It’s always wise to learn from the mistakes of other people. We always say that we’re learning from what other people do, but when we’re put in the same situation, we don’t recall the lessons. This is mostly true about financial decisions and personal budgeting.
The world of finance is easy to maneuver, and it’s obvious that you should follow the rules if you want to have a good credit score. However, almost no one observes all of the consequences that happen, even though there is a lot of available information.
Debt is something that can happen to anyone. We all start out different, and most people are not born in great wealth. That’s why being fiscally literate and responsible are so important. Here are two examples of people that knew how to handle their money.
The first example is of Ronald Read which was a low-key person for his entire life. He worked as a mechanic and fixed cars for almost 30 years and also maintained a second job working as a janitor. When he was almost 40 years old, he bought a house and lived in it for the rest of his life.
When he died, he left more than 8 million dollars to his kids and donated to charities, hospitals, and libraries. That’s when the entire world started talking about him. Another story that’s completely opposite of him is the story of Richard Fuscone.
He was a person that went to Harvard and made it to the Forbes list of 40 under 40. He was extremely successful, and yet he became broke when the crisis of 2008 happened. This scenario is quite common in the world of finance and economics.
These two examples of people are diametrically opposed, and it’s something that can never happen in another field except for economics. A janitor can never outperform a heart surgeon when it comes to medicine.
Then how could this happen when one of these people had an economics background and degree, and the other one was working two jobs for his entire life. The answer comes in the behavior and habits created when it comes to dealing with money.
How are loans connected?
In the above example, Richard Fuscone was in great debt. During the mid-2000s, he was living on a property that most of us can’t even imagine. His house, or mansion, had more than ten bathrooms, a lot of garages, two indoor swimming pools, and the maintenance costs were close to 100 000 thousand dollars per month.
This habit alone cost him more than a million dollars each year. No matter how much money you have, you can’t remain to be wealthy if the pool of banknotes is leaking on one end. In the case of Fuscone, the leak was massive.
That’s why the crash hurt him so bad. On the other hand, Ronald Read was a disciplined man who wanted to follow the rules. He invested in blue-chip companies over time, and his wise choices provided him with the opportunity to do what he liked.
That’s the sole reason why he left the generational wealth to his children. There are plenty of lessons that can be learned from this. The first one is that overborrowing is not something that you should do. A lot of instant gratification will not lead you to the life that you wish to live forever. On the other hand, there’s also the power of investing over long periods of time, as well as compounding interest.
Are personal loans a bad thing?
That’s a question that a lot of people want to ask. In the case of loans, there’s no right answer. It’s all a matter of balance. Is food a bad thing? That depends on who you ask. If you eat too much food, you’re going to become overweight and develop diabetes and heart problems.
If you eat too little, you’re going to become anorexic. Just like anything in life, it’s important to have balance. When it comes to loans, there are tons of reasons that are good, and there are tons of reasons why they’re bad. It all depends on the person you ask.
However, there are some objective facts that can’t be negated. First of all, loans present you with the opportunity to have a bulk of cash at your disposal. Of course, there’s a limit in a dollar amount, but it’s still more than you can manage to afford at the moment. With the money you borrow, you can decide to buy a house and make your life better for the future.
Then, you can live in it, resell it for a higher price, or rent it to other people to make a profit. It all depends on the type of person you are. On the other hand, you can take out a loan and buy expensive watches and designer clothes and then spend years trying to pay off the debt. That’s all a matter of perspective, and there are strategies that you can use which can help you manage your finances better.
Why should someone take out a personal loan?
There are a lot of reasons why someone would take out a personal loan. Sometimes, you’re put in a tight spot, and it’s an emergency. One example could be your car breaking down on your way to work, and you have a commute that lasts for half an hour.
You live in the outskirts of town, and there’s no public transport to get to your job. In that case, you’re dependent on your vehicle, and you need to muster up the cash if you want to keep working. That reason is completely justifiable by all standards and by every financial advisor in the world.
On the other hand, there are people that take out loans to go on luxurious vacations just to post a few pictures on their social media accounts. Even though that may seem funny to a lot of people, it’s the truth. A lot of people aren’t making great financial decisions for the future, and they come back to haunt them in the future.
Nowadays, there are two major niches that everyone is interested in. The first one is healthcare, and the second one is money. There are topp tips that you can read and learn from. Modern medicine has been pushed to the limits, and now everyone is healthier compared to the people that lived a hundred years ago.
During these hundred years, the field of economics has progressed too. But is everyone richer because of it? The answer is no. That’s because there are no laws that govern the personal use of money.
There’s a lot of social stigmas that are associated with asking people how much they earn, and a lot of people are confused about what to do with it. Everyone has their own opinion regarding their debt and savings, and the lessons that can be learned often go unspoken.
Why do people spend loans so differently?
People often forget that we’re all unique. This might make you feel better about your spending habits. There are a lot of truths in the world, and we’re all shaped by what happened to us, as well as our environment. That’s why a lot of people make bad choices with their hard-earned money.
That’s why a lot of people will never understand why someone would borrow money to post pictures on Instagram. However, people that grew up with minimal money think about their finances in terms of risk and reward. Their mode of thinking is almost set in stone.
The probability of them being frugal for the rest of their life is quite high. On the other hand, a child of a billionaire could never fathom understanding that mode of thinking. Even if they tried their hardest, these paradigms have been imposed for extended periods of time.
Some people were born during inflationary periods. This makes them view money completely differently than people who lived through a stable period. That’s why a lot of experts are still arguing about the best ways to invest their money and which stocks will outperform the S&P 500.
However, that doesn’t mean that you shouldn’t try and follow the best practices. If your goal is to become wealthy, then you should listen to the advice of people who walked the same road you’re trying to cross. If you learn from their mistakes, it’s going to be easier. When it comes to loans, it’s important to try and minimize interest while keeping the dent in your pocket to a minimum.
What’s the best way to use a loan?
One of the best ways to use a loan is to try and open a business. This is an investment that’s in it for the long term. It’s a great choice because you don’t need to share your profits with the bank or the lending institution, as long as you cover the interest. That’s one of the best things that an entrepreneur can wish for. As with anything, there are both risks and rewards for any choice you make.