Money Matters: Budgeting, Investing and Retirement

money matters

When we’re young, adulthood is a mythical place—a land where no one will tell us what to do, or how to do it. Where we’ll be our own boss. Yet, as the years roll by, independence and freedom, seems to slip further and further away. Our worries increase, our problems double. Life revolves around money. And how we never have enough.

Worries about money lead to poor mental health, stress, and ultimately a lower standard of living. But worrying never solved anything, anxiety is only useful if it spurs an impetus to action.

Abraham Maslow described the importance of financial security as a building block towards a healthy and fulfilling life. Maslow’s hierarchy of needs is a pyramid, with physiological needs, such as food, water, and warmth, at the base, rising to self-actualization at the peak. When one feels complete as a person. But without money, food is not assured, friendships cannot be thoroughly enjoyed. Only by laying a solid financial foundation can we progress upwards towards happiness and vitality.

To quote an old English saying, look after the pennies, and the pounds will look after themselves.

So, don’t let life overwhelm you, take control. With a series of simple rules and principles, financial security and independence are available to everyone. You just have to use your head. Be prudent. Plan ahead. And in no time, you’ll be a master of your finances and the captain of your ship.

Budget. Budget. Budget. 

Do you ever play a game in your head, where you pick a vice or monetary habit and begin to count how much money you’ve spent on it? Maybe you’re a smoker or like an odd drink. But as you count the price of every cigarette or every coffee you buy on the go; you begin to feel a little woozy. Money flashes before your eyes. If only you hadn’t spent it, you think. Best not to worry about it now.

These innocent purchases seem fine at the time. But they add up – remember the lesson about the pennies. 

What you need is a budget. No self-respecting CEO would manage a company without one. Hell, even your local golf course has spreadsheets of finances. 

Try a One Month Challenge to start. It’ll help give you the low down on where your money is going. Then, when you’ve gathered the data, evaluate what you want and don’t want. Our culture pits us against each other: you want what the other guy has. You measure yourself by the size of your car. The size of your house. Everything that makes you feel small.

As Dave Ramsey put it, ‘We buy things we don’t need, with money we don’t have, to impress people we don’t like.’

Stop it! It doesn’t matter if others earn more. Or if you don’t have the latest gadget. Set your own goals. Decide your priorities, your life’s ambitions. Money is a means to an end – a tool for achieving your goals. Use it wisely. 

A cup of coffee or lunch-on-the-go are lovely indulgences. But a holiday or business investment is vastly more fulfilling. By controlling your impulse spending, such as eating out or shopping online, you’ll soon find more cash in your pocket. And this is all made easier with a budget.

If you know what you have, you’re less likely to spend what you don’t.

Make sure to save. Six in ten Americans don’t have $500 in savings. Meaning if they go through a rough patch, they’ve got no safety net. No wonder they’re worried. Having a couple of months of money saved will ease any worries. You’ll appreciate it when your car needs a repair, or you lose your job unexpectedly. 

The Road to Hell is Paid by Credit Card Payments

Debt is crippling. A slippery slope that descends into a chasm. One in two adults with debts has a mental health problem, and one in four mental health suffers are also in debt. The lesson is simple: debt does not lead to a healthy life.

If you aren’t in debt, commit to this rule: I will always make more than I spend.

Follow that, and you’ll always stay in the black. As the wise Ogden Nash said, ‘Some debts are fun when you are acquiring them, but none are fun when you set about retiring them.’

Additionally, any bills that appear through your door, or in your inbox, should be paid immediately. If possible, automate the process. It’ll save a lot of hassle in the long-run.

However, if you are currently in debt, you need to start a debt elimination plan immediately. List out all your debts, from smallest to largest. Focus on eliminating the most substantial debts, paying off as much as you can (a budget will help). When you’ve paid off one debt, pat yourself on the back, and move onto the next. The sooner you are out of debt, the sooner that crushing weight can be lifted off your shoulders.

Invest in Your Future

Now, armed with your budget, with great habits, and zero debt, you can begin to grow your wealth. While saving and boosting your salary are fantastic ways to increase your prosperity, they’re not necessarily the smartest.  

Investing is naturally intimidating. The jargon is denser than a tropical rainforest. But the gains outweigh the work.

Start with an investment account. Whether you’re saving $20 a month or a large lump sum, these accounts can be a fantastic way to grow your investment. There are lots of different types, but here are the main ones:

  • Standard brokerage account (a.k.a taxable brokerage account or non-retirement account): provides access to investments such as stocks, mutual funds, bonds, exchange-traded funds etc. However, all interest and dividends are subject to tax. Start with a cash account; it’s perfect for beginners. 
  • Retirement accounts: IRAs (individual retirement accounts) are the same as a standard brokerage account; however, the tax regime is different. 
  • Education accounts: used to pay for education expenses. Must be set up before the child is 18. 

Be careful about picking the right company to host your account, as they will be responsible for managing your portfolio. Some offer free financial planning, while others charge a nominal fee, and there are even accounts for students that are free.

Mutual funds are another method of investing. Investments are pooled into an investment security which combines the assets of multiple investors to create a single professionally managed portfolio. While a brokerage account can be opened without any initial costs, mutual funds often require a minimum initial investment. They differ from stock or exchange-traded funds by only trading once per day. Think of it like this, brokerage accounts are a holding for investments, whereas mutual funds are investments themselves.

Exchange-traded funds are a basket of investments, or ‘securities’ (an investment in a company or government debt that can be traded on the financial market and produces an income for the investor), that are collated into a single security. Think of it like bricks being brought together to build a house. A share of an ETF gives the owner a proportional stake in the total assets of the fund. ETFs can contain stocks, commodities or bonds, and their share prices fluctuate all-day – unlike mutual funds. The benefit of an ETF is a low expense ratio and fewer broker commissions than if you bought the stocks individually.

While it can be a little tricky at first wrapping your head around it, the only way you’ll learn is by taking the plunge. Your wallet can thank me later.

More to Life than Money

Let’s not pretend those vague platitudes about money not buying happiness mean anything when your dirt poor. No one wants to have nothing. Civilization itself is simply the story of poor men trying to get rich. However, while a lack of money is a guarantee of misery, vast and stupendous investment portfolios do not maketh the man, nor do they guarantee happiness.  

As I said earlier, money is a means to an end. To treat it as the goal is to treat a football game as if the only thing that matters is the score. The score raises the stakes. But that’s not why people play; they play because it’s fun. After all, no one likes a sore winner—a gloater.

Famous investor Warren Buffet echoed the sentiment, ‘I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for ten years.’ So, why bother? Because he wants to. 

Success breeds happiness. Purpose creates meaning. Money merely unlocks the door.

But only you can turn the handle.

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