Personal Finance – 101 Basics

The concepts under personal finance will be good for everyone. If you are just entering the workplace focus on transitioning from a “Job” to a Career.

Budget tracking

Detailed budget tracking is the key to future planning and forecasting. The best app I have found for budgeting is iXpensit. You can also use excel or google sheets. Find a tool that allows you to adjust expenses/income and see what impact that has in the next 5, 10, or 20 years. Once you have entered all of your expenses and income the tool should be able to show you what your account balance will be in 5, 10, or 20 years. Example: I can upgrade my internet speed by paying an additional $20 a month. From the tool I can add $20 to the recurring internet expense and see what impact that has on my account balance in the future. Seeing the impact on your future account balance can help you make better decisions today.

ACTION

Create a budget

  • Write down your Income and how often you get paid.
  • Write down all of your fixed expenses and how often they occur. (Rent-Monthly, Trash-3 Months,  Car payment-Monthly, Car insurance-6 Months)
  • Write down other Planned expenses that you know are coming and about when you will have to pay them. (New tires-October, Christmas gifts for children-December)
  • Write down all Variable expenses. The amount spent on variable items changes month to month. (Gas, Groceries, Entertainment)
  • Fixed, Planned, and Variable are the categories you will use when tracking expenses.
  • Whenever you pay for anything write it down.  Ask yourself is this a fixed expense, an item that was planned or a variable expense. If it was an unplanned expense ask yourself if this expense will come up again. If so, add it to you budget.
  • At the beginning of each month write down how much you plan to spend on fixed, planned, and variable expenses.
  • At the end of each month compare how much you actually spent on each of those categories.

Pay off credit cards

Credit cards have the highest interest rates. You can’t move into Wealth management until high interested credit cards have been paid.

Emergency Fund

Have enough in savings to pay all expenses for 6 months.

Summary

This video has several different sections. It’s a good video overall with some general/basic information. Different sections will be valuable to different people.

Introduction

  • Always earn more next year. Make this an expectation of yourself.
  • People who ask for money were not always the people who deserved it. They were just more confident. So make sure you ask for more money.
  • Understand where you are spending your time. Spend time learning a new skill,  finding a mentor, etc.
  • Know your worth. This is the value that you bring to the table, not what you are paid. Worth is also relative.

Income

  • Opacity around salaries works in favor of the employer. This puts the burden on an employee to investigate their worth and make the case for more income.
  • When calculating worth you need to consider all jobs that you are capable of.
  • Investment income is taxed at a much lower percent that income tax.
  • No one ever got rich through a salary. Equity/investments are the key to long term success.
  • Empowerment comes from multiple income streams.

Tax

  • Every day we’re barraged with message about what we should be doing with our money.
  • Taxes shouldn’t be a surprise. It happens every year.
  • Tax rates on wages are higher than investments.
  • Need to think about yourself as an investor.

Goals

  • Periodically reassess current state and adjust plans for future.

Retirement / Ongoing Income

  • We all spend money until the day we die. We can’t work until the day we die. Where is the difference going to come from?

Career / Asking for More Money 19:00 – 24:00

  • This section seemed less important

Spending Money 24:00 – 32:00

  • Budgeting can tell you what you can afford but can’t stop you from buying it.
  • Shop around for everything. Even mortgage companies will provide different rates.

Planning Windfalls 32:00 – 37:00

  • Current generation is less knowledgable about money.

Credit Cards

  • Credit cards have a very high interest rate, 15% is average.
  • If you can’t save money you shouldn’t be using a credit card.
  • Pay as much as you can every month.

Savings

  • 3 – 6 months of savings is suggested.
  • Bonds are a good options for savings. I’m guessing this was when interest rates were higher. 
  • CD are also based on interest rates.
  • Government/corporate bonds are an option also.

Savings vs debt

  • Explained the difference between good and bad debt.