Blog | Personal development, Personal Finance

How to Manage Your Money (Vs. Gambling it Away)

The answer to risk management lies in your financial education

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Do you like playing the lottery? Perhaps a weekly poker game? How about putting some money down on your favorite horse? Or maybe you like to spend weekends playing slots at your local riverboat casino or vacations hitting the craps tables in Las Vegas?

What do all of these activities have in common? Relying on luck for monetary gain, which is not a sound practice for managing money. I’m not saying I don’t partake in a fun little bet here and there, but I also know that games of chance rarely result in a celebratory payday. For me, it’s the price of a little entertainment, not a way to pay my bills or fund my retirement. Before I plunk down a penny when gambling, I understand that I most likely will never see that money again, and I’m OK with that.

Managing money: The hidden risks of ‘safe’ investments

Instead of leaving it all to lady luck, I invest in cash flow assets to increase my net worth. Now, I’ll pause here for a moment, as this is the point where most people say, “Wait! Investing is risky, too! How’s it any different than gambling?”

Yes, there is risk involved with both activities. Gambling requires a lot of hopes and prayers. You give your money to the casino and “the luck of the draw” determines whether you win or lose.

With cash flow investments — whether you buy a property, invest in commodities, start a business, or something else — there is always some level of fear or anxiety present. However, there is one big difference between these two activities: Control! So, let’s explore that concept, which is essentially risk management.

What you may think is a “safe” investment, I probably view as risky. Again, look at this through a lens of control or risk management. For example, many financial planners advise “safe” investments, such as savings plans, mutual funds and 401(k)s.

But are they really “safe” investments? Let’s take a look:

  • Investment #1: Savings accounts

    When you put your money in a savings account, it sits there… doing nothing. As the dollar decreases in value, the money you are saving is worth less and will buy you less in the future.

    Plus, how much are you paying in bank fees? You may be paying more to have your money in a savings account than you are earning by keeping it there! This is not an asset that puts money in your pocket; it’s a liability because you are losing money!

    As I say in my book It’s Rising Time! ": by saving money, in many cases, you are losing money.

  • Investment #2: Mutual funds

    A mutual fund is a collection of stocks, bonds and securities. According to Investopedia, as of 2018 there were almost 10,000 mutual funds in the United States. And about 11 percent of Americans are investing in mutual funds, according to Lexington Law. That’s a lot of people investing in thousands of funds and hoping for a nice retirement. But these same people probably do not have a financial education. How do I know that? Because if you were managing money differently, you could probably get a higher return on your investment elsewhere.

    As John Bogle, the founder of Vanguard and the author of “The Battle for the Soul of Capitalism,” explains, the mutual fund system is failing investors because of the fees (some hidden): “The financial system put up zero percent of the capital, took zero percent of the risk, and got almost 80 percent of the return,” he states. “And you, the investor in this long time period, an investment of a lifetime, put up 100 percent of the capital, took 100 percent of the risk, and got only about 20 percent of the return.”

  • Investment #3: 401(k) plans

    A 401(k) is a popular retirement plan where you contribute a portion of your salary to be invested in mutual funds. This is an easy route for many because you just sign on the dotted line and start automatically saving for retirement. But when you do this, you basically give up control of your money to others, and that increases your risk. Plus, most of these plans assume you will retire in a lower tax bracket than you are now. If women knew about the hidden costs of 401(k)s, they’d probably never contribute to them.

What was the common theme you noticed in these three examples? Yep, you guessed it: a lack of control or risk management.

Gambling vs. financial education

When you’re investing in true cash-flow opportunities, you’re in the driver’s seat. This means that you know how to manage your money, what to look for, and the appropriate actions to take when an opportunity presents itself. You have control over your decisions and your cash, and this improves your chances of increasing your wealth. That’s risk management at its finest.

Now, we’ve all heard the one-off stories of success in a scenario where there was no control. There are always those lucky people who win at the casinos and come home with a small fortune. The same goes for some investors who hand all of their money over to a financial planner, spouse or family friend and do well.

Gambling may seem like an easy way to make money, but it’s very risky. On the other hand, getting a financial education to increase your cash flow is not difficult — and the rewards usually far outweigh the risks.

When it comes to my life, I want financial freedom, and the only way to experience it is to have complete control over my cash without relying on luck — or anyone else, for that matter.

Risk management starts with a financial education

Whether you turn your money over to a financial advisor or control your own investments, there will always be risks involved. However, you increase your investment risk when you have no financial education, don’t understand what you are investing in, let others keep the majority of the returns, and depend too much on others to control your investments.

Your investments are “safer” when you get a financial education, actively invest your money in investments you understand, get the majority of the returns, and become your own financial advisor. Managing your money properly means managing risk properly.

What are you going to do today to take control of your money and make better investment choices?

Hopefully, the answer is: get a financial education. If you don’t know where to begin, it’s as easy as 1-2-3:

  1. Immerse yourself in the topic. Learn about investments that put money in your pocket (assets). This information is easily accessible online, at libraries and local investment clubs, workshops, events, books, and more. Here’s a free investing class to get you started.

  2. Start small. Practice what you learn when the stakes are low. For example, there’s no risk involved when you learn by playing the free, CASHFLOW® game.

  3. Take action. There comes a point in every woman’s life when you just have to stop sitting on the sidelines and take that big leap forward!

It’s all part of the Triple-A Triangle™ that I talk about frequently: Aspire, Acquire and Apply. Once you have a financial education on managing money and take action on what you learn, you can expand your cash flow infinitely! That’s a lot better than hoping for a big, one-time win in Vegas.

Managing money skills are more important than ever

According to a Gallup Poll, 64% of Americans admit to having gambled in the last year (whether they bought a state lotto ticket, visited a casino, participated in an office pool or bet on a sporting event). If you are one of these people, why not “gamble” on something with better odds?

If you want to be rich infinitely, invest your time and effort in a financial education and discover what you need to do to increase your cash flow. Then, take action on what you learn.

Yes, there is some risk involved, and it can be scary. But if you don’t take control of your cash and move forward, you will be at the same place you are now, or probably much worse, in the future. It’s Rising Time! And your big jackpot of financial freedom awaits!

Original publish date: July 12, 2012

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