Money: Good Money Management

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Dave Deruyyter offers up the secrets of good money management.

To start with a joke: this article is not about how to marry a rich person. Although marrying a rich person could potentially go hand-in-hand with leading a happy life, very often it does not end that way. And we won’t study how to win the lottery. Yes, you can, but your chances are very slim. Many lottery schemes only pay out about half the amount that players put in. Thus, on average, you lose half of what you ‘invest’.

According to common wisdom, money would only be the sixth most important thing in life, if it is important at all. Health comes first, second is the health of your loved-ones, third, a roof over your head, then, an interesting daily occupation and fifth, a fulfilling hobby. And, there you go – money comes in at number six…

Money does not make you happy. The richest people on earth are typically not the happiest. There seems to be a correlation between the amount of money you have and the amount of greed you show. There are exceptions of course, particularly in the US with the likes of Marc Zuckerberg, Bill Gates and others. A regular, interesting, occasionally challenging, daytime occupation is invaluable to happiness and health, just as being physically active is key. Still, having no income, or money, at all is dreadful.

A minimum salary for everyone on earth? It is a very interesting and attractive thought. Still, problems occur when trying to figure out how to fund this. How to decide fairly about who should pay for it? What with the different stages of economic development of countries, or their Purchase Power Parity indices? Then, if people receive money for nothing, will there be enough incentive left for them to contribute to the economy, to society? Initiatives like free education for all are probably better, just as seed money for start-ups is a good idea to help people set up their own business and succeed.

Some principles of good money management that can make your financial life easier: Start saving when you are young; put some money aside every month for a rainy day; do not borrow to cover for your regular expenses.

To buy a house, to invest in your company, to invest in the education of your children are all often worth borrowing for. Still, the classical banking rule of thumb is: ‘Do not pay more than one third of your regular income to repay your borrowings’ – this advice has value even today. Or, how cannot save any money today, how would you be able to repay a loan tomorrow?’. And… borrowing money also costs money!