One of the things that separate the poor from the rich is how they think about money. Money lessons are not taught in school and that is the reason why most people go their whole lives without proper financial education. What most people know about money comes from their upbringing and many random searches on the internet. But this is not the right way to learn about money and quite frankly money is too important in our lives to be left to chance. Sadly, very few people possess the money knowledge they need to succeed financially so here are 7 money lessons to get you started!
Lesson 1: You can never have enough money
The first lesson you need to learn about money is that you can never have enough of it. Think of it this way. Why do the world’s richest people still work for money? Why do people who seem to have all the things they need still want to make more money? The simple answer is that they can never have enough money.
When you make enough money that can meet your current needs, you start thinking of more. You want a new house, a new car, or new furniture. While it is good to improve your living, this mindset can affect you in so many ways.
First, you believe that your happiness and fulfillment in life comes from the amount of money you make. When the amount goes up you become happy. But when you lose the money you feel unfulfilled and dissatisfied.
You can never achieve the goal of making more money. Once you meet your present goal you have to set another one. You may start to compare yourself with others and at the end of the day feel dissatisfied. There will always be someone richer than you. And if you are comparing yourself to others, you will want to make more money to be better than them. You have to decide where your real value lies. And your real value is in yourself and never in the money. You can never have enough money. Nobody can ever have enough money.
Placing value on money will put you in an endless circle of frustration. You have to decide to be happy with whatever you have. This mindset will help you to stop chasing money and focus on things that will make you happy.
Lesson 2: You can make money while you sleep
Warren Buffett once said, “if you don’t find a way to make money while you sleep, you will work until you die.” The truth is that you can never make all the money that you need to be financially free working for it. You need to have a way to make money even while you sleep. I know that sounds like a fantasy or maybe a cliché you have heard so many times but it’s true. This is not just to motivate you but to change your mindset to see the possibility of making more money while you sleep.
You cannot keep living from paycheck to paycheck without having extra money at the end of the day. You must plan for the future by saving money and investing. This is possible when you can create a system that can make money for you while you sleep. What this means is that you have to create a system that can work almost automatically. That is, requiring little or no involvement from you. This is called passive income. That way you can use your time for other important things and still be guaranteed that you will make money.
Here are a few ways that you can earn money while you sleep and grow your wealth to new heights. The first, is for you to invest in real estate. Real estate can bring you rental income if you rent out your property. You can also invest in real estate to sell when the value increases. You can become a shareholder in successful companies by buying their stocks where they pay you interest in form dividends. You can also write a book and publish it to make more money. You only need to invest your time to write the book once and you can make money from it for a very long time.
Lesson 3: You can earn outside your 9 to 5 job
Gone are the days when people just relied on having a 9 to 5 job. In fact more than ever people are dipping their toe in the entrepreneurial waters. Now, I’m not asking you to quit your 9 to 5 if you already have one or become an entrepreneur. I’m only saying it is not good to put all your eggs in one basket. Having an alternative source of income is not just an option, it is a necessity that you must consider. This is one of the money lessons that you would never learn in school. In school, you were groomed to be an employee who will depend on a paycheck. Don’t get me wrong, it is good to go to school and get a good job. People are happy doing their 9 to 5 job but you should consider adding an extra source of income.
There are endless possibilities to what you can do to make extra money. There are also no limits to the number of extra sources you can add. I will explain some ways to earn money outside your 9 to 5 job.
The first on my list is dropshipping. You’ve probably come across this on the internet and may be wondering what it is. Dropshipping is when you set up an online store with different products with the intention of selling physical products. However, instead of holding inventory, you are sending your sales items directly from your vendor to the end customer. Other things you can do include creating online courses, writing ebooks, start a blog or a YouTube channel, or sell physical products.
Lesson 4: Having money can change you
There is a saying that you don’t know who you are until you have money. Having money usually affects your behavior and can change you, and sometimes not for the better. When you have money you become more independent. You can easily buy the things that you need. While this is a good thing studies have found that money usually makes people become more self-centered. That is, they care less about others and in turn focus more on themselves. Although, this is not always the case as there are many rich people who give to charity, help developing nations and also contribute to the welfare of others. However, having more resources than your peer, which in this case is money may change how you act and perceive those around you.
In fact, having money often make peoples become louder and ruder. They want to spend all day talking about themselves and how great they think they are. They often see others who do not have money as having lesser skills and talents than they are. Money is not a bad thing you just need to understand that it can change the psychology of the one who possesses it.
Lesson 5: You must make your money work for you
The rich make their money work for them while the rest work for their money. How do the rich make their money work for them you may be wondering? The rich invest their money in things that make more money. The simple answer is they invest. Investment means forgoing the use of your money now for interest later. The first step to making your money work for you is to clear off your debts. You can’t be living in debt and make reasonable investments. Know how much you owe and set a goal to clear that balance.
The next thing you should do is make a budget. A budget will help you cut out unnecessary spending and save more money. Set aside a portion of your money for saving and investing every month. Have an emergency fund that can take care of you in case anything should happen. This should be about 3 to 6 months of your earnings. Invest your money in things that are profitable like real estate and the stock market. The greatest investment that people rarely talk about is investing in yourself. Invest in knowledge and understand how money works. Talk to a financial advisor or take a course on money.
Lesson 6: Bank accounts aren’t as safe as you think
Since the start of time, saving money in the bank has been considered the safest thing to do, but is this still true? Saving your money in your bank account is not really as safe as you think. You can easily add money and withdraw money from your bank account and even earn interest on it. However, there are several disadvantages that come with it.
The value of the money in your savings account will not be the same when you want to withdraw it. This is because the interest rate on money is usually too low. The rate cannot cover up for the high inflation rate thereby making your money have lesser value when you want to withdraw it. Keeping your money in bank accounts means that you must keep a certain minimum amount and also pay charges for your money. So you see, bank accounts aren’t as safe as you think.
Lesson 7: Investing with the masses means you are too late
You should never be tempted to invest when other people are investing. Don’t invest your money just because you see a ton of others investing at that time as this will probably make for a poor investment decision. When you are investing with the masses, it probably means you are too late and the profits you aim to gain will never come to fruition. The right time to invest is usually when others are not aware. Be an early investor and not a late bird. And when others have invested do not panic. Do not succumb to the fear of missing out. People don’t like missing out on interesting deals but when it comes to investing, FOMO is a big deal and can make you invest on emotion and not on reason.
When others are panicking and selling their investment, that should be the time that you should take advantage. Know that the market will always fluctuate. That means the investment that has little value that others are selling off will still increase in value. Learn to be patient when it comes to investing. Think of it in the long term because that is where the real profit is. Great investors don’t invest with the masses. They are afraid when others are not and they are not afraid to buy when others are.
You can’t make money if you do not understand how money works. And if you make money without understanding how it works, you won’t be able to keep it!