Everything You Need to Know About Personal Finance

Everything You Need to Know About Personal Finance

A few years ago, I had lunch with an individual who was considering hiring me to give a multi-hour seminar at a business convention on personal finance. This person knew me from the local community, and he felt that I might be the right person.

Out of the blue, he asked me to give him a five-minute version of what I would present to the group during the lunch. I thought for a minute, pulled a pen out of my pocket, and asked him for five business cards. I summarized everything I know about personal finance in a pocket-friendly presentation in those next five minutes.

Here’s what I wrote (with some extensive explanations):

1. Spend Less than You Earn

In the end, this is the fundamental rule of personal finance: spend less than you earn. It’s the one point that comes up time and time again in almost every personal finance book. Why? Because it’s true.

There are two avenues to achieving this goal: spending less and earning more. By working on either (or both) of these areas, you can increase the gap between those two numbers — and that gap is your ticket to freedom. The harder you work on either spending less or earning more, the bigger that gap will become and the quicker that train to your dreams will arrive at the station.

2. Earn More Money

So how does one earn more? Many people will argue that there is no universal way for people to earn more money, and they’re right: some people are born entrepreneurs, others function much better in an office environment. Some people are endlessly creative; others are masters at completing long lists of tasks.

Once you dig past that, though, there are some common things that anyone can do to earn more money regardless of their financial state.

3. Live Frugally

For a lot of people, frugality is a nine-letter word for cheap. They think of people doing stuff like buying cartloads of generic products, using forty coupons in the checkout aisle, wearing patched clothing, driving a rusted-out old vehicle, and other such things that it’s easy to look down your nose at.

Here’s a secret, something that I’ve witnessed several times in my own life, and read about many more: those frugal people that you look down your nose at often have a mountain of cash in the bank (not always, of course, but more often than you think). They’re not drowning in a mortgage; they’re not making payments on a five-figure credit card debt. They’re not working to death on the weekends or drowning an ulcer in Pepto-Bismol. They’re living their life according to their own rules.

4. Manage Your Money

Whenever you increase your income or decrease your spending, you’ll find yourself with more cash at the end of the month. That cash is your ticket to financial freedom, and the more you can get each month, the better off you are. The trick, though, is not to spend it but to do things that will build a stable future for you. Here’s the game plan.

Pay off all high-interest debt, such as credit cards
Anything with an interest rate over 9% needs to go as soon as possible. Use the extra money to make double or triple payments on these debts, focusing first on the one with the highest interest rate. When that one’s gone, keep going with each successively lower interest rate debt. This is akin to Dave Ramsey’s popular “debt snowball” technique.

5. Control Your Own Destiny

Most people see the goal of all of this as being rich. That’s why you see so many books about millionaires on bookstore shelves – being a millionaire is something many of us aspire to, right?

Here’s the secret: it’s not about being rich. Having a big net worth is just an indicator of what this whole process is really about.

It’s all about freedom. Freedom from debt. Freedom from supervisors telling us what to do. Freedom to spend the time to do things right. Freedom to try out new things and follow our interests. Freedom to sleep until eleven one day, then stay up until two in the morning working on what we’re passionate about.

Reference From: https://www.zdnet.com/finance/credit-cards/everything-you-need-to-know-about-personal-finance-pocket-friendly-edition/

Leave a Reply

Your email address will not be published. Required fields are marked *