Friday, April 12, 2013

Freedom Isn't Free

Freedom is sacred, be it spiritual, political, or financial.

Freedom is not free either, especially financial freedom. There is always a price for freedom; it is called sacrifice. Today’s nuggets carry truth in them. The truth is sweet to the listening ear because living by the truth one can be liberated and ultimately free. Ignoring the truth is ignoring history. There are consequences for not knowing and living by the truth. Entitlement is a subtle form of slavery. The good, the bad, and the ugly parts of the entitlement era about to face some truth. Able citizens must be producers instead of exploiters.

Is it time for us Americans to take responsibility for the freedoms we have taken for granted for so long? Living on a borrowed standard of living is like living in a house with a time bomb in the basement. Americans are at the bottom of the world when it comes to knowing and applying personal finance lessons; yet the self-help financial industry scores billions of dollars selling books promising quick financial freedom. Knowing is not enough; we must apply what we know, the proven principles of finance. Hard lessons are coming for Americans, especially those that think getting something for nothing is their birthright. We will have a financial test before the end of 2017. Are you prepared to pass that test? When unaccountable, all controlling central government combines and aligns with an uninformed populous the result is financial ruin for a nation. This time the nation is ours. Imagine a government budget for $3.8 trillion. That is over one quarter of our whole Gross Domestic Product. One trillion should be more than enough for the government to do the things a government must do, internal and external security; that is it. History will not be kind to the current leaders. True leaders lead or get out of the way and let competent ones take the charge; unless their intention is to destroy our nation.

They good news for those that understand money is that they can benefit from the upcoming crisis. History shows that even in great depressions, one third suffer greatly, one third get by, and one third prosper during even the most depressed economic conditions. Inflation is coming to America. By 2017 the dollar will lose 75% of its 2007 value. Why? They money supply increased by a factor of 4 since 2007. Remember the QEs (Quantitative Easing one, two, three, ...) or more appropriately Queer Economics one, two, three, ... What happens to the value of a company’s share when the issue issues a 4 for 1 split? The value of the shares is divided by 4. 

In a high inflationary environment, wages never keep up with inflation. There will be revolt and strikes. Internal security will become a big issue. Why do you think the government wants gun control? Angry people with guns and ammunition are a threat to government. Elected officials are nervous, and rightly so. 

Money is not everything but in order of importance it comes just below oxygen. Try to live without it! How about taking responsibility for your personal finances? Here are a few nuggets for you to get started. Do it! And you will be glad you did.  

1.      Do you have a robust plan to be financially sound during the next downturn? How many sources of income do you have? Security no longer comes from having a job, unless you are the CEO or the CFO of successful company and have tucked away scores of millions.
2.      Are you taking money advice from people who are financially free? Do a fruit check and never take advice from those without fruit in their trees. The 55-year old investment broker that is still not financially free cannot help you. The finance college professor that is financially broke, and never built a business cannot help you either.
3.      What are you leveraging to become financially free? A tiny minority becomes financially free by earning income from a job. Are you leveraging or are you being leveraged? If your leverage factor is 1.0, you, it may be time to change your thinking about money.
4.      Are you putting money and a business system to create wealth for you? If not, why not? Do you own a system or are you part of someone else’s system. Those that do not invest time and money so they can have plenty of time and money later in life always end up regretting not taking the right actions early on.
5.      What percentage of your income are you investing in you? Wealthy people invest in themselves 3-10% of their income; they invest in their education so they can continuously adapt to changing conditions. Are you?
6.      Do you understand how money is created, how it flows, and how it grows; if not, why not? Understand the basics, the laws of money, and have working knowledge of income statement, balance sheet, and cash flow statements. Most people still think the house they live in is an asset. Start investing in assets instead of liabilities.
7.      How important is money to you? Most people that say that money is not important to them don’t have any money. The funny thing is that they are working for money, in a job they don’t like, to pay for things they bought with money they didn't have, to impress people they do not even like. Isn't that insanity?

Be blessed and be a blessing to others!
Carlos Fontana, President of Phalanx
Co-author of the book Follow to Lead (The 7 Principles to Being a Great Follower)
Author of the book PRICELESS (Sixty-Six Simple Stories of Reflection, Love, and Legacy)

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