I’m writing this in the hopes that it could give you value and that the lessons I learned would push you to change something in your life that doesn’t work. I am by no means a perfect person, so the things I’m sharing is not perfect and may not make sense to you.
Money is becoming an important topic nowadays, and I thought why not talk about some things about money.
Money is A Tool
I think many of us are so emotionally tied to money. Once we get money, we have this instinct to immediately spend it on things that don’t make sense just because people are doing it.
I was a victim of this before when I earned my first paycheck. I thought to myself that I’m powerful now since I have money and I earn money. Little did I know that that only unlocked different possibilities and revealed a couple of things about myself.
I learned that I can be a compulsive buyer when it comes to tech or games, and that it’s enabling me in some ways that I’ve never been before.
Money is simply a tool to get to our goals. It doesn’t have emotions. It doesn’t care whether you spend it or not. It doesn’t care if you’re healthy or sick. It doesn’t care if you’re happy or sad. It is an enabler. In the end, it is up to the individual on how they use money.
This is why I hate it when people say, “Money is the root of all evil.” In my opinion, people who say this tend to not know anything about money at all. And I can’t blame them for that. Most of us grew up watching the media saying money is evil, that it is the source of everything wrong that happens around us. Yet the same people who tell us so are using money for their own agendas.
So, it is up to you to understand that money is a tool. Use it to get to your goals. Don’t let it blind you. It’s just like they say, “Make money but don’t let the money make you.”
Money Buys You Time
A lot of us think that the sole purpose of money is to simply just buy things or services. But here’s a truth that I’ve come to realize as I started making my own money: Time is much more valuable than money.
Don’t get me wrong. Both are important. It’s just that as you start to grow older, you realize that you don’t have much time in the world. I’m 25 years young but that doesn’t stop me from thinking about the mortality of my existence.
I think it’s important that we understand that money can buy you extra time in the world. When you have money, you can spend it to hire teachers or mentors who have spent 5+ years in their field, instead of you trying to figure things out by yourself.
If you’re running a business, a charity, a masterclass, a passion project or anything that requires work at scale, money allows you to hire people and leverage their time.
We only have 24 hours in a day, and we don’t have enough hours to work. When you hire people, you actually save time and money in the process. Instead of one person working 8 hours a day, you can have 5 persons working 8 hours a day that results to 40 hours worth of work in just one day.
Now, those 5 persons can even save you more money because they’re probably a lot better than you. Mistakes can be avoided and processes can go a lot smoother, so you can spend more time doing other things that actually matter to you like family, friends, and hobbies.
Compound Interest
Speaking of time, I should have learned this concept sooner, and that is: Compound Interest. It’s this simple math on how you earn interest on your interest. Compound interest is usually found in the world of investing, so let me show you an example.
Let’s say you have $100 invested in an account that generates a 5% return every year, and you’re not going to contribute more or take anything out of that account. On your first year, that $100 will become $105. You earned $5 without doing anything special. Simple as that.
On the second year, that $105 will turn to $110.25. You never did anything special but hold your money inside that account. Instead of simply just earning an extra $5 every year, that interest income is growing as well.
Your interest income is earning from your interest income last year. Your earnings are basically compounding every year. In 5 years, that $100 will have turned to $127.63 — a 27% return on your $100!
I know $27 isn’t a big amount and you can earn that money working for a couple of hours instead of waiting for 5 years, but that isn’t the point here.
The point is that with compound interest, you’re letting your money work for you. You’re not working for money, which is what a lot of people are doing, and why they’re still stuck in the same place.
If you invest your money now, you’re letting it grow over time. And as time goes by, that money will grow at a faster rate than you can ever imagine. I wish I had known this sooner because I would have grown my money a lot. That way, I could’ve done a lot more things that I really wanted to do.
Saving for Retirement
This is probably one of those things that I should’ve looked into before turning 20. I know it’s “too early” for me to think about retirement, but that shouldn’t stop me from doing something about it.
We usually think of retirement as getting old and not being able to work, but that isn’t the exact picture. Retirement could be anything, to be honest. To me, I define it as not working at all yet still getting paid.
Depending on where you are, retirement could have different definitions. In the US, the age of retirement is 65 years old. When people are saving for retirement, they invest money in a Retirement Account. There are different types of retirement accounts with different benefits to them.
And little do people know, retirement accounts aren’t exclusive for old people. You can already open an account when you turn 18 years old. If you’re younger than that, but already want to start saving for retirement, your parents or guardian can open a custodial account.
The sooner you start saving money for retirement, the more options you give yourself when the time comes. Like I mentioned earlier, compound interest is making your money work for you. It’s especially important when you won’t have the ability to get paid for active work, or you just simply don’t want to work, because you’ll have something to fall back on.
Credit Cards & Points
I used to detest credit cards. Just hearing it actually made me cringe when I was young, probably 16 or 17 years old, because I would hear stories of people drowning financially from credit card debt. So I stayed away from getting one until 22 or 23 years old.
But as I started to get into the world of entrepreneurship, making money through other means than the typical 9 to 5, I had to look for ways to fund my endeavors.
I needed to buy equipment and purchase some coaching programs. Since I didn’t have enough money to buy those, plus I was deeply in need because I really wanted to make this entrepreneurship thing work, I decided to apply for a credit card against my distaste of them.
It’s been a couple of years now since I got my very first credit card, which was the Discover It card. And since then, I got another credit card from Wells Fargo (I know. Not the best one. And not the best choice too). But I’ve been doing well with credit cards since.
While using them, I came to realize that you shouldn’t really be afraid of them. Credit cards are a great way to build your credit, which will help you qualify for better interest rates on other debt. Credit score is a very big thing here in the US, so it is important that everyone learn about them as early as they can.
Using credits cards as well is a great way to get free travel, discounts and other perks using cashback rewards and points. Credit card companies give you these benefits so you continue to use their cards.
If I had known that I could use credit cards this way aside from using it to buy things with debt, I would’ve built my credit sooner and have taken advantage of rewards points for free travel.
Admittedly, I only made this realization very recently. I should’ve been using my credit card for my subscriptions as well. This way I would improve my score and get those points on a consistent recurring basis.
Being Rich > Looking Rich
Many teenagers fall into this trap, especially because of social media. Before I turned 20 and started making money, I wanted to buy all the clothes that would look good on me. Whenever I find something on a store or online that I found nice, I would buy it right there and then.
Buying those nice clothes made me feel like I was confident, powerful and rich enough that I could impress others to think that I was living the life they want.
But what’s the point of that? Why do I need to impress others I barely know or don’t add value to my life? Why buy these things that would make me look rich for a short time, only to throw or give them away when I don’t want them anymore?
As I continued to learn about personal finance, I realized how wasteful that habit was. It wasn’t fruitful. It made me happy in the moment in exchange of future wealth. It wasn’t worth it. Clothes, shoes, accessories are nice to have to make you feel good, but they don’t last.
At the end of the day, you’re going to throw or give those things away. I realized that it was okay to buy clothes or other luxuries if I had the capacity to do so. If I was rolling in money, yes I would do it too. But I wasn’t.
So now, I run on a frugal and minimalistic mentality when it comes to clothing. I would only buy clothes probably once or twice every six months. And when I do, I’d be buying during a sale, at the clearance section of a store or at a thrift shop like Goodwill.
People like Warren Buffett, Bill Gates, and Mark Zuckerberg are all billionaires who really don’t care about what they look because they understand that their clothing isn’t what makes them successful. It’s been known that Mark Zuckerberg and Steve Jobs wear the same clothing because it cuts the time for them to make a decision on clothing.
I’m not against buying clothes or anything fancy. If that’s what you want to do, go do you. That’s your money to spend. All I’m saying is that my mindset on clothing and money has changed since then. You can still look good without emptying your wallet, and knowing that you are rich is actually a lot cooler than looking rich.
No Money, More Problems
You’ve all heard the saying, “More Money, More Problems,” and there is some truth to that. The more money you have, the more things you have to think about in order to keep the money or make the money.
For most people, when they start to make more money, they also start to increase their expenses in order to match the supposed lifestyle they need. This is what we call lifestyle inflation. And people relate having more problems with having more money because of this.
However, a close relative to this saying is even worse, and that is, “No Money, More Problems.” It’s a simple change but is very big in meaning.
While having more money can bring you more problems, you’re in a worst position if you have problems but have no money at all. Can you imagine having problems at home, then you have medical bills, student loans, car loans and other financial responsibility, but you can’t take care of them because you just simply have no money to spare?
That is the truth that I’ve learned about money. We all need it. Most of us are simply ignoring the fact that money revolves everything around us. The lack of money is a source for most of our problems. This ties to what I mentioned earlier as money being only a tool. We should never romanticize being poor because it doesn’t help us at all. Remember that no money means more problems.
Money Attracts, So Learn to Say NO!
A lot of people, especially where I was born, dream of being able to work overseas, especially here in the US because of the abundant financial opportunities you can pursue.
However, when I started making money here in the US, things started to change. Aside from the mindset change, I noticed that there are people who started gravitating towards me. These are not bad people by any means, but it drives my point that money attracts different things towards you.
There were those who asked me for money simply because I was earning dollars. While I wanted to help these people, I realized that this was my money and I decide what to do with it. Plus, I had never planned on giving anything yet to anyone. It’s actually hard to help somebody else when you haven’t helped yourself at all.
So learn to say no to these people if you aren’t comfortable with your ability to help them financially. Because once you say yes, you can expect for them to keep coming back to you.
Now, I’m not just going to talk about people here. I’m also talking about luxuries and other objects.
Once you have money, you can afford things and that opens you doors to more things you’ve never had and have probably never given attention to. One example that I can give you is that certain things become accessible to you only because you have money. This could be a higher credit limit, lower interest rates, VIP access, huge discounts and perks, and the like.
While those sound great, remember that if you don’t need it, don’t get it, especially if you’re still going to pay for them. Just because you can afford it, doesn’t mean you have to buy it. Say no to those things. Simple as that.
I don’t remember where I heard or seen it, but one thing I always think about when purchasing something is the “5 by 5 Rule.”
When you’re purchasing something out of impulse or temptation, pause and think for about 5 minutes if the that item is going to matter to you in 5 years. If it does, then go for it. If it doesn’t, then put the item back and move on.
This is how I’ve been saying no to unnecessary spending and disciplining myself to save more money.
Money is A Means to Happiness
We’ve all heard that saying: Money Can’t Buy Happiness. This is the last point and I’m probably going to get a lot of hate from this, but I believe that money can “buy” you happiness — to a certain degree. Let me explain.
Money, in and of itself, cannot buy you happiness because it’s simply a tool. It’s a piece of paper, a piece of metal, or digits in your bank account. It’s just that. Looking at those things obviously won’t make you happy.
Take a spoon, for example. Do you get happy looking at the spoon? Touching the spoon? Probably, not.
But when you use the spoon to feed yourself, does that satisfy your hunger and make you a little bit happy? Probably, yes.
So money doesn’t really buy us happiness. It’s the meaning of money and having money that makes us happy. It’s the possibilities and opportunities you get when you have money.
Imagine this. Will it make you happy to be able to buy a home for your family? A car for your spouse? An education for your children? Pay the medical bill for your parent’s surgery? Donate to your church or charity?
All those things will certainly make us happy. Money doesn’t have to be limited within our own happiness. Happiness through money exists, not only for ourselves but for others too. Money is a means to happiness, and should it never be used as the basis for your happiness.