The story

A story is often told about an Atheist who moved into a Catholic neighborhood. He liked roasting beef on his backyard every Friday and the sweet aroma of barbequed ribs would float throughout the neighborhood.

Every year during Lent, Catholics are prohibited from eating meat on Fridays. So the neighbors felt tortured whenever the man roasted beef during Lent. A neighborhood meeting was arranged to discuss how to dissuade the man from roasting beef during Lent.

After much discussion, it was decided that the best strategy was to baptize the man and make him a Catholic. So the parish priest was sent to the man's home and baptized him.

Incidentally the following year during Lent, the neighbors noted the familiar smell of roasted beef coming from the man's backyard. They went to check why the man was roasting beef yet he had been baptized.

When they arrived at the man's house, they found him sprinkling water on the roasting ribs as he loudly proclaimed,"You were once the meat of a cow. Now I baptize you and you will become a cabbage."

The lesson

If only I could change your financial habits and attitudes by simply pouring water on your forehead. If only it were that easy, and I would volunteer to dip you in the sea so you could become a financial wizard.

Unfortunately, changing your financially harmful habits and attitudes towards money must come from within you. The will to change is generated by listening often to financial wisdom and reading about finance.

Quote: Everything Comes To Those Who Know How To Wait.

Many people read the above quote incorrectly when they ignore the key words, "Know How To". They think it means, "everything comes to those who wait." For a minute they think that someone has finally discovered some virtue in laziness! They, therefore, hope to sit down, do nothing and be awaken from their daydreaming by astounding financial success!

The 5 basic differences between those who wish to get much from doing nothing and those who know how to wait to become millionaires are the following;

1. Being careful to spend less than you earn while still enjoying life.
2. Having an emergency fund to carry you through life's financially devastating moments.
3. Investing money for retirement.
4. Investing in self-education.
5. Borrowing money to invest in property, business and education.

Those who do not know how to wait to be millionaires usually do the following 5 things;

1. They spend more than they can afford as they try to out shine the Joneses and strangers in the community.
2. They have no emergency fund. They think insurance is a waste of money because calamities can only happen to other people.
3. They do not invest for retirement because they they will never be either too old or too sick to work. They have never seen anyone who is broke, sick and too old to work.
4. The do not invest in self-education because they know everything there is to know. They would prefer to receive something intoxicating rather than financial advice.
5. They borrow money to spend on consumables e.g. clothes, vacations, gifts and food. They cannot tell the difference between cash and credit card. They think available credit limit and cash in the bank mean the same thing and they use both the same way.

The good news is that today you have a choice to change your direction if you did not know how to wait to be a millionaire.

Read story number 1 and 2 and you will understand where i got my inspiration for today's blog.

Story Number 1.

Hippos normally give birth to one calf at a time. Some years back, there appeared a story in the newspaper about a hippo that had given birth to 6 calves. You can imagine how much buzz this story created in my usually sleepy town.

Come Saturday and off to the zoo I went. The parking lot was full and i guessed there were two hundred or so curious families eager to kill boredom by spending an afternoon watching the hippo and its 6 calves.

As expected, i found a long queue leading to the pay booth. In front of me on the queue was an elderly man who was accompanied by his much younger wife and nine children.

When it was the old man's turn to pay at the gate, i heard the security guard ask him,"Are these kids yours? All 9 of them?"

The man proudly answered, "Yes, they are all my kids and i will pay for them to see the hippo."

The security guard replied,"In that case, you do not need to pay. Just stand here and we will bring the hippo to see you!"

Story number 2.

In a popular newspaper cartoon, there appeared a drawing of a family of 10 (husband, wife and 8 kids) crowded at the counter of a Family Planning clinic. The husband was quoted to be saying,"Here is my family. Give me the plan."

Today's discussion point.

When is the best time to prepare your wealth building plan? Is it before or after retirement? If you do not have a financial plan today, think twice. You are in danger of waiting until it is almost too late to request for one. Read story number 2 again.
 

When I worked for a Network Marketing company we held Saturday meetings to recognize the people who had performed well during the previous week. We also had a tradition of letting the performers speak and we followed what was reffered to as the Money Pile Theory of Speech.

The Money Pile Theory of Speech states that the person who makes the most amount of money should be allowed to speak the longest because he will provide the most value to his audience. The person who earns the least should be allowed the least amount of time because he will provide the least amount of value to his audience.

Am sure you are wondering about the person who did not make any sale during the week. Well, the Money Pile Theory states he has nothing of value to say. So he was not allowed to speak.

You may argue that the Money Pile Theory should not be followed absolutely in all company meetings and you may be right. I also had my misgivings in that the company only recognised results and ignored to recognise effort. However, that is not my point of discussion today.

I would like you to relate the Money Pile Theory with regard to the people you listen to most often. Do you listen more to those who have financially succeeded and achieved what you desire and only dream about or do you listen more to those who are struggling financially just like you? Worse still, are you spending most of your conversation time with people who are financially worse off than yourself?

If you are just-over-broke, miserable and annoyed with the world, do you hold lengthy conversations with people who are always complaining, negative and just-over-broke? They say misery loves company. What good could possibly come out of such conversations?

Go to your library and borrow CDs of speeches and books by great, wealthy and successful people. Play the CDs in your car and in your house as often as you can. Listen more to those who are likely to inspire you to succeed and listen less to those who are likely to discourage you. That is a good way of applying the Money Pile Theory of Speech. 

Shelley-Ann Fraser of Jamaica received the gold medal for winning the women's 100 meters final in 10.78 seconds. Among the distinguished line of finalist's, Shelley-Ann was the shortest, the youngest and the most inexperienced. She, however, gave a sterling performance that created the widest margin of victory in an Olympic's 100 meters final since 1988. 

Shelley-Ann made sprinting history because the race was not decided on height, age or experience. It was decided on speed and she ran the fastest.

Similarly, at times you may feel like you are disadvantaged financially by your age and you may even wish you were born during "the good old days". You may also mistakingly assume that fortune favors the physically attractive and you may even wish you had the figure of a model. Or you may think if you had acquired good financial knowledge ten years ago you would be all set financially today. 

By winning the 100 meters dash, Shelley-Ann has proved two things. 

One. She can be an inspiration to the young, the physically challenged and the inexperienced.

Two. Focus on your strengths and the most important determinant related to your objective. In the case of building wealth, it is your ability to have a good plan, consistent saving and investing and earning at the highest rate of return.

Quote: Success is often deceptive. It hides the hard work that produces it. 

Some readers have been wondering which books am reading and whether i could recommend particular books.

Incidentally i read books for various reasons. I will demonstrate this by discussing the books am reading this week.

Book 1. Tuesdays with Morrie - A well written book that teaches me how to tell a simple story in an interesting way.

Book 2. Brother am dying - A very touching story about an immigrant family from Haiti that settled here in the US. I like it because i can relate to their story and the ending almost made me cry. This is a good book because the writer makes me feel exactly what she felt when she wrote it. 

Book 3. Maxed Out - This is a pseudo-academic book that shows how banks have ganged up to take away all the money we earn. This book is good for financial information. After reading this book, a small cautionary voice will dutifully whisper in my ear when am transacting with banks and credit providers before I sign my future earnings away on the dotted line.

Book 4. This i believe - This book quotes successful people on what they believe. It is for inspiration. Professor El Busaidy encouraged us in college to read about great and successful people. Great people inspire us to rise above the herd and leave behind us footsteps on the sands of time. I would like 200 years from now, someone somewhere to say that guy inspired me to do something good in my life. 

I also read boring books. Do you know why? They convince me that one day mine will be published. If someone can write so boringly and still find someone to publish and someone else to buy it, then what am i waiting for?

For discussion purposes, i enjoy reading Earnest Hemingway's books. You can interpret one of his stories in 10 different ways. When you discuss his book with other people, you get surprised how people interprete the story so differently. 

Since i discovered recorded Books on CD, i listen to at least 3 books every week. In a year i listen to 150 or so books. Next year i want to incease that to 4 books per week for a total of 200 books.

Which books are you reading and how many do you read in a year?

Have you ever come across a brilliant idea or business opportunity which you thought everyone will be falling over to learn about?  You are not alone. Every now and then we all bump into something which makes us believe the heavens were perfectly aligned for such a moment in history.

You get on the phone with excitement and for endless hours you bombard your dear family and friends with a tirade of the best thing since sliced bread. But sooner than you expected, you realize that not everyone is as excited as you are on learning about the new opportunity. Worse still, very few people are willing to join you on the band wagon.

What is the problem? You surely think your cousin John ought to be smart enough to see the unlimited earning potential but now you wonder why John has suddenly become so damn - so fast!

The truth is, 70% of the people are likely to be least interested in your brilliant idea AND IT IS NOT YOUR FAULT.

36% of the those you will talk to have no real desire to learn anything new or to try a different product  or service. They have simply resigned to fate. They have quit trying and have given up. It is not your fault that you have found them in this deplorable condition.

10% are outright lazy. The wish you have won the jackpot and that you are calling to let them know how much money you will be sending. Since they never get to hear the words jackpot and money in the mail, all you say, with all due respect, is sadsbsjkdjsa;ldksa;dk or worse.

17% are curious. They will ask numerous questions and will even promise to give the idea a serious thought. That is as far as it will go. This group usually has many rags to riches stories about other people. For some reason they were left behind and now you are more likely to leave them behind too. 

3% have tried to run a business or pursue an idea before, but failed. They have lost hope of success. You will know them by their battle scars and horror stories. Do not be discouraged. Failure is not contagious.

4% feel they are very much O.K. in their current position. They are snoozing happily in their comfort zone. Why should you spoil the fun?

Let us do the math: (36%+10%+17%+3%+4%=70%) 

(100%-70%)=30% This is the group present and ready to hear your story.

Unfortunately they do not come with banners on their forehead reading "Am all yours for the asking!" They are hidden somewhere among the unwilling 70%. Go ahead and tell your story, anyway. 

Efua Sutherland (1924-1996) was a famous poet, playwright, teacher and children's author. One of her well-known plays is "The Marriage of Anansewa".

Anansewa was a young, well-educated woman. One day her dad realized that Anansewa was a perfect bait to attract rich suitors who would be happy to have her for a wife.

Anansewa's dad approached the first wealthy suitor and managed to get a nice bundle of pre-paid bride price by promising him marriage to Anansewa. As it happens when money comes easier that expected, Anansewa's dad became greedy. He went ahead and received expensive gifts from three other suitors by peddling the same story.

A time came when all four suitors demanded to have Anansewa's hand in marriage. Anansewa's dad was in a dilemma. His daughter could not be married to four different suitors. Also, he was not in a position to pay back all the suitors. He was trapped like an insect in a spider's web. I am sure you can now remember this popular story and there is no need for me to explain it all.

Are you behaving like Anansewa's dad? Your good credit score has become Anansewa. You are using it to acumulate debt from as many credit companies as you can. Just like Anansewa's dad, you do not intend to settle your debts with the credit companies. You hope to make the minimum payments only.

Unfortunately debts build up to a point where the total of the minimum payments becomes a problem to repay. You are finally faced with a huge unmanageable debt that keeps increasing and interest rates that exceed 30%p.a. You finally get trapped in a web of debts, just like Anansewa's dad.

What is the ending to your common story? I am sure you can relate to this common story and there is no need for me to explain it all.

 

It is obvious that 0% would be the best interest rate when you are borrowing and e% (e means infinity) would be the best interest rate when you are investing your money. However, in general, we make financial decisions based on interest rates ranging from 1% to 50%.

In a more detailed article on interest rates i will go into greater detail about how loans are structured in relation to the rates quoted by lenders and how to determine the best interest rate when you are borrowing money to buy a house or car etc.

Today i just want to mention three things to remember when you come across the words interest rate.

1. Never agree to borrow money on a long term basis if the interest rate is more than 10%. The effect of compound interest will do alot of financial harm to your piggy bank.

2. Whenever you save or invest, always make sure the account earns you at least 4%. This makes sure you are either in-step with or ahead of inflation and it retains the true value of your money.

3. Although it may seem tedious and boring, always browse the internet to make sure you are aware about the current interest rates with regard to specific markets. This will help you negotiate the most favorable interest rate. You may start out by checking bankrate.com for interest rates and simulated loan repayment calculations.

4. This is obvious but there is no harm in mentioning it. Everything is negotiable, including interest rates. You will be amazed at how much you can earn or save just by asking. 

David Dunning and Justin Kruger of Cornell University in 1999 published a study on psychology about how people tend to rate their level of knowledge and skill.

The study revealed that people with LITTLE knowledge and skill tend to OVER-estimate their knowledge and ability. While people who know much and are able to perform competently tend to UNDER-estimate their knowledge and skill.

This study confirmed something that I have consistently observed since I started writing blogs on this website. The people who I considered to be in dire need of financial education were the least interested in reading anything about Personal Finance, including this website. And the people who seemed to have a financial plan in place were very quick to check out this website and other finance articles on the internet.

If you feel like your financial ride is all nice and smooth and you do not need any advice, beware. You may be speeding downhill.