How To Manage Your Money, According To History’s Greats
Managing money can be bewildering and overwhelming. There is so much advice out there, you may wonder which advice you should follow.
You’re not the only one who has had questions about money, or what method of saving it to follow. Throughout history, people have had to reflect on their finances and make tough choices about their money.
From the Greek philosopher Aristotle to one of our founding fathers Benjamin Franklin to fashion designer Coco Chanel, history’s greats have spent time thinking about money and working out their relationship to it.
Whether you have a spare $10 or a spare $10 million, their insights can help you navigate the complicated and stressful world of money. Here is some timeless personal finance advice.
Know the Value of Things
“Price is what you pay; value is what you get,” investor Warren Buffett wrote in the 2008 Berkshire Hathaway shareholder letter.
Buffet understands the importance of assessing the value of an item before purchasing it. A marked down item is not a good deal if it has no value to you. An expensive item is only worth its price if it has high value to you.
Benjamin Franklin wrote to a friend describing how he had learned this lesson. As a child, he saw another boy blowing a whistle. He so loved the sound it made that he offered all the money he had for it.
But he stopped enjoying his whistle when he learned he had paid four times as much as it was worth.
“This, however, was afterwards of use to me, the impression continuing on my mind; so that often, when I was tempted to buy some unnecessary thing, I said to myself, Don’t give too much for the whistle; and I saved my money.
“As I grew up, came into the world, and observed the actions of men, I thought I met with many, very many, who gave too much for the whistle.
“In short, I conceive that great part of the miseries of mankind are brought upon them by the false estimates they have made of the value of things, and by their giving too much for their whistles,” Franklin concluded.
Invest in Yourself
Trust business magnate Bill Gates for good financial advice. In a 2014 Reddit “Ask Me Anything” session, he was asked: “What is your best personal financial advice for people who make under $100,000 a year?”
His reply: “Invest in your education.”
In this, Gates echoed American industrialist Henry Ford, who once remarked, “If money is your hope for independence you will never have it. The only real security that a man will have in this world is a reserve of knowledge, experience, and ability.”
It’s crucial to invest both time and money in your knowledge, experience, and ability. This is a principle Buffet has returned to time and again. “Invest in as much of yourself as you can,” Buffett has said. “You are your own biggest asset by far.”
Sometimes investing in yourself means putting financial investments on hold. Ford advised against the common wisdom of investing often and early to prioritize investing in oneself: “Old men are always advising young men to save money.
That is bad advice. Don’t save every nickel. Invest in yourself. I never saved a dollar until I was forty years old.”
Think Long Term
Prudent financial management requires a long-term perspective. “Someone’s sitting in the shade today because someone planted a tree a long time ago,” Buffett once said.
Thinking long term can help you assess the value of things. Ask yourself: will this purchase or investment have value for me a month from now? A year from now? Ten years from now?
These questions and this perspective will make it easier to invest in yourself, because of course an investment in your training or education will continue to pay dividends long down the road.
And speaking of dividends, this long-term perspective offers a very practical and matter-of-fact way of guiding whether or not a particular stock is worth investing in. As Buffett said, “Only buy something that you’d be perfectly happy to hold if the market shut down for ten years.”
Don’t forget the forest for the trees. See the bigger picture and think long term, plant your tree today.
Appreciate What Money Offers
“It is better to have a permanent income than to be fascinating,” said Oscar Wilde, one of Ireland’s most fascinating playwrights.
Wilde, who died poor, knew what money represents: the ability to meet our needs and fulfill our material desires. As Aristotle put it, “Money is a guarantee that we may have what we want in the future. Though we need nothing at the moment it insures the possibility of satisfying a new desire when it arises.
Without financial stability, it’s difficult to make the choices we want to make. Don’t take for granted what money offers.
Remember: Money is a Means, Not an End
Keep in mind that money is important as a means to an end, and is not an end in and of itself. As Coco Chanel said, “There are people who have money, and there are people who are rich.”
Franklin once wrote his mother that after his death he would rather people said, “he lived useful” than “he died rich.”
Consider what you want people to say about you after you have died, and then use money to support that end, rather than have it as the end itself. Remember, money cannot buy happiness.
Pursuing money as its own end can also lead to an uncomfortable compromising of your principles. As the French philosopher Voltaire warned, “Don’t think money does everything or you are going to end up doing everything for money.”
Take it from history’s greats: you can be financially successful and personally happy if you:
- Know the value of things
- Invest in yourself
- Think long-term
- Appreciate what money offers
- Use money as a means, not an end
Here’s to your financial health and happiness!
- Contributed By: Mehran Aram, a graduate from the University of San Diego School of Business in 1984, founded Aramco Mortgage in 1998 after spending almost five years in the industry. Today, Mehran Aram is President and CEO of The Aramco Group, and has recently been honored with the distinction of CRMP(Certified Reverse Mortgage Professional) a certification held by less than 50 brokers nationwide. Mr. Aram currently heralds the title of “Mortgage Analyst” on San Diego radio stations: AM 600 KOGO, AM 760 KFMB, AM 1170 KCBQ, AM 1210 KPRZ, FM 98.1, and Fox News Monterey’s AM 1460. Garnering endorsements across the state of California, including from radio personalities, Roger Hedgecock, George Chamberlin, Mark Larson, and Ladona Harvey, Mehran Aram along with his nearly 20 years of industry experience has effectively become California’s Mortgage Expert in reverse mortgages, refinances and purchase loans, among many other loan products.
Category: Family Finances
