Author and financial planner Louis Barajas wants to help people achieve financial greatness by using money to express their full potential. After working with what he calls the "Mercedes and yacht crowd" in southern California, he returned to east Los Angeles to help the hard-working people he grew up with make better financial choices.
Barajas is the owner of Financial Greatness, a wealth and business planning firm, and the author of many books, including The Latino Journey to Financial Greatness and Small Business, Big Life. He is a national speaker, a frequent financial expert for the media, and a board member of the Financial Planning Association.
LoveToKnow Save asked Barajas to share his approach to financial planning.
Financial Advice: Louis Barajas Interview
LoveToKnow Save (LTK): What do you feel are the three biggest mistakes people make regarding money management, and how can they be corrected?
Louis Barajas (LB): First, people are really unconscious about how money really works and how their feelings, emotions, and beliefs affect overall wealth. The best way to tune in to this is to spend time reflecting about life, not about money. Think about your values and your purpose, and visualize what life you want and how can we create that kind of life. Money is a means to an end, not the end.
Second, it's general human nature to spend, not save. So it's important to save with what I call practical systems. Set up automatic debit from checking to savings, from payroll to pension, that type of thing.
Finally, many people get caught up in what I call "investment pornography:" all the sales stuff and get-rich-quick products, instead of paying attention to money basics. It's important to come to an understanding that there is no magic pill to wealth.
It's just like weight loss. I remember seeing Oprah do an interview about weight loss and she said, "I'm a wealthy woman. If there was an easy product that could help me lose weight, just like that, don't you think I'd own that company?"
This same principle applies to building wealth. Most people that are very wealthy have done it over a long period of time. There's a process. The problem is there are a lot of financial predators that will say, "This one fund or plan is the solution to all your needs." That's just not true.
LTK: How can a hard-working family strike a healthy balance between rewarding themselves for working hard and planning for a secure future?
LB: I do two things when clients come to me for financial advice.
- I focus on whether or not the family can afford "financial dignity." I work on creating more value in careers to develop better financial leverage overall.
- Together, we decide what is the minimum amount to put away to get them along the path of those identified goals. This is different for everyone.
And then I tell them, "Spend the rest - I have never seen a U-Haul behind the hearse." This goes back to your relationship with money. There's no need for unnecessary debt, but you shouldn't have to pinch every penny.
You need to have double vision: one eye on the future and one eye on the present.
A Revolution for the Working Class
LTK: Your financial platform is to create an "economic revolution for the working class." Please explain.
LB: Where I grew up in East L.A., the area had a 62% drop out rate in 2005. This rate has not changed in the past 25 years. The problem in lower-economic areas is not about cash or a lack of it. It has more to do with having the knowledge, attitude, skills, and habits to advance.
Here's an example. When a client comes to me who wants to save money for their child's college education, we evaluate the total family picture. Most financial planners don't go as deep into the fundamental issues as we do - issues like marriage stability, career goals, activity in school, that type of thing.
We look at the child's school progress, whether they work part-time, if they're involved in activities. Because if the mindset and the will to go to college isn't there, it doesn't matter if there's money saved for college or not.
I think financial planning is a human experience, not a financial experience. All money can provide in your life is comfort. For most people, success is a feeling. We're all flying to the same destination - death - but some of us will go in more comfort than others. Financial planning provides better education for your children, but it doesn't educate them. It buys you friends, but not a great friendship.
LTK: So, how can we change our financial attitudes?
LB: Financial advice is often so complex and overwhelming, people don't know what to do. At my firm, we stress, "Be clear about what you want to accomplish and create a plan to do it." I call it the four Cs:
- Clarify your goals
- Create a plan
- Commit to the plan
- Complete the plan
LTK: How do the financial challenges faced by Latinos in America differ from those of other Americans?
LB: Some Latinos suffer from the mi compadre syndrome - people who consult non-experts. In a family, whoever is the most educated or the wealthiest is who you go to for advice. That doesn't make that person the right person, but that's what happens.
The problem in other low economic areas are these one-stop financial centers - the instant check loan places, pawn shops, that type of thing.
There's also a bit of machismo, or male ego, to deal with in the Latino community. I see this with some clients when the man won't listen to my advice at first, because he thinks he knows. When in fact, he doesn't know, and can't get beyond the machismo to let me, an outsider, advise him.
I have ways around this, but it takes time. A mentor of mine explained it this way: "The poor usually know everything, and the wealthy usually learn everything." I want to change that dynamic.
There's also the mañana syndrome: I'll do it tomorrow.
On a deeper level, there's a fatalistic attitude among the Latino poor because of religion, in which they believe that money is bad. However, it's not the money that is bad. Frankly, money magnifies more of who you really are. So if you're good, you'll do good things with your money.
Thought Impacts Action
LTK: Your recommended reading list on your website suggests not only books to improve financial literacy and business acumen, but also self-improvement books that modify thought. How does positive thought impact our goals, financial or otherwise?
LB: It's more realistic thought. Think of it as wanting weeds out of the garden. Saying "I don't want them" isn't enough. You have to work hard. I learned this from my father. You can only achieve growth through transformation.
Our firm does not offer commissionable products, we offer financial advice. We constantly tell people, "Be careful who you're working with" because desperate people do desperate things. So I work on the root on the problem. There's hope for everyone. Organized thought and action will make a difference, and it always has.
LTK: If you were a superhero, and could save the world from one thing, what would that be?
LB: A scarcity mindset - someone who is in the survival stage or struggle stage who believes there is a lack in the world, and shrinks the potential of everyone. Australians call this the "tall poppy" syndrome - you take from others so that you have enough for yourself.
This causes a lot of pain in lower income communities and I know we can avoid this. I know there's enough to go around if we all share it.
- Visit Barajas' website for helpful worksheets, book lists, and subscribe to receive financial tools to help you define your goals.
- Look for his books, Overworked, Overwhelmed, and Underpaid and My Street Money.
~Tracey L. Kelley