Author: Youth 2 Youth

Why does maxing out your credit card
on new trainers and a pair of jeans
seem so damn alluring compared
with saving or investing in assets?
Y2Y asked Robert Kiyosaki, millionaire
and best selling author of 'Rich Dad
Poor Dad', how to break the 'povo'
cycle.

Karen: What's the most common
money mistake we all make?

Robert: The biggest mistake I see
people make is they don't spend money
for good financial advice.

My rich dad used to say, 'Your most expensive financial advice is free financial advice.' I see many people taking advice from their friends, in-laws, co-workers and financial sales people. Even when I was broke and in debt, I still paid my accountant and my tax attorney for their advice. If I hadn't paid for their professional advice, I might still be broke and in debt today. To me, taking free financial advice from people who are not financially successful or financially trained is dangerous, risky and often a waste of time and money.

Karen: So why do we just love to overspend?

Robert: We overspend because we all want the finer things in life and we want to enjoy this fabulous gift called life. But some people just can't help themselves and they feel better when they buy something. They get a rush and later the guilt creeps in. For most people it's for instant gratification."I'll feel better if I have this NOW, my life won't seem so mundane if I get this new car now". They can't wait and have no concept of delayed gratification. Instant gratification means I want it now, delayed gratification means I will appreciate it more if I wait until I can really afford it.

Another reason that people over spend is the old "keeping up with the Jones'". Their neighbour or best friend has bought a new car so they want one. Their girlfriend always has a new outfit for every party, so should they. Many people have found themselves in a dreadful financial situation trying to keep up with someone else. The usual scenario is the 'someone else' is probably in debt too!

Karen: What are some solutions to breaking our over spending habits?

Robert:

1. Decide what you want to be. If you want to be poor or middle class, avoid over-spending by living below your means. If you want to be rich, get educated and learn how to earn more by working less.
2. Change your friends. I have many friends who are very negative about money. While they are still my friends and I love them dearly, I spend more time with my friends who are rich or are striving to be rich.
3. Write a plan. Most people who are not financially rich do not have a written financial plan.
4. Have a team. One of the advantages of having two dads, one rich and one poor, was that I noticed how they handled money problems. My poor dad handled money on his own. He never asked for help. My rich dad surrounded himself with a team of advisors. He wasn't too proud to ask for help while my poor dad seemed embarrassed to ask.

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