The Importance of a Financial Education

Buy term and invest the rest. You have heard that before I would guess. It is one of those sayings, kind of like a penny saved is a penny earned. We have hundreds of these sayings that we give very little thought to, but maybe we should start to question if these sayings are truth, or potential mental landmines that can leave us broken, wondering what happened.

Buy term and invest the rest was a saying created by a guy that owned a life insurance company, trying to stir up additional sales of an easy to promote product called term life. Term appeals to everyone because term life insurance quotes are extremely low, particularly the younger you are. In fact, a 33-year-old man qualifying for a preferred plus rate class can get a $250,000 death benefit on a 10-year term life policy for as little as $9-$11 a month, depending on which company he chooses.

So there you have it, term life is cheap. But consider this fact, 54% of retiring Americans lack sufficient retirement funds who will primarily be living off social security. That is frightening.

But what can we expect when we are given soundbites by so many financial “experts”, such as buy term and invest the rest. We Americans lack financial education, particularly when it comes to how to make money and keep it. And it is ruining our lives.

So is there hope?

I would argue that there is hope. But hope comes to those who are willing to get past the worn out and old money-making mantras and dare to think differently and question what we are told. Here are some things to consider:

Is it wise to give your money to a bank, so you can earn interest on your money? Consider what the bank will do with your money. It will loan it out at 10 – 1 leverage thanks to the fractional reserve system. And what do you get in return? A measly 0.75% interest, if you’re lucky? Maybe if we thought more like a banker and less like teller we could figure out how to make 10-1 on our money.

So here is another question, should you consider investing in dividend paying whole life insurance? Prior to the last couple decades, whole life insurance was owned by a large portion of Americans. In fact, people like Walt Disney and Ray Kroc used the cash value in their whole life policies to help start and fund their respective businesses.

Alright, let’s consider the 401K plan. Did you know that the father of the 401k says he created a monster? And yet we continue to pump paycheck after paycheck into this monster in hopes of one day retiring wealthy. Remember that stat from above, how is that working out for everyone?

What other money lies and myths have been repeated so many times that we take them for gospel truth even though they are anything but?

How about the lie that all debt is bad debt? Granted, high interest rate credit cards are a thorn in the side of many Americans, but is all debt the same? Should we look at the debt on an investment property yielding positive cash flow the same as our student loan debt?

And speaking of debt, in a society that is all about credit, is it wise to follow the advice of certain financial entertainers who say you should cut up your credit cards? How are you supposed to build your credit if you have no credit to use?

As you can see, this article does not offer a lot of answers. My point in writing it was to shine some light on things we believe to be true that might not be. There are a lot of these supposed truths out there. All you must do is look at the state most Americans are in regarding their finances to know it is true.

Here is a simple exercise you can do to figure out where your priorities lie. Consider what you did over the last week. How much of your time was spent watching TV, surfing the internet, posting on Facebook, etc. Now compare that to how much time you spent on your financial education.

So I will leave you with this advice. Think long and hard about prioritizing your life. Make it a priority to get a financial education. And don’t just listen to the typical pundits, take the road less travelled. In the end, you just might learn something that changes your life for the better.

Financial Education