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Graduate As a Millionaire

85% of teenagers never take a course on credit or finances. That means they haven’t got much of a hope of being financially successful from the get-go.

The first thing most teenagers do when leaving the home is to take on a car payment, get a credit card, pay rent, and often have a student loan. But if you have teenager that’s about to leave the home, here’s a deal you can make that’ll insure their financial freedom for the rest of their life.

The only thing your teenager has to do is to save $8,000 by their 20th birthday. Nothing more – nothing less. After that, without getting into debt, or touching these savings, they can literally spend every dollar they make.

It’s the magic of compounding and works with something called the Rule of 72. Simply take your rate of return and divide it by 72 – that’s how long it’ll take for your savings to double. So at a 7% rate, it’ll double every 10 years, while a 10% rate will double it every seven years.

Do some lateral thinking of how you can help them achieve this. Maybe you can charge them rent and keep that in a savings account. Some parents match whatever the teenager saves to a certain amount – there are all kinds of ways.

Then your 20-year old just has to watch his or her savings double again and again until it reaches $1 million at age 67, using a 10% rate, and it all started with a one-time saving of $8,000.

Oh, if only we had done this when we were their age. But one more thing: Because they’re teenagers, I’d recommend there’d be two signatures on the account – just in case they get the urge to take some money out…

The Rule of 72:   At 10% it’s 72 divided by 10 = money doubles every 7 years

At 11% it’s 72 divided by 11 = money doubles ever 6 ½ years

At age              Amount now saved through compounding interest at a 10% rate

20…                 8,000

27…                16,000

34…                32,000

41…                64,000

48…                128,000

55…                256,000

62…                512,000

67…                1,014,000

THAT is the best graduation present I can think of, and it’s not hard to do at all. It works with any starting amount. Even if it’s $5,000, it’ll turn to $640,000 and that’s not a bad deal for a year of two of savings at an early age!

Adults can get there, too. If you want to have $1 million when you retire at age 67, for example, you just need to work backwards.

So at age 60 you’ll need half a million because it’ll double when you reach 67. At age 53, you’ll need $250,000 and at age 46 you’ll need $125,000, and age 39 you’ll need $63,000. When you reach any of those amounts, at whatever age, it’ll double and double until you reach a million at age 67. But, depending on your age, you may want to use a more conservative 7%, depending on your age in order to lower the risk of your investments.

However, there’s a big proviso: It’ll never happen if you’re also in debt and making a bunch of payments. Sorry, can’t be done. You need to be debt free to have some serious money to put away for investments. I know the world has taught you that you can have it all – it’s not true. There’s no chance you can save a little, pay a little here and there and still have a life with your normal rent, mortgage, utilities, gas, etc. I know you think you can and it’ll be another five, 10, or 20 years of finding out that you were really wrong and wasted another decade.

Adult Graduation – To Financial Success

We’ve talked about graduating high school and graduating out of college in the last few weeks. Today, let’s talk about adult graduation. It’s not about school – it’s about graduating to financial success. You may be 30 or 55 and haven’t really gotten to the point of managing your money and finances – instead of your money running your life. When you graduate is up to you – the sooner the better. There’s a great Chinese proverb: The best time to plant a tree was 20 years ago. The second best time is right now.

Adult graduates make a financial plan and follow it. Kids do what feels good in the moment. It’s called delayed gratification.

Adult graduates have discipline in choosing between what you want now, and what you want the most.

Adult graduates actually practice what they teach their kids or tell coworkers at lunch that they ought to do. News flash: Your kids emulate what you do and not what you say and have you ever noticed it’s all the broke people that want to give you financial advice?

Adult graduates don’t just focus on the immediacy. They don’t get conned by the 0% headline.

Financially successful grads live on less money than they earn. That’s Money 101 – if not – they’ll never graduate. They have a game plan and serious goal of getting out of debt, starting with their smallest bill and working their way up. These graduates slowly start changing over from paying everything on the planet by credit card to moving over to a debit card. That’s changing their life from living on debt to living off their chequing account balance.

An adult graduate will have read at least two books on credit, finance and investing. It’ll make them more money-smart than 95% of the population and yes – smarter than most bank employees – honestly!

And a small group will graduate with their financial PHD: They’ll have at least one week of net pay in an emergency account, and set aside one-twelfth of their annual bills for Christmas, property tax, car insurance and the likes in a separate savings account.

Are you graduating one financial class or a bunch of them? Is this the year you want to get your financial PHD? I’ll never know how many adults will graduate sometime this year. I hope it’s you – you’re worth it – it’s worth it. But I can’t fight harder for you than you’re prepared to fight for yourself…

Three Must-Do Tips for Any Grad

Ah, it’s grad season for two groups: those graduating from high school and heading into the work world or university, as well as those just now graduating from university.

When I ask any adult when they were last debt free, the answer is almost always that they haven’t been debt free since they were your age. When they were 18 or 19 – and they’ve been in debt since then. Sad but true – that’ll be you.

Getting wealthy comes much easier if you learn to say “I can’t afford it,” and spend less than you earn. When you were still in high school, you probably had a summer job or other income. You worked hard, had a goal of what you wanted to do with that money, saved like a dog, and paid cash for stuff. Plus, because you had so little money, you were careful how you spent it, right?

But now you have a paycheque, and access to borrowed money, which includes student loans and a credit card. So you’ve forgotten how to get rich already and you’re just getting going. Let me remind you again and maybe, just maybe, you’ll do these things to actually get rich, instead of just making that your 40-year dream:

Pay cash for stuff

Don’t buy crap you can’t afford and don’t need

Save ten percent of your money

Maybe someone in your family will print this out for you. Maybe someone cares enough to go over to Mosaic and get you the It’s Your Money book. Maybe I’ll see you at the top, or maybe I’ll get an e mail from you in five years or so to help you with some of your financial mess.

If you’re graduating from high school, it’s a valuable investment to establish credit. Read the chapter on how to do that and the credit card chapter to understand the rate, perks and limit traps that you’ll be dodging a lifetime.

Plus, leave your credit card at home – don’t pack it in your wallet. The first time you charge a consumable such as gas or food on your credit card and do not pay it in full when the statement arrives you’re in financial trouble. From there, it’ll just get worse. Miss paying off your balance and it’s twice as hard the following month when the balance has likely doubled. Then, the credit card companies have won and have you hooked for the next few decades.

If you’re just graduating from university, I bet you’re sick of living like a poor student and ready for some major spending. The biggest financial damage is done in the first year following graduation. Get the job, get the paycheque, but if you can delay gratification and live like a poor student for one more year, you’ll have an incredible amount of money saved in that year. Once you turn on the spending tap you aren’t going to be able to turn it off again – so just delay it one year.

Finally, there was a great article on the ten choices you’ll regret in 10 years. It includes avoiding change, trying to impress others, and giving up when the going gets tough. I’ll post the link on the site. You should add one more: Not learning from your financial mistakes by denying them…

It’s Grad Season and Lots of Businesses Want to Meet You

Your 17 to 21-year old has banks, car dealers and especially credit card companies salivating to meet them.

Those companies will do whatever it takes to get their business. Banks, and especially credit card companies, have THE best marketing minds in the country and want your teenager in debt to them – really soon and really deep.

We have a huge emotional attachment to our first credit card. It’s the reason they’ll do whatever it takes to be front and centre in your teenager’s wallet. Once they’re first, they own you and the memories and loyalties are way bigger than a teenager’s first boyfriend or girlfriend – and last a lot longer. On average, we keep our first credit card for over 15 years. It doesn’t matter the rate hasn’t been competitive for years, that the perks are junk or the fees they add on.

It’s not even important that they’re students and don’t have much of an income. For this group, the default rates are below average because, in most cases, parents will step in and pay the balance, or at least make the payments.

Why you? Because they can’t market much to your parents. Adults already have all the credit cards they need or want. So they can’t grow their business unless they get to you. It’s millions of fresh customers and bonus: You don’t know squat about credit and the dangers of credit cards, but you do love to impulse buy.

The same applies to banks wanting to get you hooked on an overdraft or line of credit once you have some income. That overdraft will be there for decades and it’s not like you know how to shop around for the best loan deal or rate.

Car dealers also can’t wait to meet you. How many cars are you going to buy in a lifetime? Three? Four? Five, maybe? Well, the average salesman sells maybe a hundred each year. So who do you think knows stuff and totally has the upper hand? It’s like bringing a plastic knife to a gun fight – you’re gonna lose, even if you bring one of your parents or a buddy.

So you’re all set. You’ve got your student loan payments for two decades, you got the credit card, an overdraft and that car payment. Grade five math says that most of your income is now going to pay all that. So someone telling you save some money is just a pipedream.

Can You Really Sign Away Your Credit Card Rights?

Capital One made social media sites explode a few weeks ago. Their new U.S. credit card contract contains a collection clause that states they can suppress or change caller ID when calling you. In other words, they can spoof the caller ID to make it look like it’s one of your relatives so you’ll answer. It’s really easy to do, and something most scamsters already use when they try to con you.

The Capital One new agreement also states they can do personal collection visits at your work or home. I haven’t found the Canadian master agreement. If you have a brand new Capital One credit card, get in touch with me as I’d love to see a copy to find that text.

What’s in your wallet? In the U.S., at least for now, I hope it’s not a Capital One card!

Consolidation Loans – Don’t Do It

What are the first three letters in consolidation? It’s con – and that’s how you should think of it. The most important factor is that you need to change your thinking from percentage rate to dollars of interest! You get sold (or sell yourself on the idea) that you’ll have a lower payment, pay less interest, and get out of debt faster. Right – wrong – wrong…

If I borrow five dollars from you and you charge me 80% interest for two days, I’m going to owe you the $5 and two cents interest on Friday. Big deal – who cares, right? OK, but if I borrow $5,000 at 80% interest and owe it to you for a year, and not just two days, that interest is $4,000. Now it’s a big deal: $4,000 interest on a $5,000 loan!

What matters is always how much you owe and the length of time you owe the debt. The rate is only the third most important factor. What do banks push in their ads? It’s the rate, and never the term or amount. That’s like the magician who has you looking over there while they trick you over here.

On the surface a consolidation is really easy to sell to you and seems like a win-win: One payment, combining all the debts and at a better interest rate. But since it’s not the rate that matters, you will almost always pay:

-more in total interest

-over a much longer term

-and be in debt a whole lot longer

-and in debt for a whole lot more money, too.

If you owe $3,000 on a credit card at 20%: If you want out of that rate trap and consolidate, it stretches it to five or ten years. That option will cost you a lot more in interest – not in interest rate but in interest dollars! Or just pay $250 a month and get rid of it in a year, at a cost of $600 interest.

Your car loan may have three or four years left. Make the payments and you know the end comes sooner, rather than later. A consolidation won’t get you a much better rate, but will trap you into stretching the loan another five, seven, or ten years. It quickly doubles the interest you’ll pay, not to mention you aren’t going to own the same car for t10 or 15 years!

But those aren’t even the biggest drawbacks and traps. The biggest one is that 90% of the time you will now be putting up your house for collateral. Everything up until the consolidation was either no security, such as credit cards, or was borrowing that only had something specific for collateral, such as a car. Now, in combining it all, you’re changing all that and putting up your home for security. Right now, the worst that could happen is that the credit cards will write off what you owe them and your car may be repossessed. After the consolidation – you’ll lose your home.

And the worst trap: Over 80% of people who consolidate run up their credit cards again within two years! No, you’re not the exception. Stop kidding yourself unless you cut up all the cards that got you to the edge of the cliff in the first place or you’ll be in debt for twice as much as you started with. After that, the next step is bankruptcy.

Any ‘con’ solidation should only be done as a very last resort…and even then, there are better alternatives. What seems like an ‘easy’ way out makes things worse – much worse. Don’t do it – list your debts smallest to largest and attack the smallest one with every dollar you can free up. Then move onto the next smallest. That do it yourself plan will save you thousands of dollars and a lot of years!

5 Short Insights

A week ago, the Fraser Institute released a report that showed how bad the financial situation is in Ontario:  The Ontario government debt is almost double that of California. They have only a third of the population (14 million vs. 38 million) and double the debt? California is really working on getting it down – Ontario seems to be really working on continuous increases. They’re already spending 10% of all their revenues on interest payments.

According to a BMO survey last week, 44% of Canadian homeowners intend to buy another home in the next five years. Boy, if that’s even close to true, that’s a lot of economic activity in the next few years! Not just for realtors and real estate prices but the average person spends over $10,000 on new appliances, renovations, etc.

Yesterday, the payday lender Cash Store Financial, with 510 stores, filed for bankruptcy. How sad (he says sarcastically). BC laws allow $23 of charges on a $100 payday loan. That wasn’t enough, as a BC court ordered them to pay back $1 million in overcharged fees. And then there’s the U.S. class action lawsuit and huge problems in Ontario…

I didn’t know a bunch of listeners have been saving thousands of dollars on eye glasses. I’ve heard from three people that Zenni Optical ( and their $20 to $30 prescription glasses are actually a hit in the Okanagan! Can’t blame people…oh, and there’s another online seller now: For both, you’ll need to just enter your prescription with your P.D. (papillary distance) from your optometrist.

Allowances & Lottery Tickets

A survey last week reported on what parents pay their kids for an allowance: 1% pay $100 or more a week and 4% pay an allowance of $50 or more. That’s insane! The majority, however, pay $11 to $30 a week. Oh, and it isn’t an allowance. It should be called commission. It should be for doing things – kind of like the real world works when they’re adults: Pay for work. If you don’t teach them that, their first, second, third, and every employer will down the road!

There are a number of new economic reports from Europe and here in Canada that economic growth will be even slower than expected.  That comes with all kinds of bad news. However, the good news would be that low interest rates will be around for a while longer.

This week, California is rolling out a test at 100 gas stations in LA. You can now buy lottery tickets right at the pump with your credit or debit card. You’ve heard of pay at the pump? This is now play at the pump. It’s a win-win: Governments increase their revenues and the average very skinny American doesn’t have to burn up all those calories walking in…they can conserve energy right at the pump.

One More Very Personal Cruise Story & A Challenge For You

Greetings from Los Angeles!

Yes, I’m still in LA, having just finished my Mexican Riviera cruise on the Norwegian Epic that we talked about last week. If you missed it, the texts of the programs are always posted on Just click on the radio stories button and you’ll find last week’s story, and the most recent on the Norwegian Epic from November, as well as the other 300 or so programs.

As some of you may know, in addition to my books and radio program, the largest part of my life is my purpose and passion in teaching team building and leadership seminars all over the world. What always drives me crazy is companies who promote “our people make a difference” on their web site – and only their web site – because they don’t actually mean it in real life.

Yet, the cruise industry, and (from what I’ve observed) Norwegian in particular, has created a culture where their people do make a difference – in actions and not just slogans. You’ll find the staff to be totally attentive to you, incredibly professional, and more than patient; sometimes with passengers who wouldn’t treat their dog the way they treat some of the 1,100 staff.

Christopher is from a small town in Indonesia and only six months into his first ten-month contract on the ship. He actually starts work at 1 AM doing clean up and prep work, so he’s not exactly on a shift where most passengers would ever see him or meet him. Kerthney is from St. Lucia in the Caribbean. She is the keeper of the soft ice cream machine. While that might not mean much to you listening to me – it means a lot to not only the kids, but the adults on any Norwegian ship…you’ll see… This week, Kerthney is celebrating her third month on the ship.

Those are just two of almost 1,100 staff from dozens of countries. Most of them don’t have fancy titles, and their cabins are below the water line, shared with three other crew members. They work for very little money when compared to North American wages. Sure, it’s often a lot compared to the average wages of their home country, but it’s also very lonely and incredibly far from home. Their shifts can be more than half the day, and there’s no guarantee that they’ll be offered another return contract at the end of each 10 month period.

On a cruise ship, most people will meet the omelette chef at the custom-order station, one or two of the hosts in their favourite restaurants, a couple of the bartenders, and their room stewart – but that may be it. However, it’s the other one thousand plus staff who are just as invaluable to making your cruise a memorable experience. So the next time you go on a cruise – any cruise – make it a point to make eye contact and say a quick hello and a thank you…to the ‘non-obvious’ people. If every passenger on the average sized ship did that just five times a day, those 85,000 plus hello’s and thank-you’s for the week make up for a lot of loneliness, hard work, and long hours.

You know this in your own life at work: Being appreciated doesn’t replace your income, but sometimes it’s just as important. In fact, until you book a cruise – and you should – start practicing closer to home: In the restaurant, while you’re shopping, or anywhere else. It matters a lot – to a lot of people.  If you want to understand more about the people part of your life at home or at work, cruise through my web site at:

Next week, we’ll get back on the financial track and talk about the dangers and downside of debt consolidations. But I’ll give you a hint: What word do the first three letters of consolidation spell?

Travel Like A Norwegian

Good morning from beautiful Mazatlan. OK, it’s not really that beautiful . But since I’m on the Norwegian Star this week on a Mexican Riviera cruise, it’s a word that gets used a lot with almost any ship announcement.

I know that huge numbers of you either aren’t Mexican vacation fans, or have never been on a Norwegian cruise ship. The former is understandable with many long-standing and well publicised troubles in Mexico. But if you haven’t been on a Norwegian cruise, you’ll definitely want to add that to your bucket list sooner, rather than later.

As more than seven million Western Canadians, we really don’t have an excuse not to, since three of their ships depart pretty close to home: In addition to the Sun’s cruises out of Los Angeles to Mexico, the Norwegian Sun cruises Alaska from May to September with many departures right out of Vancouver. The Norwegian Pear, my favourite Norwegian ship, also cruises to Alaska, departing from both Seattle and Vancouver.

If you go, or hopefully when you go, you won’t be the only Canadian. The Sun this week has passengers from 12 different countries ranging from Brazil to Ireland and China. After the 80% Americans, we Canadians are the largest group, as I’m one of 200 on board this week. I actually thought that number would be a lot higher – and it should be. With the departure being out of the Port of Los Angeles, it isn’t exactly hard, or very expensive to get to LA, since you can be there in less than four hours.

Since this is a financial program, you need to know that cruising is one of the best travel deals around, as it’s a very competitive industry. If you’ve been to a one-week all inclusive resort, you know the treatment, service, and amenities you’ll (hopefully) get. A cruise is the same thing, just with the added bonus of also getting to explore a whole lot more of the world than just the 60 or so acres of a resort. If you don’t need a suite, and can avoid the three most popular months of the year, you can cruise like a Norwegian (whatever that means…but it’s their advertising slogan) for under a hundred dollars a day. That’s cheap! You’re getting a four star all inclusive vacation AND getting to see at least three different cities in different countries during the week.

If you’re a morning person, you’ll get even more out of your cruise, as you’ll be watching six gorgeous sunrises almost all by yourself. It’ll be you and less than a couple of hundred of your fellow passengers (out of the 2,400 that the Star accommodates). I’m pretty sure it’s the 11 bars and evening activities that turn most cruise passengers into night people – or at least people that won’t be seeing any sunrises during their vacation, because, well…you know…

Even during the three at-sea days you’ll never get bored. Each day has a wide variety of more than 90 different activities. And that doesn’t even include the most important ones of just vegging, sitting in the sun, or enjoying a relaxing meal… or two… or three in one of the many restaurants. If you do end up on the Sun, you’ll be treated to one of the best food services of any ship. The variety and quality of food is unmatched by any other cruise ship I’ve been on – and that includes a lot bigger and newer ships. Even Belgian Hotel Director Hugo Vanosmael seemed a little (but very pleasantly) surprised to hear that feedback.

If you’ve never been on a cruise before, you need to so some homework. Every ship and every cruise line has a very different personality, which is just as important to know as their itinerary. First time cruisers should deal with a well-experienced travel agent that specializes in cruises. If you’ve been on a cruise before, you can find Norwegian direct at (Do avoid signing up for their newsletter as it’ll trigger marketing calls that are next to impossible to stop.)

And now I need to go: There’s great shopping to do here in Mazatlan and I have a two-hour ‘behind the scenes’ tour of the ship – something the inner nerd in me has wanted to do for over five years!

I’ll share another quick story about my cruise from Los Angeles next week.