In this post we’re going to talk about 5 money lessons to learn NOW. It’s the new year and it’s time to get smart with your finances!
There are many money lessons that are crucial to learn ASAP because they will save you despair in the long run. If you start saving and investing now, you’ll be in a better position for the future. If you understand what your ballpark retirement numbers are now, you’ll know exactly where you are and where you’re going.
I’ve decided I am going to do a series of blog posts on different money lessons that I believe people should learn sooner than later. The earlier you start managing your finances and helping yourself, the better. You put yourself in a better situation so I hope you enjoy them.
PS if you haven’t been tracking your net worth, sign up for Personal Capital for free here. I highly advise this if you’re trying to improve your financial situation.
5 Money Lessons to Learn NOW
1. Forgive yourself for past money mistakes
I talk a lot about finance, passive income, and investing, and I hear people in the comments of my content wishing they had started earlier, or didn’t spend on so many things back in the day, etc.
Unfortunately we can’t change the past, but if we focus on growing from here on out we can actually make substantial changes in our lives. It’s important to quiet negative messages because if you keep focusing on the past it’s hard to focus on the present and ultimately on learning and growing. These negative messages will hold you back.
Try accepting your past and forgive yourself! It doesn’t determine your future unless you let it.
2. The 4% rule is a great guideline around retirement numbers
The 4% rule is a way to understand how much you’ll need to save and how much you need to withdraw when retired. Theoretically, your investments will increase 7%/year on average and inflation will be 3% per year/average. This means if you subtract the two, you can theoretically pull out 4% and the principle will not dwindle.
As an example, I interviewed this girl named Anita Dhake who retired at 32. After she saved $700,000, she decided that this nest egg was enough to retire off of based on the 4% rule, equating to around $28,000 yearly spending. She put the majority of her savings into Vanguard Total Stock Market Index Fund (VTSAX) which is a pretty safe index fund that pays out dividends. So theoretically, her investment should give her the $28,000 each year that she needs without dipping into her $700,000 principle.
You can use this 4% rule to understand your retirement number and withdrawal number. It’s a great guideline to understand where you’re moving towards so you’re not aimlessly saving and investing with no end or for no reason. However, I would say use it as a framework but not as a set rule. I would go even further than the 4% rule and try to build more passive income streams so that you can fully feel secure in your financial future.
3. Set up autopay for credit cards if you can
Credit card debt is a common issue for people, and it all comes down to paying off your debt so that there aren’t high interest rates. If you set up autopay you can essentially reduce worries and make sure everything is paid off with your card. But that also means you need to make sure you don’t spend more than you should, and it means you need to know how much you currently have as well. You also want to make sure you have a stable income that’s able to pay off your expenses.
I would treat your credit card as cash you would pay out of your bank account right away so that you can set up autopay without worry. Once you set up autopay you’ll have less things on your mind to stress about.
4. Find credit cards that have great rewards
Certain credit cards actually give you solid rewards. Make sure to look for cards that give you cash back or miles and sign up for ones especially that will pay you with your every day purchases. For example, I use different cards for groceries, gas, and restaurants. I signed up for cards that I can use for every situation. Keep in mind, when it comes to opening multiple cards I would definitely make sure you’re organized and have a decent credit score before opening other credit cards. You don’t want to get into a situation in which you’re not paying off your cards and get into crippling debt!
5. Time is the currency
This is a big lesson that many people don’t realize. Time is one of the most important things in life because it’s a limited resource on Earth! Time can’t be made back, but money can. And with most active income jobs you’re trading time for money. It’s only if you start making passive income that money is not based on your hours.
So if your main source of income is a $20/hour position, a $4,000 Chanel bag will literally cost you 200 hours of your life! Is it worth it? That’s something important to think about and will help you navigate how you spend your money and motivate you to make passive income. Understanding that time is the currency is so crucial for your financial decisions.
Conclusion
I hope you enjoyed these different money lessons to learn now. I’m going to be creating more of these posts if you liked this one! There are many money lessons I think they should teach in school but don’t. BTW if you haven’t started tracking your net worth – do it NOW! You need that awareness in order to become aware of your situation and progress in your financial journey. I would highly advise signing up for Personal Capital (for free) as they will automatically sync with your accounts and give you a macro view of how you’re doing financially.
These basic money lessons would help people so much in life so that they don’t have to struggle as much. What do you think about these money lessons? Let me know in the comments below!
