Yes money matters to a lot to people but unfortunately most don’t understand the matters of money. In fact few of us are able to control the overwhelming power of money. Unfortunately the life of most people is dominated by, or even worse, built around money — the ability to make it legally or otherwise. Many believe that money can bring them power and happiness, two important long-term goals for most people.
Money creates a challenge to all classes of people irrespective of how much they have. Those with average or little income worry about how to make more in order to meet their basic or additional needs. The rich worry about how to protect and grow their wealth.
In what ways do we interact with money? In general we get it, earn it, borrow, steal, spend, lose, save, protect, and possibly grow it. In fact each of the above activities creates a challenge for us. Unfortunately we see them as standalone independent events, while in reality they are all closely interrelated. Money was invented to facilitate life — use it to exchange goods and services. With time it has taken an additional new powerful role. It has become “the master”, conquered moral values, and taken control of the life of many people. Money problems of most people emanate from two dangerous approaches namely, “spend what you have today and worry about the grocery or the medical bill tomorrow”. The second is, “if he or she has bought it, then I should”.
To join the lucky few who are able to suppress the dominance of money, one has to understand that working hard is the proper path to making money however our total lifetime wealth is determined by God. So we have to work consistently and hope that we may get financially rewarded for our effort. Working hard includes earning money and spending it in harmony, planning our finances, saving, protecting and growing our savings.
On average our earning rate during a lifetime varies. The first paycheck produces a big thrill, but the amount it brings in is insignificant. With time people’s ability to generate money increases as their skills and experience grow. The major challenge comes at retirement time, when people’s ability to make money stops or is reduced, but their need to pay for their bills does not.
Equally important to earning is the ability to spend rationally. One cannot survive for long if he spends this 30 days income in ten days. Proper spending requires prioritizing one’s needs, and making a plan to spend based on tangible income. Smart people relate their earning and spending requirements through a Financial Plan. A good plan should address the individual needs — expenses, both short and long term. In fact when we compare the earning power and the expense requirements throughout our lifetime, we quickly realize that we need to start saving early in our life to support our needs after retirement.
Over the years there has been a gradual escalation in the prices of goods and services, mostly due to the increase in the supply of money. As a consequence money gradually loses part of its value — inflation. Prudent people realize that it is not enough to keep their money secure in a safe place, instead they have to find a means to protect its value — purchasing power against inflation.
Protection or even growing of one’s saving comes from investing it in a business, property or equivalent. A tangible asset normally provides protection against inflation. Investing in the stock market that was initially restricted to an “elite” group is now widespread, has entered every other household in the US and attracted millions of new investors worldwide.
A smart investment strategy coupled with little financial planning can ease your money related worries and take you a long way toward financial security. It doesn’t require ingenuity or insider tips, just discipline and reliable timely information. Investing in stocks provides an opportunity to gain but not without risk — the risk of losing and the risk of addiction. With lack of investor discipline or willpower, the stock market can absorb most of an individual’s funds. We can reduce the dominance of money and reclaim our freedom by prioritizing our financial needs, spending in harmony with our earnings, start saving at an early stage, and invest our savings with a long term goal.
(Salim J. Ghalayini is a professional engineer and a seasoned investor. He manages several investment accounts.)
