Today, it’s exactly 1 year ago that I quit my job. Personal Finance is just as important as your investment decisions. You can save a lot of money with some very simple tricks. Here are 10 Personal Finance Tips that could change your life.
I try to run my personal finances like a business operation. Money comes in from my employment. Expenses like food, water, housing, services, etc consume the money. I can summarize it in an income statement and calculate my margins. Obviously, higher = better. 😉
I save and invest the excess while also maintaining a minimum amount in my checking account. How much I save and invest has some variability. Some months I may have higher than usual capital expenditures, like when my car needs repair. 😫 So, this is kind of like my cash flow statement.
I can also make a balance sheet with all of my assets and liabilities too. My assets would be my home, car, my investments, etc and my liabilities will be my mortgage.
Our family's goal is to keep our expenses as regular and predictable as possible. We live a pretty simple life so it's not that hard in our case. Our utilities rise and fall very predictably with the seasons.. Summer = higher electricity (air conditioner), higher water bill (lawn), lower natural gas (no heat). Winter = lower electricity (no air conditioner), lower water bill (snow - no watering the lawn), high natural gas (need heat!). Our food bill is very predictable too. It's not necessarily low but it's predictable.
These costs fluctuate over the year and rise due to inflation but they don't yo-yo up and down unexpectedly.
Life happens and unexpected negative surprises happen. We can only anticipate so much. A savings or slush fund helps. Pay for tomorrow's car repair ahead of time by putting some money away for it today.
We use credit cards but always inside of a budget. The entire balance is paid off every month. No exception. That should be a golden rule. "Thou shall pay thy credit card balance in full before the date due!" 🧙♂️ ⚡ 🧙♂️
Two fun clichés:
"I can afford anything I want. I just don't want everything!"
When I was younger I wanted all sorts of stuff, like fancy watches and lightweight carbon fiber bikes with top end Shimano Dura-Ace components. I burned through so much cash and even fell into debt for it. Maybe I had to scratch those itches while I was young so that i don't get eaten alive by those itches later in life. At the same time, my life has progressed so far from where it was. My values have changed and my moral compass points in a different direction. Where before I wanted toys, now I want my wife and kids to be healthy, strong, and happy.
"I can afford that but it doesn't make sense for me to buy it."
I see people chasing after the cars and "stuff" that I have long since forgone. Sometimes I get tempted to think about replacing my car, especially when mine is being serviced. My car is clumsy and loud and burns a little oil. I know I could talk to my wife and convince her it would be OK to sell off my taxable brokerage account and buy a new car. It would break my heart twice and twice again though. I would be betraying our long term goals and her trust in me. It would negate all the work I have been doing to build up that account. I would feel awful and stupid and lousy. It's not worth it and it doesn't make sense to sacrifice what I have for something I don't really need. 😫
100-age rule is wrong when you have children. I wasn’t happy when my father died. The last 20 years he avoided stocks and my heritage went down. My children can’t afford buying stocks. They are happy that I. Uy them and keep them. I share my portfolio and I discuss it with them. They are happy that I invest and later it will be for them. (Not going to wait till I am 100 to give a big part to them
I try to run my personal finances like a business operation. Money comes in from my employment. Expenses like food, water, housing, services, etc consume the money. I can summarize it in an income statement and calculate my margins. Obviously, higher = better. 😉
I save and invest the excess while also maintaining a minimum amount in my checking account. How much I save and invest has some variability. Some months I may have higher than usual capital expenditures, like when my car needs repair. 😫 So, this is kind of like my cash flow statement.
I can also make a balance sheet with all of my assets and liabilities too. My assets would be my home, car, my investments, etc and my liabilities will be my mortgage.
Our family's goal is to keep our expenses as regular and predictable as possible. We live a pretty simple life so it's not that hard in our case. Our utilities rise and fall very predictably with the seasons.. Summer = higher electricity (air conditioner), higher water bill (lawn), lower natural gas (no heat). Winter = lower electricity (no air conditioner), lower water bill (snow - no watering the lawn), high natural gas (need heat!). Our food bill is very predictable too. It's not necessarily low but it's predictable.
These costs fluctuate over the year and rise due to inflation but they don't yo-yo up and down unexpectedly.
Life happens and unexpected negative surprises happen. We can only anticipate so much. A savings or slush fund helps. Pay for tomorrow's car repair ahead of time by putting some money away for it today.
We use credit cards but always inside of a budget. The entire balance is paid off every month. No exception. That should be a golden rule. "Thou shall pay thy credit card balance in full before the date due!" 🧙♂️ ⚡ 🧙♂️
Two fun clichés:
"I can afford anything I want. I just don't want everything!"
When I was younger I wanted all sorts of stuff, like fancy watches and lightweight carbon fiber bikes with top end Shimano Dura-Ace components. I burned through so much cash and even fell into debt for it. Maybe I had to scratch those itches while I was young so that i don't get eaten alive by those itches later in life. At the same time, my life has progressed so far from where it was. My values have changed and my moral compass points in a different direction. Where before I wanted toys, now I want my wife and kids to be healthy, strong, and happy.
"I can afford that but it doesn't make sense for me to buy it."
I see people chasing after the cars and "stuff" that I have long since forgone. Sometimes I get tempted to think about replacing my car, especially when mine is being serviced. My car is clumsy and loud and burns a little oil. I know I could talk to my wife and convince her it would be OK to sell off my taxable brokerage account and buy a new car. It would break my heart twice and twice again though. I would be betraying our long term goals and her trust in me. It would negate all the work I have been doing to build up that account. I would feel awful and stupid and lousy. It's not worth it and it doesn't make sense to sacrifice what I have for something I don't really need. 😫
That's exactly how you should think about this!
100-age rule is wrong when you have children. I wasn’t happy when my father died. The last 20 years he avoided stocks and my heritage went down. My children can’t afford buying stocks. They are happy that I. Uy them and keep them. I share my portfolio and I discuss it with them. They are happy that I invest and later it will be for them. (Not going to wait till I am 100 to give a big part to them
I tend to do eactly the same.
The 100-Age rule is just a rule of thumb. :)