On Money

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Money is the root of all evil.

Uh, no, the lust for money is. The Bible is often misquoted. (See 1 Timothy 6:10)

Money can’t buy happiness.

Perhaps, but lack of it can certainly lead to unhappiness.

There are many pithy sayings about money. The problem is that for many people, that’s the extent of their understanding of how money works, and how to manage it properly.

I’m not sure schools even try to teach practical finance any more, if they ever did. Things like credit, interest, the power of compounding, and the evil of consumer debt. In prior years, it might have included learning how to balance a checkbook. (Does anyone still do that?)

It’s significantly more important than many of the subjects they try to teach, which are never used again by most students.

There are two critical concepts people should understand, and they both revolve around interest.

Borrowing money and paying interest on it is, in most cases, counter-productive and flat out evil.

Credit card debt is the most common. “Buy now, pay later”, apparently a new wrinkle to encourage more consumer debt, is becoming more popular. While these aren’t the most evil (I reserve that designation for predatory payday loans with even higher interest rates) it tops the list of evil interest too many people simply choose to pay.

Or, rather, that many people don’t think about and end up paying.

Imagine saying “Can I pay twice the price?” for something you want, simply because you want it sooner rather than later. That’s exactly how borrowing and interest conspire to take your money. We’ve become a “Buy Now” society.

Sure, you pay for the thing, and you get the thing, but you pay more — often much more — simply for the privilege of getting it sooner.¬† The “trick” is that paying more is stretched out over time.

Don’t. Do. That.

Save for what you want. Earn interest, rather than paying interest. Pay in full without borrowing. You’ll have payed for the thing and only the thing, paying no one else for the privilege of using their money instead of your own.

Yes, sometimes credit cards and borrowing money is an appropriate tactic. Genuine emergencies. Home purchases. Perhaps some, but not all, car purchases.

But borrowing money to pay for the groceries and paying more for the privilege to do so is a path to lifelong debt.

Learn to save. Learn to wait.

Perhaps even learn to do without, so you don’t have to pay anything at all.