This post is all about personal finance for beginners
Money is a topic that we all deal with in our daily lives. Money is what allows us to pay for our basic needs, including water, electricity, food, housing… as well as acquire any material thing we desire. But if money is such a big part of our lives and what allows us to live a comfortable life, how is it that we know so little about it?
From the moment we start working or exchanging our time and services, money is put in our hands, although at no time in our lives has it ever been explained to us how money works, how to manage it in the most efficient way, or even what money is.
But why is that? Because ignorance makes us more prone to make stupid mistakes that we could avoid with a little knowledge about money and how to manage it, mistakes even of the smallest kind, but which greatly determine whether we spend our lives as slaves to money or whether we use it to live, to improve our lives, to live our dreams.
Did you know that in the United States 68% of the population lives from paycheck to paycheck, while in the U.K. about one-third of the population wouldn’t be able to survive more than one week without being paid?
Did you know that the U.S. population has approximately $1.3 trillion in student debt ALONE? To give you an idea of how long this is, 1.3 billion seconds is equivalent to about 41,222 years.
Moreover, the average person in the U.S. has about $60,000 saved for retirement. To give you an idea of how insufficient this is, the average person in the U.S. needs between $10,000 and $20,000 a year to cover their basic needs, which means the average person could survive for about 4 years on the money they have saved throughout their life.
If you look at history or even the people around you, you will realize that the way we have been “taught” to handle money is actually making us a slave to the system, we have been taught to live from paycheck to paycheck, month to month, to cross our fingers and hope that our retirement paycheck and the little we have saved with our sweat and tears will sustain us once we retire.
But it is about time that we open our eyes and realize that this is no way to live, that for generations we have been making the same mistakes that lead us to live in poverty, both monetarily and mentally. It is time for us to realize that the beliefs about money that have been taught to us since we were children are FALSE. It´s time to change the way we manage our money and finances if we ever want to aspire to live in abundance and become finally free, instead of being slaves for the rest of our lives.
The good news is that this trap we are falling into and call life has an escape, and that escape is knowledge.
That is why financial intelligence and knowing how to manage your personal finances is so important.
So, what can YOU do to escape this trap, to avoid becoming a slave to money and the system, what can you do to learn to manage your money to live, instead of working to live?
Here are the answers…
What is money?
The first thing we should understand to learn about personal finances is what money is.
Money is globally recognized as an exchange system and it works based on the value accepted generally by government nationally and through foreign exchange internationally.
The value that money has is willingly decided by a displayed value.
In other words, the primary function of money is to be used as a generally recognized medium of exchange that people and global economies accept as payment for transactions, and which value is also decided by this governmental economy.
If you want to learn more about money and how it works I highly suggest you to watch the documentary “The hidden secrets of money”!
How are being programmed to live in poverty and scarcity
The problem with materialism. How materialism makes us poorer and unhappier
I’m sure more than once you’ve noticed that a new cell phone has come out on the market and in less than a week everyone has already bought it and is talking nonstop about it. Or that most people have a million other things in their possession that they barely use, but that they buy because why not, one more thing to add to the list of things I own.
But where does this materialism come from? Where does all this need to compete with each other, to always be on the cutting edge, to have the newest car, the most expensive phone, the biggest house, the highest salary, come from?
Could it be because since we go to school we are taught to compete with each other through our grades, our exams, our tasks? The school system teaches us to be individualistic and to strive to be the best in order to excel. This ends up creating a lot of negative influences and beliefs that stay with us for the rest of our lives, one of these being the need to compete with those around us, to stand out, to be seen as the best either through our jobs, our houses, our clothes, and a million other things.
Or it could be caused by the marketing that governs today’s market, marketing that appeals to our need to feel accepted and included by our society.
Could it be that this materialism comes from the fear in our brain that we have had for millions of years, a fear that makes us do anything necessary to integrate and be accepted by our people because in the past this ensured our survival?
Because being alone and an outcast meant having fewer chances of survival?
We buy things we don´t need with money we don´t have to impress people we don´t care about.Will Smith
Negative beliefs about money
The truth is that most of us have very big baggage of negative beliefs about money that end up affecting our opinions about it and ultimately how we treat it.
But what is a belief? And most importantly what are these beliefs and where do they come from?
Beliefs are repeated ideas that influence our thoughts, decisions, behavior, actions…
Now as to where these beliefs come from, it is different for each person.
It depends a lot on the environment in which you grew up if money was a taboo subject among your family if it has always been seen as a problem or something to worry about…
Although there are also many of these beliefs that have been taught to us universally for example through religion, which is guilty of as an example the belief that money is a sin, that if you are rich its because you are stealing or taking away from others, that the rich are evil and greedy people…
Here is an article that goes more in-depth about how beliefs are formed and what you need to do to identify your limiting beliefs and change them into empowering ones!
Do you know which is the highest expense a person has, the one that takes the most money out of his/her pocket?
I’m sure the first thing that comes to mind is your mortgages or your bills, but the truth is that what takes the most money out of your pocket is taxes. And the harsh reality is that, believe it or not, the lower class pays the most taxes.
Did you know that an employee pays around 40% of his salary in taxes?
Meanwhile, small business owners pay an average of half their earnings in taxes.
But do you know the percentage of taxes paid by large companies (over 500 employees)? About 20%.
And a professional investor (like Robert Kiyosaki)? The truth is that there are investors who do not pay any taxes at all.
But how is that?
Well, it’s not because these people are making a lot of money or they are cheating. It is because they have learned about personal finance and the laws that govern money and the system that controls it. Something you must learn if you want to stop living in monetary and mental scarcity. It’s not about what you do, it’s about the mentality you have.
Why do you think big companies pay so little taxes compared to employees or small business owners?
Because they are doing a job that the government is interested in and benefits them enormously. And that task is to create jobs, in fact, the more jobs you create, the fewer taxes you have to pay.
And since they are doing a job that is in the government’s interest, they incentivize them with tax breaks.
Because the tax system was created to benefit the producers (big companies, professional investors) instead of the consumers (employees, small businesses, etc.).
What can you do to escape this
Now that you know all the different ways in which we are being programmed to live in scarcity and to be a slave to money and the system that controls it, what can you do to escape this trap ad fix your relationship with money?
Change your negative beliefs about money
Remember what we talked about how negative beliefs can massively influence the relationship you have with money? Well, now is the moment to change or neutralize those beliefs. And in order to do this, I want to share with you one method you can start using today:
- The first step of this method is to identify any limiting beliefs you may have by simply becoming aware of your thought
- The second steps is to once you have identified a limiting beliefs write it down on paper
- The third step is changing that limiting belief into something positive, useful, and changing it around.
Let´s do an example to ee this process more clearly.
Say that you have a limiting belief about money, that sounds something like this:
“Wealth cannot be achieved without effort and sacrifice”. We could turn around that belief by saying instead: “ if I dedicate myself to what I like, there is no room for sacrifice”.
- The fourth step is to internalize and change that belief. Every time that you catch yourself saying that limiting belief, stop and instead repeat to yourself the positive affirmations you changed that belief into.
So instead of letting ourselves think that to achieve weañth we have to work hard and make sacrifices, we say to ourselves “if I dedicate myself to what I like, there is no room for sacrifice”.
If you want to go more in-depth about how beliefs are formed and what you need to do to identify your limiting beliefs and change them into empowering ones, click here!
Learn to see money for what it really is
Even though we are so used to seeing money as an incredibly valuable thing because it allows us to acquire anything we desire and have access to basic resources like water and electricity which make our lives better, do you want to know how much is money actually worth? NOTHING, ABSOLUTELY NOTHING.
Money, as we saw earlier is something we globally agreed on to use as an exchange system, but the truth is that our money nowadays is just a piece of paper with numbers on it, just that.
In ancient times this currency used to be something that was valuable for our society such as salt or precious metals.
But the reality is that our currency today is literally paper.
And learning to see money for what it really is will help you one to identify negative ideas and two to gain perspective about the importance and the headache (in many cases) that money is, instead of seeing it as a tool in your life to help you achieve your biggest dreams, to fulfill your purpose, to live life in abundance.
Learn about personal finances
Knowledge is power, and this is one of the cases where this phrase applies to the letter. Learn about personal finance, and make it a subject to learn about throughout your life, because the more you know, the more control you will have over your money and the smarter decisions you can make to make money work for you, instead of spending your time and energy working for it.
Thank you so much for investing your time in this article. I hope the tools, tips, and exercises found here will help you to open your eyes t the reality we are living and with your personal finance journey. Now you have the tools you need to go out and start managing your money and making smarter decision with it to live the live of your dreams and achieve your financial freedom!