If you could, what ideas would you pass down to your younger self? What if you could talk to the 15 year old version of yourself -Is there something you could say that would change your financial fortunes?
Here are 5 thoughts I’d share:
Disclosure: Based on personal opinion, not to be taken as advice. Seek a professional if required.
Money Isn’t Real
The first, and most important, lesson one can learn about money is that it isn’t real. It’s not a natural force which converts paper into fruit, or shiny coins into chocolate bars. Money is a tool which was fabricated to create an orderly market. It also sets barriers for those people who live under its application.
Money holds no value but the value the participants agree to assign it. -Further, the agreement was reached long before your birth. You are a co-signer by your mere presence.
The fiction of money holds a differing value, and this is normally dictated by your position in society. So, when I was ‘poor’, money was best represented as the barrier between my hunger pains, and the food in the shop. Now I am ‘lower middle class’, it represents the number which I must create each month in order to pay the bills. To some more well off, it may represent great opportunity in lifestyle and influence. To institutions it represents control and management of the system.
It is created on a screen. It is an agreed-upon fiction.
Things can be converted into money, at which point the ‘thing’ remains real, but the value is exchanged into fiction. Such as the value of an automobile purchased with a loan, or a house purchased with a mortgage, or a share of a company’s value (investments). All fiction, which the benefactor hopes to revert back into a substantive ‘thing’ at some point in the future.
Money in a board game holds the same value as money from a bank, if we agree it does.
Money isn’t real.
Money Is The Measure Of Time
For most people, money represents the value of their time -according to the person they sold their time to. How much do you get paid an hour? That is the agreed upon value of your time on earth.
If you pay somebody else to provide a product or service, you are paying them for time:
How much time did it take to make your glasses? The optician checked your eyes, which used their time. They also spent time studying how to check your eyes. They, in-turn, must pay the glass maker who uses time to create the glasses from source materials. Who in-turn must pay for the source materials. This concept is only lost once the logic-line hits the actual source material. That ‘thing’, that object, which holds value in-and-of-itself. It is useful without money. In the modern world, there is a disconnect because the ‘market’ sets the value of that item based on ‘supply and demand’.
For us, fortunate enough to live on this side of the disconnect, money is the measure of time. Most notably, our own.
Money Doesn’t Equate To Value
Your importance isn’t based on your wealth.
This is a tricky one, because we live in a society which is structured to provide you with a real sense that you should look up to those with money. That, by having money, an individual is somehow better than you. It is a fallacy which benefits those with money.
It doesn’t stop the worship of money, which is present in near all central medias.
People like to believe in the ‘not me’ syndrome. They like to weigh up their character traits against someone who is considered somewhat unworthy. But this too is a fallacy.
Given the same life, the same environment, the same opportunities, the same parents, I’m willing to bet that 95% of the people considered unworthy, would behave in exactly the same way as those that judge.
Money can equate to a better environment, better opportunities and even better parents, but it does not change the value of the person.
Like it or not, most of us are the same, just with different input -and money doesn’t change that.
Compound interest is the addition of interest to the principle sum: It is interest on interest (WIKI).
In most cases, this financial force is used against you, say in a mortgage or a loan. It means that it can take longer to pay back a debt because the debt is actually growing.
Knowledge of this simple fact empowers you to break the cycle by over-paying. Most banks let you over-pay, and these over-payments can reduce the principle, in-turn, reducing the amount that interest can be based upon.
Over-payments can reduce the length of a loan or mortgage, and reduce the total amount of money you have to pay on that debt.
Most debt calculations are made with the minimum payments, or agreed-upon payments, in mind. So they tend to project longer terms with more interest to pay.
We over-paid our mortgage and saved thousands of pounds. Understanding how compound interest works was the key to making that decision.
Compound interest also works the other way, with you making more money from investments, due to its nature.
Think For Yourself
Life in the modern world is much like a race. You start at whatever point fate provides for you. The finish line is best represented by happiness. Happiness for you, may involve/require money. If it does, and you need lots of it, you have to study for yourself, and think for yourself.
The mainstream is not the best place to seek advice on any subject, especially money.
Financial institutions are constructed with the mainstream in mind. They are successful because of the mentality displayed by the mainstream. The monetary world operates in the way it does because it can rely on the fact that most people don’t have a clue. Harsh as it may sound.
I would tell my younger self to ignore any financial advice coming from any person locked into the system.
Learning to love clothing brands, modern technology and the bright lights of modern entertainment, is not conducive to good financial sense.
While a wealthy person may exhibit these traits and still be wealthy, a poor person who emulates these behaviours will still be poor.
Study, research and work it out for yourself.
You care the most about you and your circumstances. You should think for yourself.
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