It's possible that a lot of the basic money lessons that have been taught to us in school or by our parents have been forgotten over the years. Maybe we've even gotten a reminder of our poor financial choices by the consequences we've had to pay for making them.
Whatever the case may be, there are some basic money lessons that are necessary for our financial survival. So MoneyBuildr has compiled a list of the 7 Basic Money Lessons We Might Have Forgotten:
7. Money represents labor
Money is means to convert the fruits of human labor into paper or coin form. The only way to receive money, besides inheriting it from your family, is to earn it in exchange for your work or service.
The things that you buy with your money represent your labor. So if you are not proud to buy something, then you probably shouldn't, because it is a direct reflection of all the time and hard work you spent earning it.
6. Spending is not the same as investing
There is a huge difference between spending and investing. You only invest in something that you believe will yield you more money over time; You invest with the expectation of achieving a profit. Spending is "paying out" money for goods or services, in which you will not receive a profit or tangible dividend on it later.
Think of it this way: If the item or service you're buying will provide some sort of tangible dividend (such as the ability to stay employed, advance in a career, or sell at a profit later), it's an investment. If not, it's just money spent.
5. Credit cards are dangerous
Unless you are using a charge card like American Express, any other credit card is equivalent to a loan. The bank is loaning you that money so you can make a purchase right away. You will have to pay it back later however, and with high interest, ranging anywhere from 15-25%.
If you have credit card debt than you have debt. Your debt can be calculated by how much money you owe out to all of your credit cards. Do yourself a favor, and try and keep your credit cards to a minimum.
4. There is a difference between wants and needs
Distinguishing wants from needs is an essential skill. Examples of needs are a roof over your head, food and water, and necessary clothing to remain comfortable and appropriately dressed. Wants are anything that is not a necessity, ex. new clothes every week. While you can make a case for why nearly everything on your "want" list is necessary for survival, it most likely isn't.
It is hard to not buy things we want, and instead buy things we need, but if we don't, we can run into a huge amount of financial trouble, and also waste a lot of money.
3. Spend less than you earn
It sounds so simple, yet there are many people out there burying themselves in debt and spending more than they earn, or even living paycheck to paycheck, and spending exactly what they earn.
By spending less than you earn, you eliminate your debts, you begin to save or invest, and your stress level decreases. You are also able to explore new possibilities that may be closed to you if you didn't spend less than you earned. The last thing you want to do, is be like the man pictured above, with all his money spent and empty pockets.
2. Money gives you choices
Having money gives you more choices, which ultimately translates to more freedom. This freedom begins with the first dollar that you earn.
Money gives you the opportunity to explore options that may have been closed off to you before. The choice is yours though to spend or to save. Most people live unconsciously with their money, as if they don't know what to do with it. Money gives you the luxury of making life altering choices like switching careers, moving across the country, starting a business, or retiring early.
1. Money can't buy happiness
None of what I previously mentioned about money giving you choices matters if you have money, and you still feel imprisoned, just as you did when you were young and hungry.
This feeling of imprisonment can be attributed to always "wanting more." To acquiring something that you "wanted," gotten it, and then your on to the next better thing. This feeling of always "wanting more" will never lead you to happiness, because it traps you.