Saturday, November 27, 2010

A Simple Life ... 2

As a man thinketh in his heart, so is he … Proverbs 23:7

A wise man once told me that if I would categorize all of the activities of my life, they would easily fit under one of the following three headings: Becoming, Relating, and Achieving. This idea was insightful to me because when I developed these three lists, I couldn’t find any of my activities that did not fit on one or the other of the lists. I have concluded that most people have never been given much formal training in how to excel in any of these three areas. When we look at where most Americans have ended up, it is clear that what you are about to read is not often taught in universities. Since the vast majority of us fail miserably at one of our main goals: ending up with a measure of financial security, I would like to talk here about: achieving … financially. Most of us are allowing our lives to be guided with faulty knowledge, no vision and no plan.

This post is a continuation of A Simple Life … be sure to read it first to understand the proper context.

So what basic foundational principles do I wish my parents and society had taught me to be better equipped to have success, happiness and victory in the world?

1. That the Bible is the foundation of everything in life and that the New Testament is God’s plan and His New Covenant for me. The gospel of Jesus Christ. Understanding God’s plan and purpose, the Biblical doctrines of Sin, Judgment, Love, Forgiveness, Grace, Justification, Reconciliation, Sanctification, Mission, Ministry, and my Position in Christ are the very essence of life. All of the answers to Becoming, Relating and Achieving are found here.
2. As a free American I am glad I was taught the importance of love and respect for my country, and all of it’s founding principles.
3. The importance of our health, through diet, exercise and responsible living is foundational to everything we do.
4. Education is critical ... especially reading and looking deeply into the truth is a key element to forming and shaping our mind and gaining wisdom. As a man thinketh in his heart, so is he … Proverbs 23:7.
This verse establishes the critical importance of gaining knowledge, understanding, and wisdom.
5. Money management is a key to our success and happiness. If we do not understand and apply these rules in the financial areas of our lives, we will become a slave to finances. Understanding and diligently applying these financial principles is critical to becoming a ruler rather than a slave to our finances. The rich rules over the poor, And the borrower becomes the lender's slave. Proverbs 22:7

Understanding and teaching these foundational principles should a a first priority in training up all of our children.

We will now focus on the Miss-use of credit. My success at a young age was largely due to leveraged credit. With limited assets to start with, I had no idea that there was a better way that would bring far better results and very limited risk. The more successful I became, the more credit I was offered. Inflation was high and it was easy to borrow and double my money annually. A big mistake was that I had no idea that I was putting my assets at risk. When we finally forced to sell business, there was over a million dollars owing on our lines of credit. Although all my payments were current, the lenders were forced by federal regulators to call the loans due in full. This forced the sale of my assets at the worst possible time. But now that I understand better how bank financing and compound interest works, I understand that my loss was far greater that I ever imagined at the time.

To bring this discussion into a perspective that almost anyone can relate to, let’s just look at the financing of my first two luxury cars. At the time, I leased the most expensive Mercedes Benz on the market. When converted into today’s dollars my Mercedes roadster would be priced at over $150,000. But for the sake of keeping this estimation in the real world, let’s consider the lease of a 2010 BMW 5 series GT at a cost of $64,325. This is a typical purchase for a businessman similar to where I was then, in today’s world. According to, on a five year lease the monthly payment will be $862.35 with $6,500 down payment. At the end of the first five years, I turn my car in, and sign up for a similar lease. How much did my two cars cost me over a ten year period? $116,482. Wow that sounds horrible, doesn’t it? Yes, for the cost of a car … especially when you consider that I did this for 30 years and that the two Mercedes I first bought were much more than this estimate in today’s dollars.

But the bigger question is: how much would I have now if I had invested the cost of those cars over the same 10 years at a 7% return? Answer: $234,089. And what if I left that money alone compounding at a 7% return until today with no additional deposits? How much would be in my account … right now? Answer: $1,340,257. Now that I know how much my cars actually cost me over the years (millions), I think I want to go back to riding a bicycle. Do you get the point? Everything you buy has a much higher cost when you consider the future value of the money spent. Consciously considering the financial steps we take leads to freedom. We must learn, understand, practice and teach these truths to our children.

I know you might be saying; that doesn’t apply to me because I would never have leased a car for $862 per month. But as a loan officer over the past 15 years, I can assure you that the vast majority of people pay that amount or more in combined interest on their cars and credit cards and at much higher rates than the lease factor I used. You might say that the car is fully tax deductible. I would respond by asking: have you considered tax free cash flow for the rest of your life? That idea kind of minimizes the value of tax deductions, don’t you think? You might also say that I pay cash for my cars, or I buy with a loan, not a lease. I could easily demonstrate to you that when those methods of payment are used that the end result is basically not much different from the lease. The main difference with cash is the time involved it takes you to save the money, and when you pay for an auto with your cash, you lose the investment return on your capital.

Well then, what is the point of my example? We all need cars, don’t we? Of course we do, this isn’t about cars. It is about paying interest. Quite simply: Americans have been lulled into becoming the slave of the lenders. We have been seduced into buying things that we do not need, with money that we do not have. When the interest and taxes are calculated, for most of us there is quite simply nothing left at the end of the month. Like the IRS, who gets paid up front, we need to pay ourselves first and save, and then take over the role of the bank.

So what else do all of us need to do? Figure out a way to break free from the bondage of paying interest, and put interest to work for us instead of against us. We are not alone … our entire society is guilty. Our government has also bought into the lies of the moneychangers. I know that for many reading this, every dollar you have is going to pay the bills for past purchases and past commitments. But there is a better way ... everyday, other people are deciding to free themselves from these: buy now on credit schemes. The money problems were established over a long period of time, and your solutions to get free will take time to implement.

When I consider the future value of a couple of cars over a ten year period, I shudder to think of the total money that I have paid to banks and lenders for goods and services that I did not need over the past 25 years. For the few of you who think this doesn’t apply to you I ask; Are you on a course that will result in tax free cash flow for the rest of your life at retirement? Well this is what we are talking about; for you, and your children, and your children's grandchildren. There is a road to financial freedom and victory that has been hidden from all but a privileged few. A good man leaves an inheritance to his children's children. Proverbs 13:22.

Am I saying we shouldn’t buy cars and computers and the other basic necessities of life? No, of course not, but what I am saying is that interest either works against you; or for you; 24 hours a day, 365 days a year. Banks have been practicing these principles for hundreds of years. Those who figure out how to put this power to work for them rather than against them have become converted from a slave to a master. We all have the option to choose to be in control of our financial future. We need to learn how to become victorious over our financial lives and teach our children and our grandchildren the keys to financial freedom. These are very hard times in America. I know there are many of you reading this that think that getting free is just not possible for you … but it truly is an option that is available for almost everyone. These are challenging times. My most recent career as a loan broker has been destroyed, but I have no fear. Our God has promised us victory and I believe Him. We can all live victoriously when we get out from under the bondage of paying interest to the master.

“The problem in America isn’t so much what people don’t now;
the problem is what people think they know ... that just ain’t so” – Will Rogers

God Bless you my friends, Bob

1 comment: