Hello, all. I’m going to be on vacation this week, taking my fiancee Sondra to visit my mother. While I’m occupied with the two most important women in my life, I’ll likely have limited access to my computer and scant time to update my blog. Don’t worry, though, I’m not going to leave you high and dry; while I’m otherwise occupied, I’ll be running a series of blog posts providing lists of six, covering subjects pertinent to good financial management. Why six? Well, I’ve recently passed six hundred posts on this blog, and while lists of 600 might be more apropos, they’d also take up too much of your (and my) time. So, all that introduction out of the way, enjoy six pieces of the best money advice I’ve ever encountered:
1. Earn More Than You Spend: This is pretty much THE central point if you want to get (and stay) in good financial standing. Half of the personal finance advice you read out there tells gives you help on saving money, by increasing your earning, cutting your spending, or a combination of both. The other half focuses on what you should do with the excess when you are earning more than you spend. If you can get this one point down, you’re already doing much better with your money than most of the people in the Western World.
Follow this advice, and you'll have a lot more of these in your pocket.
2. Start to Invest as Early as You Can: Investing is the best way you can put your money to work for you (rather than working for your money), and the sooner you get started, the better off you’ll be. The difference in the amount of money you’ll have available come retirement time by starting to invest at 20 rather than 30 or 40 is simply amazing, and trying to catch up later in life will only be more difficult. (As to what you should invest in, index funds are pretty handy, at least until you’ve learned more about all the options available.)
3. Keep Emergency Fund(s) Handy: Bad things happen. This shouldn’t be a surprise to anyone old enough to be reading this blog (or even to be able to read, for that matter), but more than a few of us don’t seem to prepare for, or even acknowledge, the possibility that something unfortunate could befall us. To keep from being overwhelmed by an emergency (in any of the forms it might take), keep those emergency funds ready for a rainy day.
4. Keep Your Debt Under Control: It’s hard to get an exact consensus on how much debt you should have, even if you do as much personal finance reading as me. Some commentators say you shouldn’t have any debt, other commentators say that you should take on as much as you can (as long as you do so for the right reasons), and still other commentators say that carrying debt is alright, as long as the interest rate isn’t too high.
With all that conflicting advice, it’s hard to know how much debt, if any, you should have. My thoughts: carefully watch your debt levels, and make sure you know where you stand, particularly if you are considering adding more debt. Don’t get into more debt unless you (a) are using the money gained from taking on the debt to increase your money-making prospects in the future (by going to school or investing it, for instance), (b) have a plan to pay back the debt in a timely fashion, and (c) will be able to handle the payments on the debt (and extra payments, to retire the debt sooner) without too much financial hardship. Finally, make an effort to pay down the debt as soon as possible; the sooner you get the debt paid off, the less interest you’ll have to pay, and the more of your money you’ll be able to keep in the future.
5. Watch Out For Scams: It’s a sad fact of life, but there are lots of people out there who’d like nothing better than to trick you out of your money. It’s tough to keep an eye out for all the scams that exist, let alone the new ones that people are thinking up even as we speak. I’ve managed to fill an entire category with stories and warning about money scams, and I imagine that’s only the start. There’s no sure way to ensure that you will be safe from these scams, other than vigilance, skepticism, and being sure to be educated about the sort of scams that are out there. And speaking of education…
6. Keep Reading and Learning about Money Management: Things change, investments grow (or shrink), and the world just keeps on moving. It’s important that you keep up with the changes in the fiscal world, so you can make the best choices possible. This doesn’t mean you need to spend all your free time reading absolutely everything written about money from every source, but spending some time to read through the latest money magazines, browse some books at the library, or follow some money related blogs (like this one, or some of the great blogs you see in my blogroll to the right) could easily be paid back in the money you’re able to save in your everyday life. The more you read, the more you’ll start to see the patterns of advice, and start to see through to the motivations of the writers. It’ll help you build up your BS detector and catch anyone trying to scam you; and THAT is a wonderful feeling, as you see what could have happened if you were less informed.
There you go; six pieces of money management advice that, taken together, should help you through life. There’s plenty more to learn, but follow these simple steps, and you’ll be off to a good start. Have a great week!
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