Conversations around money and personal finance can be uncomfortable to discuss. For most, it can seem easier to sign up for Salad Loans or split the restaurant bill with friends than to have an open conversation about their financial situation.
Most financial gurus promise that money is simple to understand. But why does it seem so hard? The answer to this is, again, quite simple.
There are some hard truths about money management that you either do not understand or refuse to accept. Call them the harsh realities of financial management. Because money is something you deal with on an everyday basis, it only makes sense to understand the hard truths about money management.
That is exactly what this article is about—5 hard and important financial management truths that no one will tell you but you absolutely must know.
1. Your Mindset Determines Your Financial Success
Believe it or not, it all starts in your mind and with your mindset. If you believe you can create wealth, you’re more likely to do so. People who have an optimistic mindset and a positive attitude towards money tend to be successful in accumulating wealth.
This also means that those harbouring a negative or pessimistic attitude towards money are more likely to struggle with their finances. Limiting beliefs about money, such as “you are only born rich” and “wealth is only for a select few,” can cause more harm than good—especially when these beliefs prevent people from seeking the ayudas or support that could help them improve their financial situation.
Notice the difference when you change these negative financial beliefs into constructive ones. For example, change “I am always broke” to “My financial difficulties are only temporary” or “I’m working towards a bright future” and build a growth mindset for your money and life.
2. Investing is Not As Hard As it Seems
Investing can seem difficult and exclusive, but it’s far more accessible than you think. It’s not just for the wealthy elite or financial experts—anyone can invest, and you don’t need to be a stock market guru to get started.
You don’t have to hold back just because you’re unfamiliar with stocks, shares, or cryptocurrencies. In fact, you don’t need a fortune or deep financial knowledge. All you need is a basic understanding of how investments work.
Take a little time and effort to learn about how investing can help you manage and grow your money. When you invest money into stocks, shares, or long-term savings, you’re moving your money from its idle state and making it work for you.
3. You Risk Nothing, You Achieve Nothing
This might be a difficult truth bomb to accept. Taking risks means opening various possibilities for failure, but in the financial game, there are no ‘zero risk opportunities’. If you seek the rewards, you need to be ready to take the risks head-on.
Whether it’s as simple as asking for a pay raise or as life-changing as starting your entrepreneurial journey, nothing you do comes without risks. It all comes down to your risk appetite; ask yourself how much you are willing to put on the line.
With a no-risk attitude, it’s easy to park all your money in a savings account and work for the same income all your life. But this way you’re likely to lose money due to year-on-year inflation.
Likewise, an all-or-nothing approach is never encouraged. It always makes more sense to take informed and calculated risks. It’s important to be smart and manage your financial risks instead of completely avoiding them.
4. In Finance, Ignorance Is NOT Bliss
Being an ignoramus about what’s happening in the financial world can be dangerous. You don’t want to bite the bait and walk right into a well-laid trap and get scammed. You risk losing your money if you use it without a clear understanding of the financial realities.
Ignoring key money truths often leads to costly mistakes, such as signing up for high-interest loans, investing in get-rich-quick schemes, or mismanaging your savings. The best way to protect your hard-earned money is to educate yourself about finances and stay informed.
Start by listening to financial podcasts, reading up on money management strategies, or even consulting a financial advisor to help you make informed decisions.
5. Make Money When You Have the Energy
Not when you’re old and weary and cannot do it any longer.
Growing up, we were taught to work hard until retirement, when we would have unlimited time to do whatever we wanted. This is the conventional thought process. However, in your golden years, you are likely to have significantly less energy than when you were younger. You are better off reaping the benefits of your labour while you are young and in your prime, which is now.
This is why you need to make your money work and serve you now instead of later. Living a minimalistic life, taking up side gigs for some extra cash, and learning better ways to invest can allow you to earn in your prime and live a good life beyond the typical retirement age.
Summing Up
While some hard truths are financial fundamentals, others are learned (sometimes the hard way) from life and experiences that you pick up along the way.
Learning and understanding these hard financial truths early on can give you a headstart on your financial journey, no matter which stage of life you’re in. These 5 hard truths about financial management may be a bitter pill to swallow, but understanding and accepting most of them can be truly life-changing.