Personal Finance Essentials
The Four Little Things You Must Do with Your Money
Four Words That Could Change How You Think
About Money Forever
Money is fun! When you have money, you can choose to do things you otherwise might not be able to do. But when you have money, you also have responsibilities. In fact, there are four little things you must do with your money, and having fun is just one of them.
Tax a Little
When you earn money – say, a paycheck from working – or when your money earns money – say, profits from investments – you must pay taxes to the government. Federal, state and local governments collect taxes in order to pay for services they provide to the community, from schools to roads to hospitals and more. So do not believe that you get to spend all of your money on fun. The first thing you must do is give a little of your money to the government in the form of taxes.
Understanding how taxes work is one of the most important financial skills you can develop. Different types of income are taxed differently. Investment income, wages and retirement withdrawals each come with their own rules. The goal is not to avoid taxes – that is not possible and not legal – but to understand them so you can make smart choices about how and when you earn and spend.
Save a Little
Spending money is fun. But sometimes the cost of what you want is more than the amount of money you have right now. This is why, as you get money, you should save a little of it. By setting aside some of what you earn, you let it grow – and over time, you will have enough to pay for those more expensive things. So, save a little of your money each month.
The most powerful thing about saving is not the amount you save. It is the habit. People who save a small amount consistently, starting early, end up far ahead of people who save large amounts only occasionally. If you join a retirement plan at work and contribute even a modest portion of each paycheck, you will be amazed at what that grows into over decades. The math does the heavy lifting. You just have to start.
Give a Little
Some people are not as fortunate as you. They might not have the opportunity to earn money, or perhaps they cannot earn enough to meet their needs. Consider giving a little of your money to worthy causes from time to time. You will feel good knowing that your money is being used to help others.
Giving is also one of the most meaningful things you can do with wealth. Truly wealthy people – not just financially, but in the fullest sense – tend to be generous people. Whether you give to a local charity, your church, a food bank or a cause you believe in, the act of giving enriches your spirit in a way that spending on yourself simply cannot match.
Spend a Little
We end where we started: money is fun! And you should use a little of your money for exactly that purpose – to create joy for yourself, your family and your friends. Go on a trip. Celebrate a milestone. Treat someone you love. Money that only gets saved and never enjoyed has missed its purpose.