money lessons

5 Money Lessons To Learn If You’re Earning 2022

By this time, we all are smart enough to know that only earning money is not going to take us anywhere. With the incoming cash flow, we need to maintain certain habits and monetary measures to live our life peacefully while planning the future also. Hence, this article will be about 5 Money Lessons for you.

You must have seen multiple examples of people who earn big and still fall to the faces. People with multiple income streams and big businesses end up in debt or go broke. Why do you think such instances occur? There are many answers to it, and based on those, I’ll be stating 5 money lessons for you, especially if you have recently started earning.

No one can deny that money rules the world. Those who have money have the power. We are human, and we have the urge to hold power and status. This drives us to earn money more & more. But not everyone can earn huge. However, we all can follow some steps and habits to reach the top 10%-20% of the population and status.

Money Lessons for Earning People

Increase in income? Yes. Increase in expense? No. 

Money lessons 1

This is one of the most common money lessons we all need to learn. The moment we get our hands on some extra money or our pay increases, we think of upgrading our lives. We change houses, furniture, gadgets, clothes, everything. We don’t even consider if we need these upgrades. It’s more like – “This money is not for me. This is to show other people that I’m now earning more. More than before and better than them.”

Upgrading to a comfortable life is one thing; showing off and buying impulsively is another. Say your income increased by 20%. What happens now? What do you do? You increase your expenses by 20% or even more. What’s the result? In terms of wealth, you stay where you were before. It evens out.

Do you get it now? Imagine you keep living the way you used to, and now you have 20% extra money left with you every month. Think about saving and investing this extra with the purpose of retirement, world tour, some big expense for later, etc. This is more planned and beneficial for you. Hence, the most important of all money lessons – Earn More, Spend Less.

Save First, Invest Second, Spend Third.

Money lessons 2

What do people generally do? They spend first and save, invest whatever that’s left. Sometimes, nothing is left to save or invest. Other times, what’s left is not enough to generate returns. We need to reflect on this habit.

The best way to manage our finances and invest a considerable amount is to reverse the order. The moment we get hands-on money, we must set aside a definite amount separate for savings and investments. Whatever is left after must be used for daily expenses and others.

The most basic rule is to follow the 50/30/20 habit. Set aside a minimum of 20% of your income for investments and savings. The 50% is for daily expenses and the last 30% for luxury and wants. However, you’ll find yourself in a much better position if you save some or more of that 30% stack.

First, save the amount. Second, invest most of it and keep the rest as emergency cash. Third, live your life within the rest amount.

To Save & Invest More, Earn More.

Money lessons 3

You don’t expect to keep saving and investing minimal. Let’s be honest, you can’t generate insane wealth if you keep investing 500 or 1000 bucks a month. It would help if you kept increasing the amount you save, invest.

The easiest and best way is to increase it by a percentage every year. Just as we get our income increased by some percentage, we can also choose to increase the amount we set aside for saving. Here is what I do –

I am currently investing 2000 every month in an Index Fund. I aim to increase this amount everywhere by 10%. That is, from January 2022, I’ll be putting 2200 a month in my Index Fund SIP. Now, for all the other savings and extra allowances, I invest them in stocks and sectoral funds. 5% of my total investment money goes to cryptocurrencies.

This is when you only have one source of income. But after this COVID pandemic, we know that having multiple sources of income is no longer a thing of rich people. It has become more like a necessity. Nobody knows what’s going to happen next. Therefore, one must have at least 2-3 sources of income. The more sources you have, the more you can earn, and the sooner you can amass wealth and retire.

Imagine you retire at 30-40, having enough in your savings and investment accounts. No worry about waking up to the office every day. Doing whatever you like, whenever you like.

Diversify your Portfolio in these four Buckets

Diversify Portfolio

Till now, we have talked about earning, spending, saving, and investing. This section is about where to invest, how to diversify, and where to diversify? You must have heard the famous quote –

“Never keep all your eggs in one basket.”

This quote, over the years, has become the second meaning of diversification. If you want to read in-depth about it, I’ve already written an article. Check it here –

Diversification by Sushrut – Capitalist Cabin

Now, back to the main concern. Where should you diversify? What all assets should you invest in? Let me tell you –

Index Fund –

Think of it as your retirement fund. The best way is to start a monthly SIP in any index fund and keep it going for at least 20-25 years. If you can extend it to 30-40 years, you’ll be amazed! It can easily get you wealth not only for you but for your future generations as well. Compounding is the 8th wonder!

Stocks –

These need a bit of research and smart decisions but have created more millionaires than any other thing. Stock markets are like gold mines. Those who get to know the bare minimum can mine huge wealth.

Crypto –

The trendiest and high-risk investments of today. Cryptocurrencies are highly volatile but embark on a monstrous future. Allocating a small portion of your portfolio to crypto can generate more wealth than any other. But, word of caution, invest that amount which you can afford to lose.

Cash –

Daily expenses, sudden expenses, and emergencies. It would help if you had cash for such daily dealings.

Hence, these four are the primary allocations for your wealth diversification. Abide by these, at the very least.

Stop Impulse Buying

money lessons 5

Many times, people who earn more end up having less than those who earn less. Why do you think this happens? Impulsive buying!

Having money in hand is like having a gun in hand; it wants to be spent and fired. Money, many times, urges to be spent ridiculously. People end up buying useless things on impulse, just as we talked about in the first point.

If one has control over their mind and spending habits, the little income can also prove to be the source of huge wealth. Anyways, having fewer things is good for both your mind and pocket both.

If you wish to learn and talk about Personal Finance and Investments, feel free to reach out.
I’m readily available on Twitter – @sushrutkm

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