I know it sounds really young to be starting to think about toddlers and what they have to learn about money, but I really want him to grow up with a better understanding of what money is than I did.
If I could pass on to him right now, a letter that laid out all the points of what I want him to know about money, this is it:
1. MONEY IS ONLY A TOOL, NOTHING MORE
Money is just a way to keep count of how many loaves of bread you can buy.
It is nothing more than a counter, and a way to check to see how long you can go without working or how much it will cost to buy something you want, like a used car.
It is a tracking tool of assets.
We put a lot of worth into money being the be-all and end-all but it really isn’t, it is how we as people deal with and look at money that makes it so emotional and fraught with worries.
That is why it has so many different meanings for us, but at the end of the day, money is like some pretty shells or beads, some beaver pelts or in today’s terms, Bitcoins… it is a way to trade.
But … it is just a tool.
2. MONEY DOESN’T DETERMINE YOUR SELF-WORTH, ETHICS & VALUES
You are who you were raised to be, and at the core of your self.
You know yourself.
How much or how little you have, has nothing to do with how good you should feel about yourself.
You should definitely be proud if you make a lot of money (and save it), and not apologize for it if it was done in an ethical and legal manner (e.g. not stealing from others!), but it has nothing to do with who you are and who you were raised to be.
Your ethics, and values may be tested from time to time with the lure of quick money or the feeling that you aren’t hurting anyone, just big, nameless, faceless corporations or governments, but it is how you handle the situation that will be more important than what you get at the end.
There are people who I am sure, got their money in shady ways, and perhaps live their entire lives in fear that they will be found out or caught. What kind of life is that?
There are of course, others who get their money in other shadier ways and have zero qualms about it, maybe legally as a corrupt corporation or government worker, but are they truly happy?
I am not so sure.
Karma is something I believe strongly in, what goes around, comes around.
Treat people like slaves, be a #%*$&, and act like you’re superior and/or cheat people, and it’ll all come back and just hit you harder.
Just hope it comes back sooner than later when you’re screwed and really unable to bounce back.
3. SAVINGS SHOULD BEGIN WHEN YOU START WORKING
The minute you start working, at whatever age, start saving.
25% is a good benchmark to keep in mind. 10% is the one everyone says but I prefer a higher benchmark so that if you temporarily need to scale back, you can.
You start saving for retirement the day you start working so that one day, you can stop working.
Saving early also helps you understand that you would have to work doubly hard if you took on debt, because you’d be in the negatives!
What if you’re in debt? Here are my thoughts on whether you should clear your debt, mortgage or save.
4. SPEND YOUR MONEY AND ENJOY YOURSELF WITHIN REASON
Spend your money.
It is meant to be used, not hoarded.
Go on trips, take vacations, buy your friends rounds of drinks, be generous, drive a nice car… but spend it all within reason and within your budget.
Don’t buy a Mercedes-Benz if you can really only afford a Dodge.
You have to find a balance where you enjoy life and don’t live like a miser, but you aren’t spending like there is no tomorrow because debts do pile up and take a mental toll.
5. TAKE CARE OF YOUR OWN MONEY; DON’T WORRY ABOUT WHAT OTHERS ARE DOING
Your money is your money.
No shame in saying “No”.
Take care of YOURSELF first, and that means watching YOUR money first.
So what if someone has more money than you and their parents are buying them a car and you’re stuck working to save for a used one?
Envy is a pointless thing to have.
It is human nature to desire and want more than what you have but at some point, it becomes unhealthy and it goes from admiration and light envy to full blown hatred and destructive jealousy; both of which are not healthy emotions to have.
Their money is not yours, and your money is not theirs.
They will treat their money the way they want, and you do the same with yours. If they bother you that much, stop following/watching/talking to them for a while until you gain perspective.
No one is in a perfect situation, everyone has burdens and a story to share that you know nothing about.
6. A HOUSE IS NOT THE END GOAL IF YOU ARE GOING TO BE CRIPPLED BY THE DEBT
I was always told that you should buy a home 2X or 3X your income, and in my day when I was a kid, maybe that was possible.
Now, it is not.
In Toronto it is mind boggling how expensive these shacks are (yes, SHACKS), and the amount of money needed to buy it.
Someone earning $50,000, can afford a house that is $100,000 or $150,000. Does that sound realistic to you in Toronto? No, it doesn’t.
Even if you paired up and were able to buy a $300,000 house, that is still way below what you can find in Toronto these days.
So, my advice is:
Don’t buy a house where you are.
Decide to stay, and rent because it’s cheaper, or move to a cheaper city where you can afford a home.
Also, you don’t need as much of a house as you think you do. The more house you have, the more you have to clean, pay taxes on, cover maintenance on, and deal with.
Sometimes, less really is more. I wish you just enough.
7. BE CAREFUL WHEN IT COMES TO MONEY AND LOVE OF ALL KINDS
Whomever you end up with, be careful what you sign and where you put your money.
It is perfectly fine to merge all your money together and live from one big pool.
It is also perfectly fine to keep everything separate and 50/50.
No choice is better or worse than the other, they are equal in weight.
Just be sure you understand the pros and cons of both approaches, and accept the benefits and the consequences.
Remember: A marriage is a contract.
As with all contracts, be very careful.
Get a lawyer, read it over carefully and understand what you are responsible for and what you are not. I would even go as far as to suggest a prenup for both sides at all times. The money on a lawyer is always well spent.
As for your friends: don’t worry about other people grumbling or talking smack if you don’t buy rounds for them at the bar every night.
If they’re your friends, they are your friends for you, not for your wallet. They should also be fair and understand justice in sharing the bills.
(You can always drink at home for less money in a nicer environment anyway.)
If you can’t afford it, you can’t afford it. Period.
If you don’t want to be the only one paying for all of your bum friends because you’re the only one working and making money, THEN DON’T.
You can be generous, give money to charities and be THAT guy… if you can afford it.
If you can’t afford it, then my advice is to steady yourself and get your situation sorted out before you start helping others.
You have to be in a position to be able to afford to help, not going into debt to do so.
Be anchored and secure in who you are as yourself.
8. NEVER CARRY A SINGLE PENNY OF CREDIT CARD DEBT
Clear every amount you ever spend. Period.
Can’t clear it? Cut up the card and stop spending.
9. BUDGET, BUT DON’T JUST SAVE YOUR MONEY – INVEST IT TOO!
I have a whole category of Investing here, and this is the budgeting tool I use to save money even today because budgeting and tracking your money is the KEY to starting off right and hitting that first million – case in point: I went from $60,000 in debt to 10 years later, to $750,000 as a net worth.
Here are also my picks for personal finance reads for a beginner:
- Investing like a boss: Spend 4 hours a year
- Your money or your life
- Market Masters
- Millionaire Teacher
10. STUFF IS STUFF, IN A FIRE THINK ABOUT WHAT YOU’D ACTUALLY SAVE
Stuff is just stuff.
If everything burned today, I could replace it. It would hurt financially and I may never be able to find certain items again, but at the end of the day, it is just STUFF.
I have lived, struggling to reconcile myself with not associating things with love and happiness, and I am still trying to find that balance.
At the end of the day, I just have to ask myself: If in a fire, I only had seconds to save my most precious things in the world, what would I save?
That’s it. Nothing else matters. It’s just stuff.
Don’t get hung up or attached to it.
Love using it, of course.. enjoy wearing your nice clothes, your great stereo system and precious antique collections, but remember that it is not what really matters when it comes down to a fire.