Making Money, Spending Money, and Managing Finances: Which Skill is Most Important?

Let's dive into the three essential skills: making, spending, and managing finances.

1. The Ability to Make Money
Think of the ability to make money, like clothing. Those who wear simple, everyday clothes typically have average money-making abilities. In contrast, those dressed in luxurious fabrics likely have stronger money-making skills.

2. The Ability to Spend Money
Imagine the art of tailoring clothes as the wisdom of spending money. No matter how high-end the fabric or how expensive the style is, the result won't look good if the tailor's skills are lacking. However, a skilled tailor can transform even ordinary fabric into stunning garments.

3. The Ability to Manage Finances
The style of clothes one wears can reflect one's financial management skills. Some people can pull off elegant evening wear, while others look their best in casual outfits.

All three skills—making money, spending money, and managing finances—are crucial and interdependent. We can achieve financial well-being only when all three abilities are in balance.

Case Study: Mr. Smith
Mr. Smith is an elementary school teacher known for his lively teaching style and warm, caring attitude towards students. He is highly respected and well-liked.

Recently, Mr. Smith got engaged to his longtime girlfriend. Normally, he should be full of joy and excitement. However, after the engagement, he seemed gloomy and worried.

The reason? Just before the engagement, Mr. Smith bought a house. After paying the first month's mortgage, he found himself financially strained and trying to figure out what to do.

Mr. Smith doesn't smoke, drink, gamble, or play video games; his daily expenses are frugal. However, he had very little money left after buying the house and paying the mortgage, making him feel overwhelmed.

It turns out that Mr. Smith bought a house far beyond his financial means. After just one month of mortgage payments, he began to feel immense pressure.

Mr. Smith should have considered his salary's capacity to handle the mortgage without compromising his living expenses. He wanted to make a one-time investment, planning for future children and bringing his parents from his hometown to live with him. He didn't want to rent another house due to a lack of space.

Mr Smith thought he was simplifying his life but needed to consider his repayment capacity.

As a result, even if we are not currently lacking in money, we should still spend within our means. We shouldn't follow Mr Smith's example of trying to get everything done in one step, leading to heavy mortgage pressure. This affects our quality of life and could lead to a "can't afford the mortgage" situation if our job changes or income becomes unstable.

"Spending within our means" is a vital aspect of financial wisdom and a skill everyone should learn!