I turned 23 last month and thinking back on the the things that happened while I was 22 was a real eye opening experience. I learned about a lot of things like how to properly insulate a garage , how to lay sod on a new yard, or even how to start a blog. I never really put much thought into what I learned about money and thought that it was common knowledge and not worth talking about. Until I had a recent discussion with one of my friends about money and found it weird that they didn’t know these things too. Thinking back on the past 22 years of my life, these are the top 5 things I learned about money.
1. What is money? To be honest I never really knew what it was. How could I describe money and what exactly is this piece of paper? That question was answered when I was reviewing my life insurance policy with my insurance broker. The one thing he said to me that stood out throughout that whole meeting was, “Money is a tool.” Why couldn’t I think of that? It’s a means of getting me what I actually wanted or needed, not unlike a brick or some form of weapon. Problem with those is, you could possibly wind up in jail on robbery charges.
2. It takes money to make money. Having an idea on how to generate money is great, but most of the time you’re going to need money to act on that idea. Even something as simple as going out to apply for a job requires money. Printing your resume may seem like a small thing, but if you don’t have paper to print it on or ink to print it with, you’re going to have to spend some money. Going to the casino and gambling isn’t a good idea on how to make money but it’s a good example of how it takes money to make money.
3. The value of money is easier to see when comparing things. I never really realized this until after I bought a house, that was when my spending priorities changed drastically. Now all of a sudden the $300 I spent on designer jeans could have paid for 2 weeks worth of groceries. Going out to eat a $50 steak dinner, that money could have gone to buying enough steak to eat for 4 days if I cook it myself. Sure that $50 doesn’t seem like much unless you compare it to something else, then you really find out what it’s worth.
4. Spend only what you have. A credit card is a form of convenience, not a way to carry debt. What I mean by this is you don’t have to carry cash, or your debit card if you’re Canadian, and just put your purchase on credit but be able to pay it right away if need be with your money in the bank. People get into debt problems because they have that mentality to spend now and pay it off later. You should only really spend what you have because let’s face it, unexpected things will always come up. Sure you may have it worked out how you’ll buy this thing now on credit and pay it off later when your pay check comes, what happens if there’s a mistake on your check or you have to take unpaid sick days. Now all of a sudden your check isn’t what you thought it was going to be and you can’t pay off what you put on credit in time.
5. Interest rate can make or break you. Let’s say you have a $1000 sitting in your bank account earning 4% interest but let’s also say you owe your credit card $1000 being charged 18% interest. That money in your bank account is making $40 while you’re being charged an additional $180 for owing a credit card $1000. Sure it’s nice to have money in the bank earning interest but your earnings are being negated by the interest you owe on the $1000 of debt. If you keep it as is, you’re technically losing $140 per month in interest. If you paid it off you may not have that $1000 in your bank account but you’re also not losing that extra $140 to interest.
image provided by David Siqueira
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