I was in a meeting listening to a person speak about his local financial counseling service. His idea was that they would provide financial education. In addition to education, the company’s goal is to potentially fund a small grant, up to a few thousand dollars, when and if their organization is able to find organizations or partners to assist financially.

In addition to financial education, currently the program provides free tax return services.

As I sat there listening to his sales pitch on what their company can do and what we could do for them, my mind wondered on several topics.

First, who funds the “free” tax returns? If their organization is made up of private donors, no problem; however, if taxpayer money provides services, local business suffers.

Local bookkeeping and accounting services can’t compete against free services. As far as a “double whammy”, business pay taxes on their income and assets to fund these “free services”. In summary, businesses pay taxes which go towards providing free services and then cuts out their own business.

Next, why do people need financial counseling? For one thing, our educational system must not be working or working properly. People can go to school for free. Once again, free is not really free for everyone. Now there are free counseling services for people who did not obtain a decent free education. Hmmm.

Finally, what really got me was the presenter’s attitude and lack of knowledge toward financial education. His attitude was an air of greatness. However, his information was common.

What I mean by common is the subject was on net worth, which is very important, but the manner in which it was described was lacking in details.

The idea behind building net worth, in his mind, was to get out of debt. I don’t have a problem with getting out of debt, but being debt free is not necessarily increasing net worth. I’ll explain in just a minute, but first the typical advice this service was to offer was “save” money, not “make” money, which is a different attitude.

Every radio personality I hear talks about saving money, so why is this free service any better? It’s not.

Now, when I mention net worth, if I have $10,000 and owe nothing, my net worth is $10,000. However, if I have $10,000 and borrow $10,000 more, I now have $20,000 with $10,000 in liabilities thus creating the same net worth. Borrowing the $10,000 may be put to use to create more income which can be greater than the amount of interest paid.

I didn’t mention this new program wanted to focus more on net worth than income, did I? This, to me is another huge mistake in financial education. How?

With income, I can create net worth. With net worth, I may not be able to create income.

Without income or enough income, my net worth will eventually decline. Therefore, as important as net worth is, using net worth to create income or simply increasing income is much more important.

Bills will still come each month whether people have a loan or are debt free. However, little income may make people borrow, such as on credit cards, to pay bills; which starts the whole process of financial woes all over again.

The bottom line, since we are talking about the bottom line regarding net worth, is to determine if financial education teaches us something we don’t already know, or if what we are told is simply the same rehashed stuff we commonly hear.

Whether a bank is privately held or nationalized, loans still work the same way.

A 30 year fixed is a 30 year fixed, and so are 15 year fixed rate mortgages as well. However, there is more to it than what is the rate, what is the payment. You can read what I mean in Barking With The Big Dogs. I’ve posted several chapters.

What may be different in the private sector banking versus socialized banking are limited loans types, such as an interest only.

I’m not suggesting that everyone get an interest only mortgage, but it is not a stupid loan as some would say. It’s actually a very good loan. You just have to see beyond the hype, or negative hype.

Limiting products is good for the bank, not the borrower.

With all of the problems in the financial world today, the pay option mortgage is said to be the problem that started it all. I would disagree.

The real problem is when the government passes laws and regulations, such as the Community Reinvestment Act of 1977 under Jimmy Carter, basically forcing banks to lend to risky borrowers. Also, lack of education in our schools.

I was watching a person talk about these pay option mortgages on his website and he made this point over and over about the cause of the meltdown which started the financial crisis a couple of years ago.

He used lots of graphs and charts that were overwhelming and compelling. However, on his very own site, an article (that he put up) went on to say that these loans were very good for the borrower and lender for the last 20 years!

It should be clear that the loan is not the problem, but rather the problems are much deeper.

It’s not a particular loan, but the action of people and businesses that create the problem.

I’m not sure who actually said it, but the quote was something like this, ” it takes more knowledge to borrow than to save.” Possibly Robert Kiyosaki.

Maybe having more knowledge is tough and is why the “get out debt” or “all debt is bad” people are so popular…it’s easy for everyone to talk about, and easy for some people to sell – such as a talk show host. If a person has a degree in finance, why would that person not teach what he knows versus saying debt is dumb? The answer, debt is dumb is easy to sell the masses.

In actuality, borrowing is the simple side to finance and very easy to understand, it’s just made very complicated.

Not all people should borrow money. Not all loans are meant for all people. But for those willing to learn how the banking game is played, they can come out winners of tomorrow.

Therefore, the real key to success and building wealth is knowledge.