My eight year old is richer than me!
Posted on August 2, 2008
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I have been trying to explain to my eight year old how she is actually richer than me.
She has zero liabilities, cash savings, and a steady passive income that more than pays for her wants.
Since her needs are fully paid for by me, her parent… She is already financially free.
Furthermore, I have explained to her that if she never spends more than she makes in any given month for the rest of her life, she will be rich and will always be rich… Forever!
So, how does this apply to you?
Simple really.
Rich is not defined by how much money you make or even how much money you currently have… Only by how much you have left over at the end of each month or how much you would have left if you were to pay all your liabilities.
Sound simple? It is. But, we are trained not to think that way… Instead, we normally look only at how much money a person makes or what car someone drives or what house they live in. But this is not always a clear picture of a persons financial situation.
For example, Mr. Rich, a computer programmer, makes $8,000 per month. Sounds decent. But, let’s delve deeper…
To begin, we all realize that there is no way Mr. Rich is taking home $8,000 per month… Instead, he is actually taking home about $6,000 per month… After taxes.
Next…
He and his wife each lease luxury vehicles (why shouldn’t they… They make plenty), totalling about 1,500 per month.
They live in a brand new home in a great neighborhood, the fully impounded mortgage payment runs them $2,500 per month.
Next, dining out and groceries cost their family of four $1,000 per month.
Gasoline, car insurance, and maintainence adds another $750 per month. Then comes $250 per month for the second that they took out on their house to put in a pool… Cell phones, cable, high speed Internet, Gardner, and the test of the standard utilities tacks on $1,000 more per month.
So far we are up to $7,000 in monthly expenses and we haven’t even touched on college savings, retirement savings, clothing, emergencies, travel, health insurance, etc.
Bingo!!! Mr. Rich is far from rich… In fact he spends more than he makes each month and has been for several years. In fact, what I failed to tell you is that Mr. Rich has tens of thousands in credit card debt and he continues to add to the debt each and every month… Because Mr. Rich spends more than he makes.
So what do you think of Mr. Rich now? Not so impressive.
Now let’s talk about Mr. Truth.
He is also married with two children. He also has two cars, a mortgage, and most standard expenses…
But Mr. Truth never spends more than he makes and he is truly rich.
To begin with, he owns both of his cars outright (that means no car payment to all you credit junkies).
Car #1 is an eight year old toyota camry (it’s near it’s end).
Car #2 is a three year old toyota camry that they just purchased for about half what a new one costs.
Their house is the smallest house in a good neighborhood. The mortgage on it, is $1,500 per month… Fully impounded.
Mr. Truth also takes home about $6,000 per month… But since he has about $2,750 per month less in expenses, he doesn’t spend more than he makes and he never incurs personal credit card debt.
Additionally, Mr. Truth sets aside small amounts of money to invest and save for the future, he fully funds his 401k, and he plans on purchasing a duplex as an investment property.
He does all of this without incurring credit card debt and god situation improves each and every month… While Mr. Rich continues to dig himself a deeper and deeper hole each and every month.
Now, I fully understand that most of you probably relate more to Mr. Rich than to Mr. Truth… But that’s ok.
You can change things, you can take control of your life… you can make a change for the better.
This website will give you examples of how to be honest with yourself and live a financially responsible life.
Bringing Back Lawaway!
Posted on July 8, 2008
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I want to bring back “LAYAWAY”! Does anyone know what that is ?
I will tell you… when I was a young boy, I was able to go to KMART, and pick out something that I wanted to purchase… let’s say it was a toy that cost $20. I would be able to take the toy to the LAYAWAY desk, and put down $5 towards the cost of the toy. Then the store would hold my item, and record my $5 payment towards the cost of the toy. I could come in whenever I wanted and make payments on the toy… and once I paid the balance in full, I would receive the toy!
Can you imagine a world like this ? A world where we never paid interest on the things we purchased… doesn’t it sound great right about now ? In a time where we wouldn’t dream of setting aside money to purchase a new 52″ LCD TV… putting off the purchase until we actually had the cash to pay for it… instead, if we want it now… we get it now… the store will either let us charge it to their store credit card, or a myriad of Credit Card companies will gladly extend far more credit than we can possibly afford to repay. And, years from now, we will still lay awake in bed thinking about that credit card balance… in fact, it may be time to purchase a NEW TV… and you will probably still be sending in that minimum payment each month…
This is slavery people… SLAVERY!!! I am not kidding… when you are enslave yourself to pay a bank or credit card company for ever… or what certainly feels like forever… you enslave yourself… remember, the credit card companies charge 20% on their credit cards because they have a very high rate of default… this means that a large number of people never repay their credit card debts… thus, in order to still make a good profit, the creditor will charge a very high interest rate to everyone.. and thus, the good people who actually make their payments forever… get slammed… and thus keep the credit card company’s profit margin up… that’s right paupers… the few of you who actually pay your bills are the reason that the creditors make all their profit…
I have a solution to this problem… Paupers, stop using credit cards. Did you know that if all of the people that pay their minimum payments, etc. just stop charging, pay off their balances, and don’t carry any more credit card balances… the creditors will be stuck with only the people who don’t pay back their bills… and they will lose everything… yes, that is right, you can stick it to the credit card companies… how ? Stop using their cards… stop carrying balances, stop, stop, stop!!! Let’s just stick it to the creditors.. let’s ruin them… let’s just leave them with ONLY THE non payers… thus, their whole entire system will come crashing down… in fact, if all of the people who pay back their debts just stopped using credit cards… the entire credit card system would crash in a matter of 24 months… within 24 months, most of the card holders would default and stop paying on their debts… and the credit card companies would start going bankrupt, since they wouldn’t be collecting those huge 20% interest payments from good people like you… so, join me… join me in my quest to stop the creditors from taking us down… stop using your credit cards, stop carrying balances on credit cards… stop now, and join me in my fight to break the chains around our necks…
Robert Mandrake
Saving Money On Kids Toys
Posted on July 4, 2008
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Today, I have a real cool story to share with all my fellow Paupers.
A few days ago, my eight year old daughter asked me if I would buy her an inflatable water slide that is sold at Toys R Us. The price had me a little shell shocked… $699.00… yes $699.00 - So, I was the bad guy and had to tell my young daughter that it was too expensive and was a bad use of money. She was disappointed to say the least.
Then, the next day, I went to a website called www.CraigsList.com and I looked up our local area, and looked under toys and games.
Craiglist, is a widely used online classified ads website… that is very easy to use, and is updated in real time.
So, I am looking through the listings, and voila… I see a listing for an inflatable waterslide… $125, within my driving distance (20 minutes away), and there is a picture of it posted online, and looks great!
So, I email the seller my phone number… and in 15 minutes, the seller calls me. She says to come and get it… so, I get in my truck, drive 20 minutes to her house, and I pull up… and the waterslide is fully inflated and up and running in her front yard… so, I know it works, and doesnt have holes, and I know the motor works… I ring her doorbell, and as she opens the door, I say “I will take it!” - I load it in my truck, drive home and ten minutes later, my daughter and her friends are having the time of their life, and getting so much great exercise and having so much summer fun… and I paid only $125 for a $699 item…
So, the MORAL OF THE STORY PAUPERS is… A Pauper, on their road to a life of royalty, use classified and online websites like craigslist to get bargains on things for their children and their family… thus being able to live more like royalty, yet still spending like a Pauper!
Robert Mandrake
Pay Yourself First
Posted on July 1, 2008
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I am definitely not the first to say this and I will definitely not be the last… PAY YOURSELF FIRST!
What does this really mean ?
It means save and invest no matter what, do it automatically, and worry about your bills after. Now, please don’t get into a frenzy… I am not suggesting that anyone stop paying their debts… but, what I am saying is… the concept of automatic saving in good times and bad is something that will most certainly help all of us Paupers to get closer to that life of royalty that we all seek.
Don’t believe me do you ? I didn’t understand or believe in the concept at first either… but, think about this: Think back over the past 10 years. Now, imagine if you had saved via automatic savings (auto debiting your checking account, etc.) TEN PERCENT of your take home income. Would you have still gotten by ? Would you have been able to still put food on your table (not necessarily steak and lobster at Mortons) ? Would you have still been able to pay your rent or your mortgage payment ? It has been my experience that almost everyone that I have ever asked this question to… answers, YES! I would have been able to make it. I may have had to cut back on this or that, etc… but, I definitely would have made it.
I then go on to ask the following question: If you had saved 10% of your take home income over the past ten years, would your financial situation be significantly better than it actually is today ?
Again, It has been my experience that almost everyone that I have ever asked this question to… answers, YES! I would be in a much better financial situation if I had done that over the past ten years.
So, I challenge you to really think about this concept… think about whether or not you could do this… could you afford to start saving 10% of your take home income ? If you can’t right now, is there a way to make cuts in your spending so that you could make this happen ? My guess is that almost everyone (I said almost) can and should make this life change. If you can, do it today! Stop procrastinating… make a real change, take a real step towards a life of royalty. That is what we are all after here!
Robert Mandrake
Teach Your Children To Pay With CASH! - CASH IS KING!
Posted on June 29, 2008
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Welcome Paupers,
Today, I want to discuss an important subject… CASH!
Yes, CASH… Let me state for the record: CASH IS KING! Yes, CASH IS KING!
I have been reading article after article lately talking about the benefits of using CASH as opposed to using credit cards… and I am really getting excited about this.
I want you to start paying with cash. I want you to start showing your kids that you pay with cash. I want you to start talking to your kids about paying with cash.
CASH, CASH, CASH. Ok, now that I have seared that into your brain… lets start talking about why CASH IS KING ?
Cash is king because of the way spending cash makes you feel. When you pay with cash, you have a direct psychological connection with your money, your cash… as opposed to paying with a credit card. When you pay with a credit card, you do not feel like you have parted with any real money, or cash. Instead, you make your transaction without that sense of loss… without the idea or concept that you actually spent anything… that disconnect is what causes you to spend more than you would if you were paying with cash. I challenge you to think about the last 6 months, and think back to all of your grocery store trips, your target trips, your home depot trips, etc… and ask yourself seriously… did you spend more money than you should have ? did you spend more money than you would have, if you had needed to pull out your check book or use the cash in your wallet ? How much more did you spend ? 10%, 20%, 50% ??? I have heard all kinds of numbers, but, 99% of the time, people tell me that they spent a great deal more than they should have, by paying with a credit card.
The credit card companies have worked very hard to convince you that when you pay with your credit card, and purchase that new 52″ LCD, that you are not actually spending $2,000.00, but instead, you are actually only spending $60 per month. That changes your entire perception about the purchase from $2,000 out of your bank account, to only $60 per month… which sounds better to you ? Of course the $60 sounds better… it sounds much better… in fact, even someone with very little means can rationalize to themselves that they can afford $60 per month. Heck, my eight year old could probably come up with $60 per month if she saved enough cans and bottles. Ok, so why is this so bad ? Why can’t we just use the credit card for the $2,000 LCD and pay $60 per month ?
Because it will take 4 years to pay off that LCD at $60 per month. Yes, FOUR YEARS! In addition, you will have spent an additional $870 in interest charges over the life of the payoff term. So, that LCD, which will probably we worthless in 5 years, will actually cost you $2,870 over the life of the payoff.
Now, I have a few points to make about this. First, you don’t need a 52″ LCD. Yea, I said it. If you are here reading this blog, you can’t afford it. If you are a Pauper, then you cannot afford a 52″ LCD. What can you afford ? I don’t know for sure… but, I would guess that you can probably afford a 19″ TV from walmart for $278… yes, I said 19″… you can survive on a 19″ tv. Plus, it will only take 5 months to save $60 per month and you can pay for the tv in cash… yes cash… so, please keep in mind, that the purpose of this site is to teach you more than one lesson… one lesson, pay cash in stead of credit, and the second lesson, SAVE MONEY… stop overspending… stop buying things that you clearly don’t need… don’t buy a 52″ LCD… thus enslaving yourself to 5 Years of $60 payments… instead, save $60 per month for five months and pay cash for a 19″ tv.
Robert Mandrake
Help Your Child Understand The Value Of Money!
Posted on June 22, 2008
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I am constantly getting the following question: “How do I teach my child the value of money?”
This is an excellent question, and there are probably thousands of good answers. I have many ideas and suggestions, and today I will share one of them with you.
One of the problems with children and money is that they don’t participate in the process of money often enough to ever grasp it on their own. Parents often think that their children will just absorb it as they grow older and as they are around the parents conducting financial transactions, etc.
But, the children rarely participate in the actual processes… thus, they don’t benefit from the exposure in the same way they would if they were more involved in the actual process.
Let me give you an example that may help you better grasp this concept. Imagine your children riding as a passenger in your car every day for the past 11 years of their life. They ride to school, to the store, to the mall, to grandmas… they ride with you everwhere. But, when your children are with another parent, and they are asked how to get to their house… they don’t know! You are shocked… you think to yourself, what have they been doing for all these years… have they just been staring out of the window aimlessly ? The truth is, that because they have not been helping navigate, drive, give directions, look for street signs, or really do anything else in the actual “process of driving”, they absorbed absolutely nothing from all those years of riding in your car… this isn’t their fault… they are not malfunctioning…. its just a simple fact of life and human nature… a human doesn’t absorb anything while just passively participating… participation in the actual process is usually required for the average person to gain something from the experience. Yes, I understand that there may be some extraordinary people out there that violate this rule of nature… and great for them… but, most of us do not. So, its vital that you understand this concept, and apply it to the lesson of teaching your children the value of money.
Now, lets return to the question of how to teach your child to understand the value of money…
It is vital that you include your children in the actual process of money, finances, and actual money transactions. Here are a few examples of how you can do this:
Lets say for example that you go out to dinner… as opposed to normal, where you would simply direct your children to order, occasionally vetoing your childs choice because its too junk foody, or perhaps because it costs too much, etc… instead try a different approach… when you are seated, give your children a budget… say $8 (this could be much higher or MUCH lower depending on the location or occasion)… then, let your children pick from the menu (of course you still retain veto power when it comes to poor food choices), and have them use their budget as a guide… thus, if they would normally order a lemonade with their meal for $1.99, they could opt instead for water (free), and come in under budget, etc. Next, require them to always come in at or under budget… and for the fun part… if they come in under budget by a quarter or more, allow them to keep it! This will instill in them a valuable life lesson… the life lesson of being thrifty… and I am not talking about being cheap… don’t teach your children to be cheap… teach them to be thrifty. If you make this a regular habit, and continue this for years and years and years, you will instill in your children a great lesson… the value of money. They will grasp it, they will understand it… and more importantly, they will begin to take pleasure in “saving money” on things… because you will be rewarding them for doing so. Make sure that you include that part… if you don’t you will probably never be able to get your younger children to enjoy doing it… and it could end up a complete waste of time.
Here is another great example:
Lets say that you take your family to the local pizzaria, or bowling alley, or mini golf park once per month. I don’t know about you… but, it seems impossible to escape these establishments without spending a small fortune on video games, skee ball, the toy claw machine, and food… I suggest that you think about how much money you would normally spend on your children, say $20 each (the amount doesnt matter), and when you arrive, tell your children what their budget is. At this point, instead of the children just spending like mad, and continuing to ask you for more money, or to do this or to do that… they have to think about each event… and weigh how much it costs, with what other things they want to do, etc. Now, I do want to say here… that you will need to assist your children. If they are very young, you will need to explain what each thing costs, and try to help them come up with a plan. If your children are teenagers, they may not need much help with the adding, etc… but, they probably could use some good words of advice as to how to spend their money. Additionally, as always, it is vital that you let your children keep whatever they don’t spend. - REMEMBER, each time your children forgoe one item or want or pleasure in favor of saving that money for something at a later date and time, you are forging into their character the idea of being thrifty and being a saver. Our country has lost its way on this subject, and this concept has not been past down to todays generation… even though it may drive you nuts to see your children save $5 from the bowling alley and then later spend it on something totally worthless, don’t let it get you down… your children are doing something that will greatly benefit them later on down the line… as they are demonstrating the ability to think about each purchase with a budget in mind, and with the idea that by going under budget they are saving for the future… let me repeat that again, as this is one of the most powerful concepts that you can teach your children:
“the ability to think about each purchase with a budget in mind, and with the idea that by going under budget they are saving for the future”
Think about that for a moment…
Do you see it now ?
This single concept will help them live a more financially responsible life, and help them make better financial decisions for the rest of their lives.
Robert Mandrake
Start saving for your child NOW!
Posted on April 27, 2008
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I am a huge advocate of saving for your children… yes, YOU should be saving for them.
Am I talking about setting up trust funds for them, so that they will never have to work a day in their life ? NO… of course not… if you have the money to do that, and you choose to do that… then that is your decision… but, for all of us “Paupers” (basically, anyone who can’t afford to setup a muti-million dollar trust fund for your kinds)… I AM TALKING ABOUT saving VERY SMALL amounts of money for your children… the point is just to start saving… to plant seeds for them… to practice what you are going to be preaching to them…
A very well known personal finance guru talks about your “starbucks” money… why not try that… why not take one $5 starbucks purchase per week, and instead of buying it… drink a free glass of tapwater… and take the $5 and SAVE IT for your child… yes, I am proposing modifying your current lifestyle by simply finding your “starbucks $5 per week” (this can be anything… not just starbucks… just find something that you can cut for around $20 per month)… and saving it for your child…
So, STEP 1 is START SAVING $20 per month for your child RIGHT NOW. Do NOT procrastinate, take action right now… go to an online bank, and setup a savings account for your child right now… then, setup an automatic savings debit each month from your checking account to save your child at least $20 per month… and oh yeah, don’t forget to cut out that single $5 starbucks each week
Robert Mandrake
Welcome Paupers!
Posted on April 27, 2008
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Welcome Paupers to “A Paupers Guide To A Life Of Royalty”!
This is post 1 of day 1 of this great website that is dedicated to parents, grandparents, and friends of children… this site is dedicated to helping you guide the children on a path to living like royalty, regardless of the current financial situation…
Dictionary.com describes a “pauper” as a:
| 1. | a person without any means of support, esp. a destitute person who depends on aid from public welfare funds or charity. |
| 2. | a very poor person. |
It is my desire to change the path that so many children are on… and steer them towards a life of royalty… by that, I mean financially… where a child can be assured of a life free from being “a very poor person”.
It is my belief that children do not have to be pre-destined to being a “pauper”. I think that through very careful planning, teaching, and self-discipline, a child can grow up to live like royalty (relative to a pauper that is)…
Thank you for visiting this site… and I invite you to join me in my quest.
Robert Mandrake