Missing Elements in Our Financial Education
Reflect for a moment. What are some of your earliest memories of money? Was it your grandfather giving you a silver dollar and teaching you to treasure what was in your hand? Was it watching your parents stress over not being able to pay the bills? Were you taught how to count pennies to buy a piece of bubblegum? These early memories, and emotions associated with them, have an inherent impact on our attitudes and actions towards money. It is almost certain that you were not taught how to budget or steward your finances in our traditional education system. You had to learn it either through the school of life or somewhere else. With that in mind, there is a complete realm of financial education that many do not know or understand. Like most education- it takes effort and a willingness to learn in order to comprehend and apply.
Most of the traditional American financial systems are designed to pull money away from us. Our government, understandably, does not trust us to save for retirement, so we are taught to tuck money away into systems that dissuade us for accessing this money early. (Never mind who may be to blame for not teaching us how to save in the first place.) Thanks to modern technology and auto transfers- we no longer physically touch our finances. Auto draft, auto pay, auto deposit, debit and credit cards, are all designed to make life ‘easier’... but an inevitable side effect is that we stop paying attention to where our money is going until overdraft or miss a payment. This is particularly important as we experience inflation and need to recognize that each dollar is buying less. But allowing others to control where our money goes and how it is applied has one significant drawback- you lose access and control
Some are familiar with the envelope system. This is where you physically cash a check and use envelopes to manage a monthly budget. This is an excellent tool to help better control and recognize our spending habits. Once an envelope is empty, theoretically you’re not supposed to dip into the others to buy your morning latte or happy hour drink. But what else is beyond managing our money and watching it slip away for life’s necessities? I suggest the next stage is learning how money can make money. What if once an envelope or bucket received money, it started to grow, even though some of the money was actually buying purchases and investments? What if, rather than someone else using and locking away your retirement funds, you had full access to use it as needed (car purchases, tuition, emergencies, RE investments) AND it was there to use for retirement. If this sounds too theoretical or impossible, there is a chance you have more to learn.
To understand how this works, let’s look at borrowing against versus borrowing form. The concept is best understood in the form of a home equity line of credit (HELOC). A homeowner may borrow against the equity of the home. They’re not actually taking bricks from the house and exchanging them for cash. This concept directly applies to my niche area of finance- the infinite banking concept (IBC). IBC is the idea of borrowing against a pool of money, and paying it back with interest, so that the actual pool of money grows, and most importantly it compounds, until the day you die.
This concept is the how the wealthy actually become and remain wealthy. Most did not win the lottery or just get lucky. Many, began with what they had, applied the concept correctly, and now have the joy of imparting what they know to their families. What matters most is how long, not how much. The wealthy know how to stay in control and maintain access to their finances.
If you’re not familiar with IBC, let time be on your side and schedule a free consultation today. It’s not about how much you have in your hand, it’s about whether you know how to have money make money. Let us be your guide.
Olivia McGraw- omcgraw@unbridledwealth.com & Jason K. Powers- jpowers@unbridledwealth.com