The personal finance lessons schools forgot to teach
What's the story
Managing personal finances is an essential skill, but many elements of it are neglected. While we talk about budgeting and saving, some surprising skills can make a world of difference in your financial well-being. Though not taught in schools or by parents, these skills can help you make a more informed decision with your money. Let's learn about them.
Negotiation
The art of negotiation
Negotiation is an invaluable skill that goes beyond salary negotiations. It comes in handy in every monetary transaction, right from buying a car to negotiating rent. Most people don't even realize the leverage they possess in such scenarios. From researching market rates to being prepared to walk away, you can often get better deals. The skill demands confidence and practice, but can save you a lot over time.
Opportunity cost
Understanding opportunity cost
Opportunity cost is an economic concept that deals with what you sacrifice while making a choice. In personal finance, it translates to weighing the potential benefits of different choices before making them. For instance, spending ₹1,000 on a new gadget could mean losing the opportunity to invest that money somewhere for the future. Being aware of opportunity costs allows for prioritizing spending and investment decisions.
Emotional spending
Emotional spending awareness
Emotional spending is when purchases are made because of feelings rather than need or logic. It usually results in regretful purchases and financial strain. Being aware of emotional triggers (like stress and boredom) can help avoid impulsive buying decisions. Developing strategies (say, waiting 24 hours before making non-essential purchases) can mitigate emotional spending habits.
Compound interest
The power of compound interest
Compound interest is a potent weapon for building wealth, but most people fail to understand or underestimate it. It is essentially interest earned on both the initial principal and the interest accumulated from previous periods. When you start investing early, compound interest works its charm over the years, multiplying your wealth significantly without you having to do anything at all.
Fine print
Reading financial fine print
Understanding the fine print in contracts and agreements is critical to avoid hidden fees or unfavorable terms in financial products such as loans or credit cards. Most people tend to neglect this element due to the complicated language of documents. But if you take the time to read properly, you can make an informed decision about the commitments of money management tools available today.