Understanding how to be good with money can give you the ability to choose where you want to work, where you want to live or where you go when you need medical help. How do you make sure that you are financially secure and able to live life on your own terms?
You Know the Value of a Dollar
Financial success starts with being able to know how long you have to work to earn enough money to make a purchase. You also understand the concept that money isn’t free and everything has to be paid for somehow by somebody.
You Understand Need Vs. Want
You may want a new home. However, you understand that your current home is sufficient until you can put a down payment on the one that you want. That keeps you from using debt to finance something you may not be able to afford.
You Understand Monetary Compounding
If you save $1 today and you get a 2 percent return, that $1 becomes $1.02. Knowing this, you save today because you know it will increase your wealth exponentially in the future, which may make retirement or even early retirement possible.
You Don’t Have Too Much Debt
Paying interest on debt increases the price that you pay to buy an item. By paying in cash, you own a product free and clear and don’t have to pay interest to a lender for the right to buy something that you may not need.
You Have Sufficient Savings
Emergencies happen, and they can plunge you into credit card or other debt if you aren’t ready. However, those who are financially successful have an emergency fund ready to cover unexpected expenses without worry.
You Buy Used or Rent When Possible
In many cases, it makes no sense to buy a new set of tools only to use it once. For those who don’t drive, it may be better to lease a car or use Uber to get around instead of buying a new car. Doing so helps you to meet your needs and save money at the same time.
Looking for value, only buying things that you need and saving the rest of your money can all be pillars of financial success. Once you realize how good it feels to have financial security and flexibility, you will enjoy the process of saving and investing in the things that matter most.
David Milberg is an investment banker from New York City.