Life lessons about money

The Psychology of Wealth: 7 Practical Life Lessons about Money

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Understanding personal finances is an important part of adulting. As a millennial, I was ignorant about budgeting or other important aspects of money handling until I have to do it on my own in my 30s. Money isn’t just a means of exchange — it’s a reflection of our choices, values, and inspirations. And it does bring happiness — it can open doors to opportunities, bring fulfillment of your dreams, and give you a sense of peace.

There are hundreds of books about financial literacy. Here we’ll talk about practical life lessons about money that you can apply to improve your personal finances.

1. Budgeting is your best friend

Learning to budget is an essential life skill, especially in today’s economy. A budget helps you track your income and expenses, ensuring that you live within your means. It empowers you to allocate resources wisely, save for the future, and avoid accumulating unnecessary debt.

Remember the saying: “A budget is telling your money where to go instead of wondering where it went.”

2. Start saving early


When you first get a job, it’s tempting to spend it all on out-of-town trips, dining, shopping, and more. It sounds cliché but paying yourself first means not just indulging on whims but also putting aside a certain amount of money, no matter how small.

Savings generate compound interest, and with consistent contributions over time, it can grow into substantial wealth. You can make plans for your savings via online tools such as to determine the value of your monthly investment at different compounding intervals.

Saving early and consistently is a key to financial security. You can use your savings for emergencies, long-term goals such as purchasing a house or starting a business, or retirement. The best time to start saving is in your early 20’s, the second time is now.

3. Be clever about debts

One of the important life lessons about money that you should know is that not all debt is bad.

For instance, getting a mortgage to buy a house is an investment that can pay off well in the future. If you buy a property with a mortgage, a 10% increase in the property’s value can result in a much larger return on your initial investment.

Getting a loan for education or short courses is also an investment. If you’re a freelancer, investing in tech gadgets, software, and other necessary items are essential for getting successful clients that can generate you regular income in the long run.

A lot of financial gurus will advise you to skip all non-essential debts, but in my opinion life isn’t as simple as black and white. Purchasing things that increase your quality of life is an investment in itself. For instance, if you’re living in Manila as an office worker, you will have to endure traffic almost every day, worsened by flooding during the rainy months, public transit breaking down, and/or price surges on private transport. It costs a lot of time and money to commute, and so it makes sense to purchase a second-hand car to make your life easier.

4. Take care of your health

When you’re young, it’s easy to believe that you can do anything without consequences — living off fast food, drinking alcohol regularly, sleeping for a few hours every night, and so on.

As you grow older, the body starts to catch up — you may feel a little ache here and there and eventually get diagnosed with a health condition. Treating illnesses and chronic conditions once they develop comes with huge medical costs. A lot of people get into huge debt over medical bills.

Staying healthy isn’t just cost-effective, it also leads to a better quality of life. For instance, if you neglect dental hygiene, you may need to spend large amounts of money in serious dental operations such as extractions, root canals, implants, crowns, and so forth. It’s easier to start a healthy habit of brushing twice a day and flossing rather than dealing with dental issues later in life.

5. Increase your income rather than cut expenses


A lot of people are living paycheck to paycheck, and with the inflation rates in the recent years everything has become much more expensive. But there’s only so much expenses you can cut off, especially if you’re already spending most of your income on the essentials like food, rent, and other bills.

You’re better spending your time to maximize your income potential by learning new marketable skills, applying to better jobs, or planning to get into a more lucrative career.

6. Don’t let FOMO affect your spending

It’s easy to get jealous when you see people going on trips multiple times a year, having a fancy ride, or wearing designer clothes. A recent report shows that FOMO actually drives bad spending habits, as people try to keep up with their peers and/or influencers and celebrities.

Avoid the temptation to buy things to flaunt. Instead, stick to your financial discipline and play the long game. You will feel more secure once you have your own house, investment, and savings to fall back on.

7. Lend what you can afford to lose

A life lesson that a lot of people learn the hard way is lending only what you can afford to lose. This especially applies when lending money to friends, family, or acquaintances. If you lend a significant portion of your financial resources to someone and they fail to pay it, you’re the one who’s going to suffer in paying your own financial obligations. It can also create arguments, resentment, and relationship strain — sometimes it even ends relationships.

Because of these risks, some people totally advise against lending to friends. However, I argue that being friends with someone means helping them whey are in need and sometimes that means lending them money as well. I’ve been on both sides of the situation — I’ve lent money to friends and there was a time when I had a medical emergency and a friend came through for me. It opened my eyes to how money comes into play in adult relationships. I’ve learned that it’s okay to lend money to help when I can but also having realistic expectations about being paid back.

There are tons of financial knowledge to learn in books, but some life lessons about money are often learned the hard way. What important life lessons about money do you want to share? Let us know in the comments section below!

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