The Essence of Personal Finance

I have been thinking hard about how I am going to organize my personal finance book coming out this spring. And in all the thinking I have done I have realized that I need to boil the subject down into it’s very essence. Basing most of this post on the titles of blog posts listed in my Personal Finance Challenge Series here is what I think it all boils down to…

  1. Spend Less Than You Earn – If this is all you ever do then you are way ahead of a lot of people who do exactly the opposite.
  2. Avoid Debt Like The Plague – Debt is best used to make money, not spend it. I understand that you might need to take out a loan for a car or a home, but never use debt to live beyond your means or increase your lifestyle.
  3. Choose Your Purchases Wisely – I just bought a used bike off craigslist for $60 that is better than the one I bought new for $100 at Target. I am now trying to sell the Target bike for as much as I can get for it. Lesson learned…
  4. Be Open and Honest About Your Finances – Besides saving yourself the trouble of worrying about what people think of you, being closed off and/or lying about your finances does not help you at all and only makes matters worse. Discussing your financial issues with other, possibly more wise people, will almost certainly help you in the long run.
  5. Have as Little “Stuff” as Possible – Your stuff tends to own you, more then you own it. Keep what is necessary and get rid of the rest. Make sure you never buy more than you need.
  6. Buy the Best Stuff Possible – Always buy high quality over cheap. Think about how long you can use the object before it breaks or needs repaired. Many high quality items will last you a lifetime and will save you money over the long run.
  7. It’s a Marathon, Not A Sprint – This applies to life in general as well as your finances. Always think long term.
  8. Fail to Plan, Plan to Fail – Plans don’t always go according to plan, but that doesn’t mean you shouldn’t make them.
  9. Think Richly, Not Poorly – Many people seem rich when they are not. Many people seem poor when they are actually rich. Knowing the difference can save you a world of heartache, and make you much happier in life.
  10. Invest and Reap The Rewards – Very few people consciously invest, and when they do, they often do it poorly. Knowing what to invest in comes with having a plan and knowing what you want out of life. But there are three things you should always invest in… health… wisdom… and your loved ones…

The last point may be to emphasize that you are always in control. You don’t have absolute power over circumstances, but you always have the power of choice. And if you have choice, then you are in control of yourself, and can eventually gain control of your situation. Nothing is forever…