If I could teach finances in school, I wouldn’t need a lot of time. The fact is that finances don’t have to be complicated – so much of what I do is simply correcting people’s errors and misconceptions about making and investing money. There are so many lies out there (many told by the very folks who claim to be your “advisors”) that separating truth from fact seems like looking for the proverbial needle in a haystack.
So if I could stand before a classroom of eager university students and teach them everything they needed to know about money in just a few minutes, this is what I would say:
You shouldn’t rely on a job to pay your bills. Even though it will sound counterintuitive, I would teach those students that the more reliable source of income is one they create themselves. In fact, having more than one source of income is one of the main things that separate the rich from the poor.
Never hand over control of your money to others. This lesson would teach students the importance of learning to evaluate their own investments instead of trusting a financial advisor (who might not have their best interest at heart). Obviously, this would rule out relying on mutual funds and a 401k accounts.
Instead of building a “nest egg”, focus on cash flow. The traditional advice tells young people to save up a huge pile of money and pray that they don’t outlive their savings. I would tell anyone within earshot that a far better idea would be to determine how much money they would need per month to live their ideal life and then to invest in enough assets to match that number in monthly cash flow. That way, they can live to be 1,000 years old and never worry about outliving the money – because cash flow is FOREVER!
Don’t be afraid to start small. While I would recommend making big investments eventually (houses, commercial properties, and businesses) I would tell the students in my Econ 101 class to start small. I personally started with a tiny residential property (1/4 acre parcel) that I bought for $400 and sold for $4,000. Not a huge profit and certainly not very sexy. But the money let me buy another few properties, and then another few, and then another few – and since then I have completed over 3,000 deals and own many rental homes.
I wish I could be invited to address today’s youth on finances – it would mean not having to unteach the lies later on!