An advisor recently asked a great question!

"There is one Money for Life concept ‘Save from income and invest from assets,' that I am interested in being better able to...teach and implement (for my clients).

Basically, my understanding is to save from income, purchase assets with savings & leverage, and use the income from assets to..."

Your understanding contains two premises that don't fit The Money for Life Model for Creating and Managing a Personal Economy very well.

• First, your question assumes that using leverage is an essential part of the investment equation. Using leverage suggests borrowing from lenders. That means that the lender controls the borrowed money. The Money for Life Model espouses the idea that individuals and families should control the money that flows through their lives. When individuals and families borrow from a lender, they are falling into the Debt Paradigm trap that chants the mantra "You can only have what you need and want if you borrow from others to get it."

• Second, your question implies that assets produce income. Some assets don't; your home, your car, collectibles, precious metals, and so on. Moreover, some assets that you expect to produce income don't always do what you expect; GM bonds, mutual funds, real estate, may not live up to their original billing as income producers. In addition, the unspoken conclusion of that sentence indicates that the income from the assets would reduce or eliminate the debt created to acquire them. There are many Debt Paradigm shibboleths embodied in this conclusion. Mainly, however, the Debt Paradigm promotes having stuff you don't own and buying investments you don't control.

  • Other People's Money - The Debt Paradigm calls borrowing from others "arbitrage." Not so. Arbitrage is buying in one market and selling in another in order to take advantage of varying prices [Oxford Dictionary]. A moneylender uses arbitrage when it borrows from savers and pays them 3%, knowing that their customers borrow the same money from the same moneylender at 5% for a mortgage, 7% for a car loan, or 21% on a credit card. When one borrows from a moneylender it is debt and a burden on the resources of the individuals and families that borrow.

  • Assets Increase in Value - No need to belabor this point in 2009. The Debt Paradigm assumes that 1907-14, 1929-1942, 1973-6, 1979, 1982-4, 2002-3, 2008-20nn will never happen again or that the investor should only consider the long-term. DUH.

Now, consider how the Money for Life Model for Creating and Managing a Personal Economy sees the issues surrounding investing.

The Money for Life Model for Creating and Managing a Personal Economy encourages people to save from income.  That's not pouring good money that you control into a 401(k), IRA, or other tax qualified plan that you don't control.  Look what's been happening to the money that Americans ‘saved' in those kinds of plans.

Saving means individuals and families put money into a safe program that guarantees a reasonable return for as long as they remain in the program.  These savings vehicles are called Money for Life Accounts.

Should individuals or families using the Money for Life Model choose to invest, they can borrow money for the investment from their Money for Life Accounts.  They would then make the commitment to repay those accounts from regular income on the same schedule a moneylender might impose.

If the investment failed and all of the money was lost, the individuals and families would still repay the loan.  The Money for Life Account would be fully restored, including the interest earnings.  The wealth and well being of the individuals and families that made the investment would not be damaged.

Many who follow the Money for Life Model never find it necessary to invest in anything.  All of their money goes toward building secure Money for Life Accounts and to making sure that the Four Pillars of their personal economy rest on an unassailable foundation of money that they control.