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Dumb Debt is costly

The quickest way to a financial mess is to borrow for stuff that loses it’s value. You not only pay more for such items but the item is worth less than when you acquired it because it is no longer new once you take possession of it and therefore you will receive less than what you paid for it. This is called “Dumb Debt.”

Avoiding Dumb Debt at all costs

Written by R. A. Stewart

Everyone has seen the television commercials with slogans such as “Buy now pay later,” and the like.

You do not need to save your money to buy that new car, a wide screen TV, that latest smartphone, or a holiday in a tropical island when you can have all these things now. 

Instant gratification is a very expensive habit; one that will lead you to a life of financial challenges.

There have been misleading statements in some of the advertising; one I saw read, “Helping you to get ahead.”

That kind of slogan suggests that the finance company is doing borrowers a favour which is far from the truth.

Loan sharks and finance companies thrive on financial ignorance; a person with even a basic grounding in personal finance will avoid loan sharks as if they had tested positive for covid.

One should ascertain whether the item is a want or a need before signing on the dotted line. 

Many people go into debt because they want to live a champagne lifestyle on a lemonade budget just to impress their friends. They are not happy with living modestly. 

An expensive lifestyle is costly in the long run. 

The parable of the prodigal son is a perfect example. Here was a young man who blew his inheritance on wasteful living and ended up living in poverty due to his lifestyle.

He not only blew his inheritance but was most likely living on credit.

It is borrowing that really kills off a person’s chances of financial success. That interest rate is dead money; it is the cost of borrowing.

Paying interest on stuff you have bought on credit adds to the cost of it and the value of a lot of stuff bought on credit is worth less as soon as you take possession of it.

“If you don’t have the money you don’t buy it,” is a simple philosophy to adopt.

What you think you cannot live without is something others have learned to live without. 

It all comes down to the choices we make.

There are some circumstances when it may be wise to borrow such as when the value of the item you are purchasing is going to make it financially worthwhile such as a student loan. This may or may not mean you will get a good paying job but you must be absolutely clear that it is what you want to do otherwise the course will be a total waste of money.

ABOUT THIS ARTICLE

Feel free to use this article as content for your website, blog, or ebook. Check out my other articles on www.robertastewart.com

Disclaimer: The information in this article may not be applicable to your personal circumstances therefore discretion is advised. I may receive a small commission if you make a purchase from any of the links you click on.

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From Dreams to Dollars: How to Set Effective Money Goals

“From Dreams to Dollars: How to Set Effective Money Goals”

Written by R. A. Stewart

Having a goal for your money is a must if you want to get ahead otherwise you will just simply fritter away your money on useless stuff which does not add value to your life.

Your money fits three descriptions; they are:

Short-term money (12 months or less)

Medium-term money (1-5 years)

Long-term money (6 years+)

Short term money is money you need for the short term. This is money used for emergencies, dental  costs, and every day expenses. It is a good idea to keep a separate account for emergencies. An investment in conservative managed funds if you have easy access to the money when you need it. A separate savings account for this is suitable.

Medium-term money is money needed within 5 years. This could be savings for a car or an overseas  holiday. 

Long-term money is money needed in the long-term. This is money for your retirement or savings for a mortgage.

Where should you invest your money?

Short-term money is best invested in an ordinary savings account where your money is on call, however, an emergency fund could be invested in a conservative managed fund providing you have easy access to your money if and when you need it.

Medium-term money is best invested in a balanced managed fund.

Long-term money is best invested in growth funds.

There is no hard and fast rule as to where you should invest your money; it all depends on your risk profile and whether you have the mental fortitude to ride out the lows of the share market.

The benefits of being a saver and an investor cannot be underestimated. A saver will live within their means and wait until they have saved enough money before making a car purchase.

A spender will have nothing to show for their labours and borrows money for things they need. There is a cost to this and that is interest which means that the spender pays more for stuff they have bought with borrowed money.

Discretionary spending money is a different category of money. It is money which you are free to spend on anything you like. Some investors like to use this to increase their financial portfolio or even to try out some speculative investments such as Bitcoin and other cryptocurrency. 

People who have any kind of debt do not have any discretionary spending money until that debt is paid. Paying off debts is the responsible thing to do.

It is imperative that you manage your money with the future in mind because situations will arise when you will need a large amount of money for things which your next paycheck on its own won’t cover. Ask yourself this question, “What can I do today that my future self will thank me for?”

It is also important to continually gain financial literacy by reading books about financial management and wealth creation, but the best way to gain financial literacy is by investing in the share market. There are several share market investing platforms on the internet which enable ordinary people to drip feed money into the share market or in managed (mutual) funds. 

Don’t be afraid of making mistakes because as the saying goes, “He who never made a mistake never made anything.” Mistakes are just part of the learning process.

About this article

The opinions expressed in this article are of the writer’s own opinion and may not be applicable to your personal circumstances, therefore discretion is advised.

You may use this article as content for your blog, website, or ebook.

Read my other articles on www.robertastewart.com

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How to write Specific Goals

How to write Specific Goals

Written by R. A. Stewart

A specific goal is a goal which is specific in details. An example of a specific goal is “Lose 5 kilos by  1st February.”

You have achieved your goal or failed to achieve it.

A vague goal which is not specific is, “Lose weight,” because there is no way of knowing when you have achieved the goal.

Sure, you may lose weight, but there is more satisfaction in knowing that you have achieved a target.

Imagine two footballers who have set their own goal, one a goal to score more goals and the other to score xx number of goals by the time the season is over. Which footballer will be more motivated to go after his goal?

There are several parts of setting and achieving specific goals. They are:

  1. Set specific Goals

Setting specific goals is similar to catching a bus. In order to get to your desired destination you have to tell the driver where you are travelling to. If you just told the driver you want to go somewhere nice then the driver cannot sell you a ticket unless you are specific. 

  1. Set smaller bite-sized Goals

You may not be able to save the money you need for a holiday from just one payday but you can do it by saving a small amount per payday. Your Specific goal is to save x amount of money for your holiday. Your sub goal is to save x amount per week or fortnightly.

3-Describe the goal in detail

Give a description of what you want. If it is a new car you are saving for then specify what features you want in the vehicle. If any vehicle that is adequate for your requirements is what you want then that is fine, so long as it is what you want.

4-Use mental pictures of your desired outcome.

Imagine yourself achieving your goal. Gather pictures from magazines of the desired outcome. 

5-Have mentors

If you have sporting ambitions then follow the best players of your chosen sport. It is certain that those players who you look up to had players from the previous generation who they themselves looked up to.

About this article: You may use this article as content for your blog/website or ebook. 

www.robertastewart.com

 

 

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SMART GOALS lead to better outcomes

Setting SMART Goals

Written by R. A. Stewart

You may have heard of S.M.A.R.T goals. If not, here is what setting SMART goals really mean.

Specific

Measurable

Achievable

Relevant

Timed

Here is an explanation of each part of S.M.A.R.T goals.

Specific

A goal needs to be specific otherwise it has no chance of succeeding. Examples of goals which are vague and not specific are:

Lose weight

Save money

Go on holiday

Get fit

The reason why they are vague goals is that there is no way of knowing when you have achieved your goal. If your goal is to lose weight then how much weight do you want to lose? If you want to save money then what are you saving money for and how much money do you want to save?

Measurable

A measurable goal is a goal that you specify what you want top achieve. If you want to get fit and you have never done any running previously then you might set a goal such as “I want to jog one mile without stopping for a rest.” This is measurable. You know whether you have achieved your goal or not.

Achievable

The goal must be achievable through your own efforts. A goal such as “To win the lottery” is not achievable through your own efforts because you cannot do anything to influence the outcome. A goal such as “To eliminate one bad food from my diet every week” is achievable through your own efforts because your choices will influence the outcome.

Relevant

A relevant goal is one which is relevant to your own personal circumstances and skill set. A relevant goal is not one that is imposed on you by well meaning friends and associates who say, “You should do this and you should do that.” Think for yourself and make your own choices. It is a good idea to keep your goals to yourself unless of course they affect your family. 

Timed

A timed goal has a deadline attached to it. For example you may have set a goal, “To jog a mile without stopping for a rest.” This goal is not timed, but if it is December 31 then you may set a goal, “To jog a mile without stopping for a rest by February 1.”

Your next task is deciding how you are going to achieve your goal. On day one you may decide that you will jog for 400 metres, walk 400 metres, jog 400 metres, and walk 400 metres. 

In the second week you could increase the distances you jog without stopping and reduce the walking distance.

By breaking down your goal into simple steps you can achieve your S.M.A.R.T goal.

All the best and a happy new year.

About this article

You may use this article as content for your blog, website, or ebook. 

Www.robertastewart.com

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How a Lack of Vision can lead to Poverty

 

Written by R. A. Stewart

Without Vision People Perish-Proverbs 29:18

Achieving financial success requires vision. From this I do not mean having a business idea that makes you a millionaire, but rather being prepared for life’s big events. There are a number of things which crop up during a person’s lifetime. Here are some of them.

Buying a car

Flatting

Getting married

Having children

Upskilling/Further education

Starting a business

Illness/accidents

Retiring

Starting a business

The person with vision will be prepared for all of these by saving a portion of their payment every week and have this money transferred into a separate account.

A person with no vision does not look beyond the next payday. They will spend everything they earn and if they receive a pay rise, their spending will go up accordingly.

The result of all of this is that whenever some emergency arises such as a car breakdown, a dental or medical emergency, or their child needing spectacles they borrow the money; the cost to this is interest, which means that the person with no vision is paying more than if they are paying it with cash they have available in their account.

Many people want what others have got and will even go into debt to get it. Using their credit card they go into debt to buy stuff they want but don’t need just to impress others.

There are consequences to all of this!

Debt is the most obvious one, but looking long term, a lack of financial discipline will also result in very little to fall back on later on in life.

Tomorrow always comes so you had better plan for it and not ignore it.

What if you have retired and are at the so-called golden years of your life?

Having a vision is still applicable to you.

Writing a will and making a plan for your assets requires vision. It is also the responsible thing to do. It is irresponsible to leave your descendants up the creek on your passing if you have the means to take care of them. This applies to those who have dependent children.

Ask yourself this question, “What actions can I take that my future self will thank me for?”

Life is all about making the right choices. You may not have a lot of money but you do have choices, something which no one can or should be making for you, unless you are incarcerated of course.

It is important to set new goals and not to allow the grass to grow under your feet. This may be difficult for those with financial commitments but you do have the choice of what to do with your spare time. You can either waste it or do something meaningful with it. It is all up to you.

“People with lack of vision for the future usually return to the past”-Brian Houston, Australian evangelist

About this article: The contents of this article is of the opinion of the writer and may not be applicable to your personal circumstances therefore, discretion is advised. You may use this article as content for your website/blog, or ebook.

Read my other articles on www.robertastewart.com

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7 New Year’s Resolutions You’re Bound to Break (and Why They Fail)

7 New Year’s Resolutions which are Destined to Fail

Written by R. A. Stewart

  1. Lose weight

A New Year’s resolution to lose weight is destined to fail because it is vague and not specific. It does not say how you plan to lose weight and how much weight you are going to lose. A better goal will be “I am going to Give up going to fast food outlets” or “I am going to join the local running club.” If you are going to give something up then it may be an idea to have some alternative healthy options in mind. Focus on living an active and healthy lifestyle and the weight issue should take care of itself.

  1. Save Money

A New Year’s resolution to “save money” is just as vague as a goal to lose weight. There is no power to it. If you are just frittering away your discretionary spending money and have little or nothing to show from your labours then something has to change in order for your finances to change. You are better advised to decide on what you are saving for and take the steps needed to get there. Joining kiwisaver if you are not already enrolled has to be your number one priority. There are share market platforms such as Sharesies, Hatch, and Kernel Wealth which are set up to enable ordinary people to invest in the share market.

  1. Get Fit

A New Year’s resolution to “Get Fit,” is another one which is destined to fail because there it is too vague and not specific enough. How you are going to get fit is not answered in a “Get Fit” resolution. If you have a “Get fit” resolution then what you happen is that after a couple of days of running around the block or a few games of backyard cricket old habits will take over and your New Year’s resolution will become a distant memory.

  1. Learn to Swim

“Learn to swim” as a New Year’s resolution is not specific enough. It would be better to have a goal of, “To take lessons at the local pool once a week,” or to resolve to practice one new swimming skill every week. It is consistency which drives results. 

  1. Learn to Drive

Another example of a vague goal. It is better to have a New Year’s resolution of “I intend to sign up for driving lessons on New Year’s Day or whenever the Driving School is open for business after the holiday break.

  1. Get a Job

Deciding to “Get a Job” as your New Year’s resolution means that just taking any job which comes along will fulfil your goal. If that is what you want; that is fine but if you have something specific in mind then specify it otherwise you will end up with anything. It is worth keeping in mind that many people will work at something they do not like until something more suitable comes along.

  1. Learn a new Language

This is another example of a goal which is not specific enough. There are dozens of languages you could learn so which one are you going to tackle. It will be better if you set a goal of “I will learn one new French/Chinese/Italian or whatever word per day. Such a goal is specific and tells you what you need to do in order to achieve your goal.

 

Your New Year’s resolution needs to be specific and have an action in it otherwise it will be just a wish. It is your desire which will enable your New Year’s resolutions to become the permanent change you are seeking. Just take one day at a time and see what happens.

www.robertastewart.com

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The Futility of playing the lottery

The Futility of playing the lottery

Written by R. A. Stewart

INTRODUCTION

Is it possible to use a system to beat the odds and live a life of luxury? The lottery or lotto as it is called in New Zealand first began in 1987 and I have never heard of any lotto winner claiming to have found a system to beat the odds. Most have won using lucky dips or lucky numbers, others have just selected their own numbers. 

The odds of winning the lottery

Lotto is played by millions of people worldwide in the hope of one day becoming lucky but for the vast majority of people that lucky lotto day never arrives. The huge odds against winning lotto ensures that millions contribute to the pool but only a few hit the jackpot.

In New Zealand a lotto player is required to select six drawn numbers out of forty. It is called division one. The odds of any one set of six numbers being the successful six are in in three million+

Power ball is when you have selected division one + the power ball number which is 1-10. The odds of winning a power ball are so remote that one is more likely to be struck by lightning. It is not surprising that the power ball often jackpots to huge amounts.

Some mathematicians have described the lottery as a tax on stupidity.

At least 66% of New Zealanders play lotto at least once a year. I do not know how many of them play every single week.

People who would otherwise consider themselves intelligent fall for the enticing advertising in order to participate in a gamble that is unlikely to succeed. Rationality simply goes out of the window.

A song and dance is made about the fact that 20% of all lotto sales is donated to various charities.

What I have to say about that is the lottery sucks out more money from communities than it returns. 

If one was simply donating to charities directly the person making the donation is able to claim 33% back in tax. (New Zealand). The advantage of donating to charity directly is one can choose who to give money to.

Lotto players will completely ignore all of the mathematical statistics with the argument, “You have got to be in to win.”

Problem with that kind of thinking is that few people ever do and often when they do win something, the payoff is usually one of the smaller prizes which is often spent on buying more lottery tickets or quickly frittered away in the blink of an eye.

ANNUAL LOTTERY SPENDING

If a lotto player spends $10 per week on the lottery that equates to $520 per annum. Think of what else that could have been invested in or put to better use.

There are so many share market trading platforms around today that the $10-$20 per week spent on lottery tickets could easily be used to start an investment portfolio.

Do the mathematics; $10 per week equates to $520 per annum. Over a lifetime this all adds up to a fortune.

LOTTERY SYSTEMS

Many people will swear by systems; whatever you are told the statistical odds of any set of six numbers being drawn are the same, however, if you choose numbers or a combination of numbers that are not chosen by other players then you will share the prize pool with fewer players if it is your lucky day. This is the type of strategy used by some system promoters.

Do not be deceived into thinking that any system will increase your chances of winning. This is not true!

As far as finances are concerned, I am saying that the money spent on lottery tickets is better directed at investments where you at least have something to show for it such as your retirement fund. 

It should be kept in mind that the lotto millionaires are created only because millions of lotto players have lost. You don’t have to be one of them!

ABOUT THIS ARTICLE

You are welcome to use this article to post on your site, as content for your ebook, or share it on social media. Visit my site www.robertastewart.com for other articles on finance.

www.robertastewart.com

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If you don’t have the money…

If you don’t have the money…

you don’t buy it!

Written by R. A. Stewart

Borrowing money to buy things is spending money you have not earned yet and there is a price to pay for that and it is called interest.

The worst type of borrowing is consumer debt. This is stuff you have bought with borrowed money. Consumer debt is purchasing things such as household appliances, motor vehicles, and the likes. Going on holiday with borrowed money is consumer debt. It is also irresponsible.  

As adults we must discipline ourselves to put off purchasing items which are pleasing to the eye but will leave us in debt if we break the budget in order to acquire whatever that may be. 

I can say that I have never owned a credit card in my life. Who needs one?

If someone cannot make ends meet on their income without a credit card then they need to take a stocktake because the interest payable on credit will compound over a period of time. All that interest which has to be paid on top of the borrowed money is money which could have been put to better use.

What seems to be at the heart of a lot of people’s financial problems is their lifestyle. I mean if you are going to get involved in a relationship then you had better make sure your income level is sufficient enough to pay for it all and the same applies to having kids and it is no good blaming politicians for this child poverty stuff if your own choices got you in a financial mess.

So you are in a spot of bother, now what?

There are three options.

1 Increase your income; easier said than done if you have other commitments but no one knows your personal circumstances better than you so there may be a way to work around this.

2 Decrease your spending; it is time to find ways to cut back by reducing your wants and minimising the amount you spend on your needs. 

3 Sell stuff that you no longer need. There are auction sites where you can sell your stuff. Make use of these.

There are some golden rules to follow when deciding whether to borrow for things like appliances and other items which may be consumer debt but are something which you need or will make your life considerably easier.

Ask yourself these questions:

1 Can you borrow the item? 

This all depends on how often you are going to use it. If you need a mountain bike to get to work  every day then you need to actually own one rather than borrow it but if it is a concrete mixer to do a one off job then borrowing is the way to go.

2 Can I purchase the item second hand?

You may not have the money to purchase something brand new but still can afford to buy it at a second hand store. This is a good option and you are still covered by the consumers guarantee act (In New Zealand)

3 Can I wait until I have saved the money for the item?

This option will definitely help you become a better money manager and also help develop the skill of prioritizing your spending.

4 Do I really need the item?

This all depends on your personal circumstances, tastes and preferences. It all boils down to whether you are prepared to sacrifice something now in order to save money.

Always keep in mind that saving something from your pay every week and keeping it in a rainy day account is a good habit to get into because it will enable you to pay cash for things which need fixing. It is also a good habit to invest some of your money for the long term such as in mutual funds. This is in addition to your government’s retirement scheme (Kiwisaver in New Zealand).

It is a bad habit to just spend everything in your pay packet every week so that by next week’s pay day you are broke.

www.robertastewart.com

 

Start investing on a shoestring

Sharesies makes it possible for anyone to get into buying and selling shares. It is an online share market platform where you have the option of purchasing shares in individual companies or in various funds (managed/mutual funds). You can even start with $5. This is a no brainer because it gives investors young and not so young the chance to improve their financial literacy. There is certainly no substitute for experience when it comes to learning and this is applicable to everything else, not just investing.

Join sharesies here: https://sharesies.nz/r/377DFM

 

Note: This article is of the opinion of the writer and may not be applicable to your personal circumstances. I may receive a small commission if you sign up for sharesies.

#share market #borrowing money #needsandwants #savemoney #howtosavemoney #deadmoney

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The Saving Habit

Make Saving a Habit

If there is one financial habit which will get you ahead it is this one…

Saving!

Why you must develop the savings habit

It is not how big your pay packet is, what counts is what you do with the money. Irrespective of your financial situation, it makes economic sense to save a portion of your income regularly. the mains reasons for saving are;

1-For unexpected emergencies such as car expenses, the washing machine breaking down, or dental bills.

2-To put aside money for your retirement.

3-Holidays or wedding expenses.

4-study expenses

5-Home repairs.

6-To save for a deposit for a home.

7-Saving for a car

8-Saving for a business

Consequences of not having any savings

If you do not have any savings of your own then if an unexpected emergency crops up such as the car breaking down then you may have to borrow the money to pay for repairs and every time you borrow money, the interest you pay means that you are always paying a higher price for goods and services bought with borrowed money than someone who always pays in cash.

Saving money requires you to live within your means and to live modestly. Good savers will not purchase items brand new when they can find the same item in a charity shop at a fraction of the price. 

Your choices will make or break you

Every time you make a choice there will be consequences, good or bad. The key is to make enough good choices to succeed and to minimize your bad choices. It is important to keep your eyes and ears open to what is happening around you and listen to wise people who have succeeded in their chosen field. Having said that, you must row your own boat and discover your own calling in life.

Joining your country’s retirement scheme.

Many countries around the world have their own retirement savings scheme where a portion of your gross income is invested in that country’s retirement fund and your money cannot be withdrawn until you reach retirement age which varies between different countries. (In New Zealand it is currently 65)

Accumulate investments.

It is a good idea to not only have a retirement fund but invest in various areas to increase your financial knowledge. The share market, managed trusts, and fixed term investments are all well worth getting into.

Don’t place all your eggs in one basket

Don’t under any circumstances place all of your eggs in one basket. There is no guarantee that a particular company will not go under irrespective of how solid it appears. After all, if a company is in trouble, its directors are hardly going to shout it out from the rooftops are they? During the economic downturn around 2008, many people lost a lot of money in failed finance companies and the tragedy was that many of these folk invested their entire life savings into the one company. In other words they placed all of their eggs into one basket. The number one rule is to spread your risk. Divide your money among several different companies. That way you stand a far better chance of protecting your financial assets.

About this article

You may use this article as content for your blog/website or ebook. This article is of the writer’s own experience and may not be applicable to your personal circumstances.

Www.robertastewart.com

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Goals Need to be Specific

The Art of Setting goals

Written by R. A. Stewart

Setting goals does not have to involve money on its own. If you set goals based on money then your life is out of balance. It is important to decide what is important to you and is the vehicle to helping you to achieve those aims. In short, money should not be your number one aim. 

If you accept a job with a higher pay then you had better weigh up everything that the job involves such as the hours of work, the commute to the job, and responsibilities that come with the job and then decide whether it is worth all of the hassle.

It all depends on your personal circumstances and preferences. There is no size that fits everyone when it comes to goal setting. There is no such thing as “should” even though there are people who think others should do this or do that.

Personal goals are something which are personal to you. Here are some examples of personal goals:

Learning to swim

Learning a new language (specify)

Learning to drive

Learning to use the coffee machine

Learning to salsa dance

Reading the Bible from cover to cover

Meeting your favourite sports player

joining a sports club (specify)

The most important factor in determining your personal goals is your passions. The other factor is your talents. These two are often linked. Whatever most interests you is often where your talents lie but that does not mean that you cannot learn anything new. Most skills and talents are transferable. 

We often see international sports people using the skills which enabled them to reach the elite level in their chosen sport to help them succeed in their chosen career after they have retired. Many have prepared themselves for life after sport by studying to gain a degree during their playing days.

It pays to have a number of strings to your bow as a backup. 

You have to specify what your goal is otherwise it just becomes a wish and anyone can make a wish but it is taking action which will turn a dream into reality.

If you went to your travel agent and asked for a plane ticket they are unable to help you unless you were specific and told them your proposed destination.

Examples of vague goals which are non specific are:

To lose weight

To get fit

To be happy

To save money

The problem with vague goals is that there is no way of knowing when you have achieved your goal. Goals need to be specific and timed. A goal of “To deposit at least a grand into my retirement fund by June 30th, 2023 is a specific and timed goal. You have either achieved your goal or not.

A get fit goal may be “To be able to run a 5k fun run by 31 December 2023.” This is another example of a specific goal which has been timed.

Giving your goals a timeline will give you more motivation. Just telling yourself that one day or some day I will do such and such is not a goal; it is a wish and there is a big difference between wishing for something and being serious about achieving it.

Life needs to be in balance and it is important to consider your personal talents and preferences. Many people have achieved extraordinary success in their chosen field and despite not setting out to make money have accumulated a great sum of money doing something they enjoyed. 

The key here is to not make money your number one goal in life.

www.robertastewart.com