That is why, all too often, a person who comes...
That is why, all too often, a person who comes into a sudden windfall of cash-let's say an inheritance, a pay raise or lottery winnings-soon returns to the same financial mess, if not worse than the mess they were in before they received the money Money only accentuates the cash flow pattern running in your head If your pattern is to spend everything you get, most likely an increase in cash will just result in an increase in spendingThus, the saying, "A fool and his money is one big party," I have said many times that we go to school to gain scholastic skills and professional skills, both importantWe learn to make money with our professional skillsIn the 1960s, when I was in high school, if someone did well in school academically, almost immediately people assumed this bright student would go on to be a medical doctor Often no one asked the child if they wanted to be a doctor It was the profession with the promise of the greatest financial reward
Today, doctors are facing financial challenges I would not wish on my worst enemy; insurance companies taking control of the business, managed health care, government intervention, and malpractice suits, to name a fewToday, kids want to be basketball stars, golfers like Tiger Woods, computer nerds, movie stare, rock stars, beauty queens, or traders on Wall Street Simply because that is where the fame, money and buy miu miu prestige isThat is the reason it is so hard to motivate kids in school todayThey know that professional success is no longer solely linked to academic success, as it once was
Because students leave school without financial skills, millions of educated people pursue their profession successfully, but later find themselves struggling financiallyThey work harder, but don't get aheadWhat is missing from their education is not how to make money, but how to spend money-what to do after you make it It's called financial aptitude-what you do with the money once you make it, how to keep people from taking it from you, how long you keep it, and how hard that money works for youMost people cannot tell why they struggle financially because they don't understand cash flowA person can be highly educated, professionally successful and financially illiterateThese people often work harder than they need to because they learned how to work hard, but not how to have their money work for them
The story of bow the quest for a Financial Dream turns into a financial nightmareThe moving-picture show of hard-working people has a set patternRecently married, the happy, highly educated young couple move in together, in one of their cramped rented apartments Immediately, they realize that they are saving money because two can live as cheaply as
one
The problem is, the apartment is cramped They prada logo decide to save money to buy their dream home so they can have kidsThey now have two incomes, and they begin to focus on their careers
Their incomes begin to increase
As their incomes go upheir expenses go up as well1 expense for most people is taxesMany people think it's income tax, but for most Americans their highest tax is Social SecurityAs an employee, it appears as if the Social Security tax combined with the Medicare tax rate is roughly 7 percent, but it's really 15 percent since the employer must match the Social Security amountIn essence, it is money the employer cannot pay you On top of that, you still have to pay income tax on the amount deducted from your wages for Social Security tax, income you never receive because it went directly to Social Security through withholding Then, their liabilities go up
This is best demonstrated by going back to the young coupleAs a result of their incomes going up, they decide to go out and buy the house of their dreams Once in their house, they have a new tax, called property taxThen, they buy a new car, new furniture and new appliances to match [heir new houseAil of a sudden, they wake up and their liabilities column is full of mortgage debt and credit-card debt
They're now trapped in the rat race The process repeats itself More money and higher taxes, also called bracket creep, A credit card comes in the mail A copy mulberry handbag loan company calls and says their greatest "asset," their home, has appreciated in valueThe company offers a "bill consolidation" loan, because their credit is so good, and tells them the intelligent thing to do is clear off the high-interest consumer debt by paying off their credit cardAnd besides, interest on their home is a tax deductionThey go for it, and pay off those high-interest credit cardsThey breathe a sigh of reliefTheir credit cards are paid offThey've now folded their consumer debt into their home mortgage Their payments go down because they extend their debt over 30 years It is the smart thing to do
Their neighbor calls to invite them to go shopping-the Memorial Day sale is onA chance to save some moneyThey say to themselves, "I won't buy anything But just in case they find something, they tuck that clean credit card inside their wallet
I run into this young couple all the timeTheir names change, but their financial dilemma is the sameThey come to one of my talks to hear what I have to sayThey ask me, "Can you tell us how to make more money?" Their spending habits have caused them to seek more income
They don't even know that the trouble is really how they choose to spend the money they do have, and that is the real cause of their financial struggleIt is caused by financial illiteracy and not understanding the difference between an asset and a new chanel bags liability
More money seldom solves someone's money problems Intelligence solves problems, There is a saying a friend of mine says over and over to people in debt
"If you find you have dug yourself into a hole
As a child, my dad often told us that the Japanese were aware of three powers; "The power of the sword, the jewel and the mirror
The sword symbolizes the power of weaponsAmerica has spent trillions of dollars on weapons and, because of this, is the supreme military presence in the world
The jewel symbolizes the power of moneyThere is some degree of truth to the saying, "Remember the golden ruleHe who has the gold makes the rules
The mirror symbolizes the power of self-knowledgeThis self-knowledge, according to Japanese legend, was the most treasured of the three
The poor and middle class all loo often allow the power of money to control themBy simply getting up and working harder, failing to ask themselves if what they do makes sense, they shoot themselves in the foot as they leave for work every morningBy not fully understanding nioney, the vast majority of people allow the awesome power of money to control themThe power of money is used against them
If they used the power of the mirror, they would have asked themselves, "Does this make sense?" All too often, instead of trusting their inner wisdom, that genius inside of them, most people go along with the pochette louis vuitton cro