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My WealthFinancial Wisdom

Posted Oct 2009

What is the financial wisdom? Is it only important to earn more money? Why are people spending more than the can earn?


The problem with the money is not only how much you earn, but also how much and at what way you are spending money. Most of the people believe that the secret of wealth lies within finding out a way to earn more money. "If I could only earn more" many people think. Probably you think the same way.

In reality, the truth is completely different. If you asked people who recently got a raise, about what the did with the difference, what would they say? Did they increase saving after they have got a raise? In most of cases the answer is no. Simply, if we earn more, we spend more. If you give a raise of $ 1.000 to somebody it is very likely that he will buy a new car with the monthly installment of $ 1.200. That will bring that person to worse financial situation than before, despite the fact that the income is increased.

This is kind of universal rule, the more they earn, the more they spend. People spend more money if they are in position, and they are in the same or worse situation than before. It has become normal that people spend all that they earn. People are living from one salary to another. If something unexpected happen, like extra cost or delay of salary payment, people is in trouble. In that situation they need to borrow the money. Some people are even spending even beyond the limits of the earning, by using the bank "products", loans, credit cards, ... This is a lifestyle that certainly leads you to stress, uncertainty and fear for the future.

But why are people careless with spending the money? Probably because they lack a financial wisdom. We never have a chance to learn about financial wisdom neither in school nor in family. Simply, spending makes us happy. Who cares about the financial problems? We will care about them when they come. Since people do not have sufficient financial wisdom, meaning they do not govern with their own money. Many advertisers are utilizing this as an opportunity for sales. Advertisers are suggesting you to spend money, even the money that you do not possess. In most of the cases people are buying this suggestion. Commercial advertisement is creating the desire for advertised product. Once you have the desire it is only the matter of time when you will trigger the spending. People behave as they do not live they own life but one that is created for them.

You do not have enough money? No problem, the banks are there to save you. Or it is better to say that they will take the money that you didn't even earn yet. In return they will take you the commission that you consider to be small. Loans, credit cards, debit cards, revolving card, ... The choice is yours. Many people think that credit is genius invention. It may be for the bank, but for consumer it is more like a curse. If somebody is offering you a large LCD TV for only $ 99,99 a month, people consider this as a generous offer. But people often lack the financial wisdom to understand the long-term consequences for their personal finances. The whole system of crediting is not in your favor, it is turned against you. The House always wins, not you. Just take a look at any bank, their huge buildings, expensive equipment and furniture. Somebody needs to pay that. The one that pays that is you, unless you have enough financial wisdom.

Financial wisdom is not measured by the amount that you earn but with the amount that you keep and reinvest. Financial wisdom is measured by making your money work for you instead you work for the money. It is final hour for you to start thinking about your personal finances in a way that will make you financially wise.


 

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