Money makes the world go round
With 180 currencies in the world circulating in over 190 countries the statement ‘money makes the world go round’ emphasises the importance of money and how life cannot go on without it as its so necessary. In some respects, this statement is true when you understand that money is a commodity that enables us to meet our basic needs which are to buy food, pay for shelter, and pay for healthcare, and in cases where someone has disposable income, they can spend it on luxury items and services. With a purchase of these things, it starts a cycle of money as its paid to companies that supply food or shelter or healthcare which increases their wealth and ability to continue this cycle.
The cycle of money enables the storage of monetary worth for future usage without the value deteriorating. As a result, when individuals exchange products and services for money, the money retains a specific value that may be utilised in future transactions. As you can clearly see, money is a top priority in every person's life, and life would be exceedingly difficult to manage without it. With all of this money in the world and the frequency with which it is transferred, it is difficult to dispute that money is what makes the world go round.
Cost of living crisis impact on society
The cost-of-living crisis is an issue that can make one question if the statement 'money makes the world go round' is true with the cost of everyday essentials like energy and food rising much faster than the average income. The decline in disposable income, has caused many issues throughout society such as homelessness, reduced health and well-being, and worsening mental health. People go hungry because they cannot buy enough food. People who are unable to keep their homes warm are in danger of developing respiratory illnesses and, in the most fragile cases, death. Varying households earn different amounts of money and spend it on a wide range of products and services. Some households suffer a higher effective inflation rate because they spend a larger portion of their income on energy and food, which have the fastest rising prices.
“On average, poorer households spend more of their income on these essentials. Based on November ONS price data, the Resolution Foundation estimates that the inflation rate for the poorest 10% of households is 12.5%, in contrast, it's 9.6% for the richest 10%.”
Alternatively, richer households who see significant rises in the cost of the goods and services they purchase may be able to adapt more quickly by cutting their monthly savings or modifying their expenditure on non-essentials.
Personal finance
There are 4 basic principles to master and understand when it comes to maintaining healthy personal finances, these are income, saving, spending, and investing. The most important one of the principles is income as it is the key that enables you to build your personal finance and build the other three principles. Often people have more than one stream of income to enable them to be more financially stable and this can be done through having side hustles in addition to a mainstream job or even having more than one job.
Income allows you to then save money which is important to do as it can serve a purpose in times when you may not be able to work, or something happens that requires you to need a large amount of money immediately. It's good to build a habit of putting money aside to avoid stress in these situations and with the uncertainty of life’s events it is good to increase your feeling of security and peace of mind with the knowledge that you have money saved for emergencies. When it comes to spending it serves as a reward for the hard work you have done but it is important to know that controlling your spending is vital to your financial stability. So, it’s important to implement a realistic budget that you can stick to. A budgeting strategy begins by calculating your monthly costs and dividing them by your monthly income. Use this to forecast your future expenditure and the amount of money you'll have left over each month.
At the same time, spending money on investments may help increase wealth. Investing in stocks, real estate, and other assets can bring in large returns on your money in the future. The issue is the danger of investing in something that will cause you to lose money, so it is best to have a lot of knowledge on whatever method of investment you chose to do.