Keeping In Touch
SELF DESTRUCTIVE BEHAVIOR
You may be aware that I have very few clients in El Paso, Texas. My clients are scattered all over the country and different countries around the world. The thought struck me to do an experiment. As a result, I put a radio ad on the air for the past twelve months aimed at local people. The results were eye opening.
For years, I have explained that 90% of all Americans, despite being really nice people, are financial failures. The confirmation of what I have been saying drove home like a thunderbolt over these twelve months. People in their 50’s, 60’s and 70’s would come in to meet me with nothing to their name. Nothing of significance. They had spent their lifetimes violating the most fundamental principles in terms of the use of money as a tool. The first principle is to make more that you spend. These people had made a lifelong habit of buying anything they wanted whether they could afford it or not. If they wanted to buy something, they would sacrifice their savings to get it. If they didn’t have the money to get it they would buy it on time. In fact, buying on time is one of the principle indicators of the poor. Wealthy people determine whether something they want is valuable and if the price is correct. If that is the case, they pay cash. Poor people ask,” What is the monthly payment?” If they can afford the monthly payment, they buy the item, even if they can’t possibly afford it over the long run. Over time, these monthly payments from various purchases, plus the enormous amount of interest they pay swamp their finances.
I have said over and over again, that if a person can afford to borrow money and pay back on the lender’s terms, they can afford the purchase. Most people, however, use regular banks to store their money. Once they have bought the item, and it has been paid for, both the principal and interest and all the money that those funds could have provided for them for the rest of their lives are all gone. In the event a person might be tempted to borrow money, but could not pay back on the lender’s terms, they can not afford the item. In this case, they are driving themselves into poverty.
Many of you have Bank On Yourself type contracts. The same rules apply. I have noticed that a small number of people borrow money from themselves, when they can afford to pay back the principal and interest. Using the Bank On Yourself concept, they are paying the principal and interest to themselves. Once the bills are paid, they have restored the principal and interest back in their own contracts and they have the item that they bought as well. There are a few who buy things using the Bank On Yourself concept but do not pay the principal and interest back to themselves. It is ironic that they will faithfully make payments to strangers, but choose to cheat themselves. Still, they are better off then someone with a standard bank because even when the money is out they are creating a death benefit to cover their purchase and they are also receiving dividends as owners of the company. Nonetheless, it is a poor strategy and should be entirely avoided. The easy way to eliminate the debt is by making arrangements to pay funds back on an automatic monthly basis, plus add whenever extra money becomes available. When this is done, the contract will be fully restored. Their purchase is paid for and their finances are growing.
I have perhaps over emphasized the damage that is done by any number of taxes we have to face. The tax man takes the first bite out of finances. Please be clear. It is equally destructive to waste money during a person’s entire working lifetime only to end up broke, when too old or too sick to meet their goals. By then the time frame is so short that meeting their goals becomes nearly, if not completely, impossible. I urge you, if you are young, presumably in your 20’s or 30’s, to save as much money as you possibly can. What possible harm could it do to accumulate funds as needed for emergencies and opportunities?
If you are in your 40’s or 50’s, I hope you will get serious, if you aren’t already, and begin saving money in substantial amounts. An individual who makes $100,000.00 a year or more should, in my experience, be able to save about $30,000.00 per year depending on family status. This is critical. Having cash in a place, where it is safe and freely available without questions allows a person to quickly maneuver to defend against problems that arise and provide the ability to take advantage of opportunities, when they become apparent. This is the way wealthy people become wealthy and the reason they continue to be wealthy.