The Truth About Money No One Taught You In School

Understanding money at its core is an essential talent far too many Americans lack. (Though this is perhaps not surprising, given the lack of this type of learning in high schools in the past.) While most people have a basic framework for building a budget and know how to gain access to a credit card or a personal loan, there's a lot of behind-the-scenes thinking that goes into really understanding how money operates in the modern world.

When it comes to money, start by remembering that learning within this environment doesn't ever truly stop. Consumers are constantly finding new ways to leverage their money and available credit to buy something new, or engage with the marketplace in a novel way. As a result, there's always something new to learn when it comes to financial management.

Unfortunately, schools have shown a poor track record in preparing students for the adult world of fiscal responsibility (though curricula around the country are changing, with more high schools now requiring financial literacy courses to graduate). Coming to grips with some of the knowledge gaps students often leave school with doesn't have to be a major hassle, though. Focusing on the following five areas of money can set you on the right path to learning better fiscal management — despite not being taught it in school — while also improving your relationship with the world of finance more broadly.

1. Money doesn't buy happiness (but it can eliminate problems)

A brief reframing of the core concept that "money can't buy you happiness" is in order for anyone seeking to reestablish their relationship with personal finance. There are always going to be intrinsic problems, challenges, and needs that can't be solved with an infusion of cash. Likewise, many people who work themselves to the bone chasing every dollar can find that their relationships may begin to fray. A lack of cultivation in a person's social life as a result of too much work can be a definitively negative force.

However, there's another way of looking at this tidbit of financial wisdom. While you can't solve all your problems by throwing money at them, any issue you can shore up with financial resources isn't actually a problem you have to worry about. A flat tire, for example, might take you away from other activities for the afternoon, but if you've built an emergency fund to deal with the expense, you don't actually have a problem.

The takeaway here is that financial preparation for hard times (through your emergency fund) can eliminate stressors and problem areas down the line that might otherwise truly become problematic. While it's true money can't buy happiness, it can buffer incidents that might cause you sadness and stress, making the good times better.

2. The true cost of discretionary spending and borrowing funds

It's common to think about a budget as a simple calculation of incoming capital and outflowing expenses. But the math isn't straightforward, as this simple approach might have you believe. There are certain expenses, for example, that just can't be avoided. People need a place to live, food, and clothing. Rent or mortgage payments are often one of the first things entered into the budgetary calculation. After that comes essential bills like electricity, internet, and trash collection.

Once you've accounted for all your essentials, what you've got left is your discretionary surplus. However, many experts advocate building savings and investment expenses into the budget rather than placing them at the end. It's a habit of wealthy individuals, too. Doing so allows you to save any additional funds while ensuring you've met your monthly saving goal early in the planning. With these frameworks in play, it becomes clear that any money you spend on an item or an experience today beyond your essential outflows is a trade of gratification in the present at the expense of compounded investment growth tomorrow.

Of course, you can't live your life like a robot, and simply never get yourself anything nice, but thinking about this exchange is crucial. Similarly, the use of borrowed funds to make purchases is often misunderstood. Instead of thinking about paying off a loan, it's worthwhile to frame the cost around the interest. What you pay in interest equates to the cost of spending future capital today. For context, a zero-interest offer makes this trade essentially free, but it still comes with a potentially lean financial repayment period.

3. There's 'easy money' out there (but not as you expect it)

It's often thought that there's no easy money in this world. Anything that seems too good to be true probably is, right? The reality is that "easy money" does exist; it just doesn't take on the format that most people might be expecting to see it in. Rather than an opportunity to make a fast buck, the easy money lies in things like tax-advantaged investment vehicles, contribution-matching offers from employers, and discounted rates on subscription services.

By failing to take advantage of built-in discounts, free-fund-matching programs, and other intuitive and immensely simple money-saving opportunities, you're leaving the easy money sitting unclaimed. For example, many employers match 401(k) retirement account contributions up to a certain dollar figure or calculated as a percentage. All you have to do is invest in your future, and your employer will give you free money to help you along. There's nothing difficult and/or complicated about these programs; although, it's important to make sure you aren't caught by surprise if you decide to leave before a contracted vesting schedule takes effect.

Similarly, calling your service providers before you're out of contract and floating the idea of switching routinely brings solid discounts into the fold. Taking a few minutes to call your cable provider, insurance company, or internet service every year can bring about great savings on an essential expense that simply doesn't have to be as expensive. Seeking out discounted offers is specifically a money tip/trick touted by Mark Cuban as a means to intelligently leverage your finances.

4. Think about lifestyle rather than dollar-value goals

It's easy to get wrapped up in financial goals that revolve around saving a certain amount. Many people think about retiring with $1 million amassed in their Roth IRA or building up to a personal investment portfolio worth $100,000. These kinds of round numbers can be useful guides, but the reality is that the only specific target figure that anyone should be intimately worried with achieving is the $1,000 emergency-savings marker. It's a part of Dave Ramsey's baby steps, and many other experts also cite this figure as a key signpost on the road to great financial stability.

Once fully funded, an emergency savings account should sustain you for three to six months of expenses, so everyone's actual number will be unique to them. However, $1,000 is a good starting point when fielding routine emergency spending needs. As you progress through your financial journey, focusing on the kind of lifestyle you want to lead rather than a savings target will keep your priorities in focus. There will always be another financial hill to climb, but if your goals revolve around attending two or three concerts or games a month, golfing a few times, and going out on a date night each week, then you can better gauge how close you are to a solid, measurable, and unmoving goal on a routine basis.

5. Financial education and literacy require constant care

Finally, one of the biggest misnomers about financial literacy is that it's something someone can simply attain and be done with it. Becoming financially literate isn't a barrier that's crossed and then becomes a static fixture in a person's life. There are constant changes taking place in the financial landscape that we as consumers inhabit. New lending products, retooled savings and/or investment opportunities, and an ever-shifting tax landscape all make education in the money-management space an ongoing project that never ceases.

Even if you were to pass a financial literacy course in school, it's up to everyone individually to maintain an up-to-date understanding of the financial world around them. Whether that be in the world of stock investing and the cropping up of new investment classes or strategies or in something else, constant care is required. It's your responsibility to read about or listen to information on new developments in the monetary world. Federal interest rates might not seem all that interesting or important on the surface, but they affect the way you live your life in intimate and important ways. The same goes for all manner of financial products and policies that enter the conversation and evolve over time.