Chapter 15

Don’t just dream about money – manage it wisely

A fool and his money are soon parted, as the saying goes. And this is in fact true. People who do not know how to handle money lead themselves and others into tempt­ation and take risks. This leads to conflict, depen­dencies, coldhe­ar­tedness, envy, lies, poverty, hate, abuse of power, waste, corruption, etc. Life skills not only include being able to make money but to also use it responsibly.

Do not let anyone take away your voice!

A slogan is “You don’t talk about it, you have it.” What? Money! But most people are motivated by the question: How do you get it? Usually through work. But who is to really say what the one or other job is worth in terms of in money?

In large swaths of industry, remune­ration for work is deter­mined through collective bargaining. It is a result of a power struggle. Many people had the positive experience in the last decades of the previous century that work hours decreased while remune­ration increased. Remune­ration was and is paid for times when they are not even working and times that do not even exist – such as holiday bonus (in Germany, the “13th month payment”). Proponents of this remune­ration develo­pment call this “social achievements”.

While the individual’s work perfor­mance has remained more or less constant, for the variable “remune­ration” it seems the only way is up. Over the years, this has resulted in those who have a job receiving incre­a­singly higher wages while an incre­asing number of people who are low-skilled and not motivated to work are unemployed.

While the functions of markets can be disrupted signi­fi­cantly by the power of governments, monopolies and cartels, they cannot be completely shut down in the long term. Even totali­tarian governments have not managed to do this. Therefore, those who restrict markets do not create more equity, but rather less of it. This also applies for the job market: Jobs have to be created all the time to fight illicit work.

The result of the tutelage system used to dole out income is the largely insigni­ficant relati­onship between “working” and “having money,” of work produc­tivity and income. Your personal income and the income of others are not unrelated. You compare exactly if you are being fairly paid. And this of course you aren’t. Work can only be assessed subjectively.

Handling money has to be learned

Awarding an income including the hefty deduc­tions for the purpose of redis­tri­bution and mandatory social security payments has resulted in many people looking for ways to experience personal perfor­mance directly and seek an income by way of a business on the side. Here, the assessment of perfor­mance works in the balance of supply and demand, you can experience what your work is worth to others, and how much sweat equity is required to receive something in return. The under­ground economy is not just a place for criminals. In fact, it is a human reaction to the tutelage that many feel is arbitrary and fleecing by the government.

An entre­pre­neurial approach to handling money is a foreign concept to most people. Even though everyone depends on the profits and losses of the company employing them, many people have taken on the insinuated opinion that turning a profit is something deplorable. But nobody really lets people know what capital means for the business process and how to amass, form, control and use it productively.

It is strange: Most educa­tional policy­makers attempt to prepare the up-and-coming generation for life with training that lasts longer and longer, and yet nobody teaches young people how to handle money. Their parents and the government under­write their living and learning. Some parents not only dole out money as an allowance but also use it as a motivator for good perfor­mances such as for receiving good grades, mowing the lawn or washing the car. This is misguided education. Working, parti­cu­larly as part of a family, has nothing to do with “working for money”. These kinds of child-rearing methods do not let young people learn how to diffe­ren­tiate the purpose of working in different inter­ac­tions with people. Working for money is only one part of a life filled with work.

And what’s more: Who tells young people that money only is a tool to make the exchange of goods and services possible? Who tells them that producing comes before consuming, and that an income has to be created first before it can be spent? Who tells them that handling capital with an entre­pre­neurial approach lets all of these things be created and makes life bearable or even pleasant? Who tells them that handling money must also meet moral demands and that being greedy and wasting money are not acceptable?

Money has to do with character

How people use their money has to do as much with their character and their approach to life. People who live for the moment will hardly manage their money well. People who are easily manipu­lated can be enticed to make pointless purchases. Those of us who are careful or even scared will likely keep their cash together. People who make their happiness depend on things they can afford use their money to buy status symbols.

Few people account for how they handle the funds that flow to them. Some men simply deliver their money at home and leave it to their wives to finance the household with it. It is enough for them to earn money and to be provided for. For the Sunday morning pint, pocket money is enough.

There have always been commu­nities that commu­nitize the income of their members. In these commu­nities, the individual members don’t have to worry about paying for their lifestyle. They work and the community receives their income. In return, they are fed, clothed, and have a roof over their heads. Since some contribute more than they need to live on, they can offset the costs incurred by other members doing unpaid work.

The mostly idealistic motives that motivate people to join such commu­nities mean that the majority of members are exempt from making financial decisions in line with their anti-money attitude. The handling of mammon is trans­ferred to experts. The liberating poverty enjoyed by the individual does not mean that the community as such is also poor. There are rich monastic communities.

In our society, only a minority manages, through its entre­pre­neurial handling of money, to provide for the double-sided prere­qui­sites of the economic process: income for the employees and goods/services for the customers. All attempts to make the model of idealistic life commu­nities the social model for all under the slogans of equality and justice have failed. According to these experi­ences, entre­pre­neurs should actually enjoy a high social standing. But they do not. They are attacked with the accusation that they do not create social justice.

Do you know your living expenses?

People who want to get rid of “guardians” in money matters, who want to become independent from those who want to dictate their income to them, who want to know how much their work is worth, have to deal engage with the purpose and function of money.

A useful starting point is to consist­ently record all your living expenses:

  • How much do I spend on groceries?
  • How much on clothes?
  • How much does living and heating cost?
  • How much does my car cost?
  • How much am I paying for insurance?
  • How expensive is our vacation?
  • How much do I spend on purchases?
  • How much do my hobbies cost? And so on.

Have you ever tracked all of this over a long period of time? Have you grouped these expenses into blocks, evaluated them according to their priority and compared them with your income? Such an approach is the first step in moving closer to more rational money management behavior. Involve everyone, for example in a shared apartment, who shares in the expenses and draws from the same financial sources.

Analyzing and assessing expenses identifies factors for planning the use of money:

  • Which amounts are due when?
  • Have you informed yourself suffi­ci­ently before spending money to make sure that you also receive an appro­priate value of the good or service in return?
  • Which expenses can which group member decide on on their own and which do they have to discuss with others? etc.

Dealing with money in a group provokes a variety of occasions to discuss needs and wants, but also sacri­fices and values. Delegating all financial matters to one group member has only the advantage of relieving the others from dealing with money problems. But it usually lays the groundwork for mistrust and strife. This situation can be avoided with open budgeting in which everyone participates.

How you create scope for planning your life

When you have an income that adequately covers exceeds your general needs , you need to decide how much to spend and how much to save. Dealing with money in a way that makes you doesn’t start until you start building reserves. If you manage to save up a little wealth, you are will be more independent and you have fewer worries about the future.

This reduces the necessity for constantly having to work in gainful employment when money is available for bridging the gap for transi­tional periods, such as when changing jobs. You can embark on the path to profes­sional indepen­dence when you have saved up some capital. Savings help you in emergency situa­tions. It is reckless not to foresee provide for life risks. It is reckless to not provide for life risks.

Saving up capital to fall back on requires being aware of which risks are covered to what extent by the compulsory measures on the part of the government. If relatively reliable statistics are available for the respective time of the possible risk case, a decision can be made as to what additional amount should be saved.

Imple­menting the objec­tives regarding wealth creation is only possible when working with the appro­priately competent consul­tants. People who themselves know at least a little about financial transac­tions and financial invest­ments will find out how competent these experts are. Relying on others and their advice blindly may work out, but that also may result in unfor­tunate experi­ences and losing money.

Thus, people who want to avoid the risk arising from insuf­fi­cient advice must first turn into a competent partner of those who are trying to achieve their goals for building capital. To do so, you can take advantage of the compe­tition among the providers of financial services to compare them and to then find out which offers and services are worth considering.

Own your respon­si­bility for managing money!

One motive for accumu­lating assets has always been not only to cover the own life risks and to be able to afford a standard of living that meets your personal expec­ta­tions in the long term, but also to create a basis for life for your family, community, and future genera­tions. Back in the day when entre­pre­neurs still felt respon­sible for their families and staff, like patri­archs, this was a motivation for action that defined them. Nowadays, the indivi­dua­liz­ation of our way of living and the socia­liz­ation of life risks has forced assuming the material respon­si­bility for other people into the background.

Nevertheless, for anyone who has assets – either for securing yourself, maintaining your standard of living at an old age or as a life basis for those in the family who do not do paid work – the questions remains how to use the assets not only when you are alive but also in the event that you should pass away. Managing money correctly therefore also includes handling your succession. Since your assets are not play money. Assets require a moral justi­fi­cation. And these assets should not cause any strife.

Money, assets, and managing it is downplayed by some as being purely materia­listic, and by others as a means of fighting for power and recognition and for some others, played like the lottery. Lots of strife could be avoided if more people would manage their financial affairs with expert-level responsibility.

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