How much do you understand money as a low income earner?
How many hours do you spend in a day to learn about how money works?
Understanding money for most low income earners mostly depends on how deep they are willing to learn.
Comparing yourself with someone that has been studying how money works for the past 20 years can pose more threat to your financial journey than you can imagine.
In this post, we will be discussing ways to understand money as a low income earner;
What is money?
Money is a medium of exchange which is accepted for a good or service. Money can also be a means to an end, sometimes freedom or promissory notes.
The initial concept around money was a means of exchange, as people move further away from each other, they started to exchange grains, shells, and livestock and they later developed coins. When coins became heavy to carry because values went up, paper currency and electronic means of exchange was developed.
Fundamental characteristics of money
- Durability: Money must be durable.
- Divisible: Must be easily divisible.
- Convenient: Money must be easy to carry and convenient to keep.
- Portable: Money must be easy to move.
- Money must possess value in itself.
- Must be limited in quantity that is available.
- Money must have long history of acceptance.
How to be good with money as a low income earner?
Getting good with money depend largely on spending less than you earn. Break the habit of bad spending as a low income earner and you have learnt the first secret of getting good with money.
The more you read about money, the more you learn and ultimately leads to more earnings in the long run. Set aside one hour of your day to read money related books, articles, blog post and publications.
Combination of this hourly reading everyday will help you tremendously when it comes to saving, managing money, debt and making smart investment opportunities. Also, listen to podcast about successful people that have managed their money for decades and start getting good with money.
Understanding money management as a low income earner
The ability for you to earn money have a lot of correlation with understanding how money works. To earn more money, you need to start thinking beyond your pay check.
When you learn to be more productive, you can make great impact in the world, follow your passion, be creative and even earn a decent income.
Consider how you spend your time: To grow your income, start looking at how you invest your time. Spend most of your time on expanding your skills.
If you are on a salary, stop thinking about your income as a fixed number, salary increases are asked.
Know your worth: Your worth is not what you are being paid but the value that you are bringing to the table. When you know your worth, you can negotiate and confidently present your value to your customers.
Ask about what other people that are doing the same job with you are getting paid. Remember you work hard for your money, make it work for you.
Follow the money: Be opened to ask or figure out where the money you are being paid at your work place comes from. Get to know who is paying your salary and how you are creating value for them.
Determine your income types
- Most times we often generalized income as a white collar job with a pension or retirement plan. There is much more transparency into how recent workers of these generation are being paid.
- Spend a moment to list out who is paying you now and how you can be paid more many years from now. You should also be looking at investing to grow your money overtime.
- Financial empowerment comes with multiple streams of income. Even though, it might be little at the beginning, it will eventually grow overtime.
- The higher percentage of your investment income, the lower percentage of tax that you pay.
- Longer time multiple income streams buys you options in life. Equity is the key to long term financial success.
- Start thinking of yourself as an investor to take advantage of your lower tax rate sooner. Tax rate on wages are generally higher than tax rate on investments.
11 best ways to understand money as a low income earner
- Set an emergency fund: No one is immune to financial unforeseen emergencies like getting fired at work or loss of loved one. Always have a financial escape plan. Set a structure in place to cater for your financial trouble whenever it strikes.
- Have a date with your money: Always find time to access your financial life to gain a clearer perspective. Consistent assessment of your finances will help you gain clarity on financial steps you are supposed to be taken to increase earnings.
- Set aside some money for savings: Saving money can be hard but the benefits of saving money outweighs what you get from spending extravagantly. Extravagant spending can hinder your savings growth. Learn to always set aside some income for savings.
- Build financial discipline habit: The road to acquire a thriving financial life requires time, effort and most importantly discipline. Financial discipline will push you towards healthy financial habits.
- Invest in a business that has been around for decades: There is a say that companies that has been around for decades can stand the test of time. Before you invest in a company, make sure they have a trending product that is scalable and evolving. If a company can grow that means it can make a lot of money and if you invest in these types of businesses, you will be assured of making money.
- Separate wants from needs: Learn to set a budget that separate needs from wants. Food, shelter, clothing and transportation are needs while wants are things you will like to have but you can completely survive without them.
- Focus on achievable financial goals: You will be able to focus on your goals if you write them down daily. Decide in advance where and when to take actions to achieve your written goals. Reading about money can be the most valuable self-development tool you can acquire in life.
- Set a system for consistency and maintenance: Schedule the time and place to learn about how to understand money and have a backup plan to follow it.
- Invest in yourself: Take some time to read about money every day for consistent growth. By doing this, you will learn to understand and attract money unconsciously.
- Upgrade your knowledge and skills about money every day: The knowledge and skills anyone possess about money will make him or her earn more. If you have a job, become outstanding to command the management of your company to pay you more.
11. Raise your desire to learn about money: Change your behavior and mindset towards money. Take steps that will raise your desire to learn and understand how money works.
Final note, it is possible to understand how money works as a low income earner, if you can be humble enough to create some time to learn from those that have acquired money skills over time.
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