I’m always intrigued about financially savvy folks; how did they get that way? What characteristics make them that way? I’m curious since I’m not like that at all. I feel like I usually do my best, but the outcomes aren’t always great, and I sometimes feel like I don’t know how to improve, despite the fact that I read financial books and all that. Most of my learning is largely through books, podcasts, and the internet.
How did they get so adept with money? Do they have a knack for numbers? Are they mathematically gifted? Is their investigation thorough? Are they excellent at maintaining records? Is it a personality trait or something innate? What is their secret?
Someone on Reddit asked these questions, and if you’re wondering, here’s a summary of the replies.
Learn to ignore social pressure
This is by far the most important. Many people, I’ve noticed, fall into the “keeping up with the Joneses” trap. People are under pressure to buy a fancy car after seeing their peers do so. The most essential thing is to determine what is most important to you. A premium car may or may not be important to you.
The most essential takeaway is to ensure that you are spending your money on things that are important to you and not on things that are important to others. This way, your money is at least going towards the things that matter to you, rather than those that don’t.
Financial literacy and excellent financial habits can be taught/learned, but being frugal helps 1000x. Frugality means that if you spend money on something, you should make sure it is the best value for your money, and you should always consider methods to earn money and spend less!
Don’t start replacing what you currently have; instead, make it last. Do you have a television? You won’t have to buy a new television, which is fantastic.
Track your money
Understand where your money goes, strive to save money where you can, aim to grow your money, obtain good value for your money, and be mindful of your spending.
Make a budget, stick to it, and live frugally. Don’t complain if you can’t buy something right away. It’s a mindset, and most of us will have to wait to support our hobbies and interests at some time in our life.
Upgrade your mindset
Make it a game to see how much you can achieve for each dollar. This usually entails saving money and deferring expenses. Don’t mistake this with striving to spend as little money as possible; you really have to enjoy the results of your efforts. You could get by on spaghetti and margarine and spend a lot less money on food, but it seems a little stupid.
Read up on investing, budgeting, and taxation from reputable sources. When you’ve finished reading and believe you know everything, challenge everything you’ve read and then go find additional trustworthy sources to back up your claims. Rep this process once a week for the rest of your life. If you don’t challenge it, you’ll become too comfortable, miss things, and things will go wrong.
Understanding the difference between INVESTING & SPECULATING; understand the difference between an ASSET & LIABILITY
Mindful of taxes and inflation
Taxes are important and account for a significant amount of your earnings. Continue to ask yourself, “How can I lower my taxes?” What are the differences between taxable events and tax deductions?
Inflation, too, is a stealthy destroyer of wealth. Learn how to protect your purchasing power by hedging against inflation.
Trust the numbers
The key to understanding the information and math is to remember that numbers don’t lie. Spreadsheets are recommended for tracking, managing, planning, and running scenarios for your financial life, with increasing complexity as you gain experience. Because your life is a business that you own, you must also own the financials.
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Financial planning is, in general, a very personal matter for all individuals and families. All of this has a subjective balance; being excessively disciplined comes at the expense of life satisfaction. You must strike a balance that you believe is appropriate for you, and in my opinion, you must prioritize your health and quality of life over your financial well-being.