3 Pieces Of Financial Advice I Wish I’d Learnt Earlier

thethinkingscientist

Money, money, money, it's a rich man's world!

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It is even more so the case now that the balance of the money flow is severely skewed.

While many people are left out of jobs these days because of the COVID-19 pandemic... other people have profited immensely. Just ask the vaccine manufacturers. There were NINE newly minted billionaires - all linked to the manufacturing of the COVID-19 vaccine.

In a survey conducted by Statista.com, the unemployment rate in the Los Angeles-Long Beach-Anaheim greater metropolitan area waw 9.9%, the highest among all greater metropolitan areas surveyed.

Which is a problem if we're living paycheck-to-paycheck and/or drowning in a mire of consumer debt. Even more so when Los Angeles is considered the 10th most expensive city in the world.

We do see how money-related issues can be a big reason for divorce, as it is mentioned in this article of Business Insider:

Money is the No. 1 thing couples argue about.
So it’s no surprise that money-related conflicts are frequently cited as a reason for divorce.
There’s a good reason for this: Money and stress very often go hand in hand, whether it’s because of an overextended budget, an unexpected financial emergency, or even the discovery of your spouse’s secret credit card. And financial issues don’t discriminate — they can unravel marriages between wealthy couples and couples in major debt alike.

The thing is that we don’t want to be on one extreme end of the spectrum, where we’re spending beyond our means and perpetually in debt.

Neither do we want to be on the other end of the spectrum, though, where we end up being miserable hoarders sitting on a sizeable stash of money that we can’t take with us when we die.

But as I journey through life, here are 3 things that I learnt and am trying to make use of as I attempt to master the use of money, and not let the love of it control me.

Spend within my means

A lot of things in life require a good balance. Whether it be our physical, mental, emotional or financial health, we do have to understand that the balance is what keeps us healthy.

That applies to our cholesterol levels too.

It doesn’t take a rocket scientist to figure that we do have to balance our income and our outflow of money too.

If I were to earn $1000 per month and live on a $2000 per month lifestyle, would I not be living in financial debt? That’s financial irresponsibility right there.

Of course, it doesn’t help when marketing advertisements are heavily targeted at the emotional side of consumers, as it is written in this Contently article:

It takes less than three seconds to have a gut reaction. According to Dan Hill in Emotionomics: Leveraging Emotions for Business Success, “Emotions process sensory input in only one-fifth the time our conscious, cognitive brain takes to assimilate that same input.” Emotions, rather than cognitive thinking, have a more profound impact on our actions; create lasting, instinctual impressions; and actually predispose us to follow the same course of action in the future.
For brands, this is an incredibly powerful piece of information, and many are capitalizing on it by creating emotional ads designed to go straight for the gut. Emotional ads aren’t merely images and slogans that try to educate and persuade viewers. They strategically manipulate consumers’ feelings and stimulate the emotional triggers that influence how we make decisions. An emotional ad may be designed to incite anger, sadness, or joy — all targeted toward the brand’s end goal. While this can be a wildly successful strategy, the best emotional ads reach a resolution instead of leaving viewers wallowing.

With advertisements that appeal to our emotions, however, this article from Cheatsheet states that:

It’s easy to rationalize spending when you are emotional, because sometimes spending in general, or indulging in a particular purchase, momentarily makes us feel better. However, when we make financial decisions based primarily on our emotions rather than our needs or budget, we later experience buyer’s remorse.

It’s easier said than done, to build up the cognitive resolve not to buy things on impulse. We’ve all done that in our lives at some point or another!

More so when marketing tactics are designed to exploit the human being's fear of missing out (FOMO) or trigger a person's emotional heartstrings to make them open up their wallet. It's all about understanding and manipulating consumer psychology.

Build networks

Robert Kiyosaki says, “The richest people in the world look for and build networks, everyone else looks for work”.

Most of us have gone through the traditional education system, with the aim of “looking for work” when we graduate with our degree.

However, with the economic slowdown hitting us globally as a result of the COVID-19 coronavirus pandemic, it was said in The Atlantic that:

Many of those 6-million-plus graduates will soon pursue another degree, but many others will enter a historically terrible labor market, and one that’s especially brutal for young workers. The class of 2020 has some extraordinarily rotten luck to graduate right now, and the unfortunate timing could set many of them back financially and professionally for years.

No jobs available? More stress. Add to that the debts incurred from a university education, and one may wonder why they even went to university in the first place.

And if they do find a job? They might have to accept one at below market value, just to be able to pay off their loans.

Networking and consulting, though, especially when one has a useful skill to impart, can be more viable. People look to Youtube videos to find solutions to everyday problems.

For example, the Dad, How Do I? channel on Youtube regularly posts videos on how to do certain everyday things, such as How To Grill.

This video that teaches people how to grill has already garnered more than one hundred thousand views, and the channel itself has 2.2 million subscribers.

Providing useful content and building one’s own network helps to provide a source of passive income — especially if one can visualise all the ad revenue coming from people who are watching the videos.

That’s because the video stays there and will earn money as long as people watch it.

Building a network of dedicated subscribers is key, and it provides a longer lasting stream of income as compared to a job, especially in industries that have been hard hit by COVID-19.

Layoffs are so common nowadays because of that, but… there will always be people who will want to learn how to grill (or just how to grill better).

And that's how Youtube videos produced by "Dad, How Do I?" can remain relevant and timeless.

Use money to earn money

That is a valuable strategy that I learnt from Warren Buffett. It is written in a Business Insider article that:

Warren knows about the power of compound interest. If you have a $1,000 investment earning 10% per year, that means you’re getting paid $100 in cash every 12 months. If you spend that money then it’s gone forever and you’ll always just be making $100 per year. However, at you can reinvest that money at the same high rate of return, then in Year 2 you will earn 10% on not $1,000 — but on $1,100 — which means you’ll be getting paid $110 not $100. This difference increases exponentially over time. If you continue reinvesting your profits, by Year 10 you’ll be earning over $235 every year!

The question narrows down to what we are doing with the money that we earn. Yes, we do have necessities to spend on. Our housing doesn’t come free. Neither do our utilities bills or our groceries.

We do have to face the fact that emotional marketing advertisements that talk about “saving 50%” here or “earning 3% cashback” are just enticing us to spend.

Because if I were to “save 50%” on a $100 purchase — does that mean that I gain $50? No. It means that I spent $50 less than what I was going to spend. It means that I’m not really earning anything, but I’m trading that money for a product.

The next question would be: Do I really need the product?

And that’s where buyer’s remorse may set in, but no, I am not earning anything extra. It’s nice to have a little bit of a “kickback” for purchasing necessities, that is for sure.

The thing is — can we use money to make money? Warren Buffett does that, and he’s financially free. He doesn’t have the worries that most people have.

But, how many of us do have that mindset?

I wish that I had learnt it all earlier myself!

Thankfully, it’s never too late to start.

1. Spend wisely, within my means.

2. Invest whatever I have saved to obtain good returns (use money to make money).

3. Create a network in a niche area for more earning opportunities!

If only I had learnt that earlier on in life... but it's never too late!

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