Increasing Your Money & Wealth Intelligence
(Picture Source: howstuffworks.com)
In today’s world, most people use a computer. In fact, it’s hard to imagine living life without one these days. They are a wonderful tool when they have been given the right information. When you store data inside the hard drive, you have it forever until the day you decide to delete it. You can store almost anything, documents for school, phone numbers and email addresses of clients, etc. All information can be retrieved at your fingertips. Yet, the computer can be your best friend or your worst enemy. Why? It really depends on what you have done with it. Some computers are stored with useless information that can also be a disaster. Once you call it up, you will be haunted by it for months to come.
Garbage In Garbage Out
Here’s the principle, our minds work like computers with great memory. The rich are very aware of that and that’s why they don’t feed their mind with garbage, because they know the GIGO principle: garbage in, garbage out. The rich invest intensively in the right financial education.
So what are the basic elements of the right financial education that the rich has that the poor are desperately looking for?
Since young, parents have been educating, “Never to owe anyone any money.” In fact, most financial advisers or financial planners will advise you to do so as well. However, you must realize that there are two types of debts: Good Debt and Bad Debt.
(Picture Source: DoItYourselfDebtSettlement.org)
Bad debts are any debts on consumption. They drag you down as you are paying interest on something that depreciates in value. Imagine paying installments on buying a car that costs $50,000 three years ago but currently sells for $40,000. You would definitely lose money incurring Bad Debt.
People with the right financial education manage good debt wisely to accumulate wealth. Good debt is any debt where it is possible to earn a return that is higher than the interest on the debt. Imagine taking a loan of 4%, instead of using your savings and cash to pay off the loan as quickly as possible, you channel your money into higher yielding investments such as properties, precious metals or even wine investments that can potentially generate 6% – 20% return per year.
What is our greatest asset? It is our ability to get up every day to create income. Therefore it is essential to insure the greatest asset that you have. The simple truth is insurance is the worst asset to buy but it is the best asset if you die or if you are critically ill. Insurance is bought solely for protection against the 3Ds (Death, Disability and Disease). Sadly, most Malaysians buy insurance policies as a form of retirement plan or child education plan.
People who have low financial education have little to no knowledge about buying insurance plans. Worst still, many Malaysians buy insurance policies that are recommended by close relatives as a form of support to relatives who have just embarked upon the journey as an insurance agent.
Besides protecting against the 3Ds, you must remember that you must protect your money against inflation. Inflation is a rise in the general level of prices of goods and services over a period of time. Imagine buying Nasi Lemak at RM1 ten years ago and it costs us RM5 today. So how do you protect yourself against inflation? The only way is to make your money work harder for you. If inflation rate is running at 5%, you need to aim for your money to get annual returns of 5% or higher.
Managing Your Money
We all know that even the smartest student in the school leaves university with very low level of money intelligence. Why is that so? Because the schools usually depend on fear rather than to motivate, they rely on threatening rather than to teach, imitate rather than to innovate, and punish rather than to encourage. Due to these factors, many people ended up spending when they should be saving, saving when they should be spending, fearful when they should be brave, and be brave when they should be fearful.
Managing your money like the rich requires a lot of money intelligence. Many people earn a lot of money but fail to keep much money because they manage their money like the poor. Being able to live well and still invest no matter how much you make requires a high level of money intelligence. Having cash surplus every month is something you have to actively manage.
Increasing Your Money & Wealth Intelligence
In today’s world, money and wealth intelligence is one subject that everyone must master. You do not have the choice to take this as an optional class but as a core subject of life which requires your learning and constant attention!
While most people mistaken that money intelligence is all about, the truth is it is not only about money. It is about focusing on building a life of security and passion for what you love and for the people whom you love. It is about knowing yourself and maximizing the fullest potential of your God given talents and your wealth.