Do you want to know the truth about money? How money works? Do you want to understand money better so that it doesn’t control the choices you make in life too much? What you need to know are the money truths about money.
Money can help you get what you want and bring a lot of joy into your life. But it can also take your freedom and power away. That’s why understanding money is very important today.
The money truths that are discussed in this article have been tested over time. They are lessons we would all do well to learn so that we don’t let money control our lives.
(This post contains affiliate links. If you click on a link and make a purchase, I may make a small commission at no extra cost to you. As an Amazon Associate I earn from qualifying purchases. You can read more here)
The fundamentals of money: 10 Financial truths
1. learn to control your money or money will control you
Money is a tool, not an object. It does not define us, it is only one of the tools that we have at our disposal to help shape and achieve our dreams. Money gives you independence and freedom of choice but only if you learn to control it.
To control money you need to know how it works and how to make the most of it. This is where investing in yourself, in increasing your financial knowledge is key. Learn about money, then you can learn to make it work for you.
2. the truth is spending mindlessly adds up to a lot of money
Spending money can easily become a mindless act, something we do without thinking, and it can lead to credit card debt. It doesn’t matter if you think $100 is nothing or not, because the truth is that when we spend mindlessly like this it ends up adding up quickly.
Money isn’t everything. When we stop trying to get more money and instead focus on how well we manage what we have, life becomes much easier. Our stress levels come down and the quality of life improves tenfold.
3. you need to spend less than you earn
We all know that money doesn’t grow on trees. But there’s another money truth every adult needs to learn and understand; spend less than you earn.
If you don’t, after a while your money will be gone, and then what?
It’s a common misconception that you need to spend money in order to earn more. In truth, the better way is to earn more and then spend less.
Earn more by taking on extra shifts and responsibilities at work or take on a side hustle.
Spend less by analyzing your spending. Look at what percentage of your total income you are spending on things that have little real value in the longer term, only a fleeting sense of satisfaction. E.g. a daily coffee, lunch for work, regular new clothes, nights out.
Decide which are important enough to remain, and which you can either cut out completely or cut back on. Maybe your daily coffee habit can be once a week from Starbucks, the rest of the time bring your own?
Look at your other bills and see where you can cut back in order to achieve the goal of spending less than you earn.
You need to spend less than you earn right now, in order to save for your future, pay off debts and have a decent financial cushion. Those are things not to be sniffed at!
4. investing in your financial education is worthwhile
Money is only money if you know how to make it work for you.
To know about money you need to educate yourself about how it works, about investing and money management. Educating yourself can take many forms such as courses on investing, books, websites and money bloggers.
While money courses can be a bit expensive, reading books and money blogs can be free, just the price of your internet or a trip to your local library.
5. Being frugal is a good thing!
When people think of frugality they often associate this with restrictive life, it’s not! Frugality isn’t about restricting what you can do with your money. It’s all about following the golden money rules in order to get more value for every cent spent.
Being wise with your spending can actually make things more enjoyable because you are able to do everything that makes you happy without worry!
In truth, this way of living may actually end up letting you have even MORE great times than you could before, because you will be financially secure enough to afford anything you want (within reason of course!).
6. Remember your irregular expenses
It can be difficult to predict the little expenses that are going to crop up. You might have a perfect budget, but then you get a parking ticket. Your plan for paying off debt instantly gets derailed because suddenly the cash isn’t as available.
Luckily there’s an easy way around this issue. Known irregular events like birthday gifts or vacations should be saved for into sinking funds. These are money pots you set up, outside of your everyday bank account, for all your irregular but expected expenses.
For example if you know you spend roughly $600 per year on birthday gifts, set aside $50 every month in a sinking fund. When it comes time for birthdays you have the money ready on hand. Without going into debt or having to resort to using your credit cards.
7. debt won’t disappear without your help
If you’re in debt and want to get back on your feet, the sooner you start reducing it the better.
There are many benefits of being debt free, that starting right now just seems sensible!
The longer you wait before paying off your bills, the more you risk continually owing more, thanks to interest rates which seem to only ever increase with time.
There are two ways of tackling this problem. Either pay attention first to high-interest rate debts (the avalanche method). Or focus on those that have lower balances but a higher percentage due each month (the snowball method).
Whichever is easier for you to visualize and work towards would be best. That way you are more likely to stick with your debt off plan.
Personally I like the snowball method, purely because you get quick wins (some debts fully paid off). Logic says to me that the avalanche method will save more money because you hit the highest interest first.
The reality is, it barely matters which method you choose, only that you do choose and stick to your debt repayment plan.
But seeing a small debt paid off quickly will give you the incentive to keep going. Much more than constantly chipping away at a larger, more expensive debt.
That’s just my opinion though!
8. A simple financial truth – keep it simple!
Keeping it simple is the key to success. Too often we allow ourselves get lost in details and become overwhelmed, which can lead us into a spiral of anxiety or depression.
Keep it simple with your finances, keep it simple in your house, and then simplify the rest of what you do. It’s taking up physical and mental space!
Think about areas that are not essential to what makes you happy, but instead create a lot of stress for yourself.
These are where you will benefit the most from simplifying things. Your time is precious so don’t waste any more on those spaces or activities which take away from what really matters.
9. pay yourself first
We’ve all felt the temptation when our paycheck hits our account and our bank balance looks really healthy.
It can be quite difficult to resist a spontaneous purchase when you’ve just been paid. After all, you’ve worked hard so don’t you deserve a reward, a treat?
But what if we could set up one simple rule for ourselves: Pay yourself first? And consider this our reward for a good job done.
Put your savings and investments away before paying any other bills, automatically transfer them into designated accounts every month.
You won’t even notice this happening. Once they’re all set up on autopilot, the only thing left for you to do is enjoy life with the rest of the cash in your account.
10. small habits can have big impacts
One of the hidden truths about money I (eventually) learned is that if you make small, good habits like cutting down on food spending for just a month, it can have a significant impact.
For example: One month I cut my grocery budget by 50% because I knew my spending had crept up to unacceptable levels.
I made myself only go to the store once per week instead of multiple times and managed to save loads of cash by doing so.
I didn’t notice the savings so much when I was at the store but when reviewing my spending against budget goals it was obvious.
And this is from someone who knows she should only shop once a week or less. It’s so easy to know money habits, yet much harder to always stick to them. And goodness me, you notice the extra money spent pretty quick!
Saving doesn’t need to be difficult or painful. You just might not realize how much cheaper your life could become from little changes made daily.
Know your money truths
These 10 money truths will help stop you from being controlled by your finances. Because if you’re not careful, spending mindlessly can add up to too much money that’s gone before you know it.
You know it’s important to spend less than what you earn so that debt doesn’t take over. You also need to be mindful of the small habits, because they have big impacts on how much money gets spent each month or year.
Now go out there and make some changes in your life!
Start taking back control of your money by grabbing your copy of the Money Saving Starter Guide today.
Come and follow me on Pinterest for more money saving hints and frugal tips!
Last Updated on 13th September 2021 by Emma