Skip to main content

Four Fundamental Rules of Financial Education.

Justice is a business owner. He has been running multiple online businesses for the past 5 years.

4-rules-of-financial-literacy

Financial education is the possession of a set of skills and knowledge that enables an individual to make informed and effective financial decisions using all of their financial resources. It's also known as "financial literacy," and it's critical if you want to flourish and get ahead in life.


If you want to enhance your personal and financial life, you may be striving for financial freedom and independence. It means you want to get to the point in your life where you don't have to rely on family, a job, or a corporation you don't like for money.


I'd like you to grasp another idea as well: "financial confidence." It is not the same as financial freedom. This is because independence is determined by the amount of money you have available, whereas financial confidence is determined by your ability to make money. Here's the thing: most people believe that money is scarce. They believe there is no money and that making additional money is impossible. But this is completely false. The truth is that money exists in the world, but only those with the necessary skills and expertise can earn it.


Money is like a game with a set of rules that you must adhere to. If you follow the rules, you will undoubtedly become the master of your financial life. In this article, I'll teach you the four most important money rules, which are the fundamentals of being financially free, financially confident, and financially educated. As long as you're hungry and dedicated, these basic principles I'll offer you will elevate your money game and take you to a whole new level you've never seen before.



The Problem

It's really fascinating how all of this information is getting more and more accessible every day, for extremely low or even no cost. And everything is easily available via Google searches. So, even though everything is at their fingertips, more than 90% of the population is financially illiterate. Let me give you an example: Peter just received his monthly payment. He's left with $1700 after taxes. Instead of investing, saving, or doing anything else productive with this money, he prefers to spend it on a couple of barbecues with friends and other unnecessary expenses. Do you identify as a Peter? Because there are unfortunately many financially illiterate people today, but the fact is that if they can overcome a few bad practices to create a rich attitude, then almost anyone can become wealthy.


There are no wealthy people who are financially illiterate, unless they were fortunate enough to inherit a serious amount of money or win the lottery. However, statistics reveal that 70% of lottery winners become bankrupt after only a few years of being incredibly wealthy. Why is this the case? Again, it all boils down to one's financial education. Even if you have a lot of money, you will make poor decisions and end up losing it all because you don't know what to do with it.


So, if you want to be successful in the long run, not just for a few years, you must educate yourself financially. Unfortunately, this type of education is not taught in the classroom, so you will have to learn it on your own. So, all of the knowledge is readily available, which begs the question, "Why don't individuals learn more about finance?" There are two primary reasons why people do not receive the necessary financial education, despite the fact that it is quite affordable and, in some cases, completely free.

Reason number 1: Conventional Wisdom

The truth is that financial education is NOT normally acceptable. Most people will instill in you a scarcity mindset, and if your mindset is incorrect, you will never attract money. For example, your parents may have told you as a child that "money doesn't grow on trees" and that "money is the root of all evil." These lies that parents tell their children prevent them from taking the required measures for a brighter financial future.


Another commonly held but completely incorrect belief is the negative stigma associated with debt. Debt isn't all terrible (if you know how to use it), but people detest it because they lack the necessary education.


As a result, you must avoid listening to folks who are not financially literate or confident. You should start listening to those who know how to make money since they can offer you advice on how to become financially informed. Just like in a sport, such as skiing. You would not want to learn how to ski from someone who has never skied before; you want to learn from someone who has done it before. If you apply this to your financial education, you will learn quickly.

Scroll to Continue

Reason Number 2: Comfort Zone & Self-Esteem

The rich feel that in order to make money, you must be confident and have a healthy self-esteem. Self-image is crucial, and you must first think that you deserve to be richer and happier. You will never be wealthy if you do not. Consider it a self-fulfilling prophecy: you must first imagine yourself as wealthy. This confident, charming, rich image of yourself in your mind will give you the necessary confidence to act consistently outside of your comfort zone, which is critical.


Most individuals are not successful because they are terrified of success. This is correct. To be successful, you must venture outside of your comfort zone and take chances. For example, if you want to start your first business but don't have any money, you may have to first face the risk of taking out a loan from your bank and putting yourself in thousands of dollars of debt, which is out of many people's comfort zone.


Charisma and confidence are two essential factors for becoming wealthy. You will never get wealthy if you lack the confidence to act. So, before diving into financial education, you must first work on yourself and your mindset in terms of risk-taking and failure. Confidence will give you the guts and fortitude to take risks and perform well under pressure. So, now that you know why individuals don't obtain financial education and how vital it is, let's get started with the four fundamental rules of financial education.

Rule Number 1: Don’t Invest In What You Don’t Understand

Investing is crucial, especially if you want to maximize your income. Here's the thing: working for someone else will never, ever make you wealthy in the long run. You must begin investing. There are many different sorts of investments, such as stocks, bonds, real estate, and the Forex market, to name a few, but I want you to know about the single most significant investment: investing in yourself.


Before you can invest in anything else, you must first invest in the development of your money-making machine: your mind. Gaining the knowledge required to run a business (including financial education) is not optional. Your industry and specialty will eat you alive unless you keep up to date on what's going on. Keep up to date on any information that is relevant to you and your success.


Invest in your company. If you acquire or start a business, you will almost certainly want to expand it at some point. If you wish to achieve so, you must invest money in your firm in order for it to thrive. It's like a car: you have to put gas in it to make it run. A business is no different; in order to expand, it must be fed money. Investing in your business might include everything from marketing to research and development of a new product.


Real estate is a good investment. They, like other investments, are essentially "buy low and sell high." A simple idea with really difficult steps. Most real estate investors begin with conventional houses before moving on to commercial real estate, resorts, large commercial centers, offices, and other properties. Essentially, you select units (structures) with the promise that have been neglected, patch them up, wait for the market to grow, and then sell that unit to make a profit.


Buy stocks. Stocks (or shares) are tangible pieces of a business that are available for purchase by the general public. When you purchase stocks, you gain the right to a portion of the company's profits, which is equal to your initial investment. The stock market, like any other investment, is fairly dangerous, and many individuals lose a lot of money in it.


So, these four forms of investments are the most essential and well-known. However, regardless of the form of investment you make, you must understand what you're getting into. There are rules to follow, but there is also a lot of misinformation out there. Many people are prepared to con you merely to get your money. As a result, you must be extremely cautious about who you listen to. Before investing in something new, conduct extensive research or get counsel from a professional in that area, preferably someone with skin in the game.


Remember this rule: NEVER invest in something that you do not truly understand.

Rule Number 2: Debt Is A Powerful But Deadly Weapon

This may be contentious, but the power of debt is underestimated. Those who understand how to use it will flourish, while those who are afraid of it will miss out on many chances. There's good debt and bad debt. Bad debt is anything that you know you will be unable to repay, such as college debt. This is extremely agonizing, and it destroys many people's financial lives. We shouldn't expect 18-year-olds to make financial decisions worth hundreds or thousands of dollars without thinking about the repercussions, so be cautious and only get into debt if you know what you're doing.


Good debt, on the other hand, is debt that you know you'll pay off (or have a plan to pay off) and that will also make you money. Getting into debt is a technique that you can utilize to become wealthy. For example, you may wish to obtain a loan in order to launch your business. If everything goes as planned, you will be able to pay off your debt and develop your business as long as you keep up with your payments.

Rule Number 3: Think Rich

Thinking rich means visualizing and acting rich. Basically, you're playing the role of a wealthy individual, which may include living above your means. Living within your means is a defensive strategy devised by financial gurus that, for the most part, is sound advice. I mean, we shouldn't live beyond our means because that's how most people wind themselves in real financial difficulties. You must spend your money on things that give you confidence and make you feel good as long as you are disciplined and intelligent with your money.


Do you honestly believe that sacrificing a couple of Starbucks coffees will make you a millionaire? Instead of living below your means and saving pennies here and there, begin learning new skills that will earn you money so that you can maintain your preferred lifestyle. This one trick will have a HUGE impact on your mentality; you will begin to notice possibilities and areas where you can generate money.

Rule Number 4: Develop Skills To Acquire Assets

Assets are items that put money in your pocket, but liabilities take money out of your pocket. Your brain is your most valuable asset, and you can improve it to make it even more valuable.


There are certain skills that are in high demand in the market, and they all have two characteristics in common:

1. They add significant value to the market.

2. They bring in a lot of money for you.


So, rather than working for someone else, begin cultivating skills that will enable you to produce money from nothing by simply giving outcomes to the market. Determine what best suits your abilities and create your first high-income skills to get the resources needed to accumulate more and more assets.

© 2022 Justice Ndlovu

Related Articles