Thursday, December 17, 2009

This Is The Preface To My Book "Young Money"

A study was conducted in the United States several years ago by the Social Security Office, which tracked thousands of people at graduation from university to retirement from work at the age of 65. The results were that out of every 100 people:

• 36 were dead;
• 54 were broke, dependent on pension and charity;
• 5 were continuing to work past retirement age;
• 4 were financially secure; and
• 1 was wealthy.

The study concluded that generally in the US, 5% of the working class was financially successful while 95% was unsuccessful. The 95% had all been to university, had good jobs and received high salaries. They had succeeded academically and professionally. But when it came to the management of their finances, they had nothing to show for all the money they had earned during their working lives.

A similar study by the Australian Bureau of Statistics showed that 96% of the population at retirement age ended up dead, broke or on pension. Only 3% became financially independent and only 1% became financially free and rich.

The story is generally the same for most Western countries including New Zealand, UK, Canada, and Europe.

There are no similar statistics on Papua New Guinea and other developing countries, but I would be surprised if it was different. In fact, the proportion of financially unsuccessful people in the developing world is probably closer to 99%.

What is the main reason for this? The answer all over the world is financial illiteracy which results in bad money habits. It is not that people do not earn enough. It is that they do not know how to harness the power of money and make it work for them, and because of that lack of knowledge, they develop and have bad habits when it comes to using their money. They may be good at managing other peoples’ money wisely but not their own.

At least two developed countries have become alarmed at the acute lack of financial education among the population, and have recently taken steps to address the problem. The United States Government enacted the Financial Literacy and Education Improvement Act in 2003, on the basis of which a Financial Literacy and Education Commission was established. The Australian Government established the Consumer and Financial Literacy Taskforce in 2004, which strongly recommended the establishment of the Financial Literacy Foundation.
Both organisations have been tasked with the responsibility of educating consumers on financial matters in relation to spending, budgeting saving, investing, borrowing and risk management. Their strategy is to educate people through the education system, starting at primary school upwards.

If highly developed countries like the United States and Australia can see a real need to educate their people on personal money management after the hundreds of years of people having dealt with money, don’t you think developing countries need to do likewise? I think it is imperative. In fact, it is essential.

Developing countries, which have entered the cash economy relatively recently, really need to educate their people on how they can manage their finances so as to become successful at their own level. I believe that developing countries like Papua New Guinea cannot advance and become developed unless and until their people learn how to manage their money well.

The need for financial education has arisen for two main reasons. Firstly, it has been realized that schools teach students to work for money, but not how to make money work for them. So people go to school, strive for good grades, get jobs, work for their employers, and pay their bills and debts, but do not have much to show at the end of their productive lives. Only a few break out of this vicious circle and become financially independent, free and successful. The majority may have been successful academically and professionally, but are failures financially. They end up broke soon after retirement.

Secondly, the world has changed from the Industrial Age to the Information Age. In the Industrial Age, jobs were very secure. People went to school and got jobs which they held for life. After they retired, their employers continued to support them through pensions. With the advent of the Information Age and other developments such as globalisation, jobs have become insecure. You can have a seemingly safe and secure job today but lose it tomorrow. And generally pensions and superannuation fund savings are not sufficient to maintain your pre-retirement standard of living.

Job insecurity and financial insecurity go hand in hand, because for most people, the pay cheque is their only source of livelihood. When jobs are removed, financial problems arise immediately. You can tell that by the chorus of complaints which working people kick up after missing just one fortnight. Most people are in fact a few fortnights away from bankruptcy.

That is why educating people on personal financial management is essential. You cannot afford to cling to your job and your pay cheque for your livelihood. A job may be what you need in the short term but in the long term you really need to be financially independent. You must know how to use what you earn from your job in a manner that ensures you maintain your current standard of living even if you lose your job.

My first book, Success After Graduation, was about how students can succeed professionally after school. It discussed the job market, how to get a job and keep it, the fact that there is no job security, the need to plan for early retirement, the importance of financial security and marriage, self-employment, and the fact that life is a school from which there is no graduation.
T
his second book is on how young people, those who are entering the workforce and working people, can succeed financially. I have written it to provide advice and guidance on how they can manage their personal finances so as to succeed financially – something which they do not learn in school or at home, and something which the majority of working people have not been able to achieve.

I have written the book because the education system does not teach students anything about personal financial management. The education curriculum covers literacy and numeracy but not financial literacy. In other words, students learn English and Mathematics but not how to read and use financial information for their own benefit.

Most teachers and lecturers have not been taught anything about management of personal finances when they were in school. They do not know much about how to manage their finances, and even struggle to make ends meet, even though they are academically qualified. They are therefore not in a position to educate their students on matters related to personal finance.

The result is that most working people are financial failures because they have not had the benefit of becoming educated on financial matters. Most professionals do not know much about how to manage their finances and succeed, with the result that they live in debt, are constantly broke, and struggle all their lives.

This book is my contribution to educating young people about achieving financial success after school. It is aimed at young people, but I believe that working people will find the book useful too. In fact, as the book is based on my experience as an employee and many examples are about those who are already in the workforce, working class people will find the book speaking directly into their lives.

The crux of the book is that academic and professional success does not guarantee financial success, as the studies quoted above show all over the world. In other words, good grades in school and high-paying jobs do not automatically translate to personal financial success. The evidence for this again is the large number of educated and seemingly successful working people who struggle financially all their lives the world over.

My hope is that young people will be prudent in the way they spend their money when they leave school and enter the workforce, by putting into practice some of the ideas contained in this book.

The choice is yours: You can either be one of the 95% who fail all over the world due to bad money habits, or among the 5% who succeed financially through wise management.

My advice is: don’t follow the crowd – the millions all over the world who struggle financially because of bad money habits, the major ones of which are discussed in Chapter 7. Chart a different course for yourself and discipline yourself. It will be hard going against the tide of instant gratification which drives most people towards financial ruin, but in the end you will succeed.

Times have really changed. In the past, our ancestors did not need money to live. They used various items like shells, pigs and traditional salt as currency for trade and exchange purposes, but not for their daily livelihood. They lived on their garden food and water from creeks and rivers. There were no schools to send their children to. There were no electricity bills or rent. Today, we are part of the modern cash economy where money is essential for living. Even water costs money.

In 21st century Papua New Guinea, or wherever in the world you may be reading this book from, financial success is so vital that if you fail financially, you fail in every other area of life. Think about that statement, and you will agree with me. If you fail financially, there is a high chance that your marriage will become unviable. If you fail financially, it is certain that your children will not receive a good education. If you fail financially, you will spend most of your life working for those from whom you have borrowed money. If you fail financially, it is certain that you will not leave much by way of an inheritance for your children.

I really trust that this book helps you to succeed and not fail. I hope that working people will take a long pause after reading the book and make the changes they know are necessary to come out of the financial struggles they have been living in. I hope that the book helps people to make the hard decisions that are required of them in order to become successful in future.

2 comments:

猶豫 said...

hello~nice to meet u..............................

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