This may be a controversial and sensitive topic for some but one I feel needs more discussion nonetheless. I will try my best to be as objective as possible. I know this can be nuanced. To start, most of us are not born into ultra-wealthy families that understand and teach money lessons at an early age. So let’s start at the beginning:
Early Education
How do we learn our first lessons about money? As a child, I remember watching my parents’ labor over bills and balancing money with a sense of dread and discomfort. There was always a fear of not having enough to make it through. Although both of my parents worked hard at 9-5 jobs and made “OK” money for the time, things where still tough financially. Make no mistake, we always had food and shelter growing up.
We were a typical lower middle class family and my parents never talked to me about money beyond the surface of; “knowing how to count, and save enough to have what you need”. I am eternally grateful for my parents and their great sense of sacrifice and work ethic. It is the singular lesson that has propelled me forward despite many odds. However, some voluntary, fundamental early money lessons would have also gone a long way in preparing me for life’s financial pitfalls.
So, if you are a new parent reading this that does not already think this way, consider teaching your kids financial literacy as soon as possible. At the time of writing this, they still do not teach this in public school.
Lesson One: Make More Spend Less
There is an accent secret hack to making more money. It’s called; spending less on stuff that doesn’t make more money. On the surface, this would seem like a no-brainer that everyone would get right off the bat. That everyone should have at minimum a basic understanding of when they have reached their financial limit. However, nothing is farther from the truth. One of the key issues we face as consumers is the ability to spend more than we make, or more than our budgets will allow. Now there are some that truly don’t have any wiggle room within their current costs of living. This can be systemically tied to region coupled with job skills or lack thereof. I invite those who fall into this category to check out our other post on “More Money, Faster”. There are also individuals that do have disposable income but lack the financial literacy needed to see where they are constantly going off the rails. Again, as we discussed earlier these simple but profound misunderstandings can stem from how and when we learn our “first lessons about money”. In other words; if you are constantly being bombarded with the notion that you can have whatever you want without being versed in the consequences of financial debauchery, you are likely doomed to make some amazingly poor decisions when it comes to money. You have to learn early that you don’t need everything you see just because it’s possible to have it, and you have to be able to apply this lesson to real world situations. This leads us to our next lesson…
Lesson Two: Don’t Abuse Credit Cards
Initially I was going to name this lesson “Don’t Use Credit Cards” but I realize that they do have their benefits and merits if used properly. I personally didn’t get caught up in credit card debt as a lot of people do early on. Not because I had been taught or advised financially, but because I had witnessed it happen to my parents as a child. The horrific experience stuck with me and permanently pitted me against having credit cards. I’m not saying credit cards don’t have a place in wealth building for some people. I am saying that without proper financial literacy and discipline, credit cards can be the undoing of your financial life for many years to come. It’s not accidental that they are heavily marketed to young people who are just entering the work force with big dreams and shallow pockets. For card companies it’s a “long game”. They know they can give you a little “free money” up front to turn you into a cash cow over time. Be sure you know what you are getting into and how it will affect your future financial goals. Don’t abuse credit cards! I digress.
Lesson Three: Invest Early
The earlier you start investing, the more time your investments will have for growth before you need and or want to use the money profited for life events or future investments. For Example; imagine if in your early twenties you started investing $100 a month in something that yielded you a compounded return of 20% every year. You would have over 220k by the time you are 40. This is of course hypothetical but hopefully you get the point.
Investing is not a one size fits all proposition. You can invest in many ways. One key, often overlooked way to invest is investing in yourself. By this I mean seeking out and nurturing things you are good at then monetizing those things. I often say, most people spend a lot of time trying to do what they love and not what they are good at. When it comes to making money, do what you are good at. If you love it as well that’s great! Investing is always about time, product, sales, and marketing. Always know how these four things fit into what you are investing in. Rule of thumb is, if one of these four things is broken, then the likelihood of it being a poor investment is higher. The opposite is also true.
My personal education about money as it pertains to wealth didn’t begin until I was already an adult. Luckily I was fortunate enough to avoid most of the major financial perils in my younger years due to having great examples of what not to do in close proximity. Even still, I have learned a few things the hard way. I hope this helps or encourages someone on their path to financial freedom. Let me know your thoughts in the reply box below and share it if you so choose. Thank you for your time!