When you were younger, Mom nagged you to brush your teeth, eat your veggies, and clean your room.
You didn’t listen.
When you got a little older, she might have imparted more mature words of wisdom. You probably didn’t listen then, either.
Funny, but as you become more mature, your mother’s advice starts to make more sense, and you might realize that her advice wasn’t as dumb as you always thought it was.
For instance, she told you, “Money doesn’t grow on trees.” Amazingly enough, that is unfortunately true. Money has to be earned, and earning money is a lot more difficult than picking it off of trees. Earning money is WORK.
When you have to work for your money, you should be a little more conscious about how you spend it. After all, that new gizmo you want? It will take 45 hours, or more than a solid week, of work to pay for it. When you look at objects in terms of work required to purchase, it might help you to be more discriminating about what you really want.
Of course, there’s always a credit card. Banks are more than willing to lend you money to buy the things you want. And it’s easy enough to whip out the plastic when you want to buy something. But you need to consider the consequences of not paying that item off right away. Add another 10 hours to its real cost, because of the interest you will pay on the credit. Now, is that gizmo really worth 55 hours of your time?
A second Mom-ism you may have heard is, “There’s no such thing as a free lunch.” What this means is, in another statement you might have heard from Mom, “If it seems too good to be true, it probably is.” Don’t believe everything you see or hear, because there is always a catch. There is always risk. And in terms of money, a high-reward situation is usually associated with high risk. It’s a positive correlation: the higher the reward, the higher the risk. Don’t believe anyone who tells you that they can get you a high reward without risk. It simply isn’t true.
So according to Mom, this means that you should not put your money at risk unless you are fully aware of the risks. It’s OK to bet big sometimes, but be sure to only risk money that you can afford to lose. And if you cant afford to lose, then don’t gamble. It’s that simple.
Your mom probably also told you to only buy what you can afford. Most people who are today in their 50s and beyond were raised in the time before credit cards, before easy money. They learned to pay cash for almost everything, to save up for something that you wanted, and that debt was a bad thing.
Those of you are younger were told those things by your parents, but it didn’t always sink in. When banks were giving credit cards to every freshman in college, it was easy to get seduced into spending far more than you had. And with minimum payments so low, it was usually pretty easy to keep up the level of debt that you had incurred.
What you didn’t realize was how dramatically the interest charges were interfering with your ability to pay off the debt. By only making the minimum payments, and generally keeping a credit card maxed out, a young person can easily find himself paying FOREVER on that card.
And it isn’t just one card. Once you have a single credit card, more seem to appear in your mailbox every day. Before too long, you have accumulated thousands of dollars in debt, without even realizing it.
And the final piece of advice from Mom is to put money aside for a rainy day. Always save a part of every paycheck. An emergency savings account is a critical financial tool to keep you out of serious trouble. If you have an emergency account, you can avoid putting those unexpected but unavoidable happenings on your credit card. New tires for the car, an emergency root canal, a broken refrigerator. All of these can and do happen, and they can cost several hundred dollars that you might not have on hand. But with an emergency account, you can pay for these things without incurring additional debt.
Staying out of debt is the best thing that your mother ever told you to do. Far better than eating your broccoli, although that’s good advice, too.
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