As the head of Free Your Mind Online, Matt Mason is an expert on both the macro picture when it comes to money and the deeply personal that can get to us. He spoke with us about how much of money is perception, and why you need to get past those perceptions.
What are some common mental stumbling blocks we have when it comes to personal finance?
One common mental block that most of us have is that we have been indoctrinated to believe that being wealthy makes you evil, and being poor is a virtue. Because of this, most of us on a subconscious level don't really want to achieve financial independence and wealth because we don't want to be like "those" people. So we sabotage ourselves. We need to change our perspective. Money is a tool. It makes you more of what you already are. It doesn't change your DNA.
Another mental condition that we must get over is our bad habits. Personal finance is actually simple for the most part. It is not the rocket science that it is often made out to be. Spend less than you earn! We all know this, and we can all pretty much do the math. So why is it difficult? Simply put... we are not in the habit of doing so. Personal finance is behavioral. And for most of us, it is not a part of our routine to sit down and put together a cash flow plan, a retirement plan, etc. We are not in the habit of making long-term plans for anything, much less our financial future. Most people just live in the moment and spend what they have. We need to make an effort to change our habits.
What one aspect of personal finance do you wish everyone knew, and why?
The magic of compound interest. Nothing can beat it. If you were to put $2,000 in an account paying 3% interest and wait 48 years, your money will have grown to $8,000. That's not that much! Now if you put your money somewhere that makes 6%, you will have $32,000 after 48 years. So even though you doubled your interest rate, you quadrupled your return. And if you put your money somewhere making 12%, it will balloon to $512,000 after 48 years. And if you wait another six years, you will have well over 1 million dollars, just off of a $2000 deposit.
A lot of people don't want to invest their money because they feel that it is too risky. They want a guarantee. But what they don't realize is that by leaving all your money in a bank, you are pretty much guaranteed to be broke in your later years. People are afraid to invest. But people should be afraid not to invest. The latter of the two is much more catastrophic. And I know this from experience.
Why do you think debt is so pervasive these days? How can we avoid it?
For the most part, debt is caused by consumerism. And consumerism in many cases is caused by low self-esteem. Every day we are bombarded with images and messages that make us feel inadequate and void. And the people who make you feel inadequate give you the perfect solution to your inadequacy... Their products! Get rid of your dumb phone and get the latest smartphone... then you'll be cool, and your life will be fulfilled.
I don't have a quick, easy-fix answer for this problem. But self love is the issue that needs to be addressed. Once we do, a lot of consumerism will go away in my opinion. So break out the self-improvement books, audios, videos and motivational speakers.
How closely tied is our national financial health to our personal?
Truthfully, not close at all. That is, unless you allow it to be. I remember when I first got into the financial services industry. I was told that most Americans are broke and in debt, and that a large percentage of them are a couple of paychecks away from homelessness. And the interesting thing about it is that I was told this BACK WHEN THE ECONOMY WAS GOOD!
I remember a couple of years back; I was fascinated at all of the debates going on about how our economy was. Some people said it was doing well. Others said it was terrible. I remember distinctively that no money came into or left my own pocket during the debate. I did some research to try to find out whether we were in a recession, depression, or what. And I realized that there is really no set definition. You can get different answers from different people on what exactly a recession or depression is. Then I found an old quote from Harry S. Truman that answered the question perfectly: "It's a recession when your neighbor loses his job. It's a depression when you lose your own."
And that's the truth! The economy can be at the greatest pinnacle in the history of humankind, but if you are homeless, you are homeless. But the great thing about it is that the reverse of that is just as true. I believe that a person should have their own economy, and not blow back and forth with the wind. Sure, you can have a vested interest in what happens in your country. And sure, you need to pay attention to what is going on to make adjustments. But don't ever fall victim to any of it. You have to control your own destiny.
What needs to change about personal finance in your opinion, and why?
I think personal finance is good the way it is. It works for those who know how to use it, and it doesn't work for those that don't. So you have to put in the time to learn how money works. It's not up to your advisor, not that I'm against having one. It's not up to your bank, or whatever guru is out there. It's up to you. Personal finance is "personal."
What trends in personal finance should we be keeping an eye on?
An appreciation of the dollar. As everyone in the financial community is probably aware of, due to the Federal Reserve printing money out of thin air, the value of the U.S. dollar is plummeting daily. At this point, it's not even worth the paper it's printed on. For this reason, a lot of people are beginning to invest in gold, silver, and other precious metals. And while this is certainly a wise decision, a lot of people are overlooking something. If the economy collapses, which many anticipate, and you can't get money from the banks, you can't go to any store and purchase anything you need to with gold and silver coins or bars! However bad you may believe the U.S. Dollar to be, it is the current currency. And current currency is always king. So continue to invest in precious metals. But until the government officially declares gold and silver as money, keep a stack of dollars next to your stacks of coins and bars.