Every so often, it’s good to go over the basics again. If you’ve done much reading about personal finance, you’ve probably heard everything I’m about to say many, many times before. Heck, if you are a frequent reader of The Amateur Financier, you’ve read this already in some of my past posts, and if not, you can follow the links I’ve included to read some of the current Yakezie thoughts on the subjects.
Why go through all of this again? Partly because, even though I spend part of each day reading and writing about money and personal finance in this very blog, I sometimes overlook some of the basics myself; note how I’ve managed to build a substantial amount of credit card debt (although, that was at least in part to covering living expenses following being stricken by epilepsy, so perhaps there is at least some leeway to be had there). Partly because I like see what my fellow personal finance bloggers have to say about these subjects. But mainly because I’d just like to share these points as widely as possible, and writing another post provides the opportunity to do so.
3 Money Basics, and What the Yakezie Have to Say
1. Earn More Than You Spend: It’s hard to think of a more basic point to good money management than this. You probably have heard it more often as ‘spend less than you earn’, emphasizing cutting your spending to below what you earn, but I like to look at earning more, as one of the main goals I have with this very blog is to bring in more money. (I had hoped that this would not be my main source of income until I had built it into a five- or six-figure business, but things don’t quite work the way we want sometimes.
What the Yakezie Say: There’s plenty of articles (and even the occasional eBook) on earning more and spending less out in the blogosphere. Plenty of the blog entries I come across are either about spending less or earning more. It’s an especially popular subject for newer bloggers (or those aiming at a younger audience) as those of us who are just getting a handle on our finances (myself included) tend to benefit more from this advice than even tremendous investment advice. Although:
2. Invest Early, Often, and Usually in Index Funds: Once you have your spending under control and/or have built up your income, one of the major follow up steps, along with building up a sizable emergency fund and paying down your debt (which we’ll get to in a moment), is to start investing. There’s a lot of different opinions on just what is the best type of investment; as you might guess, with tens of thousands of possible investments and endless combinations of how to invest in them, getting a sizable number of bloggers to agree on exactly the right combination in which to invest is a tough task. Still, there is general agreement on a few points: the earlier you start investing, the better; small, regular investments (dollar-cost averaging) are usually for the best; and for most people, the ideal way to invest is taking advantage of index funds, or simple investments.
What the Yakezie Say: There’s not too much to be said about indexing and dollar cost averaging (I’ve said the basics in the above paragraph), but you’ll see the occasional article proving the case again. If you search through the archives of mostof the Yakezie blogs (go right ahead; I know that I love it when people read, and comment, on my older articles), you can find that there’s at least an article or two in most Yakezie member’s blog expressing their investment recommendations. It’s hard to write about money without covering some investment suggestions at some point.
3. Pay Off Your Debt (Usually as Soon as Possible): Ah, debt-repayment. There’s a lot of discussion in the blogosphere about the finer details of debt repayment, such as which debts to pay off first, the characteristics of the debt on which to base your repayment schedule (highest interest rate, lowest balance, or the type of debt, for some examples), and whether to focus on paying off debt before or after building up a substantial emergency fund. Still, the one thing we can (nearly all) agree on is that you want to eliminate your debt as quickly as possible, while getting your other goals accomplished as well; not keeping your debt for decades is a pretty big personal finance goal.
What the Yakezie Say: This is definitely a big subject for bloggers, with some Yakezie blogs making it the subject of the entire blog. With a little searching, you can find everything from discussions of the preferred debt elimination method (that Debt Snowball is a common one) to personal stories of how readers have gotten themselves out of debt. It’s definitely a popular subject in the blogosphere. (Which is probably a sign that there is too much debt in the real world, but that’s another story…)