While growing up has anyone ever tells you these are the things you need to know about money or sit you down and lecture you this is how money works.
Even in high schools, colleges and universities is there a special class you ever attend on the things you need to know about money?.
This has never been one of the things you will learn in the class or be taught, it is just like saying reading your book makes you richer, smiles. it just as bad as this when you don’t have any knowledge about money.
You are still pondering on all these questions right, in this article I will analyze how money works and the 3 M’s of money you should know in other be financially liberated.
3 M’s You Need To Know About Money
- Make money
To make money legitimately you must create and offer value in services or sales in return for what people need. Multi billion dollars Jeff bezos Of Amazon offers value in other to be where he is today.
Conversely, what comes to your mind by creating value and offering value?
Creating value or offering value is providing what people want in exchange for something you need, it can be money, information, power or something else.
For example you are a business owner and a customer patronize you, before a customer or buyer can patronize you, you must have offer something valuable to the customer.
Another scenario, as a graphic designer you design a banner for a business owner in exchange for money. The first thing that was done in this scenario is offering something of value in exchange for money.
This is the first step in 3 M’s of money, offer value in sales, service which in return bring money.
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2. Manage Money
A lot of people make money but in the real sense they don’t how to manage money.
Actually some makes tons of money yearly but when it Osborn’s time to do the breakdown of how much they have made, they’d be Surprised a lot of money they make, the ones that have passed through their bank account, wallet,earnings and so on.
But did not have anything to show for it solely because there is no structure for their spending, income and other financial plans.
Another thing in the aspect of how to manage money is understanding what is an Asset Or Liabilities you possess.
Asset – asset in layman are what in the very first minute you got them that start giving value in return
Liability – While liable are things that takes more money from you the first minute you acquire them.
For instance a phone can be a liability or an asset, even after getting a phone you might keep spending and spending on data subscriptions, repairs and some other things without getting anything in return from it.
while the other way round it a source of income generation for some people that knows what exactly they have to do in other to make income from it.
To manage money very well you must have a well planned spending and income structure and also having a good understanding of asset and liability will go a long way in helping you tackle unnecessary expenses that might be threatening your finances.
3. Multiple Money
After making money, Multiplying money seem to be one of the most difficult aspect of 3 M’s of money. Before you can multiply money you have to have the full knowledge of how well you can manage money by understanding what Asset and liability are.
Then the first question you should ask yourself is; how can i multiply money?
How to multiply money is by creating multiple streams or source of income.
For example you work as a salary earner in a bank after a while you set up a mini mart managed by your employees. And also you decided to work as online freelancer during the weekends based on your acquired online skills.
By so doing you have created multiple source of income generation simultaneously without one affecting the other.
It is important to know that having multiple source of income helps to boost financial status and that is the beginning of wealth creation.
However, knowing 3 M’s of money alone can not guarantee your financial freedom but there are other things you need to know or learn about money.
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10 Things you need to know about money before you turn 30
1. Learn how to calculate your net worth
Your Net worth is equivalent to the money and assets you possess. So it is a must you know what your net worth is and how to calculate it in other to keep track on the increase or decrease.
If your net worth start out on a negative side, you can improve it with time by accelerating debt repayment, sticking solely to your budget, avoiding impulse buying and channeling more money into investing.
2. Start Investing/ saving for long-term goals
Investing or saving for a long term goal involves money. And when dealing with money there are things that has to be put into consideration; Inflation And deflation
a. Inflation – is the general increase in price of goods and fall in the value of money over time
b. Deflation – is the reduction in general price level of goods and services, it is the opposite of inflation.
Understanding these two concepts helps to know why you should starting investing rather than saving because when you save up money and inflation caught up with it. The value will decrease drastically beyond repair.
For instance, a commodities you will comfortably buy with $1 back in 2015 can you still get such commodities with the same $1 now. The answer is NO, why because the purchasing power of $1 has decrease and it can no longer purchase the same commodities again.
But when you invest more interest is added to the initial amount invested after some times. investment helps to overcome inflation and also increase the original worth of the money even if there is inflation in the economy.
one thing i personally do is to tax myself every month to save up $100 to boost up my investment account.
This is one of the most important aspect in the things you need to know about money. meanwhile some see money as their servant which they can deploy to generate more money and build their wealth.
3. Stick to your budget
No how you could put up a budget and money is not the main thing to facilitate it. All budgets deals with money, sticking to your budget is a good way of managing money.
Managing how much you intend to spend for a particular period of time. it also a way to stabilize your finances.
Another thing is knowing how to stick to your budget 100 percent because it will help you avoid some miscellaneous expenses that do comes up.
4. Make Yourself Debt Free
Debt takes more money away than you imagine, having a lot of debts before payday wretch more havoc on your finances and drains one financially, you may not realize that.
Unplanned miscellaneous expenses can caused one to go into debt but it can be avoided by using 3 M’s of money to analyze such spending.
debt is not a good way to start your life as a young lad, so by all means you should avoid debts in other to be financially stable with peace of mind.
5. Build other streams of income
Creating other source of income helps to become financially stable. When you have multiple screams generating income for you. it will be very easy if you want to plan your budget because more money will be available to finance your budget.
6. Understanding Difference between Assets and liabilities
Having complete understanding of asset and liabilities helps to know how ones money is spent.
Asset are things that add more value, brings more money, retains monetary value e.g house,land,company and so on while liabilities are those things that causes you to spend more.
7. Build an Emergency Funds
Specially set aside some money on regular basis In case of any unforeseen emergencies such as hospital bills as a result of unforeseen health issue, emergency repair of vehicle, family event and so much more.
8. What kinds of accounts to use for saving and investment
Never do the mistake of saving or merging a savings or investment account with your monthly budget account or emergency funds account because it will disrupt and derailed your financial plans
So it is advisable to have a special account in which savings and investment funds are kept in.
9. Never risk more than you are willing to loss when investing
When investing it is advisable not to invest more than you are willing or can afford to lose.
It is like a saying that goes thus “Do not put your eggs in one basket”. Meaning you do not risk all you have in the process of investing it. Financially it is not a ethical practice.
10. save money to buy a home
Having a roof over your head is a basic necessity in the journey of life. While trying to be build your future, planning to be financially stable, learning to know how money works don’t forget in every penny you made save some percentage towards buying or building a house.