Personal Finance Has All (And No) Relation to Money
April 1, 2019
Superficially speaking, personal finance and money are like nail and meat . Especially when it comes to enriching and optimizing investments. I can not lie and say that this is not exactly what personal finance is all about, but in analyzing it in a bigger and more important way, personal finance has nothing to do with money.
But yes on how to use it to optimize your values and priorities .
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Learn how to manage your money so it does not manage you
The truth is clear. Money does not buy happiness, but not having enough can be pain . And the level of this pain varies according to your situation. In the book Scarcity, Why Have Too Little Means So Much , authors and researchers Sendhil Mullainathan and Eldar Shafir describe in studies how lack of money affects our determination and well-being. And even politeness.
They explain that scarcity is not just a physical constraint . But it is also a mentality. When the scarcity of money captures the attention, it changes the way of thinking. And when that’s the only thing in mind, it’s the moment that affects what we perceive, how we weigh choices, how we deliberate, what we decide and, of course, how we behave.
As many do not like to think so, you have to agree that money is powerful . Most are controlled by it and in it comes personal finance. Even because it tries to learn how to manage money to be used for benefits . It is mainly about taking control. The main purpose of personal finance is to reach a point where you do not have to worry about money.
Money is not the goal
It is easier to assume that managing money is the same as pursuing it. Of course, having more money helps, though, it may not be the ultimate goal . If it is then you are doing it wrong.
For example, create a goal to be your primary motivation, be it a purchase or a trip. Clearly your goal involves money, but it is not the main reason. Because there is no point in joining money without a purpose . Money, then, is a tool and not an ideal.
Personal finance is not about accumulating tools. But rather about using that tool to live the life you want. In the Consumerism Commentary website, Luke Landes explains that money is only worth what you can do with it. “Assign your goals to the reasons why you are saving money, not money itself,” he concludes.
In the Big Picturing text, author Colin Wright says there is nothing wrong with money or wanting to get more out of it. Particularly if this helps to become more you and allow you to do more. In that case, it is important to make sure about why you are doing this.
Personal finance is more about mind than math
There are three basic rules for personal finance:
- Spend less than you earn
- Pay your debt
- Invest so your money grows
Although important, they are not the center of personal finance. Most of them, in fact, are very personal. Which means that sometimes you have to break down basic principles and do what works for you . More than math and rules, personal finance has to do with behavior .