by Damon Carr, For New Pittsburgh Courier
As adolescents we often hear our parents say “money doesn’t grow on trees.” As parents we echo the same words to our children. That’s truly the only money advice we receive from our parents. It’s the only money advice we give to our children. We generally hear those words in response to being asked countless times—can I have some money?
Money doesn’t grow on trees is a short sarcastic way of saying I don’t have any more money to give you. There’s a finite amount of money within my control. I can’t pick money from a tree like we pick apples from the tree.
In this article, I’ll delve into how money is created and what are some things that we can do with money. Before I dive into that, I’d like to share a couple of memes that I recently shared on Facebook detailing what you CANNOT do with money.
What money can buy: A bed but not sleep. A clock but not time. A book but not knowledge. A position but not respect. Medicine but not health. Amusements but not happiness. Acquaintance but not friendship. Obedience but not faithfulness. A house but not a home.
Things money can’t buy: Manners, morals, respect, character, common sense, trust, patience, class, integrity, love.
Those two memes force you to reflect and conclude that money and/of itself cannot purchase the things that we value the most. Money is simply a tool to facilitate things we need, want and desire. Below are things we can do with money.
Work: It’s true. Money doesn’t grow on trees. How is money created? Work creates money. Money is earned. You work, you reap an income. Your income is what allows you to get money and buy all the things you want to buy and do all the things that you want to do. It allows you to purchase the things you need, want and desire. Your income is your most powerful wealth-building tool. The Bible says, “You don’t work, you don’t eat.” Over time, your goal should be to transition from “earned income” to passive and portfolio income.
When we exchange our hard-earned dollars for something we value, we’re saying that we value that something more than we value the money we’re exchanging for that something. Very few of us have a problem with spending money. I read about non-spenders. I have yet to meet any of them personally. Controlling one’s spending is a learned behavior that we all have to develop in order to get ahead financially. Most of us love to spend money. Spending money allows us to purchase the things we need, want and desire. It allows us to have fun.
When we buy things we don’t need, oftentimes with money we don’t have, we’re in effect wasting money. Consider all the stuff and clutter you have piled up somewhere in your home, garage, or storage unit. Stuff you haven’t seen, worn or used in years. Stuff you forgot you had. Just think all that stuff and clutter used to be money. A good rule of thumb to use before we go out and purchase things on a whim is to give yourself a 24-48 hour cooling off period. You want to buy because you have buying fever. If after 24-48 hours, after the buyer fever cools off, only then do you buy. Doing this will allow you to see now before it turns into clutter—that it might be something that you can do without.
This is my definition of “adulting.” Only when we’re responsible to pay bills do we begin to understand that money doesn’t grow on trees. It’s a part of life. Key here is not to get overextended. You have to act responsibly and only take on bills and expenses that you can reasonably afford. In other words, you have to “act your wage.”
Saving is defined as money you’re setting aside now to accumulate and use later. If you’re stashing money away to be used within the next five years, you’re saving money. It’s imperative that we develop a saver’s mentality. It’s OK to pay bills, spend money, have fun—but not at the expense of not saving money. With so many things tugging at our money, we have to make savings a priority in order to save. You make it a priority by giving it a mission. Your mission can be whatever you decide. For example, you’re saving for emergencies, vacation, furniture, car, house. You name it. By giving it a mission you’re able to give it a dollar amount needed to save and a time frame needed to accumulate.
Investing is akin to saving but with a longer time horizon and greater amount to accumulate. When you’re investing money, your mindset should be, you’re not going to access or spend down this money within the next five or more years. Investing is generally reserved for saving for college, retirement, paying for a house with cash, and wealth-building. In order to transition from earned income to passive and portfolio income, strategic long-term investing has to be a part of your overall financial planning process.
Giving is more than likely a part of your life. Outside of reasonable, faith-based giving—it’s important to know that every gift is a sacrifice. When you give, you lose the opportunity to do for yourself. Therefore, it’s important that you have a solid foundation built—debt-free, emergency fund, actively saving for children’s college and retirement before you go willy-nilly with giving. It’s also important for you to ensure that when you give, you’re giving a hand-up, not a hand-out.
It’s been said there’s only two certainties in life. Death and taxes. If I were to ask, what’s your single largest expense, most would say their house. Taxes are the single largest expense we pay. Look at the year-to-date tax withholding on your paystub. That’s just federal, state and local taxes. Then there’s sales tax on practically everything we purchase and property taxes to name a few. You have to use legal ways to keep Uncle Sam out of your pockets. Tax favored, tax advantage and tax free retirement and college savings account come to mind.
Cost of goods and services has been drastically inflated because of loans. Instead of asking “how much does it cost,” we’ve been trained to ask, “how much does it cost per month?” When you borrow money, you steal from your future self. We’ve been taught by institutions who lend us money to use credit wisely. These are the same institutions who earn more on the interest we pay to them than they earn on their investments in the stock market. Borrowing creates debt. Debt is an enemy to wealth-building. I encourage you to use credit only when absolutely necessary.
(Damon Carr, Money Coach can be reached at www.damonmoneycoach.com)