I don't recall one school lesson that taught money management skills. My guess is that your experience is quite similar.
The lure of money pulled me out of sixth form early. I'd found a job and the thought of stacking money up in the bank had a massive appeal to me at seventeen.
I worked hard and soon became the best sales person I could be. With the commission I was soon able to buy myself a car. I found a girlfriend and later began to enjoy things like beer and clubbing. When the appeal of all that died away I settled down: got married, got a monthly repayment - commonly known as a mortgage - and had my first child. All fairly typical up to this point.
I bought a mortgage because I'd heard that a house was an asset. As no one had ever shown me what an asset looked like on a financial balance sheet I fell for it, hook line and sinker, because the truth is a mortgage is not an asset to me. But it is to my bank. My mortgage was in truth a liability.
What's an Asset?
Good question. An asset is something that earns you money. How much does your mortgage earn you? Most likely your mortgage costs you. For example an £80,000 mortgage over a normal period at a usual kind of rate will mean repayments of around £ £around £210,000.
Does that sound like an asset?
Sure you can argue that your home will rise in value. But does that earn you money? Probably not. Here's why.
Your bank knows that you won't complete the term. They know that in 6-8 years you're going to move on and take out another loan, usually a bigger debt and a bigger loan.
A Mortgage is 'For Life'
The word mortgage is derived from the French word 'Mortif' which literally means 'For life.' And this is most likely where your bank has you… for life.
Why the Rich Get Richer…
The rich get richer because they understand more about money than most people do. They got educated. They know that working for a living means you get taxed and pay your NI contribution before you get your hands on the money. So they go into business. This means that they take their legitimate expenses off pre-tax, pay less tax and end up with more disposable income from the profits.
Why Become Self-Employed?
When I became self-employed - and this may be true for you too - it wasn't for tax breaks, but to get out of the rat-race and do something I loved, while at the same time creating freedom of time. The tax breaks are a bonus, well they are if you can earn enough.
The problem for many self-employed people is that they know how to do their task, say massage therapy or homeopathy, but don't have the marketing skills to drive a stamped of customers through the door. That's why so many businesses end up closing within three years.
I’ve put together my top tips for spiritual people on earning money. These are below. They cover business as well as personal expenses.
1. If you pay money out on loans, a mortgage or a credit cards, you do not have assets, but liabilities. You are therefore the banks asset.
2. Begin to educate yourself financially. Is it your wish to see your money be put to uses you approve of. There are some excellent books on making money from money. Start to read them and edge towards financial freedom rather than financial control.
3. Reduce your expenses to a minimum. Find 10% of your income and use it to reduce your loans. Wealthy, financially fr>ee people, know to always clear their debts as early as possible. Once your debts are paid you can invest in the kind of good, ethical business you believe in.
