The first step to financial freedom starts with how you think about money.
You must resolve, now, to get your finances in order. Stop fantasizing that a lottery win or an inheritance is going to make you rich overnight, and resolve to do it for yourself.
Commit to setting long-term financial goals, and to learning and doing everything you need to achieve them.
How to be good with money
The good news is there’s not much required to get started – a few basic habits you need to pick up about living below your means and avoiding debt, and a few things to learn about the stock market and efficient investing.
The bad news is it’s harder to change how you think than to learn what to think.
In other words, becoming good with money is easier said then done. It doesn’t take time or expenditure on Get Rich Quick schemes – it takes commitment and courage.
The only way you can begin is by deciding to be good with money. After that, you need to be good with money tomorrow, next week, and next year.
When you’re good with money you’ll:
- Lose the fear
- Understand the power of compound interest
- Spend less than you earn
- Save and invest the difference
- Tackle your money black holes, such as debt and bills, instead of shutting them away (always open your bills!)
- Look for ways to get the same things more cheaply – and be proud of it
- Understand what shares, bonds, ISAs, SIPPS, and so on are
- Reconsider how you get paid, and investigate starting your own business or a second income stream
- Have long-term financial goals
- Feel more secure, and yet also more free
How and why I got good with money
I was fortunate in taking an interest in money early on in my life. I’ve worked and saved for what I wanted ever since I was a child. Obsessed with pets, I held down two paper rounds before I was even a teenager to fund my habit in fishtanks and guinea pigs.
Well, you have to start somewhere, and my pet mania taught me I could save for what I wanted, provided I focussed on what was important, and put in the required effort.
Like most of her generation, my mother had a real aversion to debt – even to the mortgage, which she considered not so much a necessary evil as a vile opponent to be vanquished. In fact, my parents were arguably too risk averse. But overall I consider myself fortunate to have been brought up the old-fashioned way to know the value of money.
But it was two events in my early 20s that really turbo-charged my saving and investing habit.
Firstly, I wanted to buy my own home but found prices way beyond what my job (which I loved, and would have done for free) could pay for. As I saw it, it was only by saving and investing that I would ever afford to buy a place I wanted.
With hindsight and more experience, I can now see I should have been more flexible when it came to buying that first property. A cheaper home in a scruffier part of town would have put me on the property ladder sooner, but instead I had to run twice as fast just to keep up with price inflation.
Nevertheless, I’ve no regrets. Working evenings and weekends and without any kids or expensive (or illegal!) habits, I quickly amassed what was for me a small fortune.
Next I had to learn what to do with it. At first I kept it in my current account, where it earned no interest! Soon though, a passionate interest in investment took root, and it continues to grow to this day.
Yet while I was saving and living below my means from an early age and now had a decent sum to play with, I wouldn’t say I was really good with money until a second key event.
I’ve written about my father’s retirement in more detail elsewhere on Monevator. In short, my hard working father, who’d been cautious and saved all his life, found himself unable to retire when he needed to. Almost as bad, when he eventually did leave work he had pretty modest results to show for a lifetime of faithfully socking money away.
As the full scope of my father’s predicament became clear to me, I resolved I would one day be financially free. I would set financial goals on my terms and meet them. I would choose whether and when I retired, and within reason where and how I spend that retirement. Sooner or later, I would be in control.
Chasing the housing market gave me the funds to invest, and the incentive to learn how to grow my wealth. But it was my father’s situation that really put the fire in my belly, and gave me the passion to go all the way.
Just be it!
Decide what motivates you to become good with money, and then resolve to do and learn what’s required to be financially free.
I can tell you how it happened for me and explain my strategies for achieving wealth – you’ll have to fill in the blanks on your side. I hope you subscribe to Monevator, but even more I hope you take away this one essential message: that you can be good with money, if only you decide to be.
From this day on, resolve to be good with money. Everything else will follow in time.