Personal Finance Lessons You Wish You Had Learned in School – Part I

Did you know that the number one cause of stress is money? According to several studies, more people worry about money compared to health, family, work or relationships. This is true regardless of age, citizenship, gender or educational attainment. Although financial stress is expected among low income families, it is puzzling to note that even high income households and highly-skilled professionals still do worry about money. A diploma on a prestigious university is never a guarantee of wealth.

There is only one explanation to all this, that is, most people do not have a better understanding on how to handle money. The result, more and more people are getting enslaved to money and debt. This kind of financial situation is called a rat race. There are many reasons why people are stuck in the rat race but the underlying reason is always financial illiteracy. After all, it is hardly taught in school.

Without any formal personal finance instruction in our high school or college curricula, many college seniors who graduate in the red continue to make common financial mistakes that only exacerbate their debt burdens. – Alexa Von Tobel

Not all will be in the rat race. According to statistics, out of 100 persons who will retire, 3 persons will be comfortable and one will be wealthy. These 4 persons out of 100 made it because they had to learn the hard way. How about you? What will your retirement look like?

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Statistics show that only 4 persons out of 100 will never have to worry about money upon retirement.

These statistics would have been better if only we learned how to handle money in school. Here are 5 personal finance lessons that you wish you had learned in school:

1. Money is Just a Tool

Mindset is the single most important thing that makes a person rich or poor. Thus, personal finance lessons should always start with instilling the proper mindset. Our mindset is a product of our environment. It is our belief based on what our parents and teachers taught us. Do You Have a Millionaire Mindset or a Poverty Mindset?

In order to be wealthy, you got to think like the rich. One of the ways in which rich people think differently is the way they view money. For the rich, money is just a tool.

Have you heard of the saying that “Money is the root of all evil”? Most people believe that money is something bad and that rich people are greedy. This belief came from misconceptions on some bible passages. It is not money per se which is bad; rather, it is the love for money. It is people’s attachment to the trappings of wealth that makes it bad. Money should be viewed as just a tool, not as something negative. If you have money, you will be able to buy things that you need and want. Money can also be used to help other people.

2. Money Buys Choices

Money does not buy happiness, what it does buy are choices. With money, you will have unlimited options. You can choose the job that you want, where you are going to live, what car do you want to drive, where do you want to go and how you are going to spend your days without constraints and worries. In short, money gives you freedom to choose.

3. There are Other Streams of Income Aside from a 9-to-5 Job

Since young, we have been programmed to do the following:

  • Study Hard.
  • Get Good Grades
  • Get a Degree from a Prestigious University
  • Get hired into one of the Top 500 Companies
  • Climb the Corporate Ladder
  • Save Money
  • Buy your Dream House and Car
  • Retire and Receive Retirement Money from Company

There is nothing wrong with this formula except that it is NOT the only roadmap to success. There are many other streams of income aside from being an employee. You can earn a living by starting your own business. You can earn from different kinds of investments. Nowadays, you can even earn money by becoming a professional blogger, YouTuber or online gamer. There are endless possibilities available out there.

4. You can Make Money Work for you

We are taught various skills in school. Most of them are catered towards the specific field of your choice. As an engineering student, you are taught technical and problem-solving skills. As a student in the medical field, you are taught about the human anatomy and physiology and illnesses. As a law student, you are taught about the laws and legal issues. After school, we are equipped with all these technical skills but how many are really ready for the real world?

Aside from your area of specialisation, did you learn about money management? How about credit and investing? Unfortunately, these are crucial finance lessons that you need to know to be successful in the real world. More often than not, these were never taught in school. As a result, most people ended up working for money when in fact, basic knowledge on personal finance can help you make money work for you through passive income.

How about you? Do you also work for money or do you let money work for you?

5. Saving Money Alone is Never Enough

We were taught the importance of saving money even at a young age. However, did you know that saving money is never enough because of an economic phenomenon called inflation? Inflation is more than just a number. It affects all of us. That is why you should care about inflation.

Inflation happens when there is a persistent increase of the prices of goods and services which will ultimately lead to the decline of the purchasing power of your money. This means that every year the value of your money is decreasing. That is why savings alone is not enough. You need to learn to invest your money too. As a rule of thumb, the interest rate of your investments should be greater than the inflation rate.

Click here for Personal Finance Lessons You Wish You Had Learned in School Part 2.

 

 

 

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