8 Basic Money Lessons Everyone Should Know!
Save some, spend some. Therein lies the most basic principle of money. In reality, though, you’ll need to learn how to do both properly in order to remain financially stable, so here’s a quick run-down on what you should know:
1. How to think about money
When it comes to money, many people have complicated feelings about it. Some feel intimidated by it, some associate wealth to greed, and some hate it. Because of this, it can lead to the perception that finances should not be a priority in life.
The goal is to be in control of your money and your life, and not to feel guilty for caring about your finances.
2. How to talk about money
Talking about money – whether it’s with a spouse or a parent and regardless of how hard it is, must be done. Most couples and family only talk about money when a crisis. In most cases, the conversation can get heated and judgemental. One person might think he or she is right and the other is stupid, incompetent or irresponsible.
Instead, plan regular sessions to talk about money. It’s important to choose a good timing, maybe a quiet and relaxed evening over coffee. It is not recommended to have a money discussion out of the blue, or when someone is angry, hungry or tired – because it won’t be fair to anyone.
3. How to live within your means
Living within your means is the real key to financial success. To achieve this, you have to change your lifestyle and live slightly below your means. There are many creative ways to live comfortably without spending all your money but many people are not prepared to do so.
You should also learn to find fulfilment from things that money can’t buy, or buying a second-hand car, a smaller house, reduce your daily coffee runs and start packing your own lunch box. Whatever works to keep you on track with your finances.
4. How to prioritise your spending
It’s all right to splurge, but make sure you splurge in the right places. Don’t feel guilty for indulging in a weekly Starbucks or a posher apartment if that’s what’s important to you. Be happy that you can afford what brings you joy.
You should also consider creating two spending accounts – one for necessities, one for wants, so that you know exactly how much you’re spending on both.
5. How to better budget
You can draft the best budget plan in the world, but no budget will work for you if you don’t stick to it. It’s so easy to get pumped up after seeing on paper how you’re going to save and spend. But how long are you able to follow that plan? If you’re prone to impulse purchases, you’re in trouble.
To make budgeting less formidable, consider breaking down your budget into monthly bites. Keep track of your daily expenses and total them up at the end of the week. That way, you’ll be able to know how realistic and achievable your budget really is.
The best budget plans will also include your financial goals for the future. How much do you aim to earn in a few years’ time, and how do you intend to budget that money? Above all, keep saving a portion of your income every month. You never know when you might need the extra cash.
6. How to save smarter
Simply thinking “I’ll save as much as I can” is not the way to save. There’s no motivation. What are you saving up for – your children’s education, your new car, or your next home? Mentally tie your savings to your life goals, then plan to save from there.
7. How to save for retirement
It’s good to save for retirement. However, have you considered how exactly you plan to save for it, besides setting side a portion of your income towards it every month (or, worse, only when you have the funds to spare)?
Part of saving is knowing when to invest so that you can get returns. Putting your money in a fixed deposit account is one way to keep it secure for retirement, but the interest rates for FD accounts are often insufficient to cope with inflation. Instead, put some of those retirement savings towards a diverse investment portfolio, such as in REITs, stocks, and bonds, so that your savings can grow money for you.
8. How to keep track of money
It’s all well and good to write out a budget and see it on paper, but if you’re the type to chuck papers away then forget about them, a physical black-and-white budget might not be the one for you.
Would a phone app be a better alternative? Or maybe you’re better at saving money via couponing? No matter what the method, as long as you can track your spending habits, that’s the perfect method for you. Remember that no one glove fits all!
Once you have these basic money lessons down pat, it’s time to learn how to start investing. Keep track of those, too, and you’ll be well on your way to financial fitness.