This six-part series will help you apply basic financial principles for a better life and greater financial security. Success depends on accepting and adopting these principles through self-discipline, making them habits over time.
- LEARN: We will discuss how you can learn not only from this six-part series but also from other resources as well. Most people simply have not learned even the most rudimentary of financial principles for managing their own finances. Their impulses and intuition don’t help them; in fact, oftentimes they hurt them.
Your money should be treated as limited income, limited in terms of how much you can earn, and for how long you can earn it. Precious and finite. When you run out of money at some stage, whether you are young, in the middle of your career, or are retired, you face major disruption in your life. You can look to relatives to take you in. You can take whatever job you may find and try to scrape by from paycheck to paycheck. Or, as has happened with far too many people, you can even become homeless, despite your education, energy, skills, and talents. When I spent a summer feeding the homeless in Los Angeles, California, I was shocked by the number of former lawyers and finance executives that were living on the streets. A medical emergency, a divorce, long-term unemployment, drug or alcohol addiction—many unforeseen events can take you from security to poverty.
So, whether you buy a book, or you take a class, or you simply want to read whatever online resources are available, here are the subjects you should understand before going on to Part Two in this series. I list the conclusions; you should read for yourself the reasons why (or message me and I will answer your questions):
- Start saving as large a portion of your paycheck as soon as you are getting paid—save even more than you think you can afford to save.
- You don’t have to be a budgeting expert to track how you spend your money. Credit cards can be used for all purchases these days, and the statements will show the categories of your spending. Or you can just keep a diary yourself.
- Avoid the “click” economy that slowly drains our financial lifeblood. Avoid any interest, fees, and transaction charges. These are WASTE costs, and your goal is to drive them as close to zero as you possibly can.
- Resist buying drinks and food in coffee shops and restaurants. Today, more so than in the past, making your own coffee and meals at home saves you a fortune. These are UNNECESSARY costs; they should be minimized.
- Invest your money wisely. A money market account will generally pay you more than your bank savings account today. But speculating on individual stocks like Apple, Amazon, or Alphabet is simply too risky, as is Bitcoin, commodity trading, annuities, or buying life insurance as an “investment.” You can learn how to invest, or you can pay a certified financial planner (CFP) to do this on your behalf. Passive investing in vehicles such as ETFs (exchange-traded funds) are one way to spread your investment across a category while incurring low fees.
- No one knows the formulas, so just ignore those articles. You don’t know how much you will need when you retire, only that it will be a lot. Save until it hurts; invest wisely; live frugally; and you should not need to be taught why leasing that Mercedes or BMW is a bad idea; or why brand names are bait that trap the financially foolish; or that you are essentially fighting on many fronts against people and organizations that will say or do anything to extract as much of your hard-earned money as they possibly can. The uncertainty of our future means:
- Your pension may be underfunded when you need it.
- Social Security, Medicare, and Medicaid could be cut in the future.
- You cannot predict your cost of living or emergency expenses.
- Find a good book (e.g., Financial Literacy for Young Adults Simplified: Discover How to Manage, Save, and Invest Money to Build a Secure & Independent Future, by Raman Keane)
- Subscribe to a newspaper or magazine (Kiplinger reigns as the ultimate choice for personal finance, while The Wall Street Journal offers detailed coverage of financial markets.
- Bookmark a website (Simplifi, Quicken, RocketMoney—best paid services that help you track your spending, budget, and save for your goals. NerdWallet and Mint are both free service, however.)
- Tune in to a podcast; e.g., “The Dave Ramsey Show,” “The Clark Howard Podcast,” “So Money,” “Planet Money,” “BiggerPockets Money.”
- Explore community events (Google this search within your zip code)
- Take online personal finance courses:
- Complete Practical Guide to Personal Finance For Beginners—Udemy
- Financial Literacy—Alison
- Introduction to Personal Financial Planning—edX
- Financial Planning For Young Adults—Coursera
- Investing Basics For Millenials—Skillshare
- Search for financial topics on YouTube or browse financial-related podcasts.
- Visit libraries, bookstores, and online sites for financial titles
- Check out personal finance websites such as Wise Bread, The Penny Hoarder, Policygenius Magazine, Econlife, The White Coat Investor, HerMoney, Ellevest, and Entrepreneur.
