My own blog posts about development, tech, finance and other (interesting) stuff.

❮❮ back

2022-04-03, Finance, Money, Truth

7 Simple Truths About Money

Money seems to be a complicated thing for many of us. But let's face it guys! We have to use it every day and so you better know the important stuff about the thing that "makes the world go round". Here some simple truths about money that everybody (even developers) have to know. Yes. This is financial advice (<= legally it is not)!

You cannot spend more than you earn!

Whaaaat? Really? You surly are surprised about this, but if you earn 2,000 per month, and you spend 3,000, you will have a problem in the long run. It seems easy but many don't have a clue about the cash flow concept. Or they just ignore it. Just watch your monthly income and your overall spending's for some consecutive months, and you will see if you have a clue about it.

Sure you can spend more than you earn ... for some time. And you can use hacks like loans, credit card debts or a mortgage. But one day in the future you will have to face the truth: If you try to drink more from a coffee cup then you filled in. It is just empty. There is no concept like minus-coffee in the real world.

You need not spend all of it!

Especially in western world it seems common sense to just spend all of your salary. Reason? Just because! I mean if I got it => I have to use it, or? No, there is no law or rule about spending all your chips.

Hey. Look at your friends, family and neighbors. It seems, the older they become, the bigger the houses, cars and TVs become. Why? I don't know. But. There is nothing wrong about staying with an old car if it still works, and you still like it. And. Is the new phone, laptop or TV really better? And. More important! Are you really happier after you used it for a week or two?

If you don't spend all of your buck, then it piles up somewhere on your bank account or in a stock depot and can yield some interest and compound interest (see below).

Money trickles away.

What if: You didn't spend your loot, but it is still gone at the end of the month? That's strange. One of the big mysteries of mankind. Like lost socks in washing machines, what happened on Area 51 and crop circles. Finally, solved. It is in cigarettes, coffee to go, expensive food, restaurant visits, debt interests, streaming subscriptions and all the other unnecessary things you spend a little quid from day to day.

You have not to quit all of your guilty pleasures. Just try to write down for one week all this little spending's and be surprised like a rabbit in headlights. Stop the trickling! Save the stash!

Money is not everything.

Okay. Ok. It is nice to have the newest iPhone, the latest PlayStation, all the streaming subscriptions and a nice vacation in a far, far away country you even didn't know it exists some weeks ago. But all these things are not really important! They are not as important as the advertisements telling you. You can live without all the stuff.

Okay. Ok. I hear you saying: But what else is important then? Other things! Relationships: Friends, family, new People! Spending your time meaningful. Learn something. Read anything. Write. Do some sports (puh really?). Make music. Sing. Dance (not you developers). Create. Make. Draw. Tinker. Go out to nature. Make Impressions. You can do all of this with no or very little money. Try it. What could go wrong?

The value of money always gets down.

Yes. The concept of inflation is built-in into our finance system. But you should know that other mechanics are also built-in. The concept of interests and dividends can increase the value of your own money. If you have your money under your pillow than it will be less worth after a year (or even a month) but invested into companies or other values like commodities, real estate or funds, you can save the value of your money. You can even increase it.

Compound interest is the biggest force in universe.

Albert Einstein said that, allegedly. And it is true. He knew stuff! If you understand the concept to compound interest, you will immediately start to save and invest your money in things that increases your cash flow. It is the recursion of a finance system. An self-amplifying endless loop of cash streaming into your account. You get interest for your dough and even the interest gets interest and the interest of interest is getting interest. And so on. That's crazy stuff!

An investment is always increasing your cash flow.

Many of us thinks that spending a lot of money is an investment. I invested into my new car, into a house or into a new set of cloth. All of this can be a good investment, but often it is not an investment at all. Investments will increase the amount of money you have over time. A car has a lot of costs, a house too and only if the money you make or save with it, is more than the costs, then it is an investment.

A car or new cloths are only an investment if you need it for work. And only if the investment increasing the amount of salary you earn over time. If you just look nicer in your new suit, and don't get more paid, then it was just spending money on stuff. Remember: An investment brings money over time!

Bonus: Money have a lot of names!

I mean, a lot of names. Really. There is even a Wikipedia page about all the weird names for money. And yes. I used some of them here. And yes. I had it from there. Useless knowledge! Grease. Cheese. Salad. Cream. Chicken. Cake ... a lot of food names. Don't eat your money! That's real financial advice.

❮❮ back