding of that money over time, make this a wise investment. In addition, many companies may match some of your contributions, giving you additional “free” money.

9. Minimize your housing and auto costs during your first year after graduation to give you time to accumulate funds and develop a rhythm for your personal finances. If possible, live at home for a year or rent a modest apartment, perhaps with a roommate. Buy an economy car or use public transportation. Try to keep your housing costs to no more than 30 percent of your gross income.

10. Try to keep an emergency fund of 3 to 6 months’ living expenses in the bank or money that is easily accessible in case you have unexpected needs or lose your job.

THE principles of making money are surprisingly simple.

You do not have to be intelligent or well-educated to be rich.

We need no verification of that.

Most of us know at least one wealthy person who is neither educated nor smart.

In fact, judging by the number of poor people with PhDs, higher education must actually be a hindrance to financial success.

Truly rich people – not those who do it with loans, leveraging and manipulating other people’s money – simply have different habits.

The habits you need to learn to become a millionaire are no more complex than the rules for playing Monopoly.

Up till now, education about money has been left to the individual.

The only people I see taking the time to educate the public about credit, credit cards and savings are banks and other financial institutions.

But when we look at the track records of these institutions, it becomes quite obvious that these ‘teachers’ have a lot to learn themselves before they start advising other people.

To let bankers educate the masses about credit is a little like having the fox protect the hen house.

Most of us are so enamoured of the idea of security that, even when we are unhappy with our jobs, we will stay with them, day after day and year after year.

The truth is that staying in situations which are unsatisfying only increases our sense of insecurity.

We begin to feel there is no other choice but to sell our souls in the name of security.

Does people living in the uppper class means they are rich?

Adam Beyah in his blog said:

There is a big difference between class and wealth. One might live as a middle class or upper class but that doesn’t mean they have true wealth. Wealth is a balance sheet function. Most people believe that wealth is an income statement function. I had a client who is a physician. This client worked at a local hopsital and received a Form W-2 of over $186,000.00. She also earned other income and received a Form 1099 for about $45,000.00. Most would consider her middle class because she lived that kind of life style.

When I completed her tax return, she had a balance due of about $11,000. I gave her an invoice and she promply wrote me a check for my fee. She got up and thanked me as she left my office (hesitantly so). About 10 minutes later I heard a soft knock on my office door. She peaked her head in apologetically and asked me if I could hold her check to the 15th of the month.

Wealth is having a sufficient amount of income producing assets that produce enough income on annual basis that affords you the ability to live the lifestyle you desire to live wthout having to go to work.

So based on this definition, wealth isn’t how much money you earn but what you do with the money you earn.

~ Robert kiyosaki ~ 

Most of us have heard the phrase “health, wealth and happiness.” But what actually brings health, wealth and happiness? Is it success, and success alone?

My poor dad was a successful man. He had a Ph.D. and was well-respected and accomplished. But he had poor health, very little wealth and was rarely happy. He smoked two packs of cigarettes a day, eventually dying of lung cancer. He made a lot of money as a government official but never invested it. He wasn’t happy with his success. In his mind, he needed to accomplish more.

So, my thought for you this month: Are you becoming healthy, wealthy and happy? Or are you sacrificing these ideals for success?

Most of us know what to do when it comes to our health and our wealth. Health is primarily about diet and exercise, and wealth is about earning and investing. But happiness is a bit more mysterious. We know to think positively, but thinking positively instead of realistically can have tragic consequences. For example, positive thinking won’t prevent you from going bust if you’re foolish with money, and it won’t reduce your percentage of body fat.

In fact, it’s often the pursuit of happiness that causes the most problems with health and wealth. Many people are obese because they eat and drink to feel happy. And others shop to feel happy, even if it means maxing out credit cards.

Many books discuss the subject of being happy and the factors that affect happiness. One factor in particular helps entrepreneurs lead happier, healthier and wealthier lives: self-control. I’m happier if I have the self-control to do the right things even if I don’t want to do them. In business, sometimes that means studying more instead of working more.

Sometimes we make business decisions because they make us feel happy in the short run. But in the long run, we become less healthy and less happy. Sometimes doing the right thing might not make us happy temporarily, but we feel better later.

To me, doing the right things, even if I don’t want to do them, is one of the keys to being truly happy. Today, whenever I feel unhappy, I simply ask myself, “What am I not doing?” or “What am I avoiding?” Then hopefully, I have the tenacity to do what I know I need to do. That’s the only way we won’t forfeit our health, wealth or happiness in our pursuit of success.