How Can I Afford Something? – Episode 389

This transcript was auto-generated and may contain errors.

[00:02] Hello, partners. On this episode of the podcast, we’re going to talk about how you can afford the payment if you should, and why we’re having the conversation around the word afford. This is like the psychology level of it, and now we’re going to take it to the prosperity level. Sound like a plan, Kim? I love our alliteration with the initial of the word P for prosperity and all things, yes, P related. Exactly. Bad words for podcasting, but hey, it’s a letter of the alphabet. Yes, yes. With affording the payment, that phrase for most people will stick with them from teenage years all the way until they decide to escape saying that. Let’s get into the afford the payment mentality. So well said. Escape from saying it. That’s so accurate. Fun little story to tell,

[01:11] and it’s about my niece, so you’ll help remember that. Before I tell it, I want to just get some basic personal finance information out there that’s so, so critical because the first place that payment comes up is usually in the purchase of a car. Now, this may change as teenagers are not purchasing cars as often because Uber and other things are taking over, but that’s really more just in the big cities. So it’s so important that people understand that when you go to a car dealership and they are focused on said payment, that that is a really expensive mistake that you could make because the car dealerships have real capability to make the payment, whatever it is that you can afford, hence supporting that kind of mentality. And if you’re not aware of the

[02:04] big picture and the full picture and the whole truth around that car transaction, you could really make a mistake that would cost you a lot more money for the car than was necessary because your payment would be low and quote affordable, but it wouldn’t actually be purchasing the car in the most efficient way, or maybe the car dealerships adding interest to the price of the car, and then they’re telling you at zero percent or a myriad of other things that happen when you only pay attention to the quote payment. So not only do we have a psychological mental problem going on, we have a personal finance problem going on because you’re just paying attention to one tiny aspect of a transaction that has a whole bunch of additional moving parts to it.

[02:49] So true. So I think most people are lost in that. Tell us what happened with your niece and how you walked her through. Yes. So my niece is over on Saturday and Sunday helping me trim the grapes and our grapes are up on an arbor. So she’s like 20 feet in the air. Of course, I’m underneath on a ladder. I’m working from the bottom. She’s working from the top and she’s not a super talkative person, but we’re just chatting a little bit. She’s a freshman in college and I’m so thankful for the help. You know, my kids aren’t around anymore. I have to have somebody to get the work done with. So she says something about, well, I can’t really afford it. And so I, in all my wisdom, shut my mouth for a few moments and just kind of let that sentence hang there in the air.

[03:42] And then I said, Hey, you know, there’s something that I learned and Robert Kiyosaki is the one that helped me learn this the best. I think I learned it in a lot of different ways, but it was to switch this sentence around from, I can’t afford it to how can I afford it? Or how could I afford it? Or what could I do so that I would be able to afford it? Now, I will be frank, sometimes the answer is no, you shouldn’t afford it or no, you can’t, or you is you really shouldn’t be, I guess is really the best word, maybe because it doesn’t match with your values or it’s an inappropriate step for where you are or what have you. Nevertheless, it is such a valuable turn of phrase to learn because if you stay stuck

[04:39] in, I can’t afford it, I can’t afford the payment, then you are going to be limited financially and mentally until you escape from said stuckness. And so it’s so important to as early as possible, learn that shift in language, that turn of phrase. And even if it takes you another three or four years to really figure out all of the personal finance areas around it, it’s such an important critical first step to take that shifting of the language from I can’t afford it to how could I afford it? With the conversation you had with your niece and then your shifting of that thinking, how long does it take a person until they can actually have the lights turn on and they’re like, Oh, I get it. You know, it’s interesting because when I shared that shift with her, she was quiet for a

[05:38] minute and then she said, Hmm, I think I get that. So that was momentary. Now, how is that going to show up in her life financially? I don’t know. That may take longer. And she may have to learn that lesson again, I guarantee I had to learn it numerous times before I really, really, really learned it. In fact, as we’ve talked on this podcast, I don’t think whatever stops learning that because as we’ve said, cashflow issues don’t go away, they just get bigger zeros on them. So I can’t afford it shifts from a $300 car payment to a $3,000 mortgage payment to a $30,000 investment in a commercial building to, you know, whatever, what’s 30,000, the next is $300,000 shop project that you’re going to take on.

[06:23] And then the next is a $3 million, whatever, whatever. And for some people, it’s the next is a $3 billion, whatever, whatever, you know, the zeros are just zeros. So the answer to your question is it’s something that just has to continually be worked on. And the levels are infinite. How do we do we take this? And we start thinking about our finances in a way where we can look at the cash flows that we want to create. And we want to look at the assets that we’re creating and say, how can I afford to create this cash flow? How can I afford to create these investments? Yeah, it’s the question that starts the ball rolling. Because if you start with the question, I can’t afford it. The ball is stuck. It’s dead. It’s not going anywhere. And so again,

[07:14] it doesn’t matter how many zeros you have on your question. What matters first is that shift in language in the question. And then what matters second is what you’re doing with it. And it’s interesting, I used the 300,000 example, just because that happens to be a personal one that Todd and I are working on right now. And he said, you know, in light of today’s inflationary environment that we’re pretty sure we’re going to be heading into, I wonder if it is better to shift the use of money from compiling monetary assets to compiling something that creates more cash flow. In fact, back to Robert Kiyosaki, this is a story that he’s told a million times. He wanted to buy a Porsche as a vehicle. And you know,

[08:17] whether you like him or don’t or like Porsches or don’t is irrelevant. But instead of buying the actual vehicle, he bought an apartment building that kicked off the cash flow that then paid the note on the vehicle. And that’s a great example of just expanding out that thinking of, well, how could I afford it? I mean, he could have paid cash for the car, he could have made the payments. That wasn’t the issue at all. It was just a shift in his language and then in his thoughts and then in his action, probably the other way around, a shift in his thoughts and then in his language, and then in his action, and then in the results, because now he got both, right? And we’ve talked about how Todd and I really

[08:56] like to live in the house of both. He got the car and the apartment building, which will kick off that cash flow long after that car is gone. So true, so true. He really figured out how to maximize that. For your business and the things that you do, you’re often helping families. They may feel like they can afford it, or it’s just close enough with being with their financial plans or whatever that is. And I’m using the word plan because that’s what the language people use. I want to be mindful of that. But what it is, most people, they’re just learning. They’re taking those steps. The question is this, how often is it that you talk with someone that’s, let’s say a life insurance plan and their significant other passes

[09:46] away? Do they feel like, because they set something up with you, that it was the right thing for them and that they should have had more, or are they happy that they had enough coverage? What does that conversation look like usually? That’s an interesting question. I have been helping people with their personal finances for almost 30 years, and I can count on one hand the amount of death claims that I have dealt with, which is actually shocking because 30 years is a long time. That’s a lot of people to help. And I just have not had to deal with that many deaths. And I’m grateful. And I do have a fairly young clientele, so that’s helpful. I have a friend in the business that has processed over 50 death claims, five zero, and he’s not that much older than I am.

[10:37] So it is an interesting experience. And for whatever reason, it’s funny, he laughs. He says, maybe people shouldn’t be clients of mine, and they should be clients of yours. But I still can answer the question because there is something that we teach in the world of life insurance, and it’s called human life value. And it’s something that we learned early on. And then frankly, I got away from, mistakenly so, like bad on my part. And then more recently I’ve gotten back to it. And that’s educating people on the concept of human life value, which is essentially the maximum amount of life insurance that any company or companies would give you. And it’s normally a function of income. It can also be measured via net worth. So just real quick, the rule of thumb is

[11:26] 15 to about 30 times income or one times, it’s actually one times gross worth, not net worth. So those are the human life value maximums. Now, if somebody has handled their life insurance properly, they have, hear me clearly, a combination of policies, some whole life, some term insurance that are approximating that human life value number. Maybe they didn’t go to the full maximum, but they’re somewhere in that space. Because if you look out on the web or in the marketplace of life insurance, people do not have nearly, nearly, nearly enough. And so I would like to say that all of our clients are aware of the human life value amount and they have somewhere in the ballpark of it. Like I said, it’s not an accurate

[12:13] statement because I did a poor job there in the middle of my career of educating people on this subject. And term insurance is such a piece of cake to grab. Like just get on, and there’s new companies that are cool, like Lemonade.com or Betterment or something like that where you can just grab some cheap term insurance and fill your human life value piece of cake. And when that happens, then Spencer, those families have enough. I asked that question for a specific reason. And here’s why. It’s because I had a conversation last week with a friend of mine who owns several large apartment buildings. And he’s getting to a stage in life where he’s putting a few of them up for sale. And we started talking about when he purchased them. And he was like on that line,

[13:04] can I afford to do this? And he decided that he could. And he purchased them years ago. And then we think about these conversations now and the handful of clients that have passed away. And I’m sure the families were grateful that they were able to set in place and afford those payments for their life insurance and for their future. And it just helps us think. And I was trying to tie all of this in together and really realize that when it comes to the wealth that we want to create in the cash flow, right now, the present is the time when we can afford it. We just have to change how we think. And we need to be doing these things at the moment right now, not putting that stuff off. So true. And it’s such an easy thing to put off because nobody wants to deal with debt

[13:54] or death. And debt is a way that we build wealth. And death is a way that our plans to use that term get sidetracked or derailed, if you will. And it’s wonderful to be able to cross the concern of death off your list. Put some term insurance in place and cross it off your list. Now, should you come back and take a look at that more thoroughly, understand whole life, learn how it might fit in? Yes, absolutely. But in the meantime, in a matter of days and the stroke of a pen, you can absolutely, 100% sure, assure your family is going to be taken care of. Well said. Well, listeners, hopefully this episode is one to help you understand that right now is the time to look at the thinking, the thoughts that you have,

[14:51] and that’s going to turn into the language. And then that language turns into those actions. And the perfect example, if you’re wanting that Porsche, well, just modify and live in that house of both, get them both. And if you’re looking for your family to protect them, well, now is the time to do it. We don’t know what the future has, but we do know what we have right now. So, Kim, wonderful, wonderful episode. And listeners, go to send an email to hello at partnersforprosperity.com with your questions. Any final statements before we part ways? I think we covered it well. Excellent. Well, thank you, listeners. We’ll put that email address in. Hello at partnersforprosperity.com for your questions. Thank you for listening to the Prosperity Podcast. To take control of your

[15:40] money and have it work for you, visit us at partnersforprosperity.com. If you liked this episode, make sure you subscribe and leave a review.