FINANCIAL LITERACY: Adopting Correct Financial Principles

Sep 24, 2017 News

Learning to control and manage your money
Money is a vital part of our everyday lives. In fact, we live in a “Money Economy” and learning how to manage our money is the key to wealth building. Some of the richest people in the world started with no money and in a few decades have become very wealthy. However, money management is very difficult for most people. This difficulty comes about because of our belief systems about money.
Our beliefs about money influence every financial decision we make. Because our beliefs define who we are, how we act, and what we may become; it is important that we identify correct financial principles that will exert a powerful influence on our financial well-being and guide us to prosperity. The more correct the financial principles we accept, the more financial control we will have.
Financial principles that enable financial control
In reviewing the personal financial literature it seems that, “There can be no happiness if the things we believe are different from the things we do.”
If we are not getting the financial results we want, we probably need to change our principles. The following are six correct financial principles suggested by Lynn Robbins, author of Benjamin’s Franklin personal financial secrets that we need to adopt:
1. Less outgo than income will solve our money problems – Unless controlled, spending will match or exceed our income. Therefore, if our outgo exceeds our income, then our upkeep will be our downfall. The need for more money is not the problem but a symptom.
Very often, people count on a raise or other extra income to bail them out of financial trouble. It is much easier to control spending than income. Living within present income is the key to sound money management.
2. Following a budget brings greater control over important choices – A budget is a financial tool that can give us correct information about our finances. A budget is a plan. It maps out a monthly and daily path toward financial dreams. The purpose of budgeting is not to account for every penny, but rather to establish reasonable guidelines and limits.
3. Most people spend according to emotion – Thousands of consumer goods and services compete daily for our dollar.
With so many desirable things to spend our money on, it is hard for us to simple say no. Value-based sending is the opposite of emotional spending.
It recognizes that spending is a means to an end – a way to get what we really want. Several things influence our spending habits, especially trying to “keep up with the Jones’ Law.”
This influence indicates, “Our needs are a function of what other people have.” Keeping up with the Joneses can keep us in debt for years to come.
4. Going into debt now decreases our future options – A quotation from Benjamin Franklin says, “Rather go to bed without supper than rise in Debt.” Once in debt, interest is your companion every minute of the day and night, you cannot dismiss it; and whenever you get in its way or cross its course or fail to meet its demand, it crushes you. Therefore, decreasing our current debt will spare us from unnecessary burdensome payments, thus increasing our financial options.
5. Money can only be exchanged for things of value – Success often depends not on how much we spend, but on how wisely we spend; not more money, but more for the money. Wise money management is the management of exchanges. We exchange our money for things. Wise money management seeks to maximize the value of each exchange. Education is the key to making wise exchanges. The more we know about an exchange, the better money manager we will become.
6. Our present financial situation is a result of decisions we made based on the money principles we believe in – Adopting this principle means that we accept accountability; and instead of seeing our financial situation as hopeless and uncontrollable, we now have a road map to follow. Responsibility for finances remains with each individual.
We direct our path by the choices we make, and our choices are stated by the principles we adopt. Therefore, changing our incorrect money principles will change our financial situation.
Concluding remarks
The question has always been asked, “If financial success is possible for so many people, why is it that so few people ever achieve their financial goals.”
There are several reasons, but an important one is that we never learn how to deploy our financial assets in a controlled and principled way. No one comes into the world understanding money. Everyone learns it on the way through by taking courses, reading books and articles like this one.
According to Brian Tracy, “You may save yourself weeks, months, and even years of hard work and expenditure by spending a few hours learning how money is acquired, invested, and increased with maximum safety.”
With this article about money and financial principles, you are well on your way to taking charge of your finances and ensuring that you and your family thrive and prosper.
Concluding remarks
Next week we will examine tips to choosing a financial literacy curriculum. Thanks for all your comments and support. As usual, please send your comments or questions to [email protected]