My son is a year old. Just after he was born, I wrote a list of financial advice for The Motley Fool that I hope he’ll read some day. Some of the highlights:
You might think you want an expensive car, a fancy watch, and a huge house. But I’m telling you, you don’t. What you want is respect and admiration from other people, and you think having expensive stuff will bring it. It almost never does – especially from the people you want to respect and admire you.
When you see someone driving a nice car, you probably don’t think, “Wow, that person is cool.” Instead, you think, “Wow, if I had that car people would think I’m cool.” Do you see the irony? No one cares about the guy in the car. Have fun; buy some nice stuff. But realize that what people are really after is respect, and humility will ultimately gain you more of it than vanity.
It’s normal to assume that all financial success and failure is earned. It mostly is, but only up to a point – and a lower point than many think.
People’s lives are a reflection of the experiences they’ve had and the people they’ve met, a lot of which are driven by luck, accident, and chance. Some people are born into families that encourage education; others are against it. Some are born into flourishing economies encouraging of entrepreneurship; others are born into war and destitution. I want you to be successful, and I want you to earn it. But realize that not all success is due to hard work, and not all poverty is due to laziness. Keep this in mind when judging people, including yourself.
This may sound harsh, but I hope you’re poor at some point. Not struggling, and not unhappy, of course. But there’s no way to learn the value of money without feeling the power of its scarcity. It teaches you the difference between necessary and desirable. It’ll force you to budget. It’ll make you learn to enjoy what you have, fix what’s broken, and shop for a bargain. These are essential survival skills. Learn to be poor with dignity and you’ll handle the inevitable ups and downs of financial life with ease.
The best thing money buys is control over your time. It gives you options and frees you from relying on someone else’s priorities. One day you’ll realize this freedom is one of the things that makes you truly happy.
Your savings rate has a little to do with how much you earn, and a lot to do with how much you spend. I know a dentist who lives paycheck to paycheck, always on the sliver’s edge of financial ruin. I know another who never earned more than $50,000 and saved a fortune. The difference is entirely due to their spending.
How much you make doesn’t determine how much you have. And how much you have doesn’t determine how much you need.
Don’t become a money hoarder or a miser. But realize that learning to live with less is the easiest and most efficient way to gain control of your financial future.
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