Dealing with people and money is an interesting business to be in. First of all, we all deal with money. If you are reading this post, I’m guessing that there is a 100% chance that you have bought or sold something. . . with money. Now I’m not going to get into some deep philosophical conversation about the economics of how money is created. If you want that, take Econ 101 (it is surprising how few people actually paid attention and understand basic economics).
The point is this. . . money is important. It is the lifeblood of our modern society. It is crucial to the function of our daily lives. How we view the function of money in our lives has a huge impact on how we live and view the world.
So it shouldn’t be a surprise that given the diversity of the world, there is a huge variety in the way different types of people view and deal with money. One obvious difference comes from your socio-economic status growing up. If you grew up in a wealthier family, it is likely you approach handling money quite differently than if you grew up poor. City dwellers often handle their finances quite differently than those in rural areas. Certainly there are differences in cultural approaches to money. Men and women who are married will certainly tell you that there are gender differences in handling the finances. And age can be a big factor too. Those in the “greatest generation” see money quite differently than millennials.
There are just so many differences when it comes to people and money. How do we handle them? Well, let me start by saying that there is no one right answer, but there are some basic principles that have proven out over time.
- Live within your means.
For many, this is easier said than done, especially if you’ve grown up accustomed to having debt and making monthly debt payments. However, one of the most powerful things you can do to help ensure your long term financial security is to 1) know what you earn, 2) know what you spend, and to make sure that 1 is always > 2.
- Pay yourself first.
One of the hardest things to do is to start paying yourself first. That is because it feels like you are intentionally giving yourself a pay cut. However, once you get it started, it’s one of the easiest things to keep going. That is because you get used to living on less. You adjust your lifestyle to accommodate your savings habits.
- Don’t put all of your eggs into one basket.
In other words “diversify.” This applies not just to investments, but to all areas of your life. Don’t become overly reliant on one person, institution, income source, etc. so that if you lose them, they cause a catastrophic impact on your life.
- Be prepared (The Boy Scout motto!).
Those in Houston, Texas and the Florida peninsula are feeling this especially hard right now. As much as we think we are prepared for a disaster, there is nothing like the real thing to show us just how ill prepared we actually are. That said, deliberately preparing is always better than waiting until the last minute. This principal also applies to both packing for travel and your estate planning. Do yourself a favor and think ahead!
No matter what your past perspective and relationship with money, these basic principles have served people well over time. There is a good reason they have become well-worn clichés.
These are some of the ones I learned and put into practice as I grew up. I’d be interested to learn what catchy financial phrases you’ve applied in your life?