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Saturday, October 31, 2009

Talking About Money

Why is money still a taboo in our society? I have read countless financial books and all of them say two things: that it is difficult to talk about money and that financial education should be brought into the schooling system. I am trying to do the second (in my own small way), but even among adults (or anyone), discussing their financial situation is a difficult matter.

Why is this? Are people insecure? Maybe embarrassed? For myself, I tell all my students that my goal is to one day be a millionaire. Then whenever the topic of money comes into the staff room, a teacher or two will always say "I heard about your million dollar plan" with a snide remark or comment. Until people realize that money problems or goals cannot be short term but long term progress this will be difficult.

My philosophy is to inch away towards my goals, as anyone who has read this blog will know. Every paycheque I update my net worth and set my goals to always have my assets going up and my liabilities falling. This has worked fairly well for me over the past few years in solidifying my financial position. I don't feel embarrassed that I am still in debt, and am slowly making changes in order to remedy this. I don't feel ashamed or uncomfortable discussing this with other people, in order to receive ideas or give suggestions to people. Money isn't intended to be rocket science, and I truly believe that all can be financially well off in the long run.

So what is causing the financial problems for most people? The concept of instant gratification is a major one. Why wait to save for something when you can borrow for it? Why should I not have a beautiful home and car and big screen television when so many other people have it? If you can't afford it, then you shouldn't have it.

Suze Orman has a personality that I have conflicts with, but she has a few good points about money. She claims that if you are unable to contribute 10% to your retirement and carry a credit card balance, that you are living above your means. She also throws in (in at least the current book of hers that I am reading) that you should also have 8 months of expenses saved up, which may be excessive but very helpful if you lose your job. She claims that the average American from age 35-45 carries $1900 on their credit card. If this isn't instant gratification, then I don't know what is. Personally I try to spend cash whenever I can. Then when my cash runs out, I don't buy anything else.

In my class I talk about financial issues that are important to me (saving, borrowing, financing your education, purchasing your first vehicle, renting your first apartment, buying your first house), and many students say to me that this is far more information then they get from their parents (concerning how expensive things are). That is a scary thought. If you are uncomfortable discussing finances with your family, then how are you going to deal with them when problems inevitably arise?

Finally, I want to point out to people that prosperity is a long term goal. I am writing this post because it is a little frustrating for myself to be inching along towards my financial dreams, but we all must realize that these are 20 year goals. As Robert Kiyosaki said in his excellent book "Rich Kid, Smart Kid", you have to look long term. His example was real estate relating to Monopoly. His "Rich Dad" purchased a piece of property and likened it to buying a property in Monopoly. He asked the kids "How long will it take me to turn this property into four green houses and then a hotel?". The answer was twenty years. Remember that when thinking about your financial goals.

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