Many people bury their heads in the sand when it comes to personal finance. I’m fortunate I have never been one of those people. Growing up in a household where the standard of living is best described as comfortable, helped. Yes I didn’t have that go kart or minibike I lusted after as a kid. I did, however, have three meals on the table, good clothes and a solid education.
From my early days I loved counting money and specifically coins. I would do a regular money stocktake. Things haven’t changed much either. Only now I have a net worth spreadsheet that is updated each month. A topic for another day.
You need to understand the concepts around money.
I’m saying you don’t need to understand monetary policies or micro and macro economics. You need to understand the concepts around money. Be comfortable talking about money. It is not some super secret thing never to be mentioned. Like everything, there is a time and a place. Unfortunately social media has turned this into a bit of a sideshow and now it’s not so much talking about money. It’s more about showing how much you have and how you are spending that money.
Most people can achieve their wealthy life without knowing that a credit default swap is a type of derivative. It is important to understand some basic concepts. The most basic of all is to spend less than you earn. This creates a surplus not a deficit. Another good one is the long term effect of compound interest.
Both of these can be understood by anyone with the most basic of maths knowledge. Many of them apply to other parts of your life. For example, maintaining a healthy weight means using more kilojoules than you eat. Once you begin to understand the basic concepts, then you can move on to others requiring a greater level of understanding.
Taking action to get the life you desire does not revolve around whether your bank balance is going up or down. The first step is to think about how you think about money. In basic terms, money is a means to an end. It gives you the opportunity to do things. Be it buying food, going to a concert or travelling to a foreign country.
Some people look at others with more money than them and think they must be arrogant, criminals or perhaps trust fund recipients. They view these people in a negative light. So in the backs of their minds they don’t want to have a lot of money because they will be perceived the same.
This is such a limiting belief. If you find yourself in this situation, be aware of your thoughts and when you feel yourself thinking that way, change the way you interpret the situation.
I once found myself in this situation, although I was on the receiving side of the comment. I’ve always loved cars. I bought my first decent sports car when I was in my early 30s. At the time I also had bleached blonde hair. Hey, remember, don’t judge! Stopped at a traffic light the person next to me asked what type of drugs I sold. His immediate thought upon seeing a young person driving a high end sports car was to assume criminal activities. He didn’t see a goal driven person who achieved success by applying themselves and working hard.
Some of this can be a cultural thing. The above was in Australia where there is the tall poppy syndrome. If you get too successful, you will be cut down to size. In the United States I have been complimented on a similar high end sports car. More of a well done attitude.
- Are you conscious about your thoughts about money?
- Do you understand the basic concepts?