Let’s face it. We’d all be happier with a greater handle on our money. If you are anything like me, improving your finances is on your to-do list this year (and probably has been for the past couple of years.)
Path to wealth
When it comes to managing your money, opinions vary on how to go about it. That said, we can all agree on one thing. The basic principles of money are simple, timeless and accessible to everyone. You probably already know them by heart. You have read about them, you have practiced them.
Here are some of the principles:-
Spend Less Than You Earn
If you spend everything or more than you earn, you can kiss wealth goodbye. Spending less than you earn means you’ll always have something extra to save. And savings are the bedrock upon which wealth is built. Think about it, if you have something left after covering expenses, however small, you are already wealthy (in a way), you have “excess!”
Pay Yourself First
Truth be told, rarely will you have all that much extra money after expenses. For a human nature reason (and economics), your expenses seem to go higher the more you earn. Maybe its lifestyle inflation, maybe it’s something elses, but expenses seem to creep up the moment your income increases.
The best way to ensure you are spending less than you earn is to save first and then spend what’s left to cover expenses. This way, you always have some savings accruing to you from every paycheck.
And think about it, you are stressed when you face your bills. Every one is taking a cut of your hard earned money. The landlord, the utility companies, grocery store and you go to great lengths to satisfy their money hunger. But you forget the most important person in that equation, YOU! It’s your paycheck, you certainly deserve a slice of it. So go ahead, give yourself a generous slice in form of savings 🙂
Invest Your Savings As Early As You Can
The power of compound interest has been sung on for generations. You know it, you know how it works and you also know that the earlier you start the better it’ll work for you. So put your savings into good use.
And it you don’t even have to pack your savings in complicated financial instruments. An index fund will do just fine (backed by science, years of research, data crunching and of course, smart money gurus…just ask Warren Buffett.)
- Pay Down Your Debts
- Track Your Spending
- Earn More
In most cases, the problem with getting a handle on your money isn’t a lack of knowledge, its lack of discipline and the emotional wherewithal to stick with the principles.
Benjamin Franklin’s – The Way to Wealth
Here is Benjamin Franklin in this classic 1758 essay, The Way to Wealth. A short, easy and interesting read that will revamp your financial life (and life generally), if you stick with the principles there in.
Whenever you feel like your financial life is spinning out of control, take 25 minutes out and read the book book, it will always bring you back in line and sharpen your resolve to better your finances.