On a sunny autumn Friday, Bader Bahmad and fellow members of a financial education seminar at the Fort Washington Public Library branch were discussing rudimentary principles, such as the difference between needs and wants.
In a run-down conference room on the library’s deserted second floor, they talked about saving money. Asked to give examples of items they should save for, one woman mentioned a $7.99 blouse she saw earlier in the week and another said a pack of cigarettes. A talkative blonde said she has never saved for anything.
Cheryl Hines of Cornell University’s Cooperative Extension community program led the discussion. She provided handouts that explained the difference between short, medium and long-term savings goals; she offered tips for tracking money, like using a notebook to record expenditures.
Bahmad, 39, found the seminar a bit basic, but she liked the reminders because she and her three children are supported solely by her husband’s earnings as a taxi driver. She strictly limits spending on discretionary goods. “In every hour of the day, if I don’t need it, I’m not doing it,” Bahmad said.
Badmad’s struggle is complicated. In Washington Heights where she lives, families are lucky to have a bank account. While 12 percent of Manhattan households don’t have a standard checking account, 25 percent of African Americans and 27 percent of Hispanics in Manhattan – the majority populations uptown – live unbanked, according to a survey last year by Pew Charitable Trusts. In effect, they pay an average $1,042 annually in check cashing fees.
Bahmad has been trying to make ends meet in the U.S. for close to 15 years. An immigrant from Lebanon, she used to sew scarves and dresses for stores in Brooklyn and Manhattan. When she returned to her home country three years ago to be closer to her family, leaving her husband behind in New York, she sold her sewing machines.
But the distance strained her marriage, and Bahmad returned to New York after two years. “Here you’re missing something, over there you’re missing something,” she said.
Now back in America without a job, Bahmad is looking for financial advice. As a start, she attended the free seminar at the Public Library.
Instructor Milly DuBouchet, who teaches similar classes in Washington Heights, finds it hard to address intricate financial problems because her audience has never had the means to save money. “It’s hard for them to save 10 percent of their income monthly when they can’t necessarily pay their phone bill every month,” she said. “Financial literacy is at a bare minimum in our community.”
To help, the Bloomberg administration created the Office of Financial Empowerment, where DuBouchet also works. It offers personal finance workshops and free private counseling.
Lower-income people may lack a basic understanding of credit ratings and the principles of debt, according to DuBouchet. Many of her clients have been denied loans and “they want to see why,” she said. Moreover, “A lot of people consider credit cards quote unquote free money.” She tries to tell her seminar members and private clients how FICO scores are compiled and reminds those in debt, “If you stop paying it, they don’t forget about you.”
Workshops offering basic financial information can be found all over upper Manhattan. Friends Jenny Gil and Angela Ariza attended one specifically for women at City College. Both women, immigrants from Colombia, readily admit they know little about personal finance.
Gil, 27, is lucky to have less than $5,000 in debt, which she described as “not impossible.” She works in a restaurant office and is trying to repay what she owes so that she can start saving and investing – only she doesn’t know how.
She blames her financial illiteracy on Colombian cultural norms. She was raised with the belief that women don’t handle finances because they are too complex. “It’s the new days and now women take care of their own business,” she said.
Gil has done some reading on her own, like “Rich Dad, Poor Dad” by Robert Kiyosaki, but still has trouble grasping certain fundamental financial concepts. To remedy the problem, she thinks personal finances should become part of the high school curriculum.
Donny Lynn Burton agrees. A vice president at the Harlem office of the non-profit Operation Hope, which offers seminars in credit and money management as well as individual credit counseling, she constantly meets people in similar situations.
Her clients live very differently from the middle class. “They live paycheck to paycheck,” Burton said. “They don’t understand the benefits of having an account” in a bank. She shows them how to create budgets and has them come in regularly to stay on track.
But often they start much too late, which she blames on pride. It frustrates her that most people in foreclosure know what lies ahead but don’t take action. ‘They never try to call their bank to work something out,” Burton said. She spends a lot of time assuring her clients that they can negotiate because the bank is better off if they stay in their homes.
She, too, would like to see financial education begin in high school, before people wade into major financial decisions.
Original post:
Seeking Basic Financial Education
This may be a simple question for you to answer but it’s one that’s plagued me ever since I got married 22 years ago.
The real difficulty answering this question came to light when my daughter and I bought tickets to see the Dodgers who will beat the Marlins this coming Saturday . We aren’t big baseball fans….we don’t really care who wins…..but we have fun when we go out to a game. Usually, that’s only once a year at most.
This ticket purchase expedition confirmed that either my memory is fading or ticket prices have skyrocketed. I was shocked at how high the prices were for decent seats.
In any event, when my daughter and I were looking for seats and she saw how high the prices were, she asked me if we could afford it.
I must tell you that I was very happy that she even thought of asking this question. I was relieved knowing that I had raised, in effect, a ‘frugal Frankle”! A “Mini Me” if you will…..
But I digress…..
Truth be told, when my little darlin’ asked me this question, I really didn’t know how to anwer her.
I explained that we had enough money to buy tickets to the game even though they were expensive – $65 each. I explained that we had money to send her to college and we had the money for my wife and youngest daughter to visit family overseas.
But I went on to say that just because we had the money to do it, didn’t mean we could afford it.
It was at this point that my daughter started rolling her eyes – wishing she were back home watching re-runs of “Law and Order”.
Right or wrong, I saw this as a teachable moment so I forged ahead.
I told her the amount of money we need to save in order for my wife and I to retire someday. I told her how far along the path we were and what we needed to save each year in order to reach those goals. Given the recent drop in the market and how that’s impacted everyone’s income and savings…..my wife and I will both be working for quite a few years to come.
So when she asked “can we afford those tickets” the answer seemed complicated to me.
We had the cash to buy the tickets – we wouldn’t go in debt in order to see the Dodgers trounce their Floridian foes.
But could we afford to spend $130 (plus parking and refreshments) for one night on entertainment? Is it the best use of that money? Wouldn’t it be better to use that money towards our bigger goals?
It’s a tough question to answer. I’ve always focused on security – for my family and my clients. I refuse to ignore the future and just “live for today” financially. But I am trying hard not to be a slave to the future at the expense of not being present and failing to enjoy life right now.
At that point, I think my daughter wanted to change the subject. She told me she needed to go shopping for clothes. I ignored the hint, tagged along and continued our discussion.
I asked her how she decides if she can afford something or not. She told me how simple that question was to answer.
If she had the money in her pocket – she could afford it. If not, she couldn’t.
I was starting to squirm a little at that point but fortunately, she redeemed herself by continuing. She told me that if she has $30, she has to decide which was more important; two lunches out with friends or a nice outfit. (A born economist. Milton Freedman would be proud.)
I explained that her process was approriate for her but not for me or her mother. We have to think about the best use of the money and hope we make the right decision.
And that is the rub. That is the juncture where the emotions fly. The guilt. The fear. The shame.
When someone asks me if we can afford something……they might think the question is ” do we have money “. The answer could be yes. But I might be thinking the real question is ”do we have a budget for this”. Unless we agree on our terms, we’re in trouble.
If I say, “no, we can’t afford this because we don’t have a budget for it” and my family sees that we have the money,dad comes out looking like a tight wad. Then, dad defends himself, emotions start flying and it’s down hill from there.
The solution is to explain the difference between having the cash to do something and having the budget to do it. I never would have even thought about this subtle difference unless my daughter explained what she meant by being able to afford something.
I guess I should go shopping with her more often.
Excerpted from:
Can We Afford It?
Money is a Handicap
Most people assume that one needs money in order to invest. Robert Kiyosaki and Wayne Palmer know that money can be a handicap because it limits your thinking.
When money is involved, people focus on how much money something is worth. Without money in the equation, the entire focus moves to value. When we focus on value we can create exchanges where all parties come away feeling like they got more than they gave.
The convenience of using money can also stop you from thinking creatively. Training your mind to solve problems without money is a skill that is truly priceless.
Watch this video and be inspire by how one creative young man turned an ordinary red paperclip into a house:
Source:
Turning One Red Paper Clip into A House
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In my pursuit for further educating myself when it comes to achieving financial freedom, I enrolled myself in a free online coaching in the Rich Dad Poor Dad lessons of Robert Kiyosaki.
In one of the chapters of the e-learning that I’ve been reading, Robert Kiyosaki suggested the Rich Dads Get Rich Strategies in which he used to get out of the rat race and become a business owner and investor.
I would like to share it all to you my readers so we can also use it to achieve financial freedom just like what Robert Kiyosaki did:
STRATEGY 1: Become financially literate.
The number 1 strategy to get rich is to become financially literate. Financial literacy is not always taught in schools. It requires proficiency in several areas: economic history, accounting, taxes, investing and building businesses. These are difficult subjects but don’t let the difficulty scare you.
Becoming financially literate has nothing to do with how far you got in school. It doesn’t matter whether you’re a failure in school, a jeepney driver, a janitor, or an executive of the company. What matters most is that you’re willing to educate yourself.
One of the things that I learned about financial literacy is on cash flow patterns. Based on these cashflow patterns, you would be able to determine if you belong to poor, middle class or rich persons.
Kiyosaki compared people with average financial intelligence vs. people with advanced financial intelligence:
People with average financial intelligence know only:
- Bad debt, which is they try to pay it off.
- Bad losses, which is why they think losing money is bad.
- Bad expenses, which is why they hate paying bills.
- Taxes they pay, which is why they say that taxes are unfair.
- Climbing the corporate ladder instead of owning the ladder.
- Buying shares of a company rather than selling shares of a company they own
- Investing only in mutual funds or picking only blue-chip stocks
People with advanced financial intelligence know the difference between:
- Good debt and bad debt
- Good losses and bad losses
- Good expenses and bad expenses
- Tax payments and tax incentives
- Corporations you work for and corporations you own
- How to build a business, how to fix a business, and how to take a business public
- The advantages and disadvantages of various investment vehicles: paper securities, real estate properties, and businesses
STRATEGY 2: Work to Learn
Most people focus on working for pay that rewards them in the short term; over the long term, this strategy can be disastrous because it doesn’t build up enough assets for a stress-free retirement. You’re not sure if your employer will be there for the next 10 years. What if you were laid off? Or what if the company closed?
If you want to be financially free, you need to seek work for what you’ll learn, not for what you’ll earn. This is one of the main reasons why I left my previous company. With my tasks, I am no longer learning and in that way, I feel rusty. It’s not always the pay that matters. It’s the satisfaction and the amount of learning that you get. The skills you learn when you work for someone else can be invaluable when you begin to work for yourself—and if you want to be financially free, you’ll have to work for yourself.
Kiyosaki said that there are three essential skills that we need to learn from our job while we are working for somebody else. These are Leadership, Management, and Sales & Marketing.
STRATEGY 3: Find Mentors, Build a Team
They say that no man is an island and that two heads are better than one. The same applies when you want to get rich and achieve financial freedom. You need to seek out mentors and advisors who can teach you the valuable skills you’ll need to become a business owner and investor. No one climbs Mount Everest alone, and you shouldn’t try to climb your personal financial mountain without the aid of others. Without support, you’ll never reach the top.
Kiyosaki said that “business is a team sport.” One thing is certain: When you want to get rich, you need to set out to work for yourself. In doing so, you’ll need more than just friends and family—you’ll need a team of professional advisors. According to Kiyosaki, one secret of the rich is their humility. They surround themselves with people who know more than they do. They surround themselves with experts.
STRATEGY 4: Work For Yourself
Kiyosaki said that most people work first for the owners of the companies that employ them, then for the government through taxes, and finally for the banks that own their mortgages. No wonder they have little left at the end of their working days! To escape the rat race, you need to work for yourself.
You should think like Rich Dad. Instead of saying, “but the odds of a start-up succeeding are against me—nine out of ten companies fail within five years,” say to yourself, “one out of every ten businesses succeeds within five years, and mine will be one!”
STRATEGY 5: Create Money
Kiyosaki said that “Money isn’t real. It’s just an idea!” Today, we are now living in the information age. The information age allows some individuals to get ridiculously rich from nothing more than ideas and agreements. There are people who makes a lot of money in the internet either by maintaining a website or by trading stocks and forex online. Today, it’s not at all out of the ordinary for millions to be made instantaneously out of nothing.
How do you create money?
Finding an opportunity that everyone else has missed.
Learning how to raise money through investments and assets.
Working with knowledgeable people to help you reach your financial goals.
STRATEGY 6: Give Back
Kiyosaki believe on charitable giving. Personally, I also believe on the universal law of nature and that’s Karma: “Do unto others what you want others to do unto you.”
Also, we should not forget Newton’s Law that states: “For every action, there’s an equal reaction.” If you’re a greedy Scrooge, people will respond to you in kind. You have to give money to get it back. Remember, give and you shall receive.
The rest is here:
6 Strategies To Get Rich
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Too many young adults who are already out of school have low levels of financial knowledge so we, as a society, need to come up with other alternatives. Employers could offer financial literacy programs or at least provide resources to help young people avoid some of these costly mistakes. Schools should offer basic financial planning classes.
If nothing else, the recession has made us brutally aware of what we don’t know. Here are some of the more common, and costly mistakes, and ways that people can avoid them.
1. Not having an emergency fund. Experts recommend that everyone have a three-month emergency fund—at least. You never know when you’re going to get a flat tire or a leaky pipe—emergencies that happen all of the time but that can become very costly if you’re not ready for them. Having to borrow money on a high interest credit card can cost you hundreds in wasted interest payments.
What happens if you lose your job and have to dip into your emergency fund? First, don’t stress. It’s ok to use the emergency fund for rent or food—for needs. It’s not such a good idea to use it for that pair of shoes you really want or a night on the town. During a recession it can be hard to have and maintain an emergency fund. That’s ok, as long as you save what you can.
2. Slow leakers. These are the people who spend money on bottled water and daily Starbucks runs. The people who use their debit card for everything, no matter how small, and then forget to include the little things when they balance their bank account or budget. Even that $2 coffee can lead to overdraft fees.
3. Bad budgeters. These are the people who forget about certain expenses and therefore don’t budget for then. Or, they don’t budget at all, then wonder why they don’t have any money.
4. Minimum wagers. Paying just the minimum on your credit card is another expensive mistake. The bigger the balance, the longer it will take you to pay off and the more you will pay in interest. If possible, only use your credit cards for emergencies and pay off the entire balance on time. If that’s not possible, pay off as much as you can each month.
5. Plastic life. Living off a credit card is one of the worst money mistakes that you can make. If you are living off your credit card this probably means that you are spending more than you’re earning, a big budgetary no-no. If you are out of work and out of money you may have to live off your credit card for a while, but, in this case, you should really tighten your belt and spend as little money as possible. In addition, try to find a credit card with a low interest rate. A credit card is like a loan, meaning that the money will have to be paid back, with interest.
6. No doggy bag. It is possible to have some money leftover from a college or personal loan. As tempting as it may be do not use this money for anything other than paying back what you borrowed. Loans have to be repaid. The longer it takes to repay them the more money you’re going to end up paying in interest. Instead of spending any leftover loan money, simply use it to pay back what you have borrowed. In fact, it’s a good idea to make a loan repayment plan and begin paying back your loan as soon as you possibly can.
7. Too much, too young. Many young people make the mistake of thinking that they need to build credit while they are still in college. While it is always good to have good credit, it is not always necessary to have credit at all. Remember, it’s a lot easier to turn your credit bad than to keep it good. Don’t open a ton of accounts just to build up your credit. In reality, it only takes three months to build credit.
No one can be perfect all of the time but if you can avoid making some of these costly mistakes you can avoid wasted time and money.
Read the rest here:
7 Common (Expensive) Financial Mistakes
