If you could teach financial literacy to children, what would you teach first? The idea behind it or the techniques to implement?
Start with the ideas. Technique without a structure doesn’t solve much.
Money is about what it means not what it is. Money was invented to allow people to make their lives easier. It’s for using. It isn’t a thing by itself.
Learn some vocabulary.
Buy – to trade money for something
Sell – To trade something for money
Once you get that, you should learn how to get money.
Remember money is about trading. If you want money you must trade something to get it.
You trade your resources for money.
Resource – Something of value
Everyone has things they can trade to get money. In the begininng people trade their time, their skill, and their energy for money. Once they have some money they can trade the use of their money (invest) and get money for that.
Invest – to trade the use of your money for an expected return of more.
Think through how you trade to get money. It makes sense to optimize the value of what you have to trade.
Time matters. If you work 50 hours a week, you should reasonably expect to earn more than if you work 40 hours. Working longer hours is a factor that sometime people overlook when comparing what one job pays compared to another.
Skill matters. If you bring more skill to your work, you should expect to earn more. Doctors make more per hour than welders and welders make more than common labourers.
You must consider how rare the skill is too. There is little advantage to acquiring great skill in an area where the skill is becoming common or unneeded or performed by machines. Some skills become obsolete. Some skills give personal satisfaction but not much money.
In the beginning look for things in demand and a short labour market.
If you can sell your skill to just one person at a time, you must earn less. That’s why musicians stream tracks or sell CDs or perform concerts in a stadium. One performance, many sales.
If you ever wonder why an NFL quarterback can make $25 million a year it is a combination of rare specialized skill and the ability to trade that skill to someone who can resell the one performance to many people.
Think how you could make your skill resaleable.
Energy. Think about energy. Some people get more done in an hour than others. Employers notice. If there is a business turn down and someone must leave, it will not be the high energy person. Earning money is about more than the rate per hour. Look at ways to get more hours and eventually a higher rate of pay.
Don’t forget attitude. Customers like a cheerful and helpful attitude. Employers do too. Think about what you like and want when shopping.
Learn more about how to get money before you decide what to do with it.
One talent is not enough. People who are successful have a constellation of skills. They don’t have to be highly developed just mutually supporting. Some of them can be acquired by accident but it’s better if you know what the skill is and why it helps you. Consider the ability to communicate. In writing or by speaking. People who communicate better do better.
Listening is part of communication. Learn to hear what others are telling you. People say you have two ears and one mouth for a reason. You learn while you are listening.
Think about other skills that support your primary skill. Leadership. Persuasion. Basic finance. HR.
Every job you have, no matter how unskilled, will help you understand what works. Treat every hour of every shift as a chance to learn important and useful skills.
Financial planning is a way to optimize the use of the money you have and can get. It is about tools and purposes.
We’ll deal with those in more detail tomorrow
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