Skip to main content

Fundamentals of personal finance - how you acquire money

Part of bringing some zen to the frenzy, is managing finances. Honestly, I've had to make many mistakes to learn the skill of responsibly managing the household money. Somehow I managed to miss all the lessons in high school about being a responsible adult who cares about budgeting and saving. I guess I should have taken Home Ec rather than pottery, but my mother would have been deprived of pottery that is so ugly it should've been smashed by the teacher the moment it came out of the kiln.

Still, there is a basic concept about money that I wish would have been driven into my thick teenage head. It would've saved me some pain down the road. This is the place I want to start with my children talking about money. There are only a few legal or legitimate ways I know of getting money.

1. Earn it - get a job!

For most of us this involves showing up somewhere and punching a clock at the start of the day and at the end of the day. It may involve providing a service or starting a business or some other form of hustling, but at the end of the day some action you took convinced someone to pay you money.

This one is obvious and I didn't need anyone to point out that I needed to get a job to get money. But there are some very dense teenage heads out there so I'm exploring the obvious.

2. Be given it - you get a push ahead in life.

This is really where most kids start. We rely on our parents to give us money or things that they bought with money. But being children that money is quickly converted into useless trinkets and candy, especially candy that involves getting sugar all over yourself.

Sometimes this is a substantial gift. A college fund or inheritance from an estranged rich uncle... My hopes and dreams of this were crushed when I realized none of my uncles were estranged.

3. Win it - gambling is not recommended, but to be comprehensive...

Don't gamble. It's a long-term losing strategy. If you happen to win money in some other manner, then good for you. Staking your future on making money this way is not a good idea.

4. Save it and invest it - the money you save makes more money!

If you haven't figure it out by now, this was the hole in my education. I wish I knew earlier the power of saving and investing money. And the danger of borrowing it. You can think of your savings as having a second person working to get you more money. At first, it doesn't bring you much. But with time it can grow to earn a substantial sum of money.

There are two things that determine how much of a difference this can make for you. Time and magnitude. The more money you save and the longer it is invested, the more it will grow. Your money can serve you or you can be a slave to your money. Personally, I hope my children take a shortcut on dealing with personal finance. I'll be encouraging them to start early and save what they can.

Of course if you have debt then it may make sense to pay that off first. That depends on the circumstances and I'll cover that in a future post about spending. But if you're starting from the beginning, spend some time to learn about saving and investing. It will pay dividends down the road.

Popular posts from this blog

Instant Pot yogurt - failure and success

Here in the frenzy, we sometimes learn from failure. And sometimes I just make a slightly different mistake on the second attempt. So I previously discussed that I ended up making two changes to my yogurt routine at once, and thus was unable to isolate which was the cause of failure. I decided to avoid too much of a blow-by-blow by doing two more rounds of yogurt so I could actually post something that has a chance of being useful. To recap a bit, I got this heritage yogurt starter: The package comes with two packets of dried granules that look like the bread yeast packets that you put in the freezer. I followed the included instructions to heat the milk, cool it to 110 degrees Fahrenheit and then add the packet. If you read carefully, it also comes with the disclaimer that this may not produce a firm yogurt the first time around but that the second time you use a starter to make yogurt the bacteria would become substantial enough to make yogurt. I decided to hedge my be

We didn't buy a diamond ring and it wasn't about saving money

Early before the coalescence of the frenzy, we had started to form our family values. One of our now well-established family values is that we try to minimize harm caused by what we buy. We don't always succeed but there is one thing we avoided from the very beginning because of the incredible damage it has done around the globe. Buying a diamond ring. This was particularly my hang up perhaps caused by Leonardo DiCaprio's attempt at a South African accent . I would not spend money on a diamond ring. But I also didn't want to seem cheap to my soon to be bride, which was entirely in my head and had nothing to do with what she thought of me. So I started the delicate dance of figuring out if we were in the 100 percent getting married camp while bringing up my ethical dilemma. Luckily, I was not left wanting for clues on this one. It was made very clear that we were indeed in camp and that we should get started on pitching the tent before midnight. I got lucky bec

Fundamentals of personal finance - how to spend money

Here in the frenzy, money goes out the door on a daily basis. The frenzy can be expensive. So we have some experience spending money. However, having experience spending money is different than knowing how to wisely spend money. In an earlier post, I talked about gaps in my understanding of how to acquire money , but I had even more gaps in my understanding of how to spend money. It’s something I am still working on. For the vast majority of us, how you spend money is much more important than how you acquire it. It took me a very long time to learn that lesson. The first part of understanding your spending is to understand what type of spending you are engaging in. This is my personal classification, it may not map perfectly for your purposes but you should go through a similar thought process when you spend money. Expenses that cannot be avoided Some expenses cannot be avoided if you participate in the US economy, and since you're reading a blog on a dusty corner of