What's Your Financial IQ?

     When I talk about financial IQ I am talking about one's knowledge about all the variables that drive the financial world.  Rober Kiyosaki defines, "Financial Intelligences," as information, knowledge, wisdom, and know how.  I have always wondered why the Jewish people have been so successful, throughout history in the field of finances and banking.  After some research I found that the core of their success is rooted in the Torah, The Old Testament of the bible.  I suggest you read my blog about the Jewish system of finances.
      What cultural and social factors have kept our culture from having a well rounded knowledge  of finances?  When I was  young the only thing I knew about investing was to start a bank account.  My parents had invested in modest life insurance policy with a modest cash value.  They were lucky to have that since many insurance companies would not sell policies to Blacks.  The only thing my parents knew about the stock market was that is was a dangerous place to have your money. They remembered the "Stock Market Crash " of 1920.
      We are a new generation, we are better educated, make more disposables income, yet we know no more about $$$ and finances than our parents and grandparents.  We spend most of lives trying to better ourselves so that we can make more money and live a comfortable life.  About 15 years ago a doctor friend of mine said Larry you make $70 a hour, I make $100 a hour, and if we are lucky we can work a 12 hours a day.  Larry, he said, the method of gaining wealth is the ability to make money while you are sleep!  In the new version of the movie, Wall Street, Michael Douglas character makes the comment that,"Money Never Sleeps."  So a big part of financial intelligence is knowing how to make money while you sleep.
     When we discuss Financial Intelligence we have to take a look at how we spend our money, our debt, credit cards, taxes, investments and so on.  There are two concepts that I feel that one should know if they  are serious about getting out of debt and building wealth.  The first concept is the rule of 72!  The rule of 72 allows you to calculate, based on interest rate, how long it would take your money to double.
The rule of 72 can be viewed in both a positively and negatively.  Lets say you were given $6,000 dollars and you invested it in a mutual fund that paid 20% interest.  You would divide 20 into 72 which would tell you that in 3.6 years your would have$12,000.  On the other hand if you had a credit card with a $6,000 balance and were paying 20% interest, your amount would double in 3.6 years.  Did you know this?  The credit card company does!
     The second concept is the power of "Compound Interest".  Compound interest is a system based on allowing you money to sit and gain interest over a long period of time.  The earlier you invest the more powerful the system works. Here is an example of two people Mary and Sue who both had $2000 to invest until age 67.  Mary, who is 26, deposited $2000 annually for next 11 years she will have $993,306 at age 67 without any further deposites..  Now Sue, who is 36, will have to deposit $2000 annually for 31 year to earn the same $993,306.  So you see the earlier you can start the better, but more important is that you start!  I used 20% as an example, but the last two years the market has paid between 18-25% per year.
      If you are blessed to have, lets say, $30,000 in your 401(k) and you earned 15% last year and continue to do so, it will only take 4.8 years for that to double to $60,000.  Wow, that's making money while you sleep.
     The bible teaches us that we need to be good stewards of our money.  Scriptures tell us not to be in debt, not to spend impulsively and to invest.  Read Matthew 25:14-30, and Luke 19:12-28 the parables of the "Talents".  Now after learning about the rule of 72 think about the following:  You owe $1,500 on your 25% interest bearing card, and you have $2,500 in savings earning 0.50% interest.  What should you do?
     I want to make sure the readers know that I am not a professional financial planner,but only a novice
who has enjoyed some success with the information I am sharing with you.  If you have a small business you should start yourself  a "Self Employment Ira".  This is a great way to save on taxes by deferring your income.  I suggest that you get as much life insurance as you can as early as you can, especially if you are an African American male.  There are so many that have diabetes , high blood pressure, obesity and can't get insurance.  Life Insurance is the main reason that the majority culture is able to enjoy generational wealth.  Life insurance can be past on to the next generation free of income tax,  so if you want to pass on wealth get a nice big term life insurance policy.  Yes I said term and not whole life, because you can purchase $200,000 of term for what you will pay for $75,000 of whole life.
     The next advice is never borrow money to purchase something that depreciates.  Yes that means don't borrow to purchase that BMW or Mercedes, because it will depreciate.  If you wait 2 years you can get it for 35% of original price and it will just be broken in.
     Do not be afraid of the market!  I suggest you invest in mutual funds because they have a variety of stocks in their funds.  The best was to invest is called, "dollar cost averaging", which means investing automatically every month.  When the market is down your $$$ purchase more funds, and when its up you get less, but in the long run you come out ahead.
     You must never forget that God blesses us so we can bless other.  You cannot beat God giving.  A large reason for my financial success is that I give freely to those in need.  I don't give expecting anything in return, but out of compassion.  However, every time I give God blesses me ten fold or more!
     If you want to increase your financial intelligence you should subscribe to money magazine, attend seminars, or find a mentor.  The only way you can keep up with inflation is to be in the market.  Have you ever wondered why every one is saying how the economy sucks, but the guys on Wall Street are making a killing?  They are paying cash for condos, apartments, homes, luxury automobiles, and Rolex watches.
     I hope this information is helpful, it worked for me!  God Bless... Amen!