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Your Most Important Education Is Your Financial One

 


I believe that a good financial education is the most important education you can receive.

One time I was searching LendingClub.com to find another loan to fund and I ran across this person who was making over $14,000 a month. If you don’t know Lending Club is a peer-to-peer lending service in which people can obtain a personal loan and individual investors can buy pieces of it in chunks of $25. The investor is paid back as the payments are made.

Anyways, their financial details were so outrageous that I had to call my wife over to come see them.

Even though they were making $168,000 a year, they had $125,000 in revolving credit (credit card or HELOC) debt! I was just floored. They made nearly 3x what I do, yet still needed to bum some money off me. Needless to say, I didn’t buy a part of their loan. I just couldn’t give some of my money to someone who owes that much on credit cards! I am pretty sure it was credit cards too, as HELOC rates are lower than the rates one gets from Lending Club.

Obviously, they knew what they were doing in their work life to earn that much, but they were severely lacking in financial education. It was basically negating the benefit of their high incomes!

I don’t have a picture of THAT loan (as it was before I started blogging), but I checked out Lending Club to find one to talk about.

This person owes almost 7.5 months of salary, before taxes just to their revolving credit! If the rate is just 15% (lowish for credit cards) then the monthly interest is $810 (that’s more than my mortgage)! That is nearly 10% of their income, more if you base it off what they get after taxes. To put it another way, they will have to work more than a month every year just to pay the INTEREST on the revolving credit.

Is the stuff they bought months or years ago still worth their labor today? Do they even remember what they spent most of that money on? Probably not.

Another thing to look at is their earliest credit line. In this case 1990. I take this information to guess their age, the earliest credit line being they were around 18-22, so 20 years old or so. This person is probably in their mid 40’s and making a great income, $105,000 a year! You would think they would have run out of things to buy long ago. They have had many years to become wealthy, but I imagine all they have are ‘things’. Things they are paying interest on.

With hard work, they can still dig themselves out of this hole and get something saved for retirement. This is why I love Lending Club so much, they allow a way for people that decide to get out of debt a way to consolidate their loans at a lower rate than they are currently paying.

I wish this person well in their journey to shed themselves of their debt burden. If you have high-interest credit card debt, look into possibly getting a loan through Lending Club to help you on the way.

(Just to be clear; I am a stockholder in Lending Club as well as an investor. While I have a small financial link to the company, I write about this without compensation. I just think very highly of them.)


Do you know anyone like that? They have well-paying jobs, yet are still living paycheck to paycheck? People that have dollar bills raining down upon them, but such little financial education to use it that the money just goes straight into the gutter?

Society wants your money. Billions of dollars are spent every year to create powerful forces of marketing to ensure that most of that money ends up back in their pockets. Also, personal finance isn’t taught in schools, at least not in any that I have seen. You need to have someone in your life that will tell you the details, or have the motivation to learn it yourself.

My wonderful parents weren’t that great with money – not terrible, just not great. Financial education is something I had to go and learn about myself. Luckily anyone that wants to learn these skills today has to just get on the internet to read or watch videos about it.

But like anything else, actually following through is the hard part.

I must confess, in the past, I knew what I should have been doing but never really did it as much as I should have. I am behind where I should have been, but as the saying goes “the best time to plant a tree was 50 years ago, the second best time is today.”

You don’t need to make hundreds of thousands of dollars a year to end up wealthy. There are tons of stories of old people who never made big bucks and then they die and it is discovered that they had millions of dollars of assets!

Here is one such tale. The story of Ronald Read who worked at a gas station and as a janitor who died with $8 million to his name.

If those people did it, so can you.

You just have to commit to it, because a little money and a lot of time is all it takes. If you want to speed the process up, just add more money.

If you need a place to start your financial education, here is a list of material that I think is worthwhile.

  • I Will Teach You to be Rich by Ramit Sethi – Good for the young crowd new to the game
  • Your Money or Your Life by Joe Dominguez & Vicki Robin
  • Rich Dad, Poor Dad by Robert Kiyosaki – A bit light on details but will get you excited
  • Dave Ramsey’s Youtube channel
  • KhanAcademy.com – Financial & Capital Markets section – Short videos
  • The Millionaire Next Door (currently free on kindle for Prime members) & The Millionaire Mind by Thomas Stanley
  • Think and Grow Rich by Napoleon Hill
  • The Richest Man in Babylon by George S Clason – Great audiobook version on Youtube
  • The Automatic Millionaire by David Bach

It is necessary for all people to educate themselves as to how to go about keeping their wealth. If you are reading this you have the ability to educate yourself, no excuses.


This post was originally featured on my Steemit blog. Picture sources: 1 2 3

5 comments

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  1. Mrs. Picky Pincher

    I’m pretty salty about the fact that personal finance wasn’t taught whatsoever during my education. But at the end of the day you have to learn how to ask the right questions, and that’s how I stumbled onto the concept of FIRE. It’s been a life-changing journey that’s affected every aspect of my life. It’s the most important education I’ve ever received, and I didn’t have to pay a dime for it.
    Mrs. Picky Pincher recently posted…How Roku Streaming Saves Us $100 A MonthMy Profile

    1. MrDD

      I’m right there with ya. It’s almost like FIRE is hidden away and only those that seek something different can find the true meaning of it. Whenever I read an article on a mainstream news site about how someone did this or that awesome financial thing (pay off a house, get debt free from being WAY down, etc.) there are always so many negative comments. Things like ‘they didn’t really do that’ or ‘they are freaks, normal people can’t live like they do’. I want to grab these people and tell them that it IS possible, and anyone CAN DO IT if it is something that matters to you! Educate yourselves about finances and become frugal and it is possible for nearly all – and those that it isn’t currently it will light a fire under you to become better and find ways to increase your income.

  2. Mr Defined Sight

    It is really a shame that financial education classes aren’t pushed harder in school. I mean really, how many things that could be taught in school are more import than personal finance? Often times people are behind the 8 ball in debt before they even take the time to educate themselves.

    1. MrDD

      It seems that in the last 20 years or so the education system has become a vessel in which to burden freshly minted adults with the burden of debt – student loans. I don’t know first hand, but I read and hear that in high school they tell the students that you need to go to college or you will amount to nothing. A higher educational system that has increased tuition WAY faster than inflation. People are tens, sometimes hundreds, of thousands of dollars in debt before they even hit the legal US drinking age. Talk about starting behind the 8-ball, right? 😀

  3. Philip Braselmann

    Money = Freedom
    If you don’t have money you will forever be a slave.

    The best education in terms of money I did receive when I quit my 9-5 without money in the bank. You learn really quick with that fire under your ass.

    I was forced to learn things my family didn’t know shit about. It made me an independent, self-reliant, stronger & more disciplined & happy person.

    I can only recommend everyone to quit their 9-5 right now.

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