As a society when it comes to your wealth, we are constantly bombarded with financial messages stating that this or that is the best thing for you to implement so that you will make the biggest return on investment or save for enough retirement! This comes along with a continuous dose of buy now, pay later at such and such interest rate, for the first number of days or months, but attached to tremendous penalties should a payment be late or it exceed the period of time for the promotion.
All of this has left the general population with a heavy weight on their shoulders, generating lots of stress and worry about money! Whether there will be enough money for us throughout life, but also what about college-funding for the children, and/or taking care of our parents in their old age, etc.
We are attacked with information regarding our finances at an alarming rate, but what is the best info for the benefit of ourselves and our families, not for the benefit of others that have taken advantage of us, past and present, against our limited financial knowledge.
My people are destroyed from a lack of knowledge! Hosea
As leaders we have a great responsibility to attain the necessary knowledge in order to create, establish, and maintain a situation of true wealth; one that not only takes care of your standard of living, but also your retirement years and beyond to your legacy! We need to check our current outlook on money, which is in a lot of cases seen through the eyes of loved ones, friends, Wall Street, and the many avenues that media reaches us. With so many different ways to place our money with the hopes of seeing a return, many individuals now-a-days are wishing they could at least have what they put in, let alone a return on their investment.
In order to begin the educational lessons on wealth, and the responsibility of money, let us start with a quick lesson on saving vs. investing. Author Dwanye Burnell stated in his book, A Path to Financial Peace of Mind,
Your savings consist of money that you dont want to lose; whereas, money you invest is money that is subject to risk of loss.
Any money that you designate for savings should be in a financial vehicle with low risk, where you can access the money, with no fear of loss of principle. To be clear: when you have money in the stock market, no matter what it is called, it is an investment, subject to loss. Money in a mutual fund or in the stock market may grow and accumulate but this money is always at risk of loss. Saving is really only accomplished in a financial vehicle in which your money cannot be lost.
For a solid financial strategy, there should be two groups of money. There should be money that is saved and not subject to risk of loss, and there should be another group of money that is invested. A proper financial strategy will have these two components clearly distinguished. We need to truly understand that the invested money has the potential for greater growth but also has a greater risk of loss.
To give you an example of how we commonly confuse our thinking with regard to saving and investing, lets look at how we talk about our 401(k). I often have clients tell me that they are saving for retirement in their 401(k). But what are the typical financial products in a 401(k)? Mutual funds. Mutual funds are an investment product, not a savings product, because they expose your money to the risk of loss in the stock market. And loss is just what many people experienced in the last two years (2008 and 2009) with respect to their 401(k) account.
A lot of retirement savings accounts are really retirement investment accounts. By confusing and blending the fundamental concepts of saving and investing, we confuse the risk associated with our money. By not being clear about whether our money is in a saving or investment product, we can end up believing that our money is less exposed to risk than it really is.
So the question is: How do we accomplish a balance between saving and investing, successfully to establish wealth for generations to come?
In banking the primary function is financing. It is through banks that the facilitation of our financing needs are accomplished. Banks also provide a savings function and a transfer of funds function otherwise known as cashflow. Banks are the oldest institution in the world and allow the world to function as we know it today. So how do we utilize the basic and comprehensive functionalities of banking institutions in the favor of our own personal and business economies?
We do this by mimicking the way the bank operates against us, for us! As the saying goes, if you cant beat em, join em! Well this couldnt be more true than in the establishment of true wealth in the best and most predictable manner known to date, utilizing the functions of financing, in order to establish the solid financial strategy of saving and investing!
By mimicking banking in your own personal and business economies we are going to review some basic financial concepts and challenge some of the knowledge we have come to believe is truth. Then we will teach you some banking strategies that include but are not limited to prepayment of principle, isolation of principle payments, leverage, liquidity, time value of money, compound interest, etc, and the best system to facilitate these strategies. And we will educate you on how to establish your own banking system for your family and/or business in order to recapture the interest that one pays to banks and financial institutions for the major items that we need throughout our lifetime, for example, cars, houses, home improvement projects, medical expenses, business equipment, investment opportunities, and the like.
Nelson Nash says in his foundational book on individual banking systems, Becoming Your Own Banker,
Banking is not about investments of any kind. It is about how one finances the things of life, which can certainly include investments. It is not about rates of return. As time goes by interest rates are up and downbut the process of banking goes on no matter what is happening. It is a well known fact that banks make more money during times of low interest rates than when rates are high.
There is no such thing as having too much money in the bank. Wealth must reside somewhere. What better place to have it reside than here. [in your own banking system]
Nelson goes on to say that everybody should be involved in two businesses, the one that we get our income from, and the banking business!
As we move forward into the tremendous phase of creating, establishing, and maintaining your wealth, let us enter with an open mind, a coachable heart, and a sense of expecting some life changing information that is going to give you the knowledge to move forward into the responsibility of wealth as it pertains to your family, community, and legacy! Lets dig in!
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