10 Things You Don’t Know about Money

You use money every day, yet you know very little about how to use it effectively! It should be no surprise that rich successful people spent the time and effort to learn about money. They do this without the benefit of a formal class or education. How do they do it? Simply said, they make an effort to learn about money. Here are 10 things you don’t know about money

• Credit cards are not evil – Too often I hear people complain or blame credit cards for their overspending.  Credit cards are issued to adults and you have to handle them responsibly. In many ways it is similar to spending cash. You cannot spend what you so not have or you should not spend more than you can reasonably pay off at the end of the month. With all the Smartphone apps, you can get warnings when you get to credit limits or any spending limit you wish to set up for yourself. At the very least, you can check your charges online as a way to monitor your spending.

• There is no easy way to get rich! – I know there are infomercials that tout buying income property with no money down or investing the next big thing. Success is not easy! It takes work and effort even if you have the next big thing idea. In every case, it takes an investment either by you to make it happen. The investment may be investors or venture capitalists. Either way, you need some capital and a well thought out plan to make it happen.

• Setting financial goals is the only way to achieve them – A goal without a plan is just a wish! Goals are never easy, but they are much harder, if not impossible unless you write them down and create a plan to achieve them. Goals should be specific, measurable, achievable, realistic and timely. Commonly called SMART goals. Setting goals, objectives or expectations is a good way to keep you focused on what you want to achieve. How can you measure your progress without goals?

• Everything is negotiable – Children negotiate with their parents at a very early age. As we grew up, we often forget that you can negotiate things like salary, promotions or mortgage interest rates. Children negotiate what they eat, toys, friends, clothes or just about everything. As adults, we negotiate for certain things such as the purchase of a home, but not the mortgage interest rate. I am suggesting no limits on your negotiation. I ask everyone for a better price or better terms or exchanging something someone wants for what I may want from them. Negotiation is reaching an agreement

• Only borrow to buy assets – A loan is borrowing a sum of money that is expected to be paid back with interest. Borrow money for assets that will appreciate more than the interest you will have to pay on the loan. I am not recommending borrowing for investing because that is risky behavior. I am suggesting avoiding credit card borrowing, Pay Day loans and other high interest loans. Borrowing should be limited to mortgages, remodeling your home or maybe starting a business. In all of these cases, you should have money in the game! Borrowing should leverage your equity  not replace it.

• Time is money – You do not realize how important time is until it is too late. Generally, it is when you are older you realize that time goes by very quickly and you missed the opportunity. In most cases, you never get another change at that opportunity. The essence of Benjamin Franklin’s quote is time is as valuable as money.

• Saving for a goal is easy – Saving is easy, but there are many distractions to spend before you save. The best way to save is to set up an automatic payroll deduction or bank debit to sweep your money into a savings account. As soon as you accumulated enough money to invest you should. If you need to save $500 a year, break it down to $10 per week. A small number such as a weekly amount makes it much easier to achieve.

• Money is not just for spending – When you accumulate enough money in the form of assets, you have achieved financial freedom! Start with your expenses and find ways to reduce your expenses. About forty (40+) years, I reduced my expenses by bringing my lunch to work. I started by replacing going out for lunch one day a week. In a couple months, I slowly switched from going out five (5) days a week to only occasionally. Making small changes in your expenses yield a lot of money. I was able to add to my savings and invest more which allowed me to reach financial independence at thirty-eight (38) years old.

• A Budget can help you achieve your financial goals – A budget is an estimate of income and expenses for a set period of time. For me, a budget is a structure to help you achieve your financial goals. Many people rely on budgets for discipline to help them achieve their financial goals. Either way, it works! In order to prepare a budget, you have to make decisions regarding your spending or expenses which is always a good exercise to take control of your finances.

• Your credit score does matter – Most people never think about their credit score until they need to borrow money or apply for a mortgage. The problem with that is it is too late. If you handled your finance responsibly, you probably never worried about your score anyway and it will not affect you negatively. Those of you will spend carelessly and pay your bills even more carelessly, your score will need attention. Credit scores such as your FICO score comes up when you borrow money for a mortgage, car loan or apply for a credit card. If you have a low score, you still may get credit, but you may pay more for it in the form of a higher interest rate.

Final thoughts

So many people learn about money when they make mistakes. Is that the best way to learn about money? There is a student loan crisis and many graduates are struggling with student loan debt. If you have a bad habit with spending money, you need to change it! Better yet, avoid the problem by learning what to do at the beginning and avoid the problems later. You probably use money every day; don’t you think you should learn about it? I was always fascinated with money and made it my career. I hop you enjoyed 1o things you don’t know about money.

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