Home Entrepreneur 10 most important economic and financial lessons

10 most important economic and financial lessons

April 14, 2021

9 minutes of reading

Comments expressed by Businessmen the contributors are their own.

. This is my succinct answer to one question in one The publisher’s weekly interview: “What has improved the lives of so many people during the Covid-19 crisis?” If more people had a deeper understanding of finance, there would probably be more people planning and saving for this unforeseen emergency. But some of the most important lessons someone does (especially businessmen) can learn from of finance?

Here is a small sample of 10 (out of 218 principles) of the most important lessons in finance adapted from my 2014 book. The most important lessons in economics and finance. Please note that these financial lessons have no particular order of importance, and each lesson may more or less apply to you at different stages of your life. Which (or possibly) was most helpful to you during a Pandemic ?

1. Maximize wealth for survival and prosperity

Principle 22: “The primary goal of any business should be to maximize its owners’ assets.”

This lesson never seems to suit many of my former finance students as it contains a sad fact – without wealth, your business will eventually die.

This concept has been expanded further in my 2016 book Survival of the richest by listing three possibilities for wealth management: Reducing wealth below the level of the minimum survival factors needed to survive (I call this the “edge of survival”); Living on the brink of survival, that is where an entity has enough wealth to survive; or to maximize wealth above the level of the minimum survival needs needed to survive (Criniti, p. 162). Out of all three of these options, maximizing wealth is the only one that will best protect you and your business in the short and long term.

Related: 5 First-Time Entrepreneur Financial Tips

Please note that Rule 22 does not give you a free pass by all means necessary; there are other ethical business lessons that will eventually remove unethical ones… some faster than others. This is why it’s best to “ethically” maximize your wealth to ensure that you’re always in control of your good reputation (and your future wealth).

2. Diversification can maximize returns and minimize the risk of your investments

Principle 38: “Diversification can be applied to everything.”

Extensive evidence proving the usefulness of diversification is one of the hallmarks of financial science. This topic originated in the beginnings of modern finance with Harry Markowitz’s Portfolio selection book.

Mutual funds are a prime example of this concept. Why hold just one or two stocks when you can have a mutual fund with hundreds of different stocks with the same investment amount? Diversification should not only apply to stocks and bonds, but ultimately to all types of investments (including real estate and collectibles). We can even apply diversification to other areas of our life, such as diversifying our friends and hobbies.

3. Any work can be valuable

Principle 57: “Every worker can make this world a better place to live and love.”

The recession has taught us to appreciate hard work even when it’s not desirable. Most people want their kids to be lawyers and doctors when they grow up. Let’s face it, though – these professions aren’t for everyone. Simple jobs such as working at a supermarket or grocery store have received the respect of many people in recent times. Without these workers (our modern heroes), who would help serve the food we need in our homes while in isolation?

4. A pandemic recession will change the financial thinking process of every survivor

Principle 64: “Major economic events often make a permanent impression on the future financial problems of its survivors.”

Like many other major events before it (The Great Recession, the Internet Bubble, and of course, the Great Depression), people are learning the true importance of financial education.

With so many businesses collapsing or cutting the workforce, unemployment is rampant. As many people learn to live less, these behaviors are more likely to continue even as the condition improves. The spirit of the living is being tested every day. Without a doubt, many financial scars will remain to remind us forever of these dark moments.

Related: 5 personal financial mistakes kills promising companies

5. Finance teaches you to take control of your wealth

Principle 71: “Mastering the science of finance can help you control your wealth.”

The first step to learning how to manage your money is learning from experience, from what finance teaches you, or both. As you learn from science, you are learning from many other people who have made mistakes and found solutions. By learning financially successful peopleYou can save valuable money and time by learning the correct ways to manage your assets. In science, we call this “standing on the shoulders of giants.” Why invent the wheel for no reason?

6. People who control money are at the root of most of the good and the bad

Principle 135: “Money is not the root of all good and bad.”

Have you ever heard the saying: “Money is the root of all good and all evil?” How could this be true? Money is just a tool that we use to complete certain tasks like buying goods or services. Money has no conscience – in fact its power is in our mind. So it is the people in control of the money who can decide to do it right or wrong; and it is people who can use their money to protect or destroy our planet.

7. Valuable poverty experiences

Principle 152: “Experiencing poverty can provide invaluable lifelong lessons.”

In a way, being poor is a blessing – you can learn things about money that would never even have been imaginable for those without this experience. With that said, this lesson is not an advertisement for “staying” in poverty, just to highlight the value gained from “surviving” it. The poor in the past are often the people best prepared to deal with large, unintended losses of wealth in the future.

8. The rich help others to understand the real purpose of excess wealth

Rule 163: “You cannot carry possessions with you when you die.”

Do you know someone rich who is greedy for her or her money; Do you know what kind of Ebenezer Scrooge? This financial lesson is specially created for the wealthy, who never use their money to help others. Incredibly, there are individuals worth tens of millions, even billions of dollars who never do charity work and / or use their money to help others – even their immediate families.

When you have more assets than your “prosperity tipping point” (a concept is created in Book of Survival of the Richest Man) highlighting the exact amount of additional wealth will add little to an entity’s benefit), all excess wealth will be best used if it is reserved for other people or purposes in life by you or shortly thereafter. With this strategy, you at least have control over who will receive your assets when you die. What’s the point of having more money than you would need if you could never use it to make a positive impact on this world? The real truth is that if a rich man dies like a cold stingy, that perception becomes her or his real legacy.

9. Building a family is very expensive

Principle 167: “An individual’s total living expenses are overstated for a family.”

This lesson is of greatest benefit to those who are planning to get married and / or have children. Life is expensive for each individual. You need money for basic necessities like food, water and utilities.

When you only add one more person to your family, you’ll now have to add all of her or his bills to yours (including potential negative spending habits). As children add to this equation, many additional bills will need to be taken into account (especially school fees). Before you go down this path in life, it is best to organize the best possible inventory to overcome potential financial troubles.

Related: Mark Cuban says the explosive growth at DeFi is ‘just like the early days of the Internet’

10. Save your coins wisely

Rule 218: “Any money you save can give you an option to spend later.”

The old idiom “A penny saved is a penny earned” can literally have the potential to ruin your financial life. Since investing is part of savings, if you invest in the wrong financial products, you can lose everything. Saving a lot of pennies over the years could leave you with no income in retirement. Also, pretend that you’ve saved all your money over the years and keep it under your bed. If your house burns tomorrow, all that money will be gone.

The bottom line of this lesson is to save money for your future – but don’t just save for the sake of saving. You will also need to ensure that your investment strategy and risk management are aligned with your goals. The firmer your investments are, the more likely that your coins will work for you when you need them.

Financial understanding is essential

We may never know the exact results of the Covid-19 pandemic if the volume is significantly larger financial literacy. Could many businesses have been saved? How much? However, it is certain that more financial knowledge can make life a little more comfortable for many during these unpleasant times. The essence of finance revolves around planning for the future, especially in emergencies. By studying the most important lessons in finance, you can be equipped to learn how to better build wealth now and in the future. Which of the above financial lessons has had the greatest impact on your life?



Please enter your comment!
Please enter your name here

Most Popular

Recent Comments