Basic Rules of Money

The first thing the majority of the people think about when they begin work is the need to cover their basic needs such as food, shelter and clothing.

However, the quality of food, shelter and clothing that we quickly end up desiring and possessing often end up higher than what we can truly afford.

Yet, once these foods are tasted, the shelter lived in and the clothing worn we find that our “basic needs” are carrying a pretty hefty price tag.

Now I do not believe that the finer things in life are bad, on the contrary I believe them to be desirable. But, in proper prospective the desire for things should not become reality until you can afford not only to purchase those items but also maintain savings when you do.

Liz Pulliam Weston wrote in her article, “9 Money Rules to Live by,”

The difference between needs and wants 

Our actual needs are pretty limited: food, shelter, clothing, companionship. Just about everything else is a "want," and our wants are essentially endless. Because our resources are limited (see "scarcity," below), we have to make choices about which wants to fulfill. 

Also, the way we fulfill our needs involves a lot of choice. Shelter, for example, can be a bed at a mission for the homeless or a $125 million mansion. Our food choices offer a similar range, from beans and tap water consumed at home to steak and Dom Perignon at an exclusive restaurant. 

I've discovered many people believe they have to spend money in certain ways or in certain amounts, when in reality their spending is a choice -- or is at least based on choices they made earlier. If you're facing a monster mortgage payment, for example, it's because you chose to buy that home and selected that particular mortgage. Taking responsibility for our choices can be scary, but it should also be empowering. After all, if you have choices, you're not just a victim of circumstance.

Scarcity makes your choices for you 

It's lovely to believe in a world of endless abundance, but the reality is that at any given point in time our resources have limits. Whether it's oil in the ground, our time here on Earth or the cash in our pockets, there's only so much available to be spent.

People who ignore this reality are the ones who run out of paycheck before they run out of month, or who extend their unsustainable spending by relying on credit cards, home equity loans and other reckless borrowing. Their refusal to make the sometimes-hard choices needed to responsibly manage money means that they will have even fewer choices in the future. The money they spend on stuff and on interest can't be invested in other goals, like retirement, so odds are pretty good they'll wind up old and broke.

The pointlessness of the hedonic treadmill 

This isn't the latest workout device at your gym. The hedonic treadmill means that we quickly adjust to improved circumstances. A raise at work or a new possession may make us happy for a little while, but we soon take our situation for granted. Our expectations continue to rise: if only I could get another raise, or a better car, or a bigger house. Should those expectations be satisfied, again we'd adjust and quickly want more.

Liz Pulliam Weston 

So how do you spend your money? This is a question if properly examined would save every one of us a great deal of financial problems. Our mindset behind our money causes us to over spend, under budget, or hold so tight to our money that we think everyone is out to get it. Financial freedom is first manifested in someone’s life through financial intelligence and the fruit that proves financial intelligence exists in someone’s life is when they not only understand their desires in relation to things but control them based on their income level. How do you rank?