What to know about basic money skills? What should I know about money? How to earn more money? How to get more money? What are the best money tips? How to make more money? We will be answering all these questions and more in this article.
Some people believe that the only way to become wealthy is to have money left over at the end of the month, but this is not the case. This is just the beginning.
You might still be Jenny from the block whether you’re paid a little or a lot, but don’t despair. There are ways to improve your finances and increase your family’s wealth status, but you must think about money differently to do so.
10 Basic Money Skills Everyone Should Know
Here are 10 money skills that you should be familiar with.
1. Nobody got rich from saving money
Moving up in wealth won’t happen just because you have money saved unless you’re saving in the millions. It is up to you to decide whether or not you will turn it into wealth.
Money saved, also known as cash or liquidity, is beneficial for two reasons. First and foremost, it serves as a safety net. If your regular income is interrupted, it’s a good idea to have three to six months’ worth of living expenses set aside. This will get you by until you are able to rally and earn again.
The second benefit of money is that it allows you to take advantage of opportunities. You can take advantage of a good investment property or a business opportunity if one arises. When it comes to negotiating a better price for yourself, cash is king.
2. Wealth, Savings & Liabilities
It doesn’t matter how much bling you have or what car you drive to be wealthy. Having valuable financial assets or physical possessions that can be converted into a form that can be used for transactions is the definition of wealth.
You might be thinking, but a Maserati can be owned for cash. But the truth is that it is a liability, not an asset. Maintenance, insurance, fuel, and depreciation all cost money, but an interest-bearing investment or a property is considered an asset and leads to wealth. They gained value over time and can now be cashed out for more money than you put into them.
After you’ve paid all of your bills, what’s left is your savings. These can either be saved to earn interest while you sleep or invested to increase in value and profit.
Liabilities are items you owe money for or that cost you money. It could be debt, student loans, your phone contract, a home loan, or a credit card, as we mentioned. Even your lease agreement is a liability because it is essentially money that you have agreed to pay.
You can calculate your wealth by subtracting your liabilities from your savings plus assets and seeing how long you can go without working. The wealthier you are, the longer you can live.
3. Make tax work for you
Small earners pay more in taxes than they should because they’re afraid the taxman will come knocking. The wealthy, on the other hand, love taxes. We’re talking about utilizing them to their full potential. You must use taxes to your advantage if you want to master money.
Learn more about how taxes work in your area and how tax incentives can help you protect your wealth. When we invest or save for retirement, there are usually tax advantages.
If you simply save your money in your current account or keep your property in a trust or a company, you may end up paying more tax. It might be more tax-efficient than owning it in your own name.
You can invest and save for even more tax with the money you save on taxes. Make sure to use tax like a rich person to keep more of your money rather than giving it away.
4. Learn how to use other people’s money
Another frequent error of the poor and middle classes is to use only their own money. There is widespread apprehension about obtaining loans and incurring debt. Certainly, going into debt for a new watch, shoes, or even a vacation is a bad idea.
However, being able to obtain loans at a manageable interest rate may enable you to increase your earnings. Perhaps you operate a service that requires machinery or own a real estate business. Taking out a loan to upgrade your property or purchase better machinery may result in you being able to charge a higher rental rate or provide the service faster, effectively doubling your client base.
Each time you evaluate an individual or a debt, you must ensure that inflation will not be uncontrollable and that you will have sufficient business to cover the debt regardless of whether your business prediction comes true.
However, if you do the math and determine that you can charge more for an upgraded property or double your sales with faster service, you will find that the loan repayment is affordable and you will have a sustainable business, which brings us to the next point.
5. You need to earn more, not spend less
Having insufficient funds is rarely resolved through cost-cutting. Afterward, we become frustrated and revert to our old spending habits. While it is never prudent to spend beyond one’s means, the most effective way to increase one’s wealth is to increase one’s income.
This could be through a race, a job change, or even a side hustle. Perhaps your business has plateaued and requires a productivity boost.
When your mind is open to the idea that the world is abundant and all you need to do is tap into it to bring in more money, you’ll begin to consider how you can bring in that additional income.
6. What are the basis points?
We’re sure you’ve heard this phrase thrown around in a news bulletin’s financial reports section. We are here to educate you on the meaning of all these technical financial terms so you can begin decoding finance.
Fundamentals are a deceptively simple concept. If you divide 1% by 100, each hundredth of a percent is referred to as a basis point. When discussing finance, we must be extremely precise. It is most frequently used when discussing interest rates.
As a result, they are used to ensure that even minor changes are recorded, as a quarter of a percentage point can equate to millions when dealing with billions. Therefore, the next time you hear 50 basis points, either increased or decreased, you will know that the interest rate has increased or decreased by half a percent.
7. Know your naira needs
It’s time to figure out how much money you actually need now that you’ve decided to bring in more money to get more out. This will make it easier to ensure that as you gain more money, you use it wisely to increase your wealth rather than simply spending it.
Most banking apps nowadays allow you to label your expenses, which generates a fantastic pie chart at the end of each month that shows you where you spend your money. Because our estimates of how much we spend on things like entertainment and groceries are usually way off, this allows you to compare a real naira and kobo of value per category.
Once you have these details, you will be better able to estimate how much time you have left to build your wealth.
8. Have a retirement plan
The sooner you start saving for retirement, the sooner you’ll be able to retire. It’s as simple as that. Most countries provide some form of retirement benefit to their workforce. This is known as a 401K in the United States. This may be sufficient for you, but if it isn’t, look into private retirement funds.
In Nigeria, there are some form of retirement benefits to the workforce especially those in higher levels. I am not saying government workers in lower levels don’t get retirement benefits but it’s reducing. With the countries present economic situations and happenstances, many government workers and civil servants are being deprived of their retirement benefits.
There are numerous tax advantages to investing in a retirement fund, as most governments reward you for taking care of your retirement needs and not becoming a burden on the state. Investing in your retirement is never a waste of money because, at the end of the day, it’s money you’ll cash out.
Compound interest is crucial in long-term investments like this. As a result, the younger you start, the less you’ll actually have to pay because interest will begin to earn for you.
9. How to safeguard your money
People who want to secure or grow their wealth have done so for centuries. Gold, art, and real estate are all popular purchases. Collector’s items and priceless family heirlooms have also proven to be excellent ways for people to save money for a rainy day.
The only real danger is theft or damage if the items are not properly stored. And, if properly insured, this isn’t a significant risk. The real danger of putting all of your money in one place is that if the economy tanked, your country experienced inflation, or there was an economic crisis, you could find yourself paddling upstream.
Putting all your eggs in one basket, which is held by a small number of financial institutions in your home country, could result in significant financial loss. Enter cryptocurrency, a tool for securing funds by diversifying your investment portfolio across savings, investments, real estate, and business.
As a result, the risk of everything being wiped out is reduced. And, even if your investments recover after a setback, you may find that your property values continue to rise steadily and your wealth continues to grow overall. Enroll in the Waptutors Crypto Trading Pro Masterclass to learn how to save and invest with cryptocurrency.
10. Make money while you sleep
You must look beyond the number of hours in a day that you have to earn money in order to understand money. While you’re sleeping, money can work for you. That is if it is placed correctly. Even the tiniest amount of spare change should be deposited in a savings account that pays interest.
This way, while you decide on your next financial move, the money is at least working for you, similar to how investments put your money to work. Alternatively, you could use a small sum of money to start an arbitrage business that will also require a mostly hands-off approach.
These are the 10 basic money skills that you should know. If you believe this article is helpful, then please subscribe to Waptutors Academy. Thanks for reading and we’ll see you next time.