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Happy Money Monday! For this Money Monday edition, I am again featuring J3 Patino of Game of Wealth with his thought-provoking post on how ignorance can cost you BIG TIME!
.
“If you think education is
expensive… try ignorance.”
expensive… try ignorance.”
The most expensive money mistakes
are the ones you have no idea you’re making. When it comes to financial education, it is easier to prefer “free” ignorance over having to pay for
education. The consequence of this is a short-term gain (savings) with a
long-term pain (bad financial decisions).
are the ones you have no idea you’re making. When it comes to financial education, it is easier to prefer “free” ignorance over having to pay for
education. The consequence of this is a short-term gain (savings) with a
long-term pain (bad financial decisions).
In this article, my goal is to
simply share with you the 3 biggest and most expensive costs of ignorance. It’s
listed down in order of increasing gravity. As you further go down the list,
the costs are going to get more and more painful. And honestly, I started
writing this article not knowing how “costly” ignorance is… but now that I’m
done with it, it’s actually pretty scary. With that said, let’s get started!
1.
Investing in Depreciating Assets
Investing in Depreciating Assets
Depreciation is defined as the
reduction in value of the product or service we paid for over time. The food we
eat is instantly depreciated the moment we eat it. A cell phone is fully
depreciated within 3 years of its purchase. A brand new car immediately loses a
significant amount of its value the moment you drive it and decays over 10
years. Different things have different ‘depreciation’ periods.
reduction in value of the product or service we paid for over time. The food we
eat is instantly depreciated the moment we eat it. A cell phone is fully
depreciated within 3 years of its purchase. A brand new car immediately loses a
significant amount of its value the moment you drive it and decays over 10
years. Different things have different ‘depreciation’ periods.
Now, the things we own can either
depreciate or appreciate. And if everything you own depreciates, then you are
very sick financially. It means that becoming wealthy will be extremely
difficult because everything you own is slowly using its value. Imagine
trying to go up in an escalator that’s going down — this is the same situation
of trying to become wealthy while accumulating too much depreciating assets.
depreciate or appreciate. And if everything you own depreciates, then you are
very sick financially. It means that becoming wealthy will be extremely
difficult because everything you own is slowly using its value. Imagine
trying to go up in an escalator that’s going down — this is the same situation
of trying to become wealthy while accumulating too much depreciating assets.
REAL Investments can either do two
things: (1) increase your ability to earn or (2) increase in value over time.
If the answer to both questions are no, then it’s not an investment but simply
a long-term expense.
things: (1) increase your ability to earn or (2) increase in value over time.
If the answer to both questions are no, then it’s not an investment but simply
a long-term expense.
Now, just to clarify – depreciation
is not really a bad or good thing. It’s just a fact of life (and accounting).
Depreciation however, becomes dangerous when you think what you’re buying is an investment,
when it’s really just an long-term delayed expense.
is not really a bad or good thing. It’s just a fact of life (and accounting).
Depreciation however, becomes dangerous when you think what you’re buying is an investment,
when it’s really just an long-term delayed expense.
So the answer here is to have a good
mix of assets that appreciate and some that you would really need to use in
your life. And at the very core of it, how can you tell what investments are
good for you? The answer is financial education.
mix of assets that appreciate and some that you would really need to use in
your life. And at the very core of it, how can you tell what investments are
good for you? The answer is financial education.
2.
Entering Bad Deals (and Being Afraid of Good Ones)
Entering Bad Deals (and Being Afraid of Good Ones)
This cost has two parts. First is not being able to stay away from
scams. The second is staying away from
REAL and GOOD opportunities. Let’s take
on the scam part first.
scams. The second is staying away from
REAL and GOOD opportunities. Let’s take
on the scam part first.
I believe that all of us are
familiar with the typical scam story.
Hard-working employee gets invited to invest into a business that
promises high-returns without much effort.
Friends and family encourage him to do so, because they have made money
in it. The employee invests his life
savings into it. The rest is history –
company turns out to be a scam, and all the money is lost.
familiar with the typical scam story.
Hard-working employee gets invited to invest into a business that
promises high-returns without much effort.
Friends and family encourage him to do so, because they have made money
in it. The employee invests his life
savings into it. The rest is history –
company turns out to be a scam, and all the money is lost.
It has happened over and over again:
AmanFutures, Enron, Madoff Investment.
Thousands of Filipinos losing millions of pesos. And frankly, these kinds of bad deals and
investments will ALWAYS be there. No
matter how strict or thorough the government becomes, scams will always be
there. The only way to stop being
scammed is to get educated and learn what kinds of businesses and investments
are actually legal, moral, ethical, and sustainable.
AmanFutures, Enron, Madoff Investment.
Thousands of Filipinos losing millions of pesos. And frankly, these kinds of bad deals and
investments will ALWAYS be there. No
matter how strict or thorough the government becomes, scams will always be
there. The only way to stop being
scammed is to get educated and learn what kinds of businesses and investments
are actually legal, moral, ethical, and sustainable.
Instead
of asking, “Is ____a good
of asking, “Is ____a good
Investment/business?.
ask,
“what is it that makes a good investment and
“what is it that makes a good investment and
business?”
(Analogy: Instead of asking what is 2+2? The better
question is how do I add numbers?)
question is how do I add numbers?)
Now,
personally, scams are OK since at least you learn from it. And you can always earn back the money. The dangerous part about scams is exactly
WHAT you’ll learn about it. You could
learn in a positive way, wherein you educate yourself more on the topic on why
it failed. OR you could learn in a
negative way and simply SHUT OUT all possible opportunities (even the good
ones). This is where the second part
comes in…
personally, scams are OK since at least you learn from it. And you can always earn back the money. The dangerous part about scams is exactly
WHAT you’ll learn about it. You could
learn in a positive way, wherein you educate yourself more on the topic on why
it failed. OR you could learn in a
negative way and simply SHUT OUT all possible opportunities (even the good
ones). This is where the second part
comes in…
Because of a FEAR of being scammed, some people have
closed themselves to ALL forms of opportunities. This is where you will hear conversations
like:
closed themselves to ALL forms of opportunities. This is where you will hear conversations
like:
Or it could also be…
NOW JUST TO CLARIFY:
Some people lose money
in the stock market and some network marketing companies are actually scams. But the only way you’ll be able to distinguish them and actually be
successful is if you EDUCATE yourself financially. Learn the answers to the following questions
in the stock market and some network marketing companies are actually scams. But the only way you’ll be able to distinguish them and actually be
successful is if you EDUCATE yourself financially. Learn the answers to the following questions
- What do I need to know in order
to make money in the market? - What is it that separates a good
network marketing company from a bad one? - What do I need to develop (with
myself) so I can succeed in X business opportunity?
Remember that:
“There are good and bad opportunities
out there.
out there.
The biggest risk is not knowing the
difference.”
difference.”
3. Missed Opportunities (because of a lack of
preparation)
preparation)
In any competition, everyone wants to win, and
everyone will ‘give their best’. The big
question that actually separates the first place from the rest is how well they
prepared (weeks, months and years) BEFORE the judgment day itself. Financial opportunities work in the same
way Everyone wants to HAVE them, but
only a few are actually able to take advantage. Think of the following scenarios:
everyone will ‘give their best’. The big
question that actually separates the first place from the rest is how well they
prepared (weeks, months and years) BEFORE the judgment day itself. Financial opportunities work in the same
way Everyone wants to HAVE them, but
only a few are actually able to take advantage. Think of the following scenarios:
It’s really painful to have to miss an opportunity because you were unprepared. Because usually one single opportunity can lead to a few more, and those few will lead to a lot more. Now in general, there are 3 resources that you should always continue to build: (1) Your Money, (2) Your Skills, and (3) Your Network.
Lacking money, skills and good network is a huge barrier to success. And right now, you can choose to make this an excuse or make it a motivator. If you don’t have P5,000 to start investing, which of the two lines will you say:
Now, this article has become pretty lengthy already, so we’ll end it here. I’m sure you already get the picture of what you’re paying for due to ignorance. But before we end, I have some bad news for you: Reading this article won’t really help you financially. There is still a lot more to learn, but the good thing is now you know WHY you have to learn them. Seek financial education, and great financial results will follow. Education may cost you something a little extra. A good book on financial education ranges from P500 to P2,000. Seminars will cost from P1,000 to P5,000. Business courses will cost P10,000 to P50,000. But these are very small prices to pay when you compare them to the cost of ignorance. So make it a point to gain financial education. Being ignorant is like being sick with a dreaded illness, whose only viable cure is financial education. Heal yourself, pay for your medicine. Get financially educated. You can join J3 on his premium online seminar called the “Game of Wealth. “ You will get online access to 7 plus hours worth of video training on how to win the game of wealth. TrulyRichClub.com – Do You Want to Gain Financial Wealth and Spiritual Abundance at the Same Time? J3 and I are also being mentored by Bo Sanchez. First time to invest in the stock market? It is normal to get scared. But it is also important to have somebody more knowledgeable GUIDE you. Join us here and learn how to be TRULY RICH. |
This is a nice post. I know that there is nothing better than educating yourself when it comes to financial aspects. I have been part of a MLM before which I learned a lesson. So everytime someone asks me to join MLM, I can easily say no. No to easy money…
Interesting analogy. I too am looking around to see what is good to invest in and how to grow our money.
As for me and my husband we invested a bit of his income in Pru Life and a bit of money in a pension that will help us with my daughter's pension fund for highschool.
very educational post. It is really important to be financially wise. I have started investing in stock market, hopefully I can add more every month.
Money matters can be scary for some. Good thing you have shared some view points that will be helpful to those who wanted to invest.
This is such a good money advice. Education is the best investment I would say and maybe investing some of the money.:)
http://pinayexplorer21.blogspot.com
You really are an accountant sis. Dealing with finances is something easy to talk about for you – sa akin yan, duling na ako LOL!
Financial things like this confuse me! My son did ask me he wants to learn the stock market … but I am afraid! I usually delegate the "money thing" to my husband especially if we talk about > P 50,000.00.
Honestly, I want to learn more about investing but I am still afraid to invest. I am missing opportunities I know. Kaya lang sis, nahihilo talaga ako pag investing and finance na e. Hehe. Thank you for always sharing financing tips and ideas in a simple way I can understand.
Mommy Maye
http://www.momaye.com
saving is a trial and error thing-y for me. i know what works best but i need to be really more disciplined. can you write about this virtue in terms of finances?
not sure if my comment went through.. can you write about how one can be disciplined in terms of handling his finances? 🙂
looks great..