As a child, most of us looked at our parents as the protectors and providers in our lives. This in itself is comforting and by no means a negative thing, however at some point (generally once we no longer have full financial support) we realize what a large roll money played in those little comforts our parents provided. While these realizations can be a bit shocking, it’s the beginning of our journey to understanding how to balance our own finances. Here are 5 things most of us can agree that we learned about money on our journey to adulthood.
1. Cash is king Fortunately, I learned as an early adult that I could save money and buy things with cash when I didn't have payments going out every month to Master Card, Discover Card, Citi Bank, student loans, car payments, and any other form of debt that included costly interest rates that an individual could rack up. My number one money building tool in my personal finances was my income. When I got to keep my income instead of making payments I racked up savings and investments rather than debt.
2. Save for a rainy day The sense of security given from having an emergency fund with six months of expenses is tremendous. Having that money stashed away untouched eliminates the stress of the "what ifs". What if my car breaks down, What if I lose my job, What if... Knowing that there is money available if needed adds to emotional security and one less thing to worry about.
3. "Do I need this or want this?" As I got older and started working my way out of debt, I changed my purchasing habits. I started asking myself, "Do I need this or just want it." I would ask myself stuff like, "Do I really need or the just want the unlimited data plan on my cell phone?" "Do I really need or just want new shoes or clothes?" "Do I need or just want to go out to eat when I have a fridge full of food to eat?" Anyone trying to get out of debt should ask themself if it is a need or a want.
4. The power of compounding I remember sitting in my Principles of Finance class my junior year of college while the professor talked about componding interest and showed us charts on the amount of money that can be saved by making long term investment. It blew my mind. Before that point, saving money and being any kind of wealthy seemed somewhat unattainable, but using the power of compounding, a steady income, discipline, and time I can say that it is possible. Go to any compounding calculator. For a couple hundred bucks a month over thirty-five years and some conservative but wise investments in mutual funds and stocks averaging about 12% return a year, patience, and discipline you can be a millionaire someday.
5. Give I've learned that it is better to give than receive. When I was a kid and heard somebody say that popular saying I didn't believe them and was focused only on getting my presents. Giving money to church, charities or just someone in need is one of life's most rewarding gestures.
Emily is a financial blogger and a contributing writer for Payday Loans.