This article is a guest post by Pearlie Henthorn.
I wanted to write a quick post on this topic – Basic Finance for Beginners – because it always amazes me that in school and college, kids get an education in all sorts of “stuff” they need to learn to pass exams, but as for basic finance? Forget it.
So here are some my simple tips for the financially challenged among you (and yes, I’m sure there are many), who want to learn just a little bit more about how to manage money, how to stay solvent, how to potentially make your money grow and so on and so forth. Take it all with a pinch of salt though, because I’m no expert!
Tip Number One – If you can’t afford something, don’t buy it!
This might seem like a rather obvious, self-evident piece of advice, but it is surprising how many people completely ignore this. Why? Because it is so easy these days to buy stuff on credit, regardless of whether you can afford it or not. You want a high-definition TV set? Fine, buy it on credit. Two week holiday in the Maldives? Go for it. Can’t afford to pay for it? Don’t worry, just stick it on the credit card or take out another personal loan to pay for it.
This seems to have become normal behaviour these days, but it’s something I’ve never understood. It’s fine to borrow money to pay for stuff if you know you will have the ability to pay it back but too often, people over-borrow for all sorts of crap they just don’t need. net result? When they can’t keep up the payments, they get more and more into debt, have their goods and property repossessed and end up with very bad credit or even bankrupt.
Our advice? Just don’t do it.
Tip Number Two – Insurance is a good thing, but don’t overdo it
At the other end of the spectrum are the people who are so over-cautious that they spend a fortune on insurance policies that they will probably never use and don’t need. Yes, insurance is sensible and it is always a good idea to insure things you can’t afford to lose like your house, your car (legal requirement), the most valuable of your possessions and potentially your health and your life. But you can overdo it.
So rather than paying outlandish premiums on the more indulgent insurance policies, why not take the money and invest it in a growth fund for example. Then, if you need it, you can withdraw it. If you don’t need it, it will grow nicely and you’ll have something to show for it.
Tip Number Three – When investing, there’s no reward without risk
My final tip is to do with the wonderful world of investing. You want your money to really grow? Then take some risks! Invest in something that you sincerely believe in but that may fall flat on its face.
Yes, you might lose your money, but equally you might make massive profits. So don’t be a shrinking violet, be a dragon! The self-made millionaires of this world didn’t make their fortunes by sitting on their money. You will never get to be rich unless you take a few risks in life. And if the risk you take doesn’t work, see it as a learning experience!
Anyway, that’s all I wanted to say on the topic. You may not agree with my basic finance for beginners, but it works for me…
Pearlie
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