- Personal Finance
The Importance Of A Good Money Mindset
Money is a tool for living, so it is important to learn to respect it. In a cashless economy, goods and services are traded and bartered. Money enables the process to be more accurate.
There are three ways to earn money; working for pay, selling a product, and investments.
How you will earn a living is a very important decision. Doing well in high school is just the beginning; from there, you can choose college or a trade school to acquire the skills you need. Generally, the more highly skilled a person is, the better he or she is paid. The lifestyle you live is dependent on this, so it's not a decision to make lightly.
Owning your own business is the ultimate American dream, but a mistake many people make is to look only at the "gross receipts", income earned from sales. Owning your own business requires a high degree of organization; you need money for startup and continuing expenses. You also need to save money for times when sales are slow, or you're unable to work. Most businesses fail within 5 years because of inaccurate attitudes regarding money.
A business owner must decide what quality of product to sell. Shoddy products can be sold at a lower price, and they have to be replaced more often. However, with important purchases, people tend to be more willing to pay a higher price for better quality. Also, shoddy products lead to a poor reputation, which will ruin sales altogether. It is better to make fewer sales at the beginning, and maintain a good reputation.
This involves loaning money to a company, which pays interest during the term of the loan. A basic passbook savings account is a form of investment, since the bank is able to use the money. Many people feel as if they're depriving themselves when they save money, rather than spending it. This belief is very destructive. People need to realize that the easiest way to earn money is to have it work for you. Passing up frivolous purchases to save money is a good idea, when you consider the payoff.
You can get higher rates by locking your money into a certificate of deposit; however, you must leave it in for the specified amount of time, or pay penalties.
Other ways to invest are through stocks and bonds. Bonds, like certificates of deposit, lock your money in for a specific amount of time. Stocks tend to earn more money than bonds, but they can also lose value, so they are riskier. As a rule, the safer the investment, the lower the interest rate.
A NOTE ON BORROWING
It is extremely important to borrow money wisely, because you pay interest on your loan. Going into debt for frivolous purchases may mean you're still paying for them long after their usefulness. So one must always count the true cost whenever deciding to take on debt.
In conclusion, money is a powerful tool. With respect, it will serve you well. Ultimately, true wealth is measured not in how many fancy objects people have, but how well they have learned to manage their money.
This book details various ways to invest money. It talks about stocks, bonds, mutual funds, annuities, buying real estate, and a lot more.
© 2012 Yoleen Lucas