Each of us learns various financial lessons at different stages of our lives, and it’s never too late — or too early — to start learning. However, certain lessons are so basic that understanding them is essential for financial survival. Here are just some of them.
Money Denotes Labor
No matter if you have worked with your mind or muscles, money is the result of your labor, it’s its physical form. This should be earned from childhood in various forms, the efforts in the help about the house, for instance, should be rewarded in this or that way, forming the necessary connections.
The secondary value of the lesson is forming the spending behavior, teaching that things bought with earned money means also represented labor. The understanding of the fact will help to form healthier spending habits.
Spending is Different from Investing
Both spending and investing can drain our accounts, but they are quite different. In case you pay $2500 for a new furniture suite, you spend means, but if you purchase a used car in a good condition to go to and from work, you invest.
If the purchased item or service provides a certain dividend to you, like the possibility to sell it later with a profit, be promoted at work, stay employed, etc. It‘s an investment. In case this criterion is not met, it’s spending. So, learn the basics of investing and make use of it.
Consumer Credit is Risky
Though you may not think of it in this way, every time using a credit card you take a loan, even if it’s several dollars for a coffee. Remember that the only aim of credit card companies is to make you pay more. Keep always in mind the evil formula of credit card geniuses: convenience + frequent use + low minimum payments = long-term debt and high returns.
The same is valid for various loans though they may be quite handy at times, especially in the conditions of a financial crisis.
Wants are Different from Needs
Do you remember that bright toy fire fighting vehicle or blond Barbie, you desperately wanted as a child, wanted so badly that every fiber your little soul vibrated with the desire. Children often want things with such enthusiasm that they are unable to understand what they want and what they need.
Still, the skill to distinguish wants from needs is an essential one for everybody, who wants to live within a certain budget because the present marketing industry made an art of confusing these two aspects.
- Read about awesome ways of budgeting as a teen.
Money is Unable to Make you Happy, but it May Provide Choices
The value of cash is not in the ability to buy happiness for us, but to allow us to buy options in life. Nowadays we may feel like having plenty of choices, but most of them are manufactured only to stimulate our consumer spending. The real life-changing choices like changing careers, moving across the country, opening a new business, or retiring early are still not for everybody, but for those most financially disciplined. These options grant us the power to reinvent ourselves.
Though it’s only 5 basic principles of money, they are able to lay the foundation to your financial security and wealth.