Three Financial Concepts I Wish I Had Learned Earlier in Life

At some point in our lives, we all look back at our financial habits. Just think of how much more financially secure you could be to today if you had realized that using credit cards could affect your ability to save money. How much closer to retirement would you be if you had started saving for it when you were in your twenties. The secret to real wealth, I discovered, is very simple save money, invest money and spend less. I just wish I had started these habits when I was in my twenties.

Credit Cards

Make the commitment to using credit cards only for emergencies. Purchase only hard assets on credit such as rental properties. Call your creditors every six months to renegotiate interest rates and pay them off. The amount of debt you owe affects your credit score. If you need to raise your credit score, quickly, pay off your debt but do not cancel the credit cards. [3][4]

Saving Money

Starting kids early on the habit of saving for emergencies can provide them with a certain level of financial security as adults. Adults with low cash reserves can still start a savings program using the "Three Piggy Bank Approach". This method provides offers motivation to not only saving money but to also budget spending and to give to others. The "Three Piggy Bank Approach" works using three separate and distinctive "piggy banks" to save for charity, for entertainment purchases and for investment.

At first, save at home using three separate piggy banks. A coin jar for change is a good way to start when finding that extra money to save is difficult. Once the savings in the investment bank reach $500 put the money in an investment account such as stock portfolio, buy savings bonds and other investments.

Saving for fun is the place to save for trips, special clothes or other entertainment in lieu of using your credit cards. I use a separate savings account called my "Fun Account" for these special purchases. Use the giving savings bank to support your favorite charities or to provide gift money for birthdays and holidays. [6 read chapter 9]

Home Ownership

Robert T. Kiyosaki created shock waves in the financial world in 2004 when he stated in his bestselling book Rich Dad Poor Dad," Your house is not an asset... your house is a liability" His radical idea was proven at the beginning of the 2008 recession and real estate crash. In 2011, according to the Wall Street Journal, 1-in-4 homes in the U.S. have a negative equity. That means that one homeowner in every four in the U.S. owe more one their house than it is worth. I have learned, the hard way, that when buying real estate; the property must bring in some type of income, such as rent, to be considered a true asset. [1][2]

More From This Contributor

Passing Your Small Business Down to the Next Generation

The Benefits of Continuing Education to Stay Job Competitive

Three Stock Investment Basics All Families Should Know

How to Turn a Hobby into a Business

References:

[1] Money Watch: Is Your House An Asset Or A Liability?

[2] Yahoo Finance: Why Your Home Is Not the Investment You Think, It Is

[3] Suze Orman: A Change in Credit Card Strategy

[4] Yahoo Finance: 10 Simple Steps to Freedom from Credit Cards

[5] Kiplinger: Piggy Banks for Managing Money

[6] "Rich dad, poor dad for teens: the secrets about money - that you don't learn ..."; Robert T. Kiyosaki and Sharon L. Lechter, 2004

[7] Wall Street Journal: Housing Statistics Hit Rough Waters