Need For Financial Understanding ‘has Never Been Higher’

Although thousands of Britons are taking steps to improve their financial understanding, more needs to be done to educate people on monetary matters, it has been suggested.

According to the Open University (OU), recent events such as the global credit crunch, “saving crises” and the effects of interest rate rises by the Bank of England over the last year make it more vital than ever for consumers to improve their financial literacy and understand how such occurrences can impact upon their spending. However, despite over 2,000 members of the public signing up for the institution’s You and Your Money: Personal Finance in Context course since last year, it was asserted that still more should be done to help get a better grip of managing their money situation.

And as a result of doing so, people may be able to develop a more responsible attitude towards personal loans and other forms of borrowing, which in turn may lead them to spend more time looking for competitively-priced credit.

Ian Fribbance, chair of the course and from the university’s social sciences department, said: “Just a quick glimpse at this week’s front pages proves that the need for financial understanding has never been higher. Consumers need to understand how changes to our economy affect them personally and the OU’s course can deliver this knowledge”.

“Over 2,000 people have already completed the course, which proves that our original promise to educate people about important financial issues, such as debt management, is working. This figure also highlights the British public’s overwhelming desire to gain a thorough grounding in financial matters as our economy faces some challenging times. Ultimately, it’s our aim for the course to better equip people to take a firm control of their own decision-making in financial matters.”

The course teaches attendees about how changes on a global or national scale can affect their personal finance situation, as well as the need to manage their money effectively if raising a family or caring for an older relative. In addition, borrowers will also be taught financial planning skills incorporating budgets and balance sheets, which could help them manage their regular outgoings and identify how much they have available to make loan repayments.

Overall, the improvement of financial knowledge could help Britons become more proactive in handling their money and so avoid developing unmanageable debt difficulties. The news comes as research carried out by Citizens Advice has revealed an increase in the number of enquiries dealt with relating to fiscal matters.

According to the advisory service, the proportion of consumers looking for advice on their struggles to manage money has increased to 1.7 million over the course of last year, as the company reported unsecured loans are “dominating” the country’s finance problems. Meanwhile, enquiries regarding personal loans are up by over 18 per cent. The study also showed that debt concerns in relation to electricity and gas bills have surged by a third, with enquiries surrounding telephone bills witnessing growth of 19 per cent. Consequently, those concerned about how much they owe could be well advised to consider taking out a debt consolidation loan as a means of paying off existing debts to various creditors and getting back on their financial feet.

The 7 Immutable Laws Of Building true Wealth

Wealth (old English) from weal – Well-being,” O.E. wela wealth,” in late O.E. also welfare, well-being,” from W.Gmc. *welon, from PIE base *wel- to wish, will” (see will (v.)). Related to well (adv.). – Online Etymology Dictionary, 2001 Douglas Harper

Given my new found focus, clarity, and vision, as touched upon in my recent post An Epiphany of Wealth and Prosperity, I have recently developed a system for building what I have labeled True Wealth” (copywrite, trademark, and patent pending, all rights reserved… lol) that I will feature in a series of posts dealing with the separate tenants of this new system. It’s called The Wealth Accelerator Strategy�.

I have come to realize that my core beliefs about economics, finance, capitalism, business, money, consumerism, and the like, are all contrary to how our world functions today. Now, the questions to ask are rather simple; Does that make the Worlds” way of functioning wrong?, Are those who make their livelihoods through this way of functioning, bad for doing so?, Are you an anarchist?

The simple answers to these three questions are no, no, & NO!

You see, fist of all, it’s not the way of functioning itself as much as what the inevitable outcome is sure to be, but more on that later. Also, the people who have to make their livings in this functional system may know of no other way. Even if they both enjoyed and preferred it, they themselves may not necessarily be a bad person, it’s simply their choice, and, they are free to choose. And, finally, I too am free to choose the direction in which I want to steer my life… I have no desires to cause an upheaval of anything… It will be what it will be, and I will be me.

Now, that put aside, let’s touch upon these laws” of true wealth” and the contrasting general world views. Note: this is not for everyone, nor do I expect anyone to agree, this is simply a difference of opinion.

The 7 Immutable Laws of Building True Wealth”

1) Seek God’s Kingdom

2) The Road to True Wealth” Begins at Home�

3) Real Money is Gold & Silver Coin

4) Live Debt Free

5) Live Simply

6) Be Generous

7) Exchange Paper Money for Real Assets

While these Laws” as I call them, seem to be rather straight forward and self explanatory, we will be gin to explore the individual tenants themselves in upcoming posts. But for now, I will give a topical sneak peek” as it were into each.

Seek God’s Kingdom

But seek first his kingdom and his righteousness, and all these things will be given to you as well. Matt 6:33 NIV

Everyone (for the most part) agrees that there is more to life that Money, Fame, & Power. The difference only comes into play concerning what is the most important thing, and if or who is the Supreme Creator(s). For me it’s obvious. However, many in our society struggle with a desire for the recognition and approval of centers of power that can be defined as both temporary and trivial at best.

Oh, and by the way… I’m not referring to Church. But, that’s a whole other blog.

The Road to True Wealth” Begins at Home�

The core of this principle deals with the fact that we desire too many things that extract us from our homes, families, and communities. We should strive to draw closer to home with Home businesses, localized investing, and maintain our Family Bank�. Also, the double meaning applies to Owning Real Estate, specifically your own home.

Real Money is Gold & Silver Coin

This is simply a direct reference to the Constitution of the United States of America that refers to not only Congress’ ability to coin money and regulate its value, but also that no state had permission to render anything but gold and silver coin as payment for debts.

$20 in face value of gold coinage has maintained its relative purchasing power against inflation. A 1 once $20 Gold Eagle has an intrinsic value of $673 USD.

Live Debt Free

It’s really simple… If you have to finance it, then you can’t afford it. Consumer debt, unlike mortgage debt, carries ZERO incentive to execute. The only benefit to individual or corporate debt is instant gratification.

Live Simply

Building off of the debt free rule, this speaks to the very core of what we feel is necessary for us to live and exist in true joy and happiness. This begins with the question; What do you really NEED in order to live in happiness?” The problem is that we really believe that all of the creature comforts” that we enjoy are really necessary for a happier life.

Be Generous

The real focus here is the power of community. The ability to have relationships that we can not only go to when we have needs, but, also to produce enough resource to be able to be a source of generosity to our trusted communal relationships.

This is not communism” or the redistribution of wealth, but, simply an elevated since of true community in which the responsibility for caring for the needs of those with whom we have primary or secondary relationships with, i.e. friend, family, religious affiliations, etc.

Exchange Paper Money for Real Assets

This probably makes more since when you put the concept into its lowest common denominator, or simplest terms.

Currency, as is the official term for printed or electronic money, is made from 25 cotton and has an intrinsic value of less than 4 cents. Electronic currency has no intrinsic (or real) value.

So here’s the exchange:

Cotton/Linen/Ink for Gold & Silver (7 $100 bills X .04 = .28) for 1 once of gold

Cotton/Linen/Ink for Real Estate (100 $100 bills X .04 = $4) for 1 acre of land

Now, the key to focus on here is not the exchange rate or the ROI, but on the preservation of value and the inevitable hedge against inflation.

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Women’s Attitude To Wealth

Why do women earn less than men? Over the last 30 years we have seen the introduction and implementation of a range of legislation aimed at addressing the gap between the earnings of men and women and yet there is still a significant gap. The UK Equal Opportunities Commission has stated that it will take at least two more generations to bridge this gap. What part does our mind and our attitude have to play in determining how much money we could or should be earning?

There are certainly enough motivators. We hate the fact that we don’t have enough money, we know we probably spend too much and we certainly know we don’t save as much as we should. Every day we read horror stores about inadequate pensions and old age poverty. These are still not enough to spur us into action and take control of our income generation. The answer lies in our conditioning and is intrinsic to who we are. Until we understand how this impacts our attitude to money, all the changes in legislation and extended maternity leave in the world will not raise our earning levels.

In our earliest years our conditioning is determined. Between the age of 0 and 8 we learn a set of values of beliefs. In fact, David McClelland, Distinguished Research Professor of Boston University, proved it could be as early as 0 to 3 when our ‘values’ are determined by our parents and those most closest to us. These values impact how we feel about and respond to all sorts of things including our attitudes to money, wealth and the types of work we should be pursuing.

The emphasis on should is deliberate. Values are all about what we believe we should be doing to please others, to please society in general and to fit in.

For women and money this is complicated. Women today are taught the importance of being financially independent, to be self reliant because, afterall, ‘a man is not a plan’. However, sometimes the messages we hear growing up are inconsistent and conflicting. On the one hand, we’re taught about the importance of money the need to spend and save it wisely. On the other, we’re implicitly and explicitly taught that it’s equally important to be kind, nurturing and collaborative; that the most important thing is our relationship with others and not our relationship with money. We are different to men: we are not taught how to be powerful or how to win at all costs. This makes us reluctant to demand what we think we deserve, including equal pay.

To add insult to injury, we are told at a very early age that girls are poor at maths. From this we conclude that we must be bad at finance and managing money as well. As a consequence, we lack confidence in dealing with money, preferring others to take charge.

If our parents were raised during or shortly after the war, we also inherited a mentality of scarcity which continues to impact our attitude to risk and money as we become adults and parents in our own right.

What has been the result?

Besides the earnings gap which persists, a recent survey by the Economist Intelligence Unit on behalf of Barclays Wealth showed that we are far less likely to take risks with our money, whether in personal finance or business affairs. Women tend to place less importance than men on our income from investments and we save to reach a goal. Once the goal is reached we will often act to protect what it is that we have built up. This means we are limiting our potential to create even more wealth and be superrich.

Men have a different attitude and game plan. The same survey showed that men claim to have better knowledge than women of every aspect of personal finance. They are more confident and as Dr Ros Altmann, Governor of the London School of Economics states, “Men have more of a mindset that you have to just go out and get it and you can see their attitude towards risk taking in the games they play.” It may just be a matter of confidence or bravado, but men play to win, take less time researching investment products and invest in the longer term.

Does this all mean we are doomed to stay poor for the rest of our lives? No! It means that what you focus on is what you get and it’s time to focus on getting rich. Being rich is a positive thing. It is about flexibility, freedom and being in control.

What do we to become rich?

1. Choose to do something about your financial literacy Financial skills are not innate but learnt. We need to learn financial skills and practice them to gain confidence. This means undertaking short courses in financial literacy which teach you how to prepare a balance sheet or income statement. Read the financial pages of daily newspapers to build an understanding of the financial world at large. Don’t be put off by ‘big words’, buy a jargon buster such as “The Dummies Guide to Investing”.

2. Spend don’t save Invest a defined amount (minimum 10% of your net income) every month into a high income bearing savings account but don’t leave it there. Once you have accumulated enough, buy an asset which will produce passive income indefinitely. This could be a buy to let property which produces positive cash flow. Invest the money from this investment to buy a second cash flow generating asset and so on, continuing to build assets.

3. Develop financial goals and stick to them After you’ve built your financial skills and have learnt to prepare a balance sheet and income statement, define how much income and assets you need to make you feel ‘rich’. This will be different for each individual. If you are planning your retirement fund aim to build a fund that contains 25 times the annual amount you want to have when you retire. So, if you want a total income of 30,000 each year when you retire, you need to have 750,000 in your retirement fund.

4. Reward achievement in investment don’t use spending as an emotional crutch

Our client wanted to buy a new Audi sportscar for 500 per month. Our challenge to her was to develop a stream of passive income to produce 500 per month within a year and then buy the sportscar as a reward.

5. Network, network, network but network with financially literate and clever people.

We are told that women are great at networking so use this skill to build networks with others (both men and women) who are interested in building wealth. Ask around to identify good tax accountants, IFAs, property companies and so forth. Build your own ‘wealth team’ with those individuals and companies who share your views and your ideals.