You are here: Home » Money Management » 9 Financial Lessons

9 Financial Lessons

by Ryan Guina

Do you follow a financial plan? Do you have a clear set of financial goals? Are you saving and investing? Do you have your insurance up to date to and an emergency fund to protect you from the unexpected? These tips can help you get on the right path to financial prosperity.

1. Set Your Financial Goals

When you go on a journey, it is difficult to get somewhere without directions, and your finances are no different. Goal setting is the first step toward becoming financially independent. Your goal does not have to be large or earth shaking, it only has to be something that will help you accomplish something you want to do. There are many ways to set goals, and many different goals you can set. Here are examples of over 50 financial goals.

2. Spend Less Than You Earn

Spending less than you earn is the number one rule to get ahead financially. It sounds simple, but that is not always the case. Once you figure out how to start doing it, you will realize why spending less than you earn is the key to financial success, and you will wonder why it took so long to get going. I am not rich, but I consider myself financially successful because I don’t worry about paying my bills each month, and I have a little left over when I am done. A key to this success is spending less than I earn. How can you do it? Pay attention to your expenditures, make a budget, give yourself a voluntary paycut, or use tracking software such as Quicken.

3. Increase Your Income

More money! Great, count me in! But how? Well, there are several ways to do this – you can get a raise, get a promotion, take in a side job, or earn income from alternative sources. I wrote about how you can start earning alternative income in the article 6 Streams of Income, posted as a guest article on the personal finance blog Moolanomy – The Science of Money. Increasing your income can have a lot of positive affects, especially if you are able to continue living at your previous standard. You can then use your extra money to invest or do number 4 in this list…

4. Pay Down Your Debts

Debt sucks. Period. OK… let me rephrase that before too many people shout out about the benefits of student loans and mortgages. Consumer debt sucks. By consumer debt, I mean credit card debt, car loans, paying off the big screen TV, borrowing money for furniture, and taking out a payday loan to pay for groceries.

I am not saying people with debt are bad, that would be unfair. But debt makes it hard to get ahead financially and I would rather have my money working for me instead of working for someone else. I also don’t like knowing that I owe people money. A great way to pay down your debts quickly is to follow Dave Ramsey’s Baby Steps and snowball your debt payments by paying your minimums plus adding whatever extra money you can find to the principal. Another way to pay down your debt quickly is to use a balance transfer credit card to transfer your credit card balance to a 0% interest rate.

5. Invest Your Money

Einstein has been attributed as saying “compound interest is the greatest force in the universe.” Whether or not Einstein actually said this (I wasn’t able to find a direct quote), I can’t argue with this logic. Compound interest plus time, is the force that will set you financially free. Compound interest involves adding earned interest to the principal amount of your savings, and computing interest from the new amount. The next time interest is earned, it is earned from the larger amount, resulting in a higher principal. Repeat this many times, and your savings will grow exponentially. The easiest place to find compound interest is in a savings account, but there are other methods of investing, such as stocks, bonds, mutual funds, real estate, commodities, and more. The point is, you want your money to work for you.

6. Invest in Yourself

You are your own greatest asset. No one else will take the time to make sure you have everything you need for yourself or your future. Your knowledge, skills, income, and other attributes will bring returns for years, so you should do your best to improve your odds of success. Never stop learning. Take classroom courses, read and follow self-improvement books, get a professional certification, learn about personal finance (I highly recommend every blog listed in my blogroll), get healthy, lose weight, stop smoking, learn a language. Invest in yourself.

7. Find Ways to Save Money

There are only two ways to have more money – increase income and decrease outflow (spend less). Obviously, saving money is important, and in fact, a penny saved is worth more than a penny earned. Here are some things I have done to save money in the past year: Negotiate your cable bill, reduce your property taxes, use coupons, use Ebates for on-line savings ($10 free for signing up!), use rewards credit cards, save money on heating bills, or try any of these tips – 25 Ways to Save Money. If you can incorporate some of these tips into your daily lifestyle, you’ll be surprised at how much money you can keep in your pockets every month!

8. Make it Automatic

Automation makes everything easier, including your finances. Most banks have free on-line banking which gives you no excuse not to take advantage of automating your finances to some degree. Some things you can do to make your financial life easier: participate in automatic deposits if your employer offers it, automate savings transfers, automatically invest in 401(k), Roth IRAs, or other investments, have deductions automatically withdrawn, opt for automatic bill pay, and more. If you take it a step further and pay yourself first through an automatic transfer, you will find that saving becomes extremely easy.

9. Give and Ye Shall Receive

Be generous. Sharing what you have with others is both gratifying and can help change someone’s life. Charities make our world a better place, so if we are able to give, we should give. But you also have an obligation to make sure that your donations are going to an organization that you believe in and that your donations are going to be used properly. Be sure to investigate charities before giving, and avoid charity scams.

Bonus Tip – Have Fun

Life is not measured in dollar$ and ¢ents. Pay attention to the big things, and let life work out the details. You’ll enjoy yourself more and find out that in the end, the details are just details. ;)

~/~

The 12 Days of Christmas – Personal Finance Style, is a group writing project. If you missed it, you can still catch up. Here is the lineup:


Published or updated March 20, 2014.
Print or e-mail this article:
Print Friendly

{ 5 comments… read them below or add one }

1 Brip Blap

Great list – thanks for including a link to my site in it! And don’t forget another great investment in yourself is reading plenty of high-quality blogs like Cash Money Life (and the blogroll to the right, which overlaps about 90% of mine)! Blogs are the gift that keep on giving – and best of all, they cost less than a subscription to Money Magazine to read, and have more content.

Reply

2 Ryan

Great point, Steve… I’ll add the part about reading high quality blogs. I guess because I do it every day, I have become blinded by association! Thanks for the comment! :)

Reply

3 Dividends4Life

There are some excellent tips there! #2 is the one most people have the hardest time with – do it and the others will fall in place.

Best Wishes,
D4L

Reply

4 Rob in Madrid

I second the comment about reading blogs, they have made a huge difference in our lives. Also I recommend if you haven’t already reading Dave Ramsey’s Total Money Makeover. Very well written book.

Reply

5 Ryan

Hi Rob,

I started reading blogs a couple months before starting my own, and I agree, they have made a huge difference in my life as well. I have learned so much about personal finance, but other topics as well, including productivity, health, social awareness, the environment, law, news, the economy, and a lot more. It has become a part of my lifestyle, and I believe I am better for it.

I have not read Total Money Makeover, but I have skimmed through it and am familiar with the concept. I think it is very good for its target audience.

Reply

Leave a Comment

Previous post:

Next post:

.