Finance is really not that complicated.
Seriously, personal finance is not all that complicated. Sure it can get crazy when you throw in estate planning and charity foundations, but the principles behind personal finance are as easy as they come.You can actually strip it down to just a few points:
1. Spend less than you earn.
Make $50k a year? Great, spend $49,999 or less (or whatever your after-tax amount comes out to). Got your paycheck and it's an even $1,000? Awesome, just don't spend any more than that and you're golden. It's really not that convoluted.2. Don't go into debt.
Don't spend money lavishly and throw all sorts of stuff you don't need on your credit card. Don't take out $40k loans for a new car, or a new boat, or a new electronic robot that makes you coffee and brushes your teeth for you every morning. Again, nothing too complicated here.3. Save money.
Whether it be in a savings account, a checking account, your 401(k), your Roth IRA, your safe, or even in your bed mattress (which I really wouldn't advise), storing away money is a pretty simple concept - all you have to do is NOT spend it ;)I bring this up so matter-of-factly because a lot of people I know try to make this much harder than it really is. Wake up - it's not! If you're just looking for excuses to avoid responsibility, then by all means do your thing. But if you really CARE about making a change and laying down your financial foundation, then snap out of it and START. The basic rules of personal finance are easy, it's applying yourself that's the hard part.
Labels: money management, personal finance
posted by J. Money at
8:14 AM
19 Comments:
What inspired this snazzy comment? Can you give us some examples of how people you know don't do this? Holler!
i couldn't agree more! it's really very simple.
I'd argue that "Don't go into debt." should be "Don't go blindly into debt without serious thought and a solid reason" but I guess that's not as good a sound bit. :)
A lot of lady types fall into the trap of 'but personal finance is hard' and I find it embarrassing and a huge cop out. Like you said, it's often a ploy not to take responsibility for spending habits.
@Anonymous - I can't get into specifics (in case they're reading this) but I just keep overhearing people say they *would* start saving for retirement but it's just too hard and they'll just "do it later" (as if they'll all of a sudden "know how" without spending time on anything). I've been also hearing how people *wish* they could start an emergency fund but they don't know which bank to choose, or what the best % is, or that they don't trust any banks or the Gov't and on and on...
Some of these are valid concerns, but I just wish people would remember that personal finance has been around for hundreds of years - way before online banks and 401ks :) Yeah it's important to research a place before giving them your money , or figuring out which retirement account is best for you, but why not SAVE and SPEND LESS in the meantime? That doesn't require anything else but you holding onto your money longer. Then when the glorious day comes when you're ready to pick specific accounts you'll already be sitting pretty.
@Ms. MoneyChat - :)
@Frugal Urbanite - Haha...yes, "Don't go blindly into debt without serious thought and a solid reason" also works out nicely.
Fabulous...this comes in language I understand. ;) Thanks!
Agree, as long as you get the basics down, the rest will eventually come. People make finances so complicated when the reality is not to spend a lot of money. Do the little things and the big add up. Ok, I'm done with the cliches for now.
oh you make it sounds so simple..oh, wait, it is...i think you left out a 4th point that's huge, DISCIPLINE/SELF CONTROL...
I think I would have to reword number one to "Make more than you spend". There comes a time when all you can do to be frugal just isnt enough and you have to seek out ways to increase your income.
By the way, where can I score one of those robots?
So true. The first point (spend less than you earn) seems to be one my boyfriend can't seem to grasp. He wants to either spend everything he earns or more. Once you can master those basic principles, you can move onto the more complicated things, like (for me) 401K or Roth IRA or stocks/bonds. That stuff I have no idea about!
Hear, hear!
Those are my secret PF tricks! Way to spill the beans to everyone! :-P
Great post my man! You're right, it REALLY IS that simple. Since I have been working on my speaking engagement I have been working on problem and solution for my topics. One problem I have found is that people simply procrastinate. (I'll do it later) we've all heard that one and in the past I have even said it myself. :) The other well known problem is debt. Payments strip the ability to save which is really why most people don't do it. Sadly, the only thing that makes people save is emotion. When someone HAS to they prove that they can. A bad economy has been proof of that as you can see from the rise in savings since last year.
Great post bro! Sorry I haven't been around much lately, just been busy. Right now I am taking a well deserved break from preparing for Friday. This post was hot in my mind so I had to drop in.
Keep it up man!
Simple as things may seem the problem comes their judgment gets the better of them. I have found this to be one my personal biggest weakness.
i read somewhere that geniuses just think in the simplest os terms and in that make the hardest concepts seem simple. this is what this post has done
are you calling me a genius? ;) if so, I love you.
I think "rationalization" must be more addictive than crack because everyone does it...
Way to keep it simple. Just don't forget about taxes when you figure how much you earn - a very important part of spending less than you earn.
This is one of my rules of wisdom:
http://investorjunkie.com/rules-of-wisdom
Going to a bank and opening a CD IS investing. See it wasn't that hard. :-)
Ain't that the truth. There are handfuls of ways to invest other than individual stocks, if only people could get it in their mind ;)
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