Personal Finance Strategy

3 comments

Magic Formula

  • Spend Less Than You Make = Wealth

No matter how much money you earn, this is true. The less you spend, the more wealth.

Principles:

  • Define wealth as having a balanced allocation and strategy for your financial goals.
  • Make sure to know your numbers, percentages, and saving/spending habits.
  • Study and get comfortable your finances even if it is ugly to look at.
  • Fall in love with your numbers even if its never perfect, treat it gently, and have patience.
  • Become obsessed with always lookig for ways to improve.
  • Aim to keep your essential expenses at no more than 50% of your income.
  • Save the remaining percentage minus taxes. (Ideally 30%).
  • Don’t be discouraged if you are not even close to that, but start soon.
  • From that percentage of savings, divide the amount into buckets.
  • Some buckets might include retirement, investments, cash savings, and dreams.
  • Break down all your expenses and savings into whatever frequency you get paid so there is more consistency and you know what to expect each time you get paid.
  • Pay yourself first. (This creates the habit and conditions it).
  • If you have high-interest debt, add an additional bucket for it and prioritize.
  • Personalize this strategy to fit your goals.

Some objectives to keep in mind:

  • Build an emergency fund.
  • Pay off high interest debt first.
  • Adapt this strategy to what works best for you.
  • Personalize buckets and balance them.

3 comments on “Personal Finance Strategy”

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