Personal Finance Strategy

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.