Personal Finance

The 2 Most Important Financial Lessons You’ll Ever Learn

Let’s face it. Most folks are failing miserably with money.

That’s because they don’t understand the most important financial lessons we should all learn.

Don’t be like most people. Learn those lessons and ensure you succeed.

As soon as you clearly understand these lessons, you’ll be well on your way to mastering your money.

Here are the two most important financial lessons you’ll ever learn.

Lesson 1: How To Earn Money – It’s Not What Most People Think

This is one of the most misunderstood financial concepts I know of.

Most people think you earn money by working, but that’s not necessarily true. I know plenty of people that work their butts off but earn very little.

You DO NOT get paid for the work you do, but rather, you get paid for the value you add!

Let me explain.

Imagine a guy who worked for 20 hours sweeping a dirt road only to find that it was just as dirty as it was when he started 20 hours earlier. Is he entitled to pay? Afterall, he did “work” for 20 hours.

Of course not. He doesn’t deserve a dime even though he spent 20 hours working.

Why?

He added no value. He spent 20 hours working but failed to produce any real results that benefited others.

Now I know this is an extreme example, but hopefully it makes the point obvious.

Just because you work doesn’t mean you’re entitled to pay. You must add value. Your work must provide a great enough benefit that others are willing to pay for it. Oftentimes, adding value and working are connected but not always.

I guess that’s why Albert Einstein said, “Try not to become a person of success, but rather become a person of value.”

If we add value, money and fulfillment will follow.

Key Takeaway

Your income is a function of the amount of value you provide to others. The more value you add, the higher your income. Therefore, the best way to increase your income is to simply add more value to more people.

Zig Ziglar, one of the great motivational speakers, said, “You will get all you want in life, if you help enough other people get what they want.” You can be rewarded handsomely when you produce enormous amounts of value for enormous amounts of people.

Lesson 2: What To Do With the Money You Earn

The second most important financial lesson you’ll ever learn is what to do with the money you earn.

This is where most folks fail. They work hard, add value, get paid, and then squander their money without ever giving it a real chance to benefit their life.

That’s because the sequence of their cash flow is wrong—they’ve got it all backwards.

The Cash Flow Sequence For Most Folks

Most people make money, pay bills, buy groceries, get stuff for their home, buy clothes, go out to eat, pay other expenses, and then if there is any money left (which rarely there is), they put it in savings or maybe, just maybe, they invest or give to charity.

Here’s the problem—this cash flow pattern is a sure way to fail with money.

Why?

With this cash flow pattern we aren’t prioritizing ourselves and others as we should be. We may think we are, but when we spend all of our money on what “needs” purchased now, we are robbing from our future, our security, and our peace of mind.

When we treat ourselves and others as an afterthought, we’ll never have enough money to reach our goals. We’ll never have enough to donate to charity, and we’ll never become financially free.

We are essentially letting our lifestyle dictate us rather than dictating our lifestyle.

So then, how do we make the most of the money we earn?

Reprioritize Your Cash Flow

Rather than allowing yourself to be an afterthought, make your future a priority. Rather than making measly donations to charity, make giving a higher priority. Rather than securing financial failure, secure financial freedom.

Flip your budget upside down and make charitable giving, investing, and saving money a priority. This is key to making the most of your hard earned cash!

Here’s How It Works

Before we spend a dime, we want to allocate money to charity, our investments, and our short-term savings goals. Remember, the goal is to get the most out of our money, not just get by.

We want to allocate our money in the ways that are going to bring the most meaning to our life.

Charitable Giving

So, with every paycheck you receive, your first priority should be to allocate a portion of it towards charity. I recommend at least 10 percent.

As ironic as it sounds, donating your money towards meaningful causes or giving it away, is the best investment I know of. Doing so generates the strongest ROI and pays the highest dividends. Don’t believe me? Give it a try, you’ll see.

Invest For Your Future

Your second priority is to invest for your future. A portion of every dollar you make should be yours to keep. So pay yourself, secure your future, and create your financial freedom. I recommend investing at least 10 percent of your income every paycheck.

Check out the investing section of this blog for more details. I especially recommend The Best Way To Invest In the Market.

Save For Your Goals

Your third priority is to allocate money towards your short-term savings goals such as an emergency fund, a down payment on a house, paying off debt, a vacation, or anything else you want to do or accomplish in the near future. This is where you turn your wishes into realities. This is where you make your money fun.

Check out Bank Like A Boss: 3 Simple, Unconventional Strategies to Get the Most Out of Your Banking for the best details of how to stockpile money for your short-term savings goals.

Live On What’s Left

And finally, the fourth priority for your money—spend what’s remaining. After you’ve given generously to charity, invested plenty for your future, and saved adequately for your goals, then you’re free to spend your money however you see fit.

Buy that new toy, go to that fancy restaurant, order something you normally wouldn’t. It’s your money, spend it how you want to. Make it fun. 

Automate Your Budget

The last step to ensure your upside down budget is as effective as possible is to automate it as much as you can. Here’s what I mean: with every paycheck you receive, money should automatically be allocated to charity, to investing, and to your savings goals. Essentially, you shouldn’t have to touch it at all. Your financial system should allocate all your money for you.

A well tuned financial system will enable you to become a millionaire automatically!

Check out The 3 Reasons Why People Fail With Money and How To Ensure You Win for more details about how to build a financial system that produces financial success.

Key Takeaway

We work too hard to squander our money and get no real value from it.

In order to make the most of your money, create a financial system that contributes to charity, invests for your future, stockpiles money for your most important savings goals, and enables you to spend money guilt free.

Conclusion: The 2 Most Important Financial Lessons You’ll Ever Learn

Knowing how to earn money and understanding what to do with it are the two most important financial lessons you’ll ever learn.

You earn money by adding value to others. If you want to increase how much you make, then add more value to more people.

In order to get the most out of the money you earn, reprioritize your cash flow sequence. Make contributing to charity, investing, and saving for you goals the top priorities for ever dollar you earn. Creating a financial system that does everything for you is a surefire way to ensure you succeed and master your money.

Action Steps

Focus on adding value at work! Ensure you’re adding a greater benefit to others than you take in payment.

Create a financial system (it’s simple to do) that automates your giving, investing, and saving.

Please share! If you found this content to be valuable, then please share it with your friends and help us spread the word of financial freedom!

Please comment! Please let me know what you think—what you liked, what you didn’t, any questions you have, or future topics you would like to see discussed. I want this to be about YOUR financial freedom! I want to provide answers to what YOU need help with!

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