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Hard-Won Personal Finance Insights

3 personal finance truths that come with experience

Over the years our intelligence changes. We go from being like lanterns - absorbing information from all over the world and trying to make use of it - to becoming more laser-like and focusing on individual issues. Our intelligence becomes more crystallised, so to speak, allowing us to build a model of the way the world works.

Anybody who has been grappling with their personal finances for years knows that there are certain truths you learn with experience. Here are some of them.

Idea #1: Money and Time are the Same Things

Whoever said “time is money” was a bit of a genius. They were precisely right: fundamentally we trade time for money when we go to work or stay in the office late.

 

Time is money

 

When you work, you actually trade your time (and skill) in return for money, which is
one of the most fundamental truths in personal finance.
(Image by Wikimedia Commons)

Just think about all the things that you do to save time that cost money. You buy microwave meals, for instance, because you don’t have to have to spend ages cooking every night. You also do things like buy health supplements because you hope that these will increase the amount of time that you have available to you on planet Earth.

When you start thinking of time as money, then you begin to see all the little inefficiencies in your life. Is it really worth spending 30 minutes every night - 180 hours a year - making sure that your dishwasher is stacked perfectly so that you don’t break any of the glasses? Probably not. During those 180 hours, you could have earned an entire month’s worth of income, far more than the cost of replacing a few cracked cups.

Idea #2: Debt is Not Your Enemy

Another insight that comes with age is that debt is not your enemy. Things can be bad for young people, thanks to student loans and large mortgages. But ultimately, debt is a tool that can be used in whatever way you see fit.

Over time, you learn how important it is to achieve a good credit score and expand your borrowing capacity. Even if your credit rating is low, poor credit direct lenders can help bump it back up again. Having a good credit score allows you to take on debt and use it to build a better future for yourself.

Idea #3: Your Friends Have a Huge Influence Over You

Humans are social creatures. We actually have special neurones in our brains, called mirror neurones that are specifically designed to mimic the behaviour of other people in our social groups. This is why families tend to be quite similar to each other in action and behaviour: they’ve spent so much time around each other that they pick up their unique habits.

While this might be good news for some people, it’s bad news for others. Mirror neurones also fire when we’re around people who don’t look after their money well. If you spend your time with people who blow all their money on drink and gadgets, then you’re more likely to do the same yourself.

From a financial perspective, the people you choose to hang around with have a significant impact. If you spend your time with entrepreneurs, you’ll be more risk-loving and ambitious. If you spend yourself with people who blow all their money as soon as they get paid, you’re more likely to as well.

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