Debt Management

Seven Financial Lessons To Always Remember And Live By

We live in a world where money is a constant issue. And yet, we neither take note of it or do something about it. Our education system is flawed; they teach people to be good workers but not good money handlers. So, when Covid-19 struck home, they are struggling to make ends meet after they have been laid off. If they had taken note of these financial wisdoms a long time ago, they could still survive comfortably while the world recovers from the crippling effects of the global pandemic. To all the future twentysomethings, read this before it is too late.

“Formal education will make you a living; self-education will make you a fortune.”

Jim Rohn

For some, money is a taboo topic, but I do not blame them for viewing money as so. In general, money can be a tricky topic to wrap your head around. Most of us obtain financial guidance from our parents. As we age, those financial guidance influence how we treat money. Once we reach adulthood, a certain level of mental effort is required to recalibrate how we view and respect our dollars and cents.

Although your parents have said what they need to say about how you should earn, use and save money, there are other pearls of financial wisdom that they may not know about but should live by. These pearls of wisdom that your parents may not have covered have stood the test of time and never fail to yield benefits to those who apply them daily. They are flags letting you know that your finances are secure, and you have a healthy relationship with money.

1. Do not bite more than you could chew.

In the context of personal finance, it simply means do not spend more than you earn.

“You cannot keep out of trouble by spending more than your income.”

Abraham Lincoln

This could be perhaps one of the most frequently talked-about financial tips you will ever come across. However, there is a reason behind it, and it is a good one. Spending more than you earn not only makes you poorer, but it can kill your credit score. If you are already in debt, increasing your outflow of money more than your inflow of money puts you in greater debt.

People frequently spend more than they earn because they want to display their stature in the community. To quench their desire to seek instant gratification from members of the community, they will be more than willing to take loans from the banks to spend on trash such as flashy cars and a luxuriously big house. Is it really worth keeping up with the Joneses and posting pictures of your fancy yacht on Instagram?

If you are not living below your means, it is time to take a hard look at your personal financial statement. That is the first step. The second step is to write down your financial goals – what do you want to achieve and by when you want to accomplish them? Take note of the specific sub-actions you will take to fulfill your financial goals.

Also, budgeting is a skill everyone should strive to master. Once you have a budget in place, you can better observe the movements of your money as they come in and out of your financial statement. For example, are you spending too much on electronics? Are you on the verge of spending all of last month’s paycheck? Again, budgeting can give you the answers.

2. Pinpoint your financial Achilles’ heel.

Do you buy too many bottles of energy drink each time you go to the supermarket? Are you spending too much on your house mortgage? Do you act impulsively when you are purchasing clothes online?

Determining what motivates you to spend money recklessly can aid you to make wiser financial decisions that are in accordance with your financial goals. Here is a pro tip: print out your most recent monthly bank statement and identify the unnecessary expenses that you had made. Noticed that you spent way too much money eating lunch out? Cross them out, and then refrain from making the same unnecessary expenses moving forward.

3. Drive your fixed expenses as low as possible.

Somewhere in your budget, I am sure you have labelled certain items as fixed expenses. These are the costs that you must pay monthly, no matter the circumstances. If you are not covering them in full and on time, you are bound to have a low credit score, which could deteriorate your financial health. You cannot run away from bills – it represents a basic rule whereby when a consumer consumes a product or service, he or she must cover the cost.

Based on the 50/30/20 rule, you should allocate 50% of your monthly income for fixed expenses first, 30% for wants and 20% for savings. I concur with that principle, although you do not have to follow it strictly because it really depends on your financial standing at the time and the cost of living. However, if you are serious about regaining control over your money, then this rule will definitely help.

“Beware of little expenses. A small leak will sink a great ship.”

Benjamin Franklin

Once you have a grip on how much of your monthly income is allocated for fixed expenses, the next priority is to reduce expenses as much as realistically possible. The more you lower your expenses, the more money you can add each month to your piggy bank. So perhaps that dream about going to Hawaii is not a galaxy away after all. You can now buy more toys and treats for your rabbits. Alternatively, you can finally pay off your car loan and home mortgage quicker.

4. Do not bother buying it if you cannot afford it.

This rule is targeted at all the credit cardholders out there. You might swipe your credit card to earn some points for perks such as cash backs or travel benefits. However, bear in mind that if you do not have the funds to pay for something, do not charge it to your credit card.

Just because your credit card allows you to spend up to $2,000 in a single month does not mean you just earn $2,000 free cash. Instead, a credit card is simply a tool, a financial instrument given to you by the bank to help you build and improve your credit score. Using your credit card(s) wisely can be the difference between a high credit score and a desperate financial situation. If you are caught between a hard rock and a hard place, it is a good idea to consult with a credit card consultant as he or she can offer you practical advice on how you can improve your financial situation.

Adhering to the financial principle means you will escape the horrors of accumulating high-interest credit card debt. Additionally, it keeps you within your budget and on track as you journey towards your financial goals.

5. Improving financial literacy is the solution to all your money problems.

“Money is not good or evil. It has no morals or intentions on its own. Money reflects the character of the user.”

Dave Ramsey

Money is notorious for manipulating the emotions of even the most financially intelligent person. In general, people tend to keep their attention away from money because it is a delicate, if not frightening, subject to talk about. We are so often in vigilant mode when it comes to protecting our hard-earned money that we are afraid of making a financial mistake. It can be a mentally punishing experience to accept the details of your credit card report and repay your debts.

The only way you can be financially stable in the future is by equipping yourself with the best resource available: education. Given that we live in the Information Age, you can learn anything you want, including financial literacy, for free. Again, money can be emotional for most of us. We usually link our net worth to our self-worth and self-esteem. It is widely believed that people who inflate their lifestyle are those with low self-esteem.

However, having a tremendous amount of money to spend and being good with the money does not make you a better human being than anyone else. Remember, just like a credit card, money is a tool that helps us to live our best lives and attain our financial objectives. The more you educate yourself about money, the less likely it is for money to run you.

6. You have got to make some space for splurging.

I believe in the “treating yourself once in a while” philosophy. It is one of the smartest things you can do while assembling your weekly, monthly, or even yearly budget. Don’t get me wrong – living below your means should be everyone’s financial motto. However, there are times when we will still buy something that does not serve our financial goals well.

Whether it is $10 per week or $50 per month, leave some extra cash to pamper yourself with something pleasant. Once in a while, rules are meant to be broken. Giving yourself moments of indulgence is actually good for your mental health and your budget, believe it or not. When you have a small fun fund, you can spoil yourself with something nice without worrying about overspending. You cannot be living frugally all the time, my friends.

7. You control your money, not the other way around.

“If you take control of your finances today, then you won’t be a victim of them tomorrow.”

Emily G. Stroud

The last pearl of financial wisdom I want to share with you is this: you are the master of your money. What you spend, how you spend, the financial goals you have established for yourself, how you accomplish them, by when you want to accomplish them, are entirely up to you.

We are continuously bombarded by social cues to spend and live a lifestyle that requires us to live well beyond our means. That said, never give in to societal pressure. It is your money, not theirs. You are in control of your money and money does not control you, remember that. You are fully responsible for your financial situation.

Transforming your mindset to ensure complete control over your finances provides you with an overview of what financial mistakes to avoid and what actions you can take to improve your personal financial statement. So, get started by educating yourself on everything money-related and take control of your financial situation today.

Final 2¢: Never forget them.

Regardless of how good or bad your financial situation is currently, there is always space for refinements. By adopting these rules and implementing them in real life, you are one step closer to that vacation in Hawaii and a stable lifetime relationship with your dollars and cents.

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