Tag: broke

The Real Reason You’re Broke

So what’s the real reason most people are broke in the world? It’s a controversial subject. Right now I’m reading “50 Success Classics” which has great quotes from people throughout history.

Most of us operate under what I call “pain-avoidance delusion” – it’s one of the 25 cognitive biases, and nothing brings out delusion more than money.

I was talking to somebody who was broke the other day and she said, “It’s not my fault.” And there’s a little bit of truth to that, some of the problems in the world come from government and taxes. I was listening to the President’s State of the Union address recently and he has some noble goals.

I’m not completely knocking the place of government but I want to put it into perspective by reading you this quote by Benjamin Franklin.

Many years ago in the 1700’s someone came to him and said “The taxes are too high, I’m not making any money.”

Benjamin Franklin replied: “The taxes are indeed very heavy, and, if those laid on by the government were the only ones we had to pay, we might more easily discharge them; but we have many others, and much more grievous to some of us. We are taxed twice as much by our idleness, three times as much by our pride, and four times as much by our folly; and from these taxes the commissioners cannot ease or deliver us, by allowing an abatement.”

Franklin was a man who not only got over the pain avoiding delusion, but also mastered the mis-weighting bias. Most of us mis-prioritize those things that are actually holding us back in life.

The main thing holding back the world is not government taxes. I’m reading Gregory Mankiw’s book “Principles of Economics” and taxes definitely matter, they cause shifts in supply and demand.

But you know what will have the biggest bang for the buck? Optimized brains in the billions of people across the world.

What stops us from having an optimized brain?

Franklin says we are taxed twice by our idleness. Our own laziness holds us back.

He says we’re taxed three times as much by our pride.

We’re taxed more by the latent and unused human potential in our own brain than we are by any government organization.

Lastly, Franklin says we’re taxed four times for our folly. What’s our folly? Making too many mistakes because we’re too lazy or proud to listen and realize that the answers aren’t always within.

I have a huge library of books because I use them to stop myself from making mistakes. Exercise for the brain is just as important as exercise for the body. My grandma is 96 and she’s very sharp. Part of that is good luck and good genes, but she’s also been stimulating her brain with chess and backgammon for years.

These are the things that you must work on first. In “The 7 Habits of Highly Effective People” author Stephen Covey says to focus on the things in your control. Some of you might become politicians and change government for the better but those of us who aren’t in the political realm can’t really control these things.

So don’t be lazy. Don’t be proud. Avoid making mistakes. These are the things that will bring you poverty, but if you invert them, they will bring you immense wealth.

What’s an example of an area where you have been too idle, too proud, or had too much folly?

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How To Get Out Of Debt

I am not really religious but it’s the holiday season.

So I decided for today’s Book Of The Day I would read the Bible, specifically the Book of Proverbs.

The wise man says in Proverbs 22:7, “…the borrower is the slave of the lender.”

How true this is.

Throughout history, the lender has always been the master over the borrower.

The average person in the USA is $225,238 in debt.

They owe $15,263 on their credit cards (at interest of around 14.95%), $147,591 on their house, $31,646 on student loans, and owe a staggering $30,738 on their car.

You might be in debt too.

If you are in debt you have two choices. You can be like most people and blame capitalism or ‘corporations.’

Or you can follow the old saying, “If you can’t beat them, join them.”

So become a lender. Start lending money yourself.

Start small.

Lending money will accomplish one main thing: make you sophisticated with money.

Nothing will make you more financially savvy then lending out a little money and losing it, then learning from your mistakes, and evolving into someone skilled in advanced financial principles.

Lending money will teach you:

1. How to read people and be discerning with money.

2. How to structure win-win negotiations.

3. How to draw up a promissory note.

4. How to calculate a loan repayment schedule.

5. How to deal with conflict from people that aren’t paying you back.

Remember, if you want to thrive in life you have to become sophisticated with money.

One of the reasons I went through the whole laborious Certified Financial Planner Program was to understand money at the deepest levels.

So start by lending out a $100 or $500.

Remember only lend out what you can afford to lose.

I once lent a buddy $38,000 to renovate and flip a house. That was in 2007, right before the market dropped. I still haven’t seen a penny back yet.

But who cares? Gaining knowledge to me is more valuable than losing money here and there.

It’s like anything in life, you will suck at first. But if you patiently commit to building the new skill of lending money you will get good over time – real good.

I don’t recommend lending to family or close friends since there is always the chance of some long-term tension.

Lend to an acquaintance or a friend of a friend.

And do not just informally lend out the money. That won’t teach you anything.

You probably have already done that in your life before. There is no real educational value from just pulling a $100 out of your pocket and giving it to a friend who is broke.

Structure the deal formally so they have to pay you back on an exact lending schedule.

Go to Rocketlawyer.com and download a simple loan agreement.

Don’t worry about charging interest. This is a training exercise not an attempt to become a bank or a loan shark.

The bonus to all this is that you will also be improving the world.

When I lived with the Amish I realized they have a secret weapon. Instead of only relying on big banks, they lend each other money at low interest. This allows young people who don’t have much credit to get started running their own businesses.

Many Jewish, Lebanese, and Muslim communities do the same. It’s genius.

By the way one of my favorite charities is Kiva.com where you can lend money to people in third world countries so they can start up their own business and rise out of poverty.

So stop being a servant. Become a master. I don’t care if you are 18 or 85. Flip the tables on the conventional structure by becoming sophisticated with money.

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How To Increase Your Income If You Are Completely Broke

I’m here in Palm Springs doing some work with my team and thought I would make a quick book of the day.

I got asked if someone had a gun to my head and I was completely broke how I would make 1 million dollars?

Here’s my answer, “I would go out to a big market and I would take an idea that is working really well and bring it to a small market.”

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