The Good, Bad, and Ugly Side of Personal Finance – When You Don't Do the Right Thing with Your Money
I am doing it differently this time.
When I finished school, I had almost no money.
I could not afford a condominium and in terms of net worth, I was behind due to my student debts. A natural goal was to save for security.
The good side of personal finance: Saving so you can sleep well at night. Saving so you don't have to worry.
So, a few years later, I am in a good financial situation. Not good enough to not have to work a single extra day, but good enough to really rationally not have to worry about money and even be able to take a year or more off.
But until a few months ago, I hadn't really done the work I usually recommend to others.
When you let go of finances, the bad side comes. You live with money stress.
You need to move money from today to the future.
What you actually do with savings is take money from today and move it into the future. It is the exact opposite of loans, which are money you will pay back in the future.
The question to ask yourself is:
Was it a wise choice of mine to set aside money for an occupational pension or could I have used that money more wisely?
The answer is I don't know.
I don't know because I haven't set any concrete quantifiable financial goals. I haven't thought about how much money we need, how much money is enough, or even what I want us to use our money for.
Many of us think a lot about saving - how we should invest our money, what are the best mutual funds, how should I allocate our money, etc.
What if the trick is to have a plan?
Imagine if the trick was as simple as:
Think about what is important in my life
Put a price tag on everything that comes along
Identify your current financial situation
Make a plan between the desired state and the current state
Enjoy and let life be as good as it gets along the way
The ugly side of not doing the right thing with money. You run the risk of ruin:
Excessive savings, or
Insufficient savings
That is, I save more than I need. That is, I spend too much life energy gathering resources today that I may not need in the future.
Alternatively, I have a strategy where I save too little, which means that no matter how good an investor I am, it doesn't matter, because the market will never be able to save me if I put too little fuel in the car.
I firmly believe that financial goals are unique to each of us.
For some, it is not to worry about money, for others a residence in Italy, for others more time with their children, traveling, starting a business, spending more time on their hobbies, or something else entirely.
But it can also be watching the sunrise on a picnic towel on the lawn. It's not about the money, it's about what a rich life is for you.
That's why I believe that the most important work you can do - and with which you should engage - is to think about the questions surrounding financial goals.
The best questions I've asked:
Why is it important for me to save?
What scenarios do I want to avoid?
What scenarios do I want to achieve?
What do I want to do more of in life?
What do I want to do less of?
What do I want to experience?
etc.
The goal of the questions is to discover what is unique to you and your family. These are difficult questions that deserve to be thought about for more than a few seconds.
Many of us don't like to get stuck in a problem and want to go straight to the solution. Also, many of us - I'll be the first to admit - have certain tools, methods, and solutions that we like to use in time (and out of time).
Do what is right for you. Forget about the rest.
Take good care of your money. Don't waste it around.
Live well.
See you later.
This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.