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5 Things You Should Know About Personal Finance

5 Things You Should Know About Personal Finance

    Money.  Oh money.  It makes the world go ’round.  It’s one of the biggest reasons for divorce.  It either frees us or enslaves us.  It is the commodity of all commodities.  And yet, as much as many of us make, most of us know so little about how it works.  I blame our parents.  They should have known.  They should have taught us.  Well, either way, I’m about to give you a quick crash course in cash money 101, and how personal finances should work.  Buckle up and enjoy the ride.  Hopefully you’ll be enlightened.

    1. How a credit card works

    Credit cards are an interesting commodity.  They can either work for you or against you, depending on how much you know about them and how smart you are with them.  The biggest problem with credit cards, though, is that we gain access to them before we know enough about them.  Your parents should have taught you how they work, but sadly, many adults don’t even know exactly how they work.  This article should help.  Read it.  Then read it again.

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    2. How to create a budget

    Budgeting is something that people either love or hate to do.  Personally I hate it.  But I keep a general budget because it’s important to know where my money is going.  A friend of mine knows where every dollar he spends goes.  I’d rather divide my money into 2 different accounts, business and pleasure.  I give myself an “allowance” to do whatever I want with monthly, and the rest stays in my “business” account for bills and other living expenses.  Need a crash course on building a budget?  Check this out.

    3. The time value of money

    The time value of money is a simple principal to understand:  basically it states that any amount of money is worth more today than the same amount of money in the future due to it’s earning potential.  This means that if you have $100 to invest today, it’s worth more than $100 a year from now, because it could be gaining value through investments for a year.  Let’s assume you average 9% on your investments… Your $100 today will be worth $109 in a year, whereas getting $100 a year from now is only worth about $91, due to the value of money lost in the year.

    This is very important when you consider the next point…

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    4. Start investing early

    Take a look at this chart.  Basically what it states is that when Saver B starts investing earlier on in life, the time value of his money allows for gaining potential so much greater that even though Saver A invested more than 4 times the amount of Saver B, Saver B has gained more than $400k more than Saver A by retirement.

    Moral of the story?  If you start investing now, you’ll have much more than if you wait till you make more money, even if you invested more in the years to come.

    5. Let your money work for you

    We were all taught that it is important to gain a good education and to learn valuable skills to enter the job force and start a good career.  But here’s what few of us have learned:  more important than having a good job is learning how to make your money work for you.  Consider this: if you can save $500k, and you average 10% on your investment portfolio, you will gain $50k annually without doing anything other than having the money.  $2 million will earn you $200k per year (earning 10%).  $10 million will earn $1 million per year.  The more you invest, the more you’ll make, without lifting a finger (well, other than managing your money, of course).

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    Sure it’s important to have a good job.  But it’s even more important to be investing your money, no matter how much you’re making.  If the goal is financial security and freedom, it doesn’t take rocket science; just a little discipline and sacrifice early on.  And what you’ll gain is so much more than what you could buy today.

    One last note:  $1 at age 18 can’t get you more than a coke, or maybe a dollar menu burger.  But $1 at age 18 is worth $54 at age 60 (assuming 10% again).  Keep that in mind the next time you stop at Starbucks.  Your cup of joe is actually taking more than $150 out of your retirement fund.

    Spend wisely.

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    Photo Credit: aresauburn

    More by this author

    Ibrahim Husain

    Ibrahim is a management analyst who writes about communication tips on Lifehack.

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    Last Updated on May 12, 2020

    8 Steps to Continuous Self Motivation Even During the Difficult Times

    8 Steps to Continuous Self Motivation Even During the Difficult Times

    Many of us find ourselves in motivational slumps that we have to work to get out of. Sometimes it’s like a continuous cycle where we are motivated for a period of time, fall out and then have to build things back up again.

    There is nothing more powerful for self-motivation than the right attitude. You can’t choose or control your circumstance, but you can choose your attitude towards your circumstances.

    How I see this working is while you’re developing these mental steps, and utilizing them regularly, self-motivation will come naturally when you need it.

    The key, for me, is hitting the final step to Share With Others. It can be somewhat addictive and self-motivating when you help others who are having trouble.

    A good way to have self motivation continuously is to implement something like these 8 steps from Ian McKenzie.[1] I enjoyed Ian’s article but thought it could use some definition when it comes to trying to build a continuous drive of motivation. Here is a new list on how to self motivate:

    1. Start Simple

    Keep motivators around your work area – things that give you that initial spark to get going.

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    These motivators will be the Triggers that remind you to get going.

    2. Keep Good Company

    Make more regular encounters with positive and motivated people. This could be as simple as IM chats with peers or a quick discussion with a friend who likes sharing ideas.

    Positive and motivated people are very different from the negative ones. They will help you grow and see opportunities during tough times.

    Here’re more reasons why you should avoid negative people: 10 Reasons Why You Should Avoid Negative People

    3. Keep Learning

    Read and try to take in everything you can. The more you learn, the more confident you become in starting projects.

    You can train yourself to crave lifelong learning with these tips: How to Develop a Lifelong Learning Habit

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    4. See the Good in Bad

    When encountering obstacles or challenging goals, you want to be in the habit of finding what works to get over them.

    Here are 10 tips to make positive thinking easy.

    5. Stop Thinking

    Just do. If you find motivation for a particular project lacking, try getting started on something else. Something trivial even, then you’ll develop the momentum to begin the more important stuff.

    When you’re thinking and worrying about it too much, you’re just wasting time. These tried worry busting techniques can help you.

    6. Know Yourself

    Keep notes on when your motivation sucks and when you feel like a superstar. There will be a pattern that, once you are aware of, you can work around and develop.

    Read for yourself how the magic of marking down your mood works.

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    7. Track Your Progress

    Keep a tally or a progress bar for ongoing projects. When you see something growing, you will always want to nurture it.

    Take a look at these 4 simple ways to track your progress so you have motivation to achieve your goals.

    8. Help Others

    Share your ideas and help friends get motivated. Seeing others do well will motivate you to do the same. Write about your success and get feedback from readers.

    Helping others actually helps yourself, here’s why.

    What I would hope happens here is you will gradually develop certain skills that become motivational habits.

    Once you get to the stage where you are regularly helping others keep motivated – be it with a blog or talking with peers – you’ll find the cycle continuing where each facet of staying motivated is refined and developed.

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    Too Many Steps?

    If you could only take one step? Just do it!

    Once you get started on something, you’ll almost always just get into it and keep going. There will be times when you have to do things you really don’t want to: that’s where the other steps and tips from other writers come in handy.

    However, the most important thing, that I think is worth repeating, is to just get started.

    Get that momentum going and then when you need to, take Ian’s Step 7 and Take A Break. No one wants to work all the time!

    More Tips for Boosting Motivation

    Featured photo credit: Japheth Mast via unsplash.com

    Reference

    [1] Ian McKenzie: 8 mental steps to self-motivation

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