Pay yourself first - What?

Pay yourself first - What?

We [ my daughter and I ] were sitting and talking, of all things - about the subject of money. We had just finished reading the last part of chapter 4 of “Rich Dad Poor Dad”. My twelve year old was asking questions that proved she may not completely understand but had a deep interest in the subject.

I was trying to encapsulate what we had just read so far and go over some of what we’ve discussed these last few days. I tried to keep it very simple so she could understand.


Q. What is an Asset?
A. Something that makes you money and you own.

Q. what is a liability?
A. Something that cost you money… expense monthly..

Q. Example of an Asset?
A. Business you own.

Q. Example of a liability?
A. House, car - your always paying out.

She had that concept pretty much down but I wanted to help her get a better understanding of what and why I was teaching her all this.

Government Taxes you to Death !

So we spoke a little on the subject of “Taxes”. I didn’t go into the details of when taxes started or how taxes effect the poor more than the Rich. The book did a good job of that - I was more concerned with her getting the concept of “Paying yourself first”.

teach children about money
When I explained to her that the minute an “employee” gets his/her paycheck he/she already loses money [ in taxes]. She was shocked. When I explained to her that she will be taxed to death, she was puzzled.

Federal tax, state tax, social security, medical, County tax, city tax, sales tax, gas tax and even hotel bed tax - there is even a federal tax for cellphone use….

I could see she was confused & blurted out as only a child can - “ But that’s my Money”. I explained to her that even in death - the government taxes you. “how unfair” was her response.

The reason behind Paying yourself FIRST.

I tried to explain to her that as long as she only works for someone else - she will never be in control & will be overwhelmed with all these taxes. So I tried to condense what we’ve been reading, discussing and putting into practice in short form.

money and kidsThe reason people are poor, can never truly get ahead is because they always pay everyone else first and by the time they are done - they have nothing left for themselves. Nothing ….

Using myself as example:
1- I work
2- taxed by government before paid
3- pay mortgage
4- house ins. & car ins.
5- taxed when I buy gas, clothing, do things….
6- at the end of month, I barely have anything left of my money to save much less invest.

So I asked her: “What should I do?”
My daughters response: “Make more money…?”

She has the right idea but missed the real crux of the principal. So I tried to explain - it’s not about how much money I make, but how you make & manage that money.

Simple out line

1. Make Money
A. work my job [ make money]
B. find ways to make more money
C. save to buy “Assets”

2. Manage Money
A. Save money [ pay yourself first ]
B. Budget your money
C. Protect your money [ a fool & His money are soon parted ]

3. Invest Money
A. buy assets [ start small ]
B. learn how to make money work for you [ buy bigger assets ]
C. Multiply your efforts [ re-invest, grow ]

* above is just an outline of my speech .

I’m not sure if she totally understood it all, but it did peek her interest. I explained to her that Google is a business - every search, every click makes them money. Now that really got her asking questions. I explained to her that she has to decide what she wants for her life tomorrow, make a plan & a goal today, and work towards that goal everyday of her life.

Ofcourse she wanted to know more about Google - so I explained to her that there are millions of ways to make money. Just take for example her FREE interactive online penguin game she and her friends play with online everyday. The penguin is an imaginary thing [ does not really exist ] but thousands pay that website “Real” money to place virtual [ fake, imaginary] clothing on non-existing penguins. She defended herself & her love for her online penguin - but I could see she understood what I was saying.

Creating a goal to Pay yourself first

Understanding that the best way to learn is by doing - we came up with a small goal [ a year long goal ] as a lesson. Starting October 31, 2009 - my daughter has one year to earn $1,000 dollars on her own [ I can help but not do work for her or any allowance ]. So by Oct. 31, 2010 - my duaghter has to create, make, earn or work to build up $1,000 dollars.

To her last a lot of money.
To her it may be a game.
To her it could just be a test.

She has until Oct. 31, 2009 to think up of a way to earn income to reach that goal. I can see she is not really into it, yet. But I am hoping that once she gets started she’ll want to reach that goal and more. Then the real lesson begins.

Side Note: I just ordered “Cash Flow” for kids board game. I brought my family together and showed them the game online - I wanted them all to be interested in playing it [ learning ]. The kids were stoked, the wife…. She just gave me a funny look and said: “ what ever you say honey.”

I’ll tell you how it turns out… I can’t wait to try it. At minimum I spend time with the family - best case scenario - my kids learn how to manage money and invest.

Rich "Exploiting" children & Parents help?

The Rich exploiting children & parents help?

I was listening to the Presidents speech about the need for government to create more jobs and to protect the union workers. That we have to change the old ways of government helping the “Rich get Richer” while the middle class and the poor suffer. It was a good speech.

When the speech was over I flipped the channel over to VH1 and watched an episode of “How the stars make their millions”. It’s an interesting show - depressing to see how many millions of dollars some of these stars are making compared to the average American worker. But I watched, I thought about the Presidents speech, about how he believes the Rich are taking advantage of the poor and I thought: “ We the poor deserve to be taken advantage of”… We ask for it. In fact, we go looking for it.

Taking Advantage of the Poor

As I watched the program and wished it was me making all those millions - I had to stop day dreaming and take note of a few comments made by some of the commentators.

“ Hillary Duff is worth $25 Million Dollars …”

money and kidsAs of this episode and the tax year of June 07 to June 2008 - Hillary duff has an estimated worth of $25 million dollars. How did she do it? Well, according to the shows commentators she [ intelligently ] tapped into the $100 Billion dollar Tween market. The tween market is made up of 11 - 12 year old children who buy anything and everything the stars they love so dearly sell, endorse and push down their throats.

As one commentator put it:

“Hilary is making millions because all these tweens have Parents who buy them everything they want.”

Not only are our kids being taken advantage of by marketers who are selling them junk saying they need this or that to look cool, grown up - or grow up to fast, but now they push garbage endorsed by the stars they love at them. The sad thing is these kids have no money - their Parents are the ones who are going out of their way to buy these products and going to extremes to get them what they were told by some commercial they needed to have.

* need a book bag - get the $60 dollar Hillary bag.
* you want your third pair of $100 dollar sneakers - no problem.
* Oh how cute - your dog has a thirty dollar Hillary Duff sweater.

Why the Rich get Richer

People always get angry and blame the rich for their problems. We all say things are “unfair” - but we forget, who ever said anything in life is fair? But since we have to blame some one - lets blame the Rich, then the government and the schools. After all, it can’t be our own fault - can it?

The reason why the rich get richer is because they think & lead - the poor just follow. We want to work less, get paid more and spend even more. In fact, we have sunk so low as to allow ourselves [ Parents ] to be used by marketers, as the tool to train our children to spend with no control, on garbage they really don’t need [ and if you think about - don’t want ].

A $3 dollar T-shirt can sell for $25 dollars if you slap Hillary Duff’s name on it. So what do we parents do? - we go out and buy our child three or four of these poorly made, over priced pieces of garbage. Do you remember those Cabbage Patch dolls? Tickle me Elmo? Parents were killing each other to get one of those stupid dolls…. I wonder where that $300 dollar Elmo doll is now????

Teaching our kids to invest in themselves

rich cashMartha Stewart [ Sept 16, 2009 ] on CNBC said that

“ Due to the recession people have gotten use to living without the things they don’t need. It’s our job to get them to start buying again & find that which will drive them to the stores. “

Interesting that she would choose to say “things we don’t need”…
My daughter is 12 yrs old and she’s being bombarded by TV shows, commercials, movies and even by her gullible friends - who all want to influence her on what she should wear, how she should dress and so forth.

I find myself trying very hard to teach her how to be wise with her money. To learn how to think for herself - invest today rather than wait until tomorrow. Who really needs 20 pairs of shoes … gosh you only have two feet. I try to teach and instill in her the idea that she is her own person and that pier pressure comes in all forms - even when it comes to money, saving and investing. Instead of being a blind follower - set goals, be independent, work on reaching those goals, strive for financial independence. Despite what she hears on TV - the government is not there to take care of you.

I sit with my daughter now almost every other day and we read “Rich Dad Poor Dad”. I talk to her about self worth, preparing now for the future, managing money, instilling the idea into her that it is better to be the business owner than the employee of a good company. I teach her about principals that can help her in all the facets of her life. That mistakes does not mean failure - but an opportunity to learn and succeed. That what others say about you does not define you. That just because the crowd is scared to excel - that we should not conform to mediocrity.

Even simple every day situations are used as a means to teach:
* You want new shoes? Save for it or create more money.
* You want to have fun - fine but don’t forget your responsibilities, goals.
* Your young - not dumb!

Today she might think dad is a bit pushy, she may enjoy the time we spend together & our talks but not grasp all the concepts I share. But my hope is that little by little - what I share with her will sink in. That what we’ve read and talked about will make sense and she’ll be able to weigh both side of the argument. Do I try to be a follower and poor - or be my own person and have financial freedom. Even if she doesn’t become rich - she will be better off in the long run.

As a side note: As I strive to learn in order to teach my children a better way - I put what I learn to practice. Your never to old to learn and improve.

Kids become RICH in 21 days

Kids become rich in 21 days !
Ok, not really - it can and has happened, but that’s not what this article is really all about. At least the title may have caught your attention and that’s good - because YOU CAN TEACH YOUR KIDS TO BE RICH IN 21 DAYS.

It is a proven fact that habits are formed and/or broken in a span of 21 days. If you want to break a bad habit - just force yourself not to do that deed, action [or what ever] for 21 days. Studies have proven that if you repeat something over and over for a time span of 21 days it becomes a habit. You start to do that action, deed or such without even thinking. The same goes for breaking a habit - you just have to stop for 21 days and usually the habit is broken or replaced with a deferent habit that is.

As I found myself trying to teach my kids about money I ran into the same old obstacle every parent faces - a child with no desire to learn a difficult or uninteresting subject. In fact I said in my earlier post “ Money is not evil - being poor is evil ” that I was going to get my daughter to read the book “ Rich Dad Poor Dad “ by Robert T. Kiyosaki.

Do not be lazy
money and kids
The effort was difficult at first - because I first tried the easy lazy approach - I asked her to read the book. I figured if I wasn’t pushy [ and she does love to read ] that she would do it and that would be that. It was the lazy approach and it back fired on me. Three weeks passed before asking turned into demanding her to read it. That approached failed as well - because she just could not grasp much of what she was reading [ even if some of it was basic to me ], why - because she had no real interest.

So I decided to take the familiar proven approach - be involved and sit with her to read the book. Ofcourse my rule was that she had to read out load to me so I knew she was reading and not zoning out and I was available to answer questions and be helpful. After all money is not an interesting subject to kids and this not only helps her but gives us a time to bond.

Our fist attempt was difficult - a lot of why, I don’t get it, do I have to read and the famous of them all - “I’m tired”….. But after four days of reading 1 or 2 chapters every other day - it’s turning into a bonding experience that has resulted in my daughter grasping on to some insight really quickly.

Keeping it Simple?
As we read one of the chapters last night - I found one of the books simple sayings to be very true - KISS - “keep it simple stupid” . It was one of the sayings the rich dad would tell his son and Robert as he taught them about money and how it worked. Robert was stating that the book had a simple way of teaching about money because 1- it was the way his rich dad could convey many complex ideas to them [ they were kids ] and 2- to point out that the book is not simple because it’s for dummies but rather that we over complicate things in our life.

money and childrenI want my children to learn about money - and I just can’t let some one else teach them - I simply can not sit back and wait for them to figure it out on their own. To top that off, it will be a process that will have to take time. A process of teaching them on a daily and slow process. Slowly but surely she is now finding it a nice time to sit , read and talk. She still complains some times when the chapter is long or she really wants to go watch TV - but like I said - in 21 days it will become a habit for us to sit and read about money, how it works and have a small conversation afterward.

Yes, she wont be financially rich in twenty one days - but she will have something most kids will not - a habit. The habit of sitting down to learn about money and to actually talk about how it’s made, how money works and what she can do to shape her tomorrow today. She asked me a simple question last night - can you work and own a business - my answer was yes.

My children, your children are smart. Smarter than we give them credit for. We want them to get good grades, graduate from school and find a good job. But we forget to teach them how to avoid the traps and pitfalls we’ve been in for years. Even a dead end job may seem secure - but if your laid off or have to work twice as hard for the same pay because your afraid of being laid off - only means you’re a slave. Stuck in a pitiful resentful life and you have to ask yourself? If you want better for yourself - why not do something to make it better for your kids. You can start with 21 days… 21 days can change your life and it can change the future of your children’s lives.

It is as easy as reading a book ..

Money, Kids and Failure

Money, Kids and failure

I grew up in a time where “success” meant everything. It didn’t matter what you did or how you did it as long as you won. The funny thing growing up in a poor neighborhood - there really wasn’t much to succeed in - so like most kids today we excelled at being the worst, best dressed and even the worst drunk. That’s right - our goals didn’t amount to much - just like today. Kids have nothing more to look forward in life but video games, music videos and TV.

Yes, there are the few smart kids and sensible ones who want more in life - but everything that is being taught our kids today is geared toward - depending on others to survive [ not succeed ]. Example - in school their told study hard get a good grade for success - then they go home and parents, friends, the news tells them that only the government can help them and that they can’t succeed without help from the county, city or government.

money and kids
Yes, this is a bit political and no I do not agree with all the Obama agenda’s. But think about it -we tell our kids that they can become what ever they dream - then we tell them that the reality of life is that they will never succeed in life unless some one else helps them. We tell them that they should be their own person - but then turn around and tell them to conform in order to fit in???? Amazing.

What brought this up..

Well, I’ve been trying to change the way my kids think about money, how it works and creating wealth. I expect my five year old not to understand - but I expect more from my eleven year old who is smarter than the average kid. When she came back from NY she came back with a new hobby - making jewelry. She surprised me when she said she was thinking of making some and selling them to make extra money. That’s a good idea - until days passed and weeks passed and she just stopped making jewelry. She just lost interest, desire - she was more interested in hanging out in front of the TV or talking with friends. What happened??

What happened was “challenge”, “adversity” and the desire to give up than rather over coming. That’s right, she caved when the first problem came along. Yes, I know, she’s eleven and I should expect this - but really, we all act like this. We all run into problems and we simply give up. So few of us truly strive when faced with struggle… which brings me back to the political aspect of this.

savingsWith all the economic turmoil we’re facing - we are losing the opportunity to teach this generation to face trouble with a stern upper lip and to face adversity and to fight to over come it. When you read about the great depression you see how people struggled to survive - but you see how the country came together, how people , families worked together to save, penny pinch - rubber drives, food drives and so much more. An entire generation saw the worst and over came. Today, our children only see the government throwing worthless “stimulus packages” at a failed economy and doing little to change the root cause of the problems around them.

I was helping this family of seven [ mom, dad and five kids ] and they told me they had to leave early because all the kids had to go work [ don’t worry they were all of legal age ]. I thought about the things they shared with me. How they all pull together, struggle together, sacrifice what many consider necessities in order to survive this week.

This is why it’s important to teach your kids about money and how it works. Teach them that sacrificing today can help you tomorrow. That money isn’t everything in life and if you made it once you can make it again. That life is not made up of how much you succeed but about how you over come. That there are things more important in life and that family, life, freedom are a few of those treasures in life. Teach them, because no one else will.