Simple Personal Finance Principles No One Taught You
Why is no one teaching this stuff? I've been on a binge of personal finance books over the past couple of years. Part of that just comes with heading into your 30's, but part of that also comes from the fact that none of this was in my education, birth through graduate degree. Still not sure why. I'll teach my kids these things before they leave the house.
So, here are some simple principles I've learned, and where I learned them from, in no particular order. (All the links are just for you. No affiliates or sponsors.)
The single best investment you can make is in financial education for yourself.
Everyone looks for the best place to invest their money. Time is a more finite investment. We can always make more money, but we can't make more time. The best investment of your time when it comes to your money is to understand as much about the financial world as possible. It's hard to make the best decisions when you don't have all the information.
Order matters.
Every Single Book
Every book I read had a theme of not just assigning where your money goes, but also in what order. Several books are around "Pay Yourself First," the idea of saving and investing your first few dollars before you spend the rest. Several books are around "Honor God with the Tithe," the idea of giving your local church the first 10%. Everyone agreed that the order of where your money went was significant.
Automation almost always trumps self-discipline.
I'm a nerd. I like spreadsheets. I like doing financial analysis. But most people aren't like that. The reality is most people don't want to think about this all that much. The strategy in this book is set it and forget it. One time automation lessens the need for self-discipline consistently. You can't live your life this way, but you can, to some extent, manage your money this way.
Simple is almost always better.
Simple Path to Wealth, Everyday Millionaires
I loved this book. As you dive into the world of personal finance, you discover just how complicated things can get. IRAs. 401(k)s. Whole Life Insurance. Stocks and Bonds. Mutual Funds. The author here points out that most people don't play the stock market game all that well. Even the professionals. Keep your strategy simple, and you have a better chance of understanding it in the first place and staying with it for the long haul.
Know the difference between expenses, liabilities, and assets. (and buy assets)
In short, assets put money in your pocket while liabilities and expenses take money out of your pocket. Building wealth means you intentionally buy assets.
Save for the future. Live in the present.
This is an (almost) one hundred year old book on personal finance! Peak your interest? Anything that is still relevant that much later is interesting to me. One simple thought: Don't spend so much time saving that you don't enjoy what you have now. The book has plenty more. I'd recommend this one.
Be generous.
Master Your Money, The Blessed Life, Your Money Counts, Tax Free Retirement
Many books recommended this thought. It took me by surprise that as many books recommended intentional, large generosity. The truth is, you can't take your wealth with you. Bless others. Intentionally. It's an incredibly healthy reminder that there's more than just money.
Whether you hire a financial advisor or not, YOU are the only one who will truly take care of your money.
Every Single Book
Some books recommend financial advisors. Other books recommend against. All of them agree that you are the one personally invested in your money, so you should understand every move that is made, whether you initiate it or your advisor does.
Plan for taxes now and later.
Tax-Free Retirement, The Power of Zero
Be careful with tax-deferred retirement plans. Yes, you might not pay taxes now. But you will pay taxes later, on both the money you put in now and the gains. Tax rates will likely look different (read: higher) in the future. Some methods can avoid this. But no matter what, make a plan for it.
It's not yours.
Master Your Money, The Blessed Life, Your Money Counts
If you come from a faith worldview like I do, you believe that nothing really belongs to you. God has entrusted us with our money, and we use it the best we can to honor Him.
Avoid Bad Debt
Every Single Book
Dave Ramsey fans, rejoice. Debt is bad. Don't do it. If you've got it, get rid of it. If you're pondering it, avoid it at all costs.
Personal Finance is more about Personal than it is about Finance
I heard it said that if you read one book, you think you know everything. When you read three books on a topic, you'll discover it's more complex than you thought when you read one book. And when you read 12 books, you'll understand all the different facets of an issue. That has been true as I've read.
Personal finance is about how to apply financial principles to your financial situation. We have different incomes, different expenses, and the IRS knows that we all have different tax situations. Ultimately, we each have to chart our way forward.
I would contend it's better to know the different paths, not just take the path of least resistance.
I'd love to hear back from anyone who got to the bottom of this one. What's one personal finance principle you swear by? And where did you learn it from?
Don't like books? Here are some other ways to learn:
Podcast: Millionaires Unveiled
Blog: Mr. Money Mustache
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