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  #1  
Old May 11, 2015, 06:58 AM
Dien Rice Dien Rice is offline
Onwards and upwards!
 
Join Date: Aug 2006
Posts: 3,386
Default The 1 bad, 1 neutral, and 1 good thing you can do with your money...

I have some friends... And it sometimes makes me sad...

Why?

These are people who haven't put aside any money for a rainy day.

When they get money, they spend it on the things they enjoy.

Don't get me wrong - they are really great people...

The problem comes... when the flow of money starts slowing down!

For example, one of my friends lost his job about a year ago. He just recently got another one. But during that year in which he didn't have a job, he was really struggling...

Another friend of mine got some inheritance. However, two years later, 90% of it is all gone. I won't go into details of what he did with it, but 90% was all wasted. He has nothing - literally nothing - to show for that 90%. (Fortunately, he did invest 10% of it, which will pay off for him in the long run, but he could have done much better.)

What could they have done better?

What it comes down to is a kind of financial "knowhow"...

Did you know that, when you get money, there are three things you can do with it?

You can save it, you can spend it, or you can invest it.

What does that mean?

Saving it means hanging on to it, not spending it, but not making any extra money with it either.

Spending it means spending the money in ways where it effectively "disappears."

One common way is buying things that will decrease in value. For example, if you win the lottery tomorrow and immediately go out and buy a new Alfa Romeo sports car... As soon as you drive it off the lot, your Alfa Romeo will start decreasing in value! If you try to sell it a few years later, you won't be able to get anything near what you paid for it. You will have lost that money!

Investing your money, on the other hand, means putting it somewhere where the money will grow.

Now, when people think of investing, they often think of stocks and real estate property. However, you can also invest in your own business.

For example, buying "chattel" and reselling it for a profit is a kind of investment (what Gordon Alexander calls "chatteling"). You can keep doing this, and grow your money...!

Are there other ways?

I'd say you can also "invest" it in education. If that education means you'll end up making more money in the end, I see that as a kind of financial investment, too...!

(I've easily "invested" tens of thousands of dollars over the years in my business education - through books, newsletters, courses, and so on... And in my opinion, it's paid off... )

Anyhow, i just wanted to share those thoughts... I hate to see people struggle unnecessarily, when those people don't have to, if they just looked after their existing money a little bit better...

What are you doing with your money?

Best wishes,

Dien
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  #2  
Old May 11, 2015, 10:05 AM
sandalwood
 
Posts: n/a
Default Re: The 1 bad, 1 neutral, and 1 good thing you can do with your money...

Quote:
Originally Posted by Dien Rice View Post
I have some friends... And it sometimes makes me sad...

Why?

These are people who haven't put aside any money for a rainy day.

When they get money, they spend it on the things they enjoy.

Don't get me wrong - they are really great people...

The problem comes... when the flow of money starts slowing down!

For example, one of my friends lost his job about a year ago. He just recently got another one. But during that year in which he didn't have a job, he was really struggling...

Another friend of mine got some inheritance. However, two years later, 90% of it is all gone. I won't go into details of what he did with it, but 90% was all wasted. He has nothing - literally nothing - to show for that 90%. (Fortunately, he did invest 10% of it, which will pay off for him in the long run, but he could have done much better.)

What could they have done better?

What it comes down to is a kind of financial "knowhow"...

Did you know that, when you get money, there are three things you can do with it?

You can save it, you can spend it, or you can invest it.

What does that mean?

Saving it means hanging on to it, not spending it, but not making any extra money with it either.

Spending it means spending the money in ways where it effectively "disappears."

One common way is buying things that will decrease in value. For example, if you win the lottery tomorrow and immediately go out and buy a new Alfa Romeo sports car... As soon as you drive it off the lot, your Alfa Romeo will start decreasing in value! If you try to sell it a few years later, you won't be able to get anything near what you paid for it. You will have lost that money!

Investing your money, on the other hand, means putting it somewhere where the money will grow.

Now, when people think of investing, they often think of stocks and real estate property. However, you can also invest in your own business.

For example, buying "chattel" and reselling it for a profit is a kind of investment (what Gordon Alexander calls "chatteling"). You can keep doing this, and grow your money...!

Are there other ways?

I'd say you can also "invest" it in education. If that education means you'll end up making more money in the end, I see that as a kind of financial investment, too...!

(I've easily "invested" tens of thousands of dollars over the years in my business education - through books, newsletters, courses, and so on... And in my opinion, it's paid off... )

Anyhow, i just wanted to share those thoughts... I hate to see people struggle unnecessarily, when those people don't have to, if they just looked after their existing money a little bit better...

What are you doing with your money?

Best wishes,

Dien

Dien,

As a person in the financial arena for years upon years, I will say:

1) your article is spot on
2) people don't think about a rainy day
3) every civilized country has a method for people to save that will insure said same people a living amount when they get old
4) many people think they know more about saving than they really know
5) advice in this field is all over the place. One of the worst pieces of advice I ever heard came out of the mouth of a syndicated financial guru. This is a guy with millions of followers. One of the best pieces of advice I ever heard came out of the mouth of a guy with no syndicated radio show. Who do you think the people will follow?
6) we need articles like your post to keep people thinking about their money
7) that rainy day you mentioned could be surviving a heart attack, stroke or cancer and not being able to work. Ouch!

OK, I'm off my soap box. Thanks for a money reminder.
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  #3  
Old May 11, 2015, 02:47 PM
TommyBoy
 
Posts: n/a
Default Re: The 1 bad, 1 neutral, and 1 good thing you can do with your money...

What a tease. Come on, Tom. Regarding #5 what was the worst and best financial advice you've heard?
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  #4  
Old May 12, 2015, 05:01 AM
Dien Rice Dien Rice is offline
Onwards and upwards!
 
Join Date: Aug 2006
Posts: 3,386
Default Re: The 1 bad, 1 neutral, and 1 good thing you can do with your money...

Hi Tom,

Quote:
Originally Posted by sandalwood View Post
As a person in the financial arena for years upon years, I will say:

1) your article is spot on
2) people don't think about a rainy day
3) every civilized country has a method for people to save that will insure said same people a living amount when they get old
4) many people think they know more about saving than they really know
5) advice in this field is all over the place. One of the worst pieces of advice I ever heard came out of the mouth of a syndicated financial guru. This is a guy with millions of followers. One of the best pieces of advice I ever heard came out of the mouth of a guy with no syndicated radio show. Who do you think the people will follow?
6) we need articles like your post to keep people thinking about their money
7) that rainy day you mentioned could be surviving a heart attack, stroke or cancer and not being able to work. Ouch!

OK, I'm off my soap box. Thanks for a money reminder.
Thanks for sharing that, Tom!

I'll say, regarding my friend who got the inheritance... I didn't know about his inheritance till all this had happened, and he had already lost a big chunk of it. If I had known, I feel I could have probably helped steer him more in the right direction...! (He only started talking to me about it after most of the money was already gone...)

He hasn't had a lot of income his whole life, so I guess he never bothered to educate himself on what to do when you do have money to invest. Then, when he had it - he didn't know what to do with it!

Sadly, he seems a bit morose nowadays... I haven't really talked to him about it explicitly, but I think he knows he had an opportunity to "set himself up" financially for the rest of his life (if he had invested wisely)... and he blew it... I think he can probably see that in hindsight... I don't want to rub salt into open wounds...

On no. 5... I agree with "TommyBoy"... what's the good advice? What's the bad advice? Curious minds want to know...!

We'll all have "rainy days"... We'd all like to think we'll be healthy and energetic the rest of our lives. I've had my "scare" with diabetes, which has affected me... I seem to have it more or less under control now, but it took me a long time to figure out what seems to help me (diet-wise, supplement-wise, and so on)...

Can you survive (financially) if you get sick? That's a very scary question for many people...

The solution is to educate yourself... Be open-minded but also a bit "skeptical" of the "gurus"... Then take action, maybe small actions at first (while you test the waters), then, as you gain in experience and knowledge, dip your toe, then your whole foot in the water...

Best wishes,

Dien
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  #5  
Old May 12, 2015, 05:05 AM
Dien Rice Dien Rice is offline
Onwards and upwards!
 
Join Date: Aug 2006
Posts: 3,386
Default Re: The 1 bad, 1 neutral, and 1 good thing you can do with your money...

Quote:
Originally Posted by TommyBoy View Post
What a tease. Come on, Tom. Regarding #5 what was the worst and best financial advice you've heard?
I second this... I'd like to know too!

Best wishes,

Dien
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  #6  
Old May 13, 2015, 09:47 AM
sandalwood
 
Posts: n/a
Default Re: The 1 bad, 1 neutral, and 1 good thing you can do with your money...

Quote:
Originally Posted by TommyBoy View Post
What a tease. Come on, Tom. Regarding #5 what was the worst and best financial advice you've heard?

Worst - Buy term and invest the difference

Best - Save for a rainy day

I'll let you guess who touts the worst but my mom told me the best.
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  #7  
Old May 13, 2015, 09:56 AM
sandalwood
 
Posts: n/a
Default Re: The 1 bad, 1 neutral, and 1 good thing you can do with your money...

Quote:
Originally Posted by Dien Rice View Post
Hi Tom,


Thanks for sharing that, Tom!

I'll say, regarding my friend who got the inheritance... I didn't know about his inheritance till all this had happened, and he had already lost a big chunk of it. If I had known, I feel I could have probably helped steer him more in the right direction...! (He only started talking to me about it after most of the money was already gone...)

He hasn't had a lot of income his whole life, so I guess he never bothered to educate himself on what to do when you do have money to invest. Then, when he had it - he didn't know what to do with it!

Sadly, he seems a bit morose nowadays... I haven't really talked to him about it explicitly, but I think he knows he had an opportunity to "set himself up" financially for the rest of his life (if he had invested wisely)... and he blew it... I think he can probably see that in hindsight... I don't want to rub salt into open wounds...

On no. 5... I agree with "TommyBoy"... what's the good advice? What's the bad advice? Curious minds want to know...!

We'll all have "rainy days"... We'd all like to think we'll be healthy and energetic the rest of our lives. I've had my "scare" with diabetes, which has affected me... I seem to have it more or less under control now, but it took me a long time to figure out what seems to help me (diet-wise, supplement-wise, and so on)...

Can you survive (financially) if you get sick? That's a very scary question for many people...

The solution is to educate yourself... Be open-minded but also a bit "skeptical" of the "gurus"... Then take action, maybe small actions at first (while you test the waters), then, as you gain in experience and knowledge, dip your toe, then your whole foot in the water...

Best wishes,

Dien

Dien,

I answered the question on number 5 in the above post. Let me expand on that rainy day saving idea. Currently there is a product on the market that will let you save for a rainy day. Even if you employ no other method and if followed faithfully will accumulate quite a bit of cash for you when you reach 65, the age at which most of us have been trained to retire. This product is available, from what I understand, in almost all civilized countries.

Even when I show them the power of this product some people say no and walk away. They've bought the buy term and invest the difference parable in their mind.

Of course that's their right but these are the same folks who will scream their social security check isn't enough to live on and that the income inequality gap isn't fair. Yada, yada, yada.

We live in fantastic times. It is time to wake up and employ the solutions that already exist.

Last edited by sandalwood : May 13, 2015 at 11:37 AM.
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  #8  
Old May 13, 2015, 10:50 AM
Rob Yaggie
 
Posts: n/a
Default I have term insurance

No doubt there is a "financial literacy" problem and sometimes the right choice for a person isn't the best option but rather the best option for their discipline, resources and skill level.

I am able to live within my means, save for a rainy day, use tax favored investment vehicles (401k, 529, IRA, etc.) and non tax favored investments.

For me, insurance and investments are 2 different things and the insurance that makes sense for me is term life for a certain portion of my life (kids at home, wife and outstanding mortgage, etc).

I don't agree that "buy term and invest the difference" is the worst advice as a blanket statement but it is only good advice for a limited audience.

Rob Yaggie
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  #9  
Old May 13, 2015, 11:50 AM
sandalwood
 
Posts: n/a
Default Re: I have term insurance

Quote:
Originally Posted by Rob Yaggie View Post
No doubt there is a "financial literacy" problem and sometimes the right choice for a person isn't the best option but rather the best option for their discipline, resources and skill level.

I am able to live within my means, save for a rainy day, use tax favored investment vehicles (401k, 529, IRA, etc.) and non tax favored investments.

For me, insurance and investments are 2 different things and the insurance that makes sense for me is term life for a certain portion of my life (kids at home, wife and outstanding mortgage, etc).

I don't agree that "buy term and invest the difference" is the worst advice as a blanket statement but it is only good advice for a limited audience.

Rob Yaggie

Rob,

Thank you for the reply. I believe it is the worst advice because of the alternative that exists. I also can prove it is the worst advice that exists. However this isn't the place for me to prove it so I won't.

I noticed the programs you list. They are forever taxed programs once you begin withdrawing your money. The program I talk about is a never taxed program once you begin withdrawing your money. This program is also IRS approved so that isn't even an argument or consideration.

By the way, if you should suffer a heart attack, cancer or stroke and live and can't work or see your income diminish how will your investments and term policy help you? Better yet, how long will they be able to support you? My product will support you for life. You can't beat that. Hence buy term and invest the difference is the worst advice I know of.

I believe you should always arrange your finances in the manner that is best for you and your family. I am not arguing with you or trying to convince you how smart I am or get you to change your mind.

It is my opinion a look at alternatives that exist and are proven to be superior to what we've been told in the past should be examined. That's it.

The only constant thing in life is change. And, that is exactly what has happened in the financial world. The people who control what we invest in figured this out and are now on to this product. It has already made a big difference to quite a few people.

I also believe all advice is good advice for only a limited audience. I can also prove that.

Again, thank you for the reply.
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  #10  
Old May 13, 2015, 01:10 PM
Rob Yaggie
 
Posts: n/a
Default Defining "Invest the difference"

Quote:
Originally Posted by sandalwood View Post
Rob,
Hence buy term and invest the difference is the worst advice I know of.

Tom,

Thanks for your reply and I'm not arguing here either. There are many financial products out there and several (not all.... lol) have a valid use and audience. Maybe my issue with you classifying this as the worst advice could be differing definitions of "invest the difference". In my definition, anything not spent on the term insurance become available to the use in the rest of the plan (which could include an annuity or anything else you might be recommending). I just mentioned a few of my other choices (like company matched 401k) but not my entire financial plan (which I'm sure has some gaps as well).

So, how does term help me if I survive a heart attack? It doesn't because it is not designed to help in the least for that scenario and wasn't purchased to fill that gap. However, in an equally undesirable event (my death during a critical 20 year period of my income contribution to my dependents) it is an excellent affordable tool. This is just one of the many tools I use and doesn't mean I ignore the others.

Thanks,
Rob Yaggie
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