5 important things about money that I wish I learned earlier

Until a few years ago, my understanding of money was pretty basic. I got a monthly paycheck from my employer and spent most of it every month. I had a few savings, but in case of a job loss, I'd need a new job quickly, or I would run out of money fast. Luckily, my parents taught me how to budget, and so I never had any debt, and I was able to pay my credit card bills in full every month.

When I became self-employed, I decided to learn more about money. These are the most important things:

Money is like oxygen

If you don't have enough money, everything you do is centered around it. If you have enough, you don't care about it anymore. This is similar to oxygen – we don't value it if we can breathe, but if we run out of it, we die. Know your baseline and focus on getting that solid.

Know how much you need

How much does your (realistic) dream life cost? Are there any things that you want to own? Make a list of these things, it doesn't matter how ridiculous they are.

After that, figure out how much they cost per month – you can get a lease for a $100.000 car for $1,000/m, buy a house on $2,000/m, and add other wishes to this list. If you end at $5,000 monthly, you don't need to be a millionaire to achieve this dream. A net income of $60,000 is enough. $60,000 per year is much easier to earn than having $1,000,000 in the bank.

Savings are key

Savings keep me calm. If you rely on a paycheck every month to pay your bills, someone else has control over your life. Having enough savings to keep your current lifestyle for at least six months, removes a lot of this pressure. Over time, I was able to extend this to two years, and so even a pandemic doesn't scare me financially.

Know how much you need and live frugal until you have enough savings to get a peaceful mind and start new adventures whenever you like.

Money is a tool

Money lets you outsource everything that you don't like and can indeed buy time – but only in the present. It is a tool that you can use to make more money by buying time and investing money itself.

Investing for dummies

Disclaimer: This is not investment advice

This is the most essential thing that everyone should know: Capitalism and our economy are based on continuous growth. If the growth stops, our economy and society collapse. So if you look at the economy over more extended periods of 15-30 years, there is always growth.

The problem with the stock market is that you don't know which company keeps growing and which one goes bankrupt. This is why I decided to invest in index funds that bundle many companies, and if one company goes out of business, another one rises and evens this out. If you invest in these funds, it's basically impossible to lose in the long-term.

Chose funds that invest all their earnings and have low costs (lower than 0,5%). This automatically increases your investments, and so it is the most straightforward tool for wealth creation.

Start as early as you can – investing takes multiple decades, and even small investments in your early twenties have a significant effect long-term.