If you Google the definition of the word “economy” you get the search result; “careful management of available resources.”
Yet modern people’s ways of handling money seem to be anything but careful. Too many people trade a great portion of their lives for money, only to throw it away.
If you want to handle your life and its potential better, you have to learn to manage your economy by managing your money.
Knowledge is power. Knowledge provides you with the opportunity to be aware. Besides, you do not prioritize what you do not know- or are unaware about.
It should worry you and make you worry that despite our praise of the information age, you know so little in general about your economy and money, despite it being such a vital foundation of your opportunities and personal freedom.
Technology has made it a lot easier to provide ‘services’ which caters to your wants as a consumer instead of your needs as a human being.
If you like to spend money algorithms will instantly recognize your spending pattern online and present you with more of what you were looking to buy. If you Google for information on whiskey or search for shoes on Amazon, They will find you on media like Facebook and present you with more of what you were looking for.
As a consumer you might think that this is a good thing. Just remember that these initiatives are made because they make you spend more of your hard earned money.
And what if your search for news or information in general is gathered in the same way?
You might think that you are informed but in reality you conform to more of what you want to believe in. Technology is the perfect tool to lead you into an echo chamber of information and keep you there.
Technology will dull your investigative mind and lead you to more of the same. To form a well-versed world view, you have to inform yourself on opposing sides of topics. Also the ones you disagree with.
It develops your empathy – your ability to see things from another angle than your own – thus creating a genuine dialogue instead of what often can be seen than a monologue. We are getting caught in very restricted pockets of information, echo chambers, which pick up our preferences and surround us with more of the same, including people who think just like us.
The same goes for issues with money. Technology leads you astray from managing your economy to using up your financial resources.
I see it as a matter of culture. We have been cultivated to spend our money without thinking, which is much easier to do if you know nothing about money and your economy to begin with.
Whenever banks come out with a new way for people to pay without cash- with your cell phone, your watch, your index finger, I see that people are cheering for more solutions to dumb down and numb their awareness and understanding about money and the way they are encouraged to spend it.
For people to do what you want them to do, they have to be distracted from thinking about their core needs and personal interests. You have to cater to their wants.
Handling money well is ultimately based on applying knowledge to logic, then possessing self-discipline to delay gratification. Yet, too a large number of people this seems to be a tree lost in the woods.
An excess amount of stuff but no money
Many people are working hard for their money. Then the big question arises; what do people choose to do with the result of their life and energy spent?
In a consumer culture, too much of this money gets tied up, but not in wealth-accumulating investments.
One industry which has been booming for the last couple of decades is the business for storage facilities. Our consumer culture prompts us to keep buying long after our biological needs have been met.
Instead of saving the money we have after the bills have been paid, we spend it on things which commercials attempts to convince us that we need or want. Our emotions take over where our logic tells us to stop.
More and more people only need to take a look at the boxes piled high in the garage or drive to their storage facility to get an understanding of where their financial resources are tied up. People’s private economy has been allocated into rapidly depreciating consumer products. And there is a reason or this.
Our consumer-based society wants us to spend our money instead of saving it. That way the profit of the companies increase, which satisfy management and increases the number of jobs. This stimulates the national economy, increases the GDP and increases tax income, which makes the politicians happy.
- You need to buy new clothes up to 4 times a year to be up to date in fashion.
- You need the new iPhone because the ads make your current iPhone seem old and irrelevant.
- You have got to have a new and expensive car so that you can drive through the city and turn the heads of people you do not know.
- (insert your own reasons for spending money on things you do not need)
No one wants you to save your money with the financial setup we have created in our society. It is not in our short-term interest. And since few people think about the long-term consequences, the downside to your private economy is largely ignored.
To escape this setup you have to think outside of the paradigm, which you have been put in.
And it starts with your parents.
You inherit your economic habits from your parents
Your parents were the first teachers you ever had. This means that your first role models you looked to for shaping your beliefs about money and your economy was your parents. When you were a child you did not have the awareness and knowledge to form your own world view. So, you looked to your parents for help to shape your impression of the world around you.
You observed their behavior and opinions about essential things such as work, relationships, household chores, money and spending.
If your parents were bad with money or had the belief that “money is bad”, or “what is the point of having savings if you die tomorrow?” you risk carrying on that belief unless you have the self-awareness to question your own behavior.
Being self-aware about yourself and your weaknesses is the first step to handle money.
Your economy is your responsibility
However, the most important premise for controlling your economic situation is to realize-and accept that your economic situation is your responsibility. The responsibility for your financial situation cannot be outsourced to the government.
You may be unemployed, working part-time or work a low-paid job. It is your responsibility to adjust your expenses to the size of your income. To do this you may have to ignore the narrative which is promoted by your colleagues, friends, and family.
If your co-worker tells you about how he/she is buying a new car or going on an expensive holiday, you must refrain from adopting the collective narrative that “that is what you are supposed to do with your money”.
You must create your own narrative about what to do with your financial resources. And remember that your resources are limited.
Your money is the easiest and fastest medium of exchange
Think about it. What is the fastest and easiest way to acquire something which you either want or need?
If you need to acquire something, it will be far easier and faster to pay with your money. Why? Because the receiver can use that money just as fast and easily to cover his own wants and needs.
Otherwise you would have to offer your labor for an amount of time equivalent to the value of the item you wish to acquire. But perhaps you do not have the skills or strength required to do the work.
Or you will have to offer trading something of yours for what you wish to acquire.
Your money represents the amount of your finite life spent on doing work for other people. You must value it accordingly.
Money is nothing more than a tool
If a million dollars was dropped in your lap tomorrow, would you know how to handle it?
A tool must be mastered, not used like a toy. You can use a hammer to hammer nails and build something, or you can abuse it to shatter windows.
The same way you can use money to build your life or abuse it to shatter your life. It depends on your own mindset.
To use money as a powerful tool you must understand what money really is. You should invest in your own economic education.
I will provide you with a link to a very well-made video series about money on YouTube from a man named Mike Maloney. Maloney is a libertarian. He believes that the optimal foundation for a society consists of free markets and little government interference. He also believes in investing in precious metals such as gold and silver.
You do not need to take his investment advice but I encourage you to watch his videos (several times) to learn about what money really is and why you should treat it with respect.
Reflect and realize
I believe that you must question what you “believe” in, in order to either confirm that it is a true belief or reject it as an idea without enough merit.
If you are bad with money, you have to become aware of this before you can change your behavior.
Ask yourself; What is my history with money?
If you manage money on an unconscious idea that “money is bad” or “only rich people have money” or “I will never be rich anyway”, you are self-sabotaging your economic present and future situation.
Instead you must confront you destructive mindset and make sure that your unconscious narrative about money is constructive and enables you to earn money and save and invest.
If you are used to wasting your money, you must ask why. Why did no one teach you to be resourceful with money?
The answer could be that you parents did not know any better themselves. Neither did your family, your teachers, or any adult in your surroundings when you were forming your belief system as a child. We receive no economic education in the school system.
Try telling yourself that “I deserve to become financially free” or “I want to succeed with (insert own ambition here)”.
Try to sense if there is any mental resistance which attempts to shut that narrative down. Then try to locate where it is coming from.
If you grew up in an environment that was bad with money, it becomes your job to break the social heritage when it comes to wasting money.
First step is to seek out people who thinks successfully rather than people did in your old environment. The most significant indicator of a person managing his/her money well is that he/she has a plan. Money is not simply stuck under the mattress.
If you need guidance you could adopt Dave Ramsey’s 7 baby steps. You can hear Dave Ramsey explaining the logic behind his program here (the video contains ads).
Make a budget
Again, planning is the key to moving toward economic freedom. A budget is your day-to-day tool to ensure that you reach your long-term goals.
Making a budget may seem boring until it provides you with an overview of your expenses. It may then present you with either what seems like a nightmare or a view of your opportunities.
If you spend your entire paycheck, you have a problem. Every time you receive a paycheck, you must have just a small amount to put aside. A MGTOW with a YouTube channel called Mobile MGTOW shares his take on Financial Fasting.
Getting out of debt is priority number 1
Have you ever put on a weighted vest or tie weights to your ankles before a run? If the answer is yes, then maybe you are a crossfitter or a professional athlete. Then adding weight to your exercise is done with a purpose – to develop yourself and excel.
Taking on debt is like tying weights around your economy. Therefore it should only be done in certain situations where it will help you improve and develop yourself and your business.
Debt should only be taken on as an investment in something which can generate more economic resources in your life. Any debt beyond that is generally destructive to the kind of life you wish to lead.
Save and invest
Saving and investing is the equivalent of thinking about- and preparing for the future.
There are four important types of savings to consider.
- Unexpected expenses
- Retirement
- Education
- unemployment
One of the most devastating factors to the majority of people with little to no wealth is the occurrence of unexpected expenses; the car breaks down or there is a leak in the house.
Without warning you have gone from 0 dollars in your bank account to perhaps owing a payday loan company several thousands of dollars. Nobody wants to be in such a situation.
An economic buffer for unexpected expenses is an absolute must when it comes to gaining control of your economic future.
Savings for retirement should also be fundamental. Whether your savings will make you able to completely retire is the question. But you should at least be able to substitute the main part – if – not all of the income you receive from a paycheck which will sustain your fundamental living conditions as you get older. Do not count on government welfare in the future and be prepared to consider part time work the future “retirement”-model
Lifelong education is crucial and you should consider saving for future online courses, tutoring, and compensating for possible lower wages in preliminary job situations when migrating to another job field.
Unemployment will happen to more and more people if they are not able to educate themselves in the future. Having savings which corresponds to about 6 months unemployment will provide you with a buffer to look for work while learning new things. Or you can combine it with savings for education and spend a year or more on an education.
When you have all the basics of you economic situation under control, you start investing beyond this level.
Invest (in the following order)
- Entrepreneurship
- Precious metals
- Stocks
- Bonds
- Real estate
Entrepreneurship
The most flexible and powerful form of investment is entrepreneurship. If you are able to create an online business, you can scale that business by creating products that make you money while you are sleeping (passive income). If you generate a modest income and scale down your living standards, you can become economically independent from the government, banks and employers, which is the ultimate goal for more and more people today.
Precious metals
When financial crisis happens and the purchasing power of currencies goes down, the value of precious metals like gold and silver go up. You should not think of investing in precious metals as a profit-generating investment, more like an emergency hedge for inflation and financial downturn in society.
Stocks
Stocks are the ordinary citizen’s way of investing. Orginally it worked through pension funds who allocated people’s savings on the stock market. Today people are directly choosing their own funds and individual stocks.
The stock market is volatile and experiences corrections with intervals of about 6-7 years. You should be aware of this when investing, to understand whether the market is over-value and facing a correction. Unfortunately no one is able to predict exactly when these corrections occur.
Bonds
Historically, few investments have been considered as safe as owning bonds. Bonds are IOUs issued by a country’s government, which means that the country’s citizens are liable for repaying the debt through taxes. It means that you can own a small part of the national debt and in return for the money which you have lent the state, the bond will be paid back to you with interest. Since the risk of governments going broke is usually low, the return on bonds is also rather low. Stocks have therefore been seen as the more profitable investment, combined with a certain portion of the investment allocated to bonds as a form of security.
Real estate
During the housing bubble, before the crash in 2008, real estate became a more mainstream form of investment (or speculation). Today the public awareness about investing in the equity of appreciating property is perhaps as great as investing in stocks.
Know your business and know yourself
The common denominator for these types of investments is that you should never invest in something which you do not understand. Many people hire financial advisors, but the decision to invest is still their own – and so is the responsibility.
Your economy demands a dedicated and consistent effort
Your economy is an extensive topic. Too extensive to be handle in a simple blog post.
There are many things you can do, and some, which you should certainly take action on. But remember that your economic prosperity is an ongoing process.
You will realize that many people have the same attitude about their economy as they have about losing weight; “I will exercise and starve myself for a month to reach a certain weight for this party, and then I will stop.” (and gain weight again).
In the same way people will save a certain amount of money and then go spend it all on a certain product, then start saving from scratch for a new computer etc.
Your economy (and weight loss) takes a consistent and dedicated strategy for the rest of your life. The discipline is not a hundred meter sprint, it is a lifelong marathon and you must disperse your resources accordingly.
In the end, economic growth is basically about thinking like a squirrel; gathering resources and delaying gratification.
Remember, your economic development is not a sprint, it is a marathon and you should allocate your resources accordingly.