Let's Talk about Money! Are you ready to retire?

I’ve spent the past month aggressively working to become financially literate. When I say financially literate, I’m not talking about balancing my checkbook and knowing the difference between an asset and a liability. A balanced checkbook tells me what I’ve already done, not where I’m headed. I’m talking “how does money work and why?” From what I have gathered thus far, most experts tell us to work hard, cut back and save money which seems like good advice and would be great advice if this was 1971, but unfortunately it’s 2010 and that advice alone will not position people to be financially independent. There are new money rules, but most of us didn’t follow the old money rules. Maybe that’s good thing because we don’t have much to unlearn.


History Lesson:

In 1971 President Nixon stopped the dollar from being backed by gold which changed the dollar from money to currency. This decision led to the demise of the Bretton Woods system which demanded that every nation adopt a monetary policy that maintained the exchange rate of its currency within in a fixed value –plus or minus one percent –in term of gold. This kept currency from floating. Once gold no longer backed the dollar it began to lose value because the U.S. could print currency that had no value. When the dollar was backed by gold, it made sense to save it. Now saving money is not the way to become financially independent. (For more information check outhttp://www.investopedia.com/terms/n/nixon-shock.asp)

The dollar is constantly losing value. According to a recent Bloomberg report, the dollar has lost 13.2% of its value since George W. Bush took office in January 2001. That means the dollar is losing its purchasing power. This is why the same bag of chips that costs $.75 in 2001 cost $1.29 today…the dollar is losing value. So what should we do? The short answer is that we need to learn how to invest our money in assets that are less likely to lose value. We use to hear that a home was an asset…well the latest recession proves that is not true. All around the nation, people are living in homes that they can’t sell because those homes have lost their value. There are many investment vehicles, but you’ll have to find the right one for you.

Here are some things that must occur to be prepared for whatever direction the economy may take:

We must take responsibility for our financial knowledge and future – Too many people expect someone else to rescue them financially. We have a generation of people preparing to retire that expect the government to pay them social security. Social security is on a fast train to bankruptcy. If you put your trust in it, you will be disappointed. Others have put all of their trust in 401K. We’ve had many corporations show us that we can’t trust them to provide our financial security. Others trust so called financial experts who have no personal proof that their advice works. Finally most people just keep working, spending and pretending that things are getting worse. Take responsibility!

The Bible says people perish for lack of knowledge! Most people do not have enough financial literacy to make intelligent decision regarding money. Do you k

Open your bills! Face your creditors! Pull your credit report! Stop ignoring your debt and current financial situation. In order to create a roadmap anywhere, you must locate where you are.

We must educate our children – Most of what we know about money we learned from our parents. Being a good parent doesn’t mean that you handle your finances well. The Bible says a wise man leaves and inheritance to His children’s children. Did you receive an inheritance? Will you leave one? Nothing just happens. We can’t live our lives paycheck to paycheck and then expect an abundance to be left to our children. We must prepare! Even if we plan to have life insurance policies to leave our children, we must teach prepare them to handle large sums of cash. If we want our children to be prepared we must teach them that it’s better to own Nike stock than Nike shoes.

We must embrace the process – Anything worth having is worth working for including financial freedom. Acquiring wealth is process that begins with our thinking. We must bombard our thinking with information about money. We must decide what financial freedom means. One person may say it’s no debt. Another may say it’s the freedom to pursue a dream job without having to consider money. What do you say?

We must not expect a quick fix – People are constantly being taken advantage of because they look for a quick fix. You must learn about money, identify your spending habits and develop a plan that will produce solid results long term. People are living above their means and using credit cards to finance their lives. When the credit cards are maxed out, they refinances their homes to continue the façade until the entire thing collapses.

I don’t claim to know it all because I’m still learning every day! However, I always try to share what I have learned. I hope this helps those of you who haven’t taken responsibility for your financial future to face your fears, get educated and pursue freedom!