Tuesday, April 13, 2010

Wanna Bet

People have a lot of misconceptions about their 401k. They think of it as being their way to get rich and make your money move for you while you are going about your everyday life. With this post I plan to make you think more into the subject.

Most people think of their 401k as another savings account rather than it being a stock. Isn’t it intangible money rather than tangible money? You can’t just go and pull it out without paying a penalty of 15% on it unless you are at the retirement age.

In actuality you are gambling with your money rather than saving it. You are giving your money to someone who you think is going to make you money. Isn’t that the same thing as gambling? Sure sounds like Russian Roulette to me. Stocks are subject to rise and fall depending on how a product sells. For instance, Lets just say that you have stock in Target and it does well for the month. Then your money in that stock goes up for that month. Also vice versa if it tanks for the next month then all of your money is gone. Well let’s just say that each month your stock goes down and that happens until you get 65, then at the ripe old age of 65 you will have nothing to show for your effort. Who says that you will only live to be 80? Some people live to be 100, and I would think that it would be rather hard to live another 20 to 40 years without any money saved up.

I am not telling anyone to not put any money into their 401k. What I am saying is don’t put all of your eggs in one basket. You should only put about 5 to 10 percent of your money into your 401k. You should do what I call “Spreading The Wealth.” By that I mean that you should have your money spread across the table. That encompasses land acquisition, stocks, bonds, real estate, bank cd’s that gain interest the over the years that you have them, business ventures, etc. That is why all of those people lost their life savings with the Enron debacle. They were wishing on a dream. They had their entire livelihood tied into one thing. You should put the majority of your money into savings because that is something that you can feel and see. It is a tangible asset. It is the only for sure money that you can bank on. A bird in the hand is worth two in the bush.

Why do people continue to tell me that by the time I get to be 65 then I will be a millionaire? They are only banking on their 401k, as if it is the way to become a millionaire, so naïve. Why can’t you become a millionaire before then? What is holding you back from that achievement? I plan on being a millionaire way before my retirement age. I think of banking on your 401k money instead of saving as dumb and inconceivable. You are going to mess up your for sure money, trying to get more money, and end up with no money. To tell you the truth, not many of you even know much about stocks and where your money is going anyway. They can show you charts and say a money mutual fund , Roth IRA, and all of that, but in essence it is like they are talking in Hebrew to someone that only knows English. You don’t know all about the true meaning of high risk, and low risk stocks. So therefore, you are paying someone to play with your money, and trusting them to do what’s right with your money. I’m not a trusting person when it comes to my money. I don’t play with my money because it’s too hard to make it. My dad always told me when I was young that the only friends that you’ve got have green backs, white faces, and they don’t fold. He also used to tell me not to trust anyone except your mom and know when to cut the cards with her too. I thought it was funny as a 5 year old, but as I got older, I started to see what he was saying. What he was saying is that when it comes to money, don’t trust anyone, not even your friends. So why would you trust a total stranger to take care of your money?

I know a lot of you are skeptics about what I’m saying. I know a lot of people will try and debate me on it. All I have to say is women lie, men lie, but numbers don’t. Just ask the Enron employees. A lot of people might not see it as gambling, but I have one question to ask, “Wanna Bet?”


~Marks of Wisdom

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