If you’ve got questions about building wealth and keeping your money in order, Paul D. Jones is the man to ask.
As a certified financial education instructor, Jones has written best-selling books (I Quit (Being Broke), Schedule for Success, Who Told You…You Were Broke?) and released popular DVDs on vital money management tips for both adults and teens. With his knowledge on financial dealings in the entertainment field, he also provides advice on managing sudden wealth in the music industry. Additionally, Jones holds seminars around the country titled Financial Literacy University in which he lays out his expertise to help you handle your bucks.
Jones gave us his take on the recent estate controversy surrounding deceased musician Prince, as well as excellent advice on building wealth, why money management is important, and teaching our children how to maintain good credit.
Why didn’t Prince have a will?
Sometimes, you’re so focused on the direction you’re going, that it doesn’t hit sometimes that the end is coming. That’s why people need sound financial counsel. Thinking about everyday people — we wake up and say “I gotta get on my grind.” But no one actually considered a car accident happening, or a heart attack, because you’re so focused on life. But we have to start thinking about life after we’re gone. We shouldn’t have to get a GoFundMe account for something that we know is going to happen one day.
What can we learn from the ugly battle over Prince’s estate?
1. Get life insurance. Not just for burial, but to pay off all your existing debt. So if you own a home and you have $90,000 left in that home mortgage, your life insurance will cover that, and the estate — your home — goes to your family.
2. Have a will. When you have that will in order, then everything is set.
3. Already have your burial taken care of. This is for those who are mature and older. Some people, when they go, the plot is already taken care of. Don’t leave this for someone else to deal with. Nobody wants to go through that while they’re mourning. Think about that — you have to go handle business when you might be in a mind-state where you may be at your lowest decision-making. And funeral directors are sales people, too.
4. Have residual income. Hopefully when a person’s working, they’re thinking about doing something where they’re the owner and they have some form of residual income, so they can live a Sam Walton or a Kennedy lifestyle where when the parents are gone, the estate still has money coming in. It doesn’t have to be super big money. That’s how I model my life. I love my wife, my daughter, and my son, so I’m going to prove it. Even at my grave when I’m gone, they’ll still receive a check, and they’ll say “Man, my dad really loved me.”
What are five tips to prepare teens to have great credit?
1. As long as you (the parent) has a great credit history, then have a joint credit card with your teen to establish history for them. Add your teen as an authorized user on one of your good standing credit cards, and do not give them a physical card to use. (Your payments will count as positive monthly reporting for them.)
2. Teach them about the costs of interest rates and how it compounds and grows.
3. As soon as they are eligible, have them establish three open and active trade lines.
4. Teach them to always make on-time payments (late fees, grace periods, introductory rates, and promotional periods.)
5. Teach them to never max out their available credit usage! Just because credit is available, they still should only keep their credit card usage to an average monthly balance of less than 30 percent. Yet, having a zero balance is optimal.
What are three ways to build your net worth?
The main key to building a net worth is to first understand what net worth is. This means you and your kids must have a clear understanding of liabilities (debt and things that take away from you) and assets (things that increase in value and add to you). When you subtract your liabilities from your assets, the difference is then your net worth. Therefore, in order to have a positive net worth, you must own assets.
1. Save at least 20 percent of every dollar that you receive. This forms great financial managing habits. If your kid gets $10 as a gift for their birthday, put $2 in a growth fund or money market account. This money is not meant to save and then later spend at the mall for fun. This money is for future investments that will increase their assets even further.
2. Have a life insurance policy/policies left to them. One of the best ways of creating a positive net worth is and should be from the parents (mom, dad and grandparents). As long as you teach your kids good, sound financial literacy, they in turn will make great decisions with any influx from an inheritance.
3. Have an owner’s mentality. Simply put, you will want to reduce who and what you owe and increase what you own. This will cause you to always be mindful of your income and your expenses. A great rule to understand is that debt keeps you from having a net worth, and owning assets keeps you out of debt.