Personal Finance Basics
In the past few years of trying to figure out personal finance, I realized one common trend across the board and that is; we kind of fail at personal finance because it seems too intimidating and difficult. The numbers, the stocks, bonds, investments, debts, etc. I realize now that, it does not need to be that difficult. In this article, I will be breaking down personal finance, in pretty much the simplest way possible, so that you can avoid all the outside chatter, and help yourself achieve the financial dreams that you wish for.
Educate yourself and find out the things in your life that are holding you back from financial independence.
Tip Number One: Educate Yourself
Educate yourself and find out the things in your life that are holding you back from financial independence. Oftentimes, we use excuses to try and combat the things that we know aren't right. Look at yourself in the mirror and decide; is it your income, is it debt, is it your spending, etc. that is the problem. You need to identify where those problems are and understand that you can get help to fix them. Fixing them however, means that you have to first and foremost educate yourself. If you are not willing to ask questions, it's going to be very difficult. Educate yourself and be willing and open to ask questions, and learn.
Some books that could help you to get there if you're in debt or debt is a problem, are; Dave Ramsey's “Total Money Makeover”. Love them or hate them, it's an outstanding book and arguably the best way to get out of debt though not necessarily the best way to grow financial wealth. If you're thinking about the mindset, you got books from Tony Robbins, Ramiz Sade’s “I Will Teach You To Be Rich”, Robert Kiyosaki and Sharon Lechter “Rich Dad Poor Dad”, which is a classic, etc.
Overall, there are some great books out there on just switching the mindset. You can get yourself into this mentality of personal finance, if you want a way out of debt, or you're looking at that next step to reach financial independence. Even if you don't like reading books there are other places for education. Dave Ramsey has a podcast, just look it up on google, and there's a whole bevy of podcasts out there on personal finance that you can choose from. There’s also a whole variety of other venues to learn from like personal finance seminars. Whichever way you choose to learn, always remember that the first step of personal finance starts with learning.
Money has to be made if you’re to achieve financial independence, and to make money, you have to invest.
Tip Number Two: Invest
Money has to be made if you’re to achieve financial independence, and to make money, you have to invest. The questions are always about what to invest in, why invest in it, how to invest, when and where to invest. In general, all investments are geared towards trade; which is the buying and selling of goods and services.
The trick is to know which goods or services are tradable commodities, and what you need to invest in them. The investment could be capital invested in education or training, to acquire the skills to offer a certain service through employment. It could be capital to buy manufacturing equipment to make certain goods to sell. It could also be capital to buy and sell already made goods or services by others e.g. on the stock market, in a store, and so on.
Investment overall is the way by which you’re going to establish or create an income avenue for yourself. Either its investment in skills, which could be your own or other individual’s skills, to offer a service, or products, which again could be your own or others making, to offer as goods. How well you go about the investment process, long term or short term, will determine how well that investment pays dividend or makes returns.
It is borderline impossible to succeed in personal finance if you can’t save money.
Tip Number Three: Spend Less Than You Make
It is borderline impossible to succeed in personal finance if you can’t save money. It is easier said than done, but with some work, you can handle it. Anybody should be able to handle it because there's no way around it just like anything e.g. trying to lose weight, which will mean fewer calories in than going out. It is a simple mentality which you are going to have to cultivate. Whether you're in debt, whether you're investing, whether you're a millionaire already, etc. If you spend less than you make, you are going to continue to be successful financially.
Just because you’re make more money doesn't mean you have to spend more money.
Tip Number Four: Avoid The Lifestyle Creep
Just because you make more money doesn't mean you need to spend more money; that you need to grab this and that, because this little lifestyle creep over time, adds up. Instead, when you get that raise, consider it as more money to save, more money to put in the emergency fund, etc. When you think in terms of more money, more vacations, a different car, and so on, you’re denying yourself financial freedom. Rather than keeping that money in your pocket, you’re putting it in other people’s pockets which leaves you with little to no financial assurance. Avoid the lifestyle creep, and you shall be good in the long term.
More still, many people in their life make statements like; I deserve this because I work so hard, I should be driving a super car, I work so hard. You can't be telling yourself that you deserve certain things because you work hard, what you deserve is financial independence. You deserve to go to work when you want to go to work, you deserve to have the job that you want to have, etc. You have so many other things that you deserve besides a super car; you deserve to retire at a reasonable age and spend time with your family. These are the things that you deserve, things that bring freedom and choice into your life in the long term.
You have to make sacrifices if you want to get ahead with personal finance.
Tip Number Five: You Have To Make Sacrifices
You have to make sacrifices if you want to get ahead with personal finance. Find contentment that you don't need that bigger house, you don't need all these bedrooms, you don't need to spend unless it’s necessary, etc. and you’ll find that it will significantly change your life.
Also, spend less time in leisure activities and more time in money making activities e.g. work, learning about money and how it works, exploring ways to grow your income, etc. The thinking here is that, if we say no to short term leisure activities in exchange for long term goals, then later in life, we'll be able to go on month-long vacations, that's where the sacrifice comes in. Sacrifice time now for time later because, time later is just going to be so much more wonderful especially if you have your finances in order.
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