Browse By

Personal Finance 101: The Three Money Secrets

Money. We all want more, yet paradoxically, the rich keep reminding us that money is one thing that no one can have enough of. All the same, the alternative situation isn’t anything anyone would wish upon themselves. The solution it seems is to learn how to live with this seemingly insatiable thirst. Nowhere else does is this dogma hold as in personal finance.

poster with image of dollars in backgrouund: Personal finance - three money secrets

The only use of money is to be spent. You don’t have to have to have a zero balance on your bank account frozen to appreciate this fact. Besides, for any economy to flourish, there has to be a healthy flow of money in the economy. When a section of the economy holds up money, it causes strain in the others upsetting the equilibrium and retarding economic growth.

In a twisted altruistic sense, the key to healthy personal finances therefore lies in wise, deliberate spending. However, money spent without due consideration, on impulse, soon deserts its owner. The definition of what constitutes wise spending depends on the needs, priorities and goals of the individual.

The bedrock of Personal Finance lies in personal Financial planning

Certain forms of spending money are universally accepted as wealth creating. As a thumb rule, money spent in building up your asset base almost always leads to wealth creation.

Adopting a rigors saving culture in personal finance builds up your liquid assets base is indeed spending. New age personal finance rules implore on the 21st century worker the importance of personal budget and saving.

In effect, this makes personal expenditure tracking aimed at yielding surplus as the bedrock of personal finance. Whatever formula you adopt 50:20;30, 28:36 etc, the goal remains the same: generation of surplus from personal earnings. This surplus can then be spent in various ways such as: contributing to retirement plans, life insurance, trust funds, trading in stocks etc. Therefore, learning how to make a sound personal budget is critical.

Money is a Measure of Value

Tracing the history of money reveals the different forms of its existence. From barter trade to cowrie shells to silver and gold coins to the advent of paper money pioneered by the Chinese and most recently, electronic money best exemplified by mobile money .

In all these different stages of the development of money, the goal was a universally accepted, legally sound measure, by which the value of both goods and services could be ascertained. Once value can be measured, trade becomes the natural consequence as per Adam Smith’s constructs.

Successful entrepreneurs create value for every cent spent by their customers. They obsess themselves with value creation through various means such as quality guarantees, discount offers which promise more for less money spent, value creation through impeccable customer care, corporate social responsibility programs which add value
to the societies they serve by improving the quality of lives, and other means that ensure that their customers get the most of their hard-earned money.

It should be no different for individuals seeking healthier personal finance. To accomplish this goal, each individual ought mind their every coin. This is because once money is spent, all that matters is what it has been spent on.

This rule is no exception even for the wealthy,who to an outsider may appear not to mind such trivialities like price tags, even if the amounts spent by the rich on wants may
appear insanely colossal. It should be acknowledged that more often than not those extravagant price tags represent the true value of the commodity.

Think about it, if the rich were that careless with their money, would they be that
wealthy? As Warren Buffet puts it

Rule No.1: Never lose money. Rule No.2: Never forget rule No.1”

Money is A Language

To wiser mange your personal finances, it is imperative to learn the language of money. What is an asset? A liability? What of securities? Or unit trusts ? Stocks? What does
inflation mean? What about compounded interest ? So on and forth.

The only rule to understanding the language of money is to appreciate that nothing captures attention like the mention of money. For instance, you might be hard pressed explaining the concept of time management to an indolent individual. But try quantifying the time they waste lazing about in money terms and you’ll have their ears almost invariably. Likewise, personal finances should be manged from a similar
outlook.

Join the conversation by leaving a comment.

BE

LIVE

KNOW