Cover via AmazonWhy reinvent the wheel? There are best selling books on Personal Finance. There are countless websites and blogs. Do a little reading and see what is applicable to your situation.How did I start?
In the first few days of 2009, I read the best seller "Smart Women Finish Rich" by David Bach (don't worry - the information is generic enough for anyone, and he does have different versions). The book was already in my personal library, I just hadn't read it yet. Given the uncertainties we all face, I figured the time was now right. I would highly recommend the book to to help with thinking about saving vs investing (reminder: they are not the same), and also general money management. There is a lot of information specific to the USA, but the general principles are universal, I think.
Next step - application of principles.
For example, that book inspired me to read another personal finance book - but it was a best seller motivational book not a classic "how to" book. Now, I did not have that book in my library, so I went to buy it. But, here's something key, Bach's book had taught me the importance of discipline in spending (which I will get into in a later post), so although I picked up 10 books in the bookstore, I decided that I did not need them - although I wanted them - and decided to buy only the book I intended to buy when I went to the store. By exercising discipline in my consumption of my favorite impulse items, I saved significantly that day! I had saved money by not spending it and not losing savings interest on that money. What's your favorite impulse item or items? Does this story sound familiar - walk into a store for one thing and buy a ton of other things? Now, am I likely to purchase those books later? Sure. But for the time being I can earn interest on that saved money since I am unlikely to read 10 books at the same time :)
Despite the habitual convenience of using a credit card, I used cash to avoid interest charges. This tip came directly from the book, and in a later post I'll get into how to think about various forms of debt. But the main point is that dollar for dollar, interest rate charges will exceed after tax income on savings. So, as much as you save, your net will be negative if you pay high interest rate charges.
Lesson Learned:
- Learn from the experts and start applying the principles immediately. Make personal finance a lifestyle change
- Make a list of needs - not wants - before shopping. Take the list. Try to stick to it. With discipline and habit, foregone consumption can add up to real savings which earns interest.
- Make cash or fee-free ABM cards the preferred payment type. Debt reduction and avoidance reduces the amount of your hard earned savings lost to debt service.
Check back tomorrow for a summary of basic personal finance principles to get you started on your journey!
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Hi D. This is great! I've become a subscriber. I need all the help I can get. Good for you to do this.
ReplyDeleteGirl I am right there with you for 2009. I just bout a couple pairs of shoes and I am already taking them back. I also just purchased Quicken to help me track my accounts and set savings goals.
ReplyDeleteSO glad it's helpful! Keep reading! I look forward to the feedback
ReplyDeleteKapo says
ReplyDeleteOne challenge is that in trying to save money, you sometimes lose. I bought Smart Cook Digital Timer at Azans over the weekend to control my online time. I chose the cheap one, which also looked more sensible as it used cheaper batteries and was quite simple. Cost, approx $300. Utter rubbish. It eats batteries and the measurement methodology is dumb. I dont think it is ethical to take the product back as it does as advertised, but also does some stuff I didn't expect. Do not buy this product as it is a waste of money. Actually most cheap digital products fall into this category, but I figured the Chinese knew how to make a simple digital timer.