The 7 Money Truths You Must Know

You may create a sound financial lifestyle by becoming informed about money, investing, saving, and spending. Furthermore, there are always new financial concepts to grasp. 

Even while it could seem daunting, by understanding some of the most crucial money truths, you can get started on your journey toward financial literacy.

What Are Money Truths?

Money is a social construct, a medium of exchange accepted by a community to represent value and facilitate transactions. Its value doesn’t stem from the material it’s made of, but from collective trust and belief.

Almost all professionals in the field of money, from bank managers to financial influencers, largely agree on one particular truth.

Whether your goal is to reduce expenses, start investing, or save more money, knowing these facts will help you achieve better financial stability.

Let’s begin by going over the top 7 money realities that everyone should be aware of and see why they’re beneficial to both beginners and experts in the field.

1. Costly Does Not Equate to Valuable

Now, something’s price does not always indicate its quality. Several products charge greater prices for the look of luxury, social influence, and brand names even while the product is low quality or low value.

One of the best illustrations of the money truths including cost, quality, and frugality is seen in luxury cars. A luxury car that is brand-new typically has a high price tag. 

But as soon as that pricey car leaves the dealer’s lot, depreciation causes it to lose a lot of value.

On the other hand, if you are wanting to invest and have some extra cash, consider the purchase’s long-term profits.

Purchasing a home or going to college, for instance, are frequently regarded as high-quality, high-return investments. Although they are pricey, they can ultimately increase your wealth rather than cause you to lose it.

2. When It Comes to Money, Patience Is a Virtue

The proverb “Patience is a virtue” is often used to teach children to slow down and wait. Perhaps your mother told you this when you were a little child in an attempt to get you to quit asking when dinner would be ready.

But in terms of money, the suggestion is also very effective.

Building Wealth Requires Time

Real wealth is frequently not created quickly. Money grows slowly most of the time.

To see significant returns, for instance, receiving portfolio income from savings interest or dividends may take years.

But if you have patience, you should eventually benefit from compound interest and large profits. However, investing too quickly can reduce your ability to accumulate wealth.

For example, some investors sell off their stocks immediately when the market declines because they don’t want to lose any more money.

Regretfully, you can lose money on your investment if this happens, even though the stock prices might climb again in a few years.

3. One Important Money Truths Is That Budgets Actually Work

A frequently disregarded truth about money is that budgets are effective. Really.

One of the most helpful financial instruments at your disposal is a budget. The secret is to adopt a new perspective on budgeting.

A budget is not a set of strict guidelines to adhere to. It does not specify when you are allowed to use your funds.

Achieve objectives and keep an eye on expenses.

Rather, a budget is meant to assist you in keeping tabs on your income, savings, and expenses. It’s a simple method of determining whether your monthly expenses exceed your income.

A budget can also be used to assist you in planning and achieving your financial objectives.

Assume for the moment that you have three months to save $500. With the help of a budget, you can determine how much you make and spend each month on average.

It’s therefore simple to determine what needs to be changed in order to accomplish your objective.

Perhaps all you need to do is stop using a handful of your subscription services. Or perhaps, in order to accomplish your goal, you’ll have to eliminate all wasteful spending.

In any case, having a budget allows you to swiftly evaluate your financial status.

4. To Achieve Your Financial Objectives, You Must Set Them

Let’s say you have an extra $1,000 in your pocket. What would you do with that money, do you know?

Otherwise, it may be time to make some financial resolutions.

Your entire financial condition may be harmed by earning, saving, and spending money without having both short- and long-term financial goals.

Lack of direction when saving or spending money can result in overspending, lost investment profits, and passed-up chances.

Setting SMART Financial Goals

You can set simple or complex financial goals. Setting measurable objectives and allowing yourself enough time to achieve them are crucial.

For instance, one of your short-term objectives can be to accumulate money for unexpected medical costs. You resolve to accumulate $3,000 in an emergency savings account within the next six months.

A timetable and measurement are two essential components of SMART goals, and this one contains both:

• S: specific
• M: measurable
• A: attainable
• R: relevant
• T: timebound

Set Both Short- and Long-Term Financial Goals

When defining your financial goals, it’s critical that you avoid concentrating too much on the present or the distant future. 

People in good financial health combine short- and long-term objectives to create a balanced financial picture.

Setting short-term goals keeps you motivated. You’ll experience a surge of excitement every few months as you’ll accomplish short-term financial goals more quickly.

On the other hand, long-term goals are crucial for accumulating wealth, acquiring assets, and preserving sound financial standing over time.

5. Generational Wealth Can Be Built

Assets and money passed down from one generation to the next are referred to as generational wealth. 

Generational wealth is essentially the amount of inheritance you leave to your descendants. 

They then continue to increase the family’s fortune so that it can be passed on to their heirs by using that inheritance.

It goes without saying that it takes time to build generational wealth.

But it’s a crucial thing you can do for your grandchildren, future offspring, and other family members. You can build more wealth for your future family the sooner you start.

Of course, savings accounts aren’t the only source of generational wealth.

It’s frequently far more than that, in actuality. Typical assets that increase wealth throughout generations are:

• Accounts for investing in real estate
• Retirement funds
• Life assurance
• Debt repayment 

How to Start Growing Your Money

Recall that money grows gradually. It is preferable to start little rather than never start at all.

Consider opening an investment account, getting a life insurance policy, and setting aside money for a down payment on a house if you want to create generational wealth for your kids and future generations. 

You’ll position your kids for future financial success as you accomplish each goal.

The Difference in Wealth Across Races and Generations

Not everyone has had equal opportunity to build up wealth over generations, which is one of the hard money truths.

For people of race, particularly Black Americans, building wealth has proven challenging due to institutional racism and unfair laws and practices.

White families have been able to build up wealth through investing and owning real estate. Conversely, black families encountered obstacles to building wealth, ranging from redlining to slavery. These barriers have widened the racial wealth disparity over many generations.

According to the US Department of the Treasury, the average wealth of a white household is $184,000. The average wealth of a Black family is only $23,000.

Thus, when it comes to investing in generational wealth, the median White family has more than $160,000 than the median Black family.

Closing the Wealth Gap Between Races

Even though closing such a big disparity is difficult, there are things people can do to assist close their own wealth inequalities, like:

• With financial literacy, you can empower both your community and yourself.
• Create a financial plan, such as a savings or debt repayment strategy for a down payment.
• Make it a point to teach your kids about money management.
• Seek for minority-owned companies and organizations to assist.
• Cast your ballot for candidates and policies that tackle these problems.
• Give money or your time to groups that are trying to close the gap.

6. Pay Yourself First

When you have bills to pay, it’s simple to forget to save money. Perhaps at the end of the month, after paying all of your expenses and treating yourself to a little indulgence, you discover that you haven’t saved any money.

Fortunately, there’s a simple solution to that issue if you keep in mind certain money truths, including paying yourself first.

A financial tactic that compels you to save for the future is paying yourself first. You make a commitment to saving when you take care of yourself first, whether that be for a house down payment or an emergency fund.

It is as simple as setting money aside for savings before spending it on dining out, bills, or new purchases.

Automated transfers from your checking to savings accounts are a simple way to begin paying yourself first.

Make a Plan to Assist with Paying Yourself First

Naturally, if you get behind on your expenses, none of the savings you accumulate from paying yourself first will be of any assistance. It is still your goal to pay all of your expenses on schedule.

This implies that in order to determine how much you can afford to save, you should first set up a strategy for your finances.

Let’s say you get paid every month on the first and earn $3,000 per month. With your monthly expenses coming to $2,500, you have $500 left over each month to save.

Every month on the second, you automatically transfer money to your savings from your checking or direct deposit account.

Your $500 funds disappear from your bank account each month before you may use it when your paycheck arrives.

7. Investing Is Not Hard at All

When most people hear the term “investing,” they picture extremely wealthy individuals like Warren Buffet. The good news is that everyone may start investing, regardless of wealth, which is one of the realities of money.

Additionally, investing is very easy to execute, despite its scary appearance. Investing is now simpler than ever because to two factors:

An increase in technology

Information availability

Make Investments with Technology

With the use of technology, such as robo-advisors, you may open an account and begin investing practically instantly. 

A computer program known as a robo-advisor uses your level of risk tolerance—that is, your comfort level with market swings—to generate a personalized investment strategy.

With little to no fees to open and maintain your account, the majority of large brokerage platforms offer robo-advisor choices.

Your business may even have an investment account that is ready for you. Although a 401(k) and other retirement savings accounts are offered by many workplaces, only roughly 43% of women have one.

Many employer-sponsored plans have a small selection of investments. For experienced investors, this can be a drawback.

On the other hand, a target retirement fund, which invests based on your projected retirement year, might be an excellent place to start if you’re just getting started or don’t know how to handle investments.

Study Up on Investment

There are a ton of resources available on the internet if you’re ready to learn more about investing. The ability to get information on almost anything is one of the greatest things about the internet.

To learn more about investing and money management in general, you can make use of various resources, including free online classes.

With the help of these money-related truths, increase your financial literacy!

These are just the first seven money truths that everyone should be aware of. These money truths might provide you with the knowledge you need to start saving more, cutting back on spending, and accumulating wealth for the future.

However, smart financial professionals understand how critical it is to continuously seek to increase their understanding of finance.

In conclusion, think about devoting time to financial literacy classes in your town, viewing financial education films, or taking money courses. The knowledge you currently possess and the knowledge you acquire along the way may surprise you.

Ready to share these Money Truths with others? Spread the knowledge and help everyone build a brighter financial future!