The importance of having money can’t be overlooked given the fact that we need money to live. Without money, it’s impossible to get food, shelter, clothing, medicine, education among many other basic needs. It also takes money to get the better things in life. No wonder people spend a lifetime trying to accumulate enough money. But do most people understand money? In an effort to help you know if you understand the most important things about money, here are some important money questions to ask yourself.
What is money?
Most people think of paper money when they think of money. However, anything can be used as money as long as it is deemed valuable by the parties engaging in a transaction. Originally, valuable commodities such as gold and silver were used as money. Paper money was simply used to back gold among other valuable commodities in an effort to ease trade as well as solve other problems associated with using commodities as money.
This however changed with the birth of fiat money (money declared as legal tender by governments) but isn’t backed by valuable commodities like gold. Fiat money is dependent on the faith people have in an economy as well as the debt levels of that economy. If people lose faith in a country’s paper money (fiat money), the money will seize being valuable. This highlights the importance of using money to buy tangible assets as opposed to valuing and storing money in its paper form. It is hard to get financially independent if you don’t understand what money is in the first place.
Why am I in my current financial situation/status?
This is another crucial money question everyone should ask themselves. You are where you are financially because of the financial decisions you have made in the past. If you are in a better place than you were years ago, you have been making good decisions. If not, you need to identify your mistakes and move on. The best ways of identifying bad financial decisions is; reflecting on your past decisions. You need to ask yourself other questions. For instance; do you budget? Do you follow your budget? Is your budget balanced? Do you invest? How much risk do you take on? Are you in debt? How did you spend past loans? If you don’t make an effort to find out why you are where you are financially, it will be difficult to progress. It doesn’t matter if you are doing well or not currently. Just find out why you are in your current financial status to be able to take the necessary action
How do I attain financial freedom?
Financial freedom can be defined as the state of having enough money to cater for all living expenses without having to ever work again. Rich people have financial independence. As long as their money is invested in activities that generate recurrent income, they never have to work another day in their lives. The importance of figuring out how to attain financial freedom can’t, therefore, be overlooked when talking about money. If you aren’t asking yourself this question on a daily basis, then your chances of being rich are slim.
In fact, asking yourself this question is the first step to becoming rich. There is no need of working hard and earning a lot of money if you are not thinking of ways of making your money work for you. There will always be something to spend your money on so, if you keep spending without investing, you will keep working for the rest of your life. You should focus on investing and gaining recurrent income streams instead. After working hard for decades, you should sit back and let your money work for you. Investing in financial education is the best way to start discovering how you can generate income for a lifetime without having to work every day.
If you are able to ask yourself and answer these three money questions, you will be a step closer to financial freedom. Start by understanding what money is and why you are where you are financially. Proceed by understanding what you need to do to make sure you attain financial freedom. Seeking financial education is a good place to start.