Personal finances: you reap what you sow
You’ve probably heard the proverb “you reap what you sow”, but have you ever wondered whether it applies to your personal finances too? In this myLIFE article, we share our perspective on this question and explore three areas in which it’s important to “sow” part of your earnings in order to “reap” rich rewards later.
In previous myLIFE articles, we’ve helped you to draw up the family budget, avoid mental traps and manage your expenses as a couple. We’ve shared a whole host of ways to spend less and highlighted retirement plans that help you to set money aside. We’ve even shown you how to spot bad deals and decide on a strategy before hitting the sales.
Today, we want to share more than just practical advice and go beyond merely unveiling the cognitive bias that influences your shopping habits. We want to explore some of the fundamental principles that may help you to control your finances rather than letting your finances control you. To that end, we’ve drawn on popular wisdom and various strains of secular and non-secular thought to come up with a few key principles to bear in mind when it comes to money. It’s up to you to decide whether our proposals are compatible with your values and priorities.
Our first observation is that there is a dizzying array of proverbs and sayings out there to guide us on how to think about and deal with our finances. To cite just a handful of examples, we say “money makes the world go round”, “a fool and his money are soon parted”, “money can’t buy happiness”, “look after your pennies and your pounds will look after themselves”, “the love of money is the root of all evil”, “where your treasure is, there your heart will be also” and “money doesn’t grow on trees”.
In and of itself, money is neutral. How we use money is never neutral. Money is only valuable at all because we can exchange it for goods or services.
Money is neutral, you are not
In and of itself, money is neutral. How we use money is never neutral. Strictly speaking, money is only valuable at all because we can exchange it for goods or services. Keeping money for the sake of it may bring a feeling of satisfaction or security, but that makes no sense at all when we think about it rationally. To see that this is true, all you have to do is imagine yourself on a desert island with suitcases full of banknotes. Having money would be absolutely useless in terms of survival. Once we have recognised this truth, we can start to think logically about the role money should play in our lives.
What are your projects and needs? What are those of your loved ones? What are you hoping to achieve by investing or saving? The way in which we each spend our money is very revealing and answers all of these questions. An objective look at our behaviour shows us that what we say and what we do are often two very different things. While money tends to stir up an array of contradictory emotions and beliefs, everyone agrees that our attitude to money affects how we live our lives. We each have our own unique relationship with it. With this in mind, without seeking to opine on the value of money, can we pinpoint a few basic principles that will help us to manage our finances in a way that reflects our identity and aspirations? The answer is yes!
First, invest in the things you need
It is only logical that we should first and foremost spend our money on meeting our basic needs: food, housing, clothes, etc.
Why not make a list of these primary needs and decide how much of your resources you ought to invest in ensuring they are properly met? Make sure that you don’t confuse what you need with what you want. You need to eat to survive, but do you really need to eat so many sweet treats or go to a restaurant every day? Similarly, you need clothes, but is that sharp designer suit really essential when your wardrobe is already overflowing?
Human beings are complex because the things that keep us alive are not enough to keep us living.
But basic needs are not just material. Human beings are complex because the things that keep us alive are not enough to keep us living. We have mental, relational, cultural and even spiritual needs in addition to our bodily needs. And meeting these sometimes requires financial resources.
We recommend that you draw up a list of these needs, rank them by order of priority and determine how you are going to meet them. Then you can invest in actually meeting every need, regardless of rank, making sure that this doesn’t take up all of your money.
Next, invest in the future you want
Life is not just a question of meeting our basic needs in the short term. We each have dreams and ambitions that may require a lot of time and money to achieve: becoming a homeowner, studying to improve our career prospects, making the most of our retirement, travelling the world, leaving money to our loved ones, etc.
Once your basic short-term needs are covered, think about how your finances will help you to make your dreams a reality. What future do you picture for yourself? Before embarking on a million different projects, ask yourself whether they all fit into the same vision. If you try to work towards more than one vision, the chances are that you’ll spread your resources too thinly and make little progress. Instead, identify the projects that will help you achieve your vision, rank them by order of priority and dedicate a proportion of your resources to gradually moving forward. If necessary, consider turning to a professional with expertise in investing and saving, who will help you to adopt a strategy in line with your goals.
We recommend that you regularly invest a proportion of your resources in moving closer to the future you want. Decide on an exact amount and what you will spend it on.
Lastly, invest in what you love
Already allocated enough money to meeting your fundamental needs and achieving your goals? If so, the time has come to invest what’s left in what you love, with whomever and wherever you like. After all, it’s important to enjoy moments of relaxation and savour the little extras which, while not essential, help to brighten up everyday life.
If you can give according to your means, without reservations or sadness, you will discover that money has no hold over you and that you really are in control of your finances.
If you’re one of those people who prefers giving to receiving, don’t hold back from giving some of your savings to people you love and those in need. If you can do so according to your means, without reservations or sadness, you will undoubtedly discover that money has no hold over you and that you really are in control of your finances. Generosity pays dividends in terms of personal fulfilment.
That’s why we recommend that you invest some of your money in the things that you love and that move and inspire you.
Ultimately, all of these points to consider can be summed up in an invitation to sow based on what you would most like to reap. It’s up to you to find the right balance between short-term needs, plans for the future and what you love and to decide where your priorities lie. Whatever yours may be, never invest so much in one area that you destabilise the other two.