If there’s anything I’ve learned over the years, it’s that people sure like to complicate things. They do it at their jobs, they do it at home, and they certainly do with with their finances. In fact, I’ve come to realize that there are 2 very different types of people out there – the ones looking for that magic bullet (a hot stock pick, the secrets to winning the lottery), and the others who genuinely want to better themselves. The people like you and I who actively seek ways to increase our financial knowledge, just like we’re doing here online 😉
You see, managing your finances is actually pretty easy. There are certainly products out there that require professional attention, but the fundamentals behind keeping more money in your pockets is simple. Here are 3 of my favorites – all of which you’ve probably heard before in some form or another:
- Spend less than you earn. This has been written about in hundreds and hundreds of books over hundreds and hundreds of years, and to this day it still remains just as true. And guess what? You totally understand it right? Whether you listen to it, now, is a totally different story. But I promise you this – you always spend less than you make and you will never go into debt. It’s mathematically impossible.
- Save 10% of your income. Another favorite among us finance people. Who’d ever debate that saving 10% of all your money hurts? If you could go back in time and follow this, how much wealthier would you be right now? Seriously, imagine if you saved 10% through all those crap jobs in high school, college, and even the ones you’re holding right this minute. And that’s not even counting any birthday money or other financial presents you’ve received over the years.
- Track your spending. All you need is a few receipts, some paper (or online tools like mint.com) and you record away! It’s annoying, but it certainly isn’t hard. And quite honestly it’s one of the most important things you can do to get on track. If you don’t know here your money is going, how can you keep a budget? You’d be amazed at the things you’d find if you actually sat down and sorted through it all. Even doing it just ONCE can make a difference.
I could go on and on here, but I think you get the point 😉 Financial management is one of the easiest concepts to understand. It’s the game plan and motivation that people usually struggle with! That, and the fact that we see 10,000 ads a day subconsciously reaching for our hard earned money.
So make a stand today, and DO something about it! Promise to stash away more money every month. To track your spending and work on the ares that need the most improvement. At the very least, spend less than you earn! Any one of these will put you on the fast track to financial freedom – you just have to start.
We forget how simple it is!!! If we all just followed this… we spend so much time justifying purchases instead of just working to own them 🙂 Thanks for the reminder!
Amen sister 😉
Yes! The biggest key is living beneath your means. THINK about every penny that you spend. I’ve read that biggest trait of those who retire early is they have always had frugality as their mentality and always lived under their means.
Too many people waste hard earned money on “Stuff” that they soon tire of and gives them more to maintain, instead of focusing on how to grow their money or put into experiences which will make them happier.
Which is another reason I’m trying to go down the “minimalism” route as well 😉
Here’s a post I wrote on it:
http://www.budgetsaresexy.com/2009/08/living-minimalist-lifestyle-is-it.html
I tend to collect things and then get tired of VERY quickly, so now I either have to sell/donate/throw out an item when I bring one in, or I don’t buy it to begin with…it’s pretty hard to get used to that mentality, but every month it gets a bit easier.
And in the meantime, living below our means and thinking more about our expenditures is helping grow the one thing that I don’t want to minimalize – my money!
I’ve read many personal finance books and blogs over the last few years. It really does boil down to the basics: spend less than you make, pay the 10%YOU bill first, know where your money goes, and make conscious decisions about where it goes. You can make it as simple or as complicated as you like as long as you follow those (what should be) common-sense guidelines.
yep! now if only people would DO IT.
The two best things I ever did as far as more personal finances were concerned was:
1. Set up automatic withdrawals into my savings / investment accounts.
2. Sign up to Mint
The first made it really easy to stash away that 10% because now it gets pulled out of my bank account without me being able to justify when I absolutely, positively need it right this second or the world will explode!
The second gave me a free, automatic way to have someone yell at me consistently about spending too much on stuff I don’t need.
On occasion, all of us need a robotic voice yelling orders at us — especially when dealing with finance.
Great points mate!
If everyone did just those 2 things people would be sooooo much happier! Automation is killer and totally the way to go esp if you have steady income. And mint? Hell yes. It takes a few mins to set up, but once you’re in you’ve got a nice little snapshot right there in front of you helping you out.
I like the way you think, sir.
Best thing I ever did was start using an envelope budget. It helped us implement ALL of these principles with ease.
I’ve heard great things about that method my man. Never tried myself, but I like the way it sounds in theory 🙂
I think that personal finance is pretty simple too. The problem that I see is most people run into a lack of motivation/will to manage their money. It takes a little WORK to understand how you are spending your money. It also takes a lot of work to bring an end to those nasty spending habits. The bright side is that once you take the time to evaluate the situation and make a plan, it’s easy to maintain the momentem – just like getting/staying fit.
exactly! so basically anyone reading this article right now actually *cares* and wants to do something about it 🙂 at least in theory, but I’ll take it!
Not to spam up the comments, but the authors personal blog, Budgetsaresexy.com, that’s brilliant! I love it!
The first one seems to be the one people hear, understand but have a great problem implementing. I know so many people who can’t wrap their heads around it, but it’s all because of habits. I wrote about it on my blog here http://www.mikekey.com/5-warning-signs-you-will-stay-poor/
Those are some of the most basic points, and it seems people also need to consider how they think to get a good grip on their finances. Excellent post.
I wonder if people just don’t know that they should spend less than they earn and save, or whether people can’t get enough of PF writers saying the same thing, hence why writers write it over and over again?
Whatcha think?
I think people hear it and read it and see it all the time – they just block it out and say “Duh! Tell me something I didn’t know” and then move along as if they’re the master of savings. I tend to write about it a lot myself in hopes that one day the light bulb will go off and they’ll realize that they need to START doing it!
Of course, most people that are coming to these blogs & sites already have the willpower and willingness to learn, so for 90% of them it’s just for motivation and to let them know they’re on the right path 😉
I have a friend who went bankrupt recently and it’s the same story. He’s buying new cars every other week, eating out all the time at fancy restaurants, even after going bankrupt. He still can’t figure it out. No savings, no nothing.
That makes me sad. Tell him I’ll manage his money for him for 1 month and he’ll get an “allowance.” If he can survive, I will pay him $100. haha…no, I won’t, but you can if you’re a good friend 😉
I’d rather not waste my time talking to a brick wall.
Those are the people that need to hear these mantras again and again.
Thx man 😉 Going over to check out your site now…
I like the saving 10% rule, but what about paying yourself first?
Too many people living paycheck to paycheck complain they never have anything left to save. I think that simple rule makes a big difference as well.
Yup, paying yourself first and the 10% saving rule go hand in hand. You “pay yourself” this 10% of all the income you have first, before all the other bills. In fact, you might as well just call this 10% a bill – YOUR BILL! If people thought more along those lines they’d be golden 😉