11 Easy Money Lessons You Need To Learn To Be Rich

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As I get older and (hopefully) wiser, I tend to rethink situations and scenarios I have lived up until this point. If you’re new around here, you need to know that I have not always been wise with money. In fact, I have been quite normal. Normal meaning I have made plenty of financial missteps including credit card debt, car loans, and nearly purchasing a house I couldn’t comfortably afford. In fact, those missteps are the reasons I’m not already financially independent. In light of my colorful background, I’d like to take a look at some easy money lessons I wish I had learned in school. These are money lessons you need to know if you ever want to become rich. 

So if you’re ready to dive in to see the money lessons you should’ve learned in school, but didn’t, let’s do this!

1. Budgeting Is The First Step To Understanding Your Money

When Mr. MMM and I started our life together, our finances were normal a mess. We weren’t really tracking our money and we were spending it like we were in college. Think dinners out all the time, movies at the theater, beer at those expensive microbrew taverns. Yeah, we were splurging so often it wasn’t considered splurging anymore, it was our normal spending pattern.

But then we realized something when we nearly bought that house I mentioned earlier; we realized we weren’t in college anymore and we needed to kick it into high gear if ever wanted the option to retire before the traditional retirement age.

So, we canceled the contract on the house, adopted a selectively frugal mindset, and created a budget. Budgets aren’t my favorite thing in the world, but they’re a wonderful tool to gain a clear picture of how much money is coming in and how much is going out.

Budgets allow you to easily spot areas in which you’re spending too much money. After you use a budget for a few months, you’ll be able to see the big picture and make adjustments to meet your long-term financial goals.

We don’t use a budget anymore because we don’t spend money on things that aren’t planned. But if you’re just starting out, I highly recommend you start with a budget.

2. You Need An Emergency Fund!

Yes, you do need an emergency fund. I know they’re not exciting and you might think your money is being wasted because you’re missing out on the opportunity to make more money by not having it invested. But let me tell you, you need a stash of cash sitting in a readily accessible account that you can tap when your company decides to downsize or your dog needs unexpected surgery.

Unfortunately, it’s not a question of IF these things will happen, it’s a question of WHEN they will happen. Do yourself a favor and make sure you have a healthy emergency fund waiting in the wings.

How much do you need? Well, that depends on a lot of factors. The “experts” say you need at least 3 – 6 months worth of expenses (not income), with some even suggesting you have at least a year’s worth set aside.

It also depends on whether or not you’re single or coupled and whether or not there are 1 or 2 incomes. If you’re married with children and only one of you brings in an income, you might want to aim for a larger emergency fund. If, on the other hand, you’re single and still live with roommates, you’re probably safe to aim for a smaller emergency fund.

It’s all situational, determine what you need for your situation and start stashing cash like a kid stashes candy to get that oh-so-important emergency fund in place. Believe me, when the unexpected happens on some random Tuesday, you’ll be glad it’s there.

3. Your Partner Matters

I have said this more than once and I’ll say it again. Your choice of partner matters A LOT when it comes to your overall financial health. This is experience talking here. Not only have I made financial missteps in my past, but I’ve also made relationship missteps, too! Oh, what fun.

At any rate, I can tell you that you will adapt your personality to your significant other. I’m not saying you’ll lose yourself and become derelict and have to live in a van* down by the river. I am saying, however, that if your goal is to build wealth and you marry a spender that doesn’t value money, it’s going to be infinitely more difficult for you to reach that goal.

Bottom line, when it comes to choosing someone to share your life with, think about what you want from life and choose wisely.

*We have chosen to embrace #VanLife and are looking forward to part-time van livin’!

4. Debt Is Dumb

Yes, I’m oversimplifying it. But when it comes down to it, if you have significant debt, you’re funneling money toward paying it down instead of investing. I can come right out and say debt is dumb because I have lived it many times. I fell into the debt cycle more than once and when I was in it I wasn’t building wealth. All I was doing was paying it down and stressing over it.

If you’re in a perpetual state of debt, you’re likely going to end up scrambling to save for your future as you inch closer and closer to traditional retirement age. And, I imagine, scrambling is no fun.

There are two popular options for eliminating debt. One is the Debt Avalanche and the other is the Debt Snowball. Both will get you to debt freedom in the end. Your method of choice will depend on your personality. Just in case you’re wondering, we chose to use the Debt Snowball. 🙂

So if you want to build significant wealth and give yourself the option of an early retirement or a traditional retirement with a mighty nest egg, you need to eliminate your debt now.

5. Your Credit Score Can Have A Huge Overall Impact

Paying your creditors and debts on time is extremely important to ensure you maintain a high credit score. Why are credit scores so important? Because your credit score is what lenders use to determine your worth as a borrower.

Having a high credit score will guarantee you get the best interest rates on things like a house and a car. Getting the lowest interest rate possible on big life purchases like houses and cars will make an unbelievable difference in how much money you will shell out over the course of those loans. And when I say unbelievable difference, I mean tens to hundreds of thousands of dollars.

But what if you use public transportation and don’t ever want to buy a house or car? Well, keep this in mind: It’s also what property managers and landlords use to determine whether or not you’re going to pay the rent on time. So, regardless of your lifestyle, your credit score is important.

Never underestimate the power of your credit score.

6. Big, Impressive Houses are Overrated

I learned this one the hard way – almost. When we were under contract for that house, all I could think about was how big and impressive it was. I couldn’t wait to get settled in and start living our lives in that big house. It was going to prove to the world (actually, just me) that I had made it. Whatever that means.

But as we got closer and closer to our settlement date, my anxiety was skyrocketing. And not just my anxiety, Mr. MMM’s anxiety was off the charts, too. After several nights of waking up in a panic, I realized we needed to pull the plug if we ever wanted to sleep well again.

You see, Mr. MMM’s pay is variable and unpredictable. And that’s not a good combination when you’re buying a big, impressive/expensive house. My income is steady, but what if something happened where Mr. MMM had a delay in pay or didn’t have any contracted work for an extended period of time? The answer is that we would eventually have to tap our savings and possibly even investments to cover monthly expenses. When we came to that conclusion, we were done.

Fortunately, the home inspection came back unfavorable and we had the opportunity to walk away without losing any money. We took that opportunity and never looked back. That was the catalyst for getting our financial house in order and for launching this blog!

7. Invest Early And Often

8. Track Your Net Worth

Tracking your net worth is essential if you want to see a clear picture of your financial health. Your net worth allows you to see your assets and liabilities all in one. Essentially, net worth is your total assets minus your total liabilities. That number is how much you’re worth. Don’t be shocked if it’s a negative number. If you’re just starting to take control of your finances, debt can weigh heavily on your net worth.

But don’t worry, as long as you’re paying off debt and not digging your hole deeper, your net worth is going to go up. That’s right. Whether you’re investing or paying down debt, your net worth is going to rise.

Tracking our net worth is the single best thing we did to keep us motivated when we were just starting out and getting rid of debt. We use Personal Capital to track ours. It’s a free, secure tool that allows you to input all of your information in minutes. After you have it set up, you can see your net worth in colorful charts. There are also a ton of resources you can use to calculate and predict your financial future and what you’re going to need.

If you’re starting your wealth-building journey and are not already tracking your net worth, I highly recommend you give Personal Capital a try!

Other articles you might enjoy:

• You’re Not A Bad Parent If You Can’t Afford To Save For College
• Be Coachable If You Want To Build Massive Wealth
• 13 Easy Tips To Take Control Of Your Money
• How Should Parents Talk To Their Kids About Money?
• 5 Reasons You Need To Track Your Net Worth To Build Wealth
• We’re Reaching Financial Independence Without Bikes or Baked Beans

9. Don’t Pay For Your Child’s College Education

Got kids? Or want them someday? If you fall into one of those two categories, chances are you’re already thinking about or actually saving money for your child’s college education. Now, don’t get me wrong, I think footing the bill for your son or daughter (or both) is perfectly fine if you have all of your other financial ducks in a row.

The problem arises when parents put paying for college over saving for their own retirement. Remember, kids can always borrow money to go to college or go to a less expensive school, but you will never be able to borrow money for your retirement.

So, if you don’t want to become a financial burden on your college-educated children because you don’t have enough money for your electric bill when you’re 70, save for retirement, not college.

10. You Might Not Be Capable Of Working

No one likes to think about this one, but, things change, people get into accidents, and sometimes we get sick. There could come a time when you’re not physically able to work for an extended period of time or ever again in your life.

Finding yourself in a situation like this certainly isn’t ideal, but you’ll be able to cope with it much better if you don’t have to worry about meeting your basic living expenses. This is where having an emergency fund, eliminating your debt, and having investments will come in handy.

11. You Will Make Mistakes – And That’s Okay

There is no doubt about it, you will and maybe already did make mistakes. Hey, so did I! It’s okay. Beating yourself up over past mistakes isn’t going to do any good. Accepting your mistakes and learning from them, however, can make a world of difference to your financial future. Do that, and you just might be throwing in the retirement towel decades ahead of schedule.

And there they are, a quick an dirty list of 11 easy money lessons I wish I had learned in school – or at least much earlier in my adult life. By implementing these lessons little by little, you just might end up rich.

What did I miss? Are there another financial lessons that should be on the list?