School plays an important role in every child’s development. It is at school that we learn most of what we know and it even influences our future careers. The school system not only teaches us what is prescribed in the curriculum but we also learn life skills such as social, communication, leadership skills, etc.
One of the skills we are not taught at school, however, are financial skills. This, however, should not be mistaken to mean that financial skills are unimportant because being a good manager of your money can keep you out of financial trouble and keep financial distress at bay. That financial skills are not taught in school means we have to ‘fend’ for ourselves and figure it out as we go – some with less success than others.
5 Simple, But Important Money Lessons I Have Learned
I believe that financial skills should be developed from a young age – either by being taught in school or intentional teaching by parents. By teaching our children money management skills at a young age we help them develop good money habits which they will carry into adulthood.
Even still, I believe it is never too late to teach an old dog new tricks. Below I share some of the important money lessons I learned that could be valuable to anyone of any age or financial status.
Lesson 1: Live within your means
The people who break this rule are those who live a champagne lifestyle on a beer budget. Living within your means is the golden rule of money management. If you live by this rule alone you will immediately wipe out your financial stress. Living within your means is about knowing what you can and cannot afford and accepting that you cannot afford certain things, right now.
Living within your means basically means your expenses should never exceed your income. If your income is P10 000 and your expenses are P11 000 then you are not living within your means. Where will the extra P1 000 come from?
Lesson 2: Plan your spending
There are many different ways of budgeting and everyone should have some form of a budget – find a budget that works for you and stick with it. Your budget could be itemized by expense or have main categories e.g. fixed expenses, savings, ad hoc, indulgences, etc.
Tracking your spending is a tedious and boring exercise but it may be necessary to help you see where you can cut or reduce your expenses to bring them in line with your income. If you are living beyond your means tracking your spending is the best way to start gaining control of your finances.
Lesson 3: Avoid unnecessary debt
If you are living beyond your means and refuse to plan for your spending then you will most definitely find yourself always in debt. We are not in debt because things are expensive, life is hard, or are not getting paid enough. We are in debt because we don’t follow lessons 1 and 2.
The extra P1 000 in expenses in the above scenario has to come from somewhere and the only option is DEBT. No matter how bad your financial situation is getting into debt is an option. We find ways to justify why we had to borrow money but the truth is if we are living within our means and planning how we use our money then we would have no reason to borrow money.
Lesson 4: Save, save, save – no matter what
Even if your income is cut in half – or even by 80% – you can still save if you want to. Of course, it is not going to be easy nor will you be saving bucket loads of money but putting something aside, no matter how small, is still saving. Living within your means actually means more than breaking even – it means your expenses are less than your income meaning you have something left to put towards savings.
The thing is, if you have no savings, no matter how small, you find yourself having to borrow money when emergencies arise. Emergencies are guaranteed. So if you know there will be an emergency in the future, why not prepare for it? If you are determined not to borrow saving becomes very important.
Lesson 5: Avoid putting yourself under social pressure
This should be the number one lesson because it is the cause of most people’s financial downfall. As different people we all have different means. This means we won’t always be able to afford what our friends can. If we decide to not measure ourselves (and indeed our worth) by our material things we would gain so much more peace, joy and happiness from within, and that is much more lasting than the happiness we seek from outside.
These important money lessons are necessary if you want to gain financial freedom. Most of us are struggling with our financial situations every day. Financial stress is fast becoming a leading cause of overall stress in our society and we are suffering in silence with no one to help us. Start by trying out these five lessons and see if your financial situation, and indeed your wellbeing, do improve.
Thank you for reading my article. I hope it has helped you and your families journey to more savings. If you or your company need more training or coaching send me an email on [email protected] or give me a call on 72 303 444. Please also have a read of my one of my other articles, Raising Money Smart Kids.