Frugal U – Some Thoughts and Basics About Money and Finance

Dishonest money dwindles away, but whoever gathers money little by little makes it grow.  Proverbs 13:11, NIV

What is finance?  Finance is how PEOPLE handle their financial situation.  To break it down into simple terms, money is a piece of paper.  A piece of paper has no value.  But we place value on these pieces of paper every day.  Most of us work at jobs to earn some of that paper, in what we hope is a fair exchange.

In turn, we provide some of that paper we earn to others for expenses, goods or services.  In most cases, we pay what we think something is worth.  For instance, if you see a candy bar for $1, you may buy it. If you see that same candy bar for $5, you may think “that’s ridiculous, I’m not paying $5 for a $1 candy bar!”  But someone else, who is having a serious craving and is in a hurry, may pay $5 for that candy bar.  What we value is personal to each of us and our particular situations.

We do not build wealth by earning a lot of money. We build wealth by watching what we spend.  You may have heard stories about school teachers with low income leaving $1 million to charity.  They did not earn a lot of money, but they spent less than they took in.  That is the key to wealth. Spending less than you earn.  It’s really that simple. And it’s very very possible for most of us to live within our means.

What we spend money on shows what our values are.

The less debt we have, the more financial freedom we have.  Period.  Some debts may be necessary (student loans and mortgages), but all debt should be paid down as soon as possible.  If you need advice on how to do that, email us.  If you want personal wealth, stop making banks wealthier by paying fees and interest to them.  Keep your money.

Every dollar does count. People who have the mentality of “it’s only a dollar, or its only $5,” are more broke than people who know the value of every dollar.  Sure a cup of coffee is only $2.  $2 every day is $14/week. That’s $56/month.  Keep doing the math to see how that adds up.  Always be mindful of spending, no matter how small the amount.

Always remember that there are some people who don’t earn enough or who encounter financial difficulty through no fault of their own. Whether they lose jobs unexpectedly, become ill, are forced to spend a large portion of their incomes on life-saving prescriptions, lose their home and possessions in a natural disaster, or are supporting elderly parents or other family members, people sometimes need our help.  So, giving to nonprofits, charities, or to people in need is a great way to spend our money.  A good rule of thumb – save 10-20% of your income and give 10-20% to people in need or charities if you can.  Who knows, you might be a person in need someday. And if you are not, then you can definitely spare a few pennies for those who have fallen on hard times.  If you don’t trust charities, find a single parent and help the family with school supplies.  There are creative ways to give.  In my personal experience, money donated to causes I believe in has not been missed.