Avoid These “Solutions” to Money Problems
Money alone does not solve your money problems. That is why giving poor people money does not solve their money problems.
In many cases, it only prolongs the problem and creates more poor people. Take for example the idea of welfare. From the time of the Great Depression until 1996, the government guaranteed money to the nation’s poor regardless of personal circumstances. All you had to do was qualify for the poverty requirements to receive a government check—perpetually. If you showed initiative, got a job, and earned more than the poverty requirement, the government cut off your benefits. Of course, the poor also had other costs associated with working that they didn’t have before, such as uniforms, child care, transportation, etc. In many cases they ended up with less money when they were “working”—as well as less time. The system benefited those who were lazy and punished those who showed initiative. The system created more poor people.
Hard work doesn’t solve money problems. The world is filled with hardworking people who have no money to show for it, hardworking people who earn money, yet grow deeper in debt, needing to work even harder for even more money.
Education does not solve money problems. The world is filled with highly educated poor people. They’re called socialists.
A job does not solve money problems. For many people, the letters J.O.B. stand for just over broke. There are millions who earn just enough to survive but cannot afford to live. Many people with jobs cannot afford their own home, adequate health care, or education, let alone set aside enough money for retirement.
What Solves Money Problems?
Financial intelligence solves money problems. In simple terms, financial intelligence is that part of our total intelligence we use to solve financial problems. Some examples of very common money problems are:
- “I don’t earn enough money.”
- “I’m deeply in debt.”
- “My car is broken. How do I find the money to fix it?”
- “I have $10,000. What should I invest in?”
Financial intelligence solves these and other money problems. Unfortunately, if our financial intelligence is not developed enough to solve our problems, the problems persist. They don’t go away. Many times they get worse, causing even more money problems. For example, there are millions of people who do not have enough money set aside for retirement. If they fail to solve that problem, the problem will get worse as they grow older and require more money for medical care. Like it or not, money does affect lifestyle and quality of life—as well as afford conveniences and hassle-free choices. The freedom of choice that money offers can mean the difference between hitchhiking or taking the bus… or traveling by private jet.
Solving Money Problems Makes You Smarter
When I was a young boy, rich dad said to me, “Money problems make you smarter… if you solve the problem.” He also said, “If you solve your money problem, your financial intelligence grows. When your financial intelligence grows, you become richer. If you do not solve your money problem, you become poorer. If you do not solve your money problem, that problem often grows into more problems.” If you want to increase your financial intelligence, you need to be a problem-solver. If you don’t solve your money problems you will never be rich. In fact, the longer the problem persists the poorer you’re likely to become.
Rich dad used the example of having a toothache to illustrate what he meant by one problem leading to other problems. He said, “Having a money problem is like having a toothache. If you do not handle the toothache, the toothache makes you feel bad. If you feel bad, you may not do well at work because you are irritable. Not fixing the toothache can lead to further medical complications because it is easy for germs to breed and spread from your mouth. One day you lose your job because you have been missing work due to your chronic illness. Without a job, you cannot pay your rent. If you fail to solve the problem of rent money, you are on the street, homeless, in poor health, eating out of garbage cans, and you still have the toothache.”
While an extreme example, that story stayed with me. I realized at a young age the importance of solving problems, and the domino effect caused by not solving a problem.
Many people do not solve their financial problems when they are small and at the toothache stage. Instead of solving the problem they make it worse by ignoring it or not solving the root of the problem. For example, when they’re short of money, many people use their credit cards to cover the shortfall. Soon they have credit card bills piling up and creditors hounding them for payment. To solve the problem, they take out a home equity loan to pay off their credit cards. The problem is they keep using the credit cards. Now they have a home equity mortgage to pay off and more credit cards.
The Fastest Way To Become Smart
Question everything you hear, read and watch from the various financial experts in the media today. That includes me. So often the advice being touted may sound sensible, but when you dig deeper, is their recommendation really going to get you to your goals?
For example, the advice of “live below your means.” It seems to make sense. Most people translate that to mean, spend less than you make. Now for someone who is a chronic over-spender, that might be good advice, but for someone who is seeking financial freedom, that advice could work against you and keep you poor.
I’ve said many times, instead of living below your means, why not expand your means? Instead of figuring out how to cut $100 from your expenses, why not task yourself to turn that $100 into $200. Instead of cutting you expenses, why not increase your income. Turning $100 into $200 takes thinking, creativity and above all, action.
When someone you admire recommends a simple “easy button” product to improve your credit via a special debit card, a friend promises you that her financial planner can take care of your retirement needs, or your favorite celebrity touts a must-have a product or service, it can be very enticing to hand your money over and lose control of your finances. First, above all, think for yourself. Question everything.
No matter who they are or how “credible” they may be, no one can give you financial freedom. It’s up to you to do the work.