Personal finance is intimidating to most. Its hard to pick up a news article or open CNBC without running into crazy jargons you cannot understand. I am there with you, I have been in the personal finance world for years now and I still have a hard time understanding some of the crazy terms wall street throws out. But, what I have learned throughout the year is: a simple personal financial plan you implement is better than a crazy one you do nothing with.
I want you to consider taking these steps to make a simple financial plan for your self and generations to come. Implement these steps and teach others. They may seem so simple but trust me they will make a big impact.
1. KISS works wonders for personal financial plan
Unless you are a fortune 500 company your finances should not be complicated. “Keep it simple, stupid!” You don’t need a million spreadsheets.
2. Track & Budget monthly
Things you track tend to stay in line. A budget does the same thing. It tells your money how it should be spent. It should not restrict or worry you. A budget is a guideline to allow you to color within the lines. It is up to you and your income to allocate this spending.
You can create use a simple notebook and pen or download a free budget template. Both google sheets and excel provide budgeting templates. I would recommend a digital form over a physical one since its portable, takes less space and can be easily adjusted.
3. History is your best friend
There is nothing like seeing things going in the right direction to motivate someone. If you track your expenses and your net worth for a few months or a year you will know what I mean. The more you constantly track the more you will see trends. Maybe your restaurant budget has doubled and you did not notice or your net worth (total assets-total liabilities) has shot up and you did not notice. Either way unless you have some historical patterns you will not know.
Like this post ? Also read: How much money is enough ? or 5 Easy Ways to $1 Million Net Worth
4. Automation: Not just for computers for a simple financial plan too
Set it and forget it! Your finances are not a board game. You don’t need to move any pieces. The best thing to do is: extensive yet simple financial plan initial research and stay the course.
Also plan to minimize the numbers of transactions you perform. When you are buying and selling stocks, real estate or mutual funds You lose a portion of your transaction as a fee. Even with apps like Robinhood which they claim its “free” they charge $0.000145 per share. This may not seem much for one transaction but it quickly adds up.
5. Less hands in the cookie jar means better results
NEVER EVER work with an adviser that charges an AUM (Assets under management) fee. A person that charges this kind of fee will take a portion of your hard earned money every time you contribute. Most advisors will promise results that beat the market which is almost impossible to fulfill year after year. If you need a full financial plan, which I highly recommend, work with a fee based advisor or invest in low cost index or target date funds. Vanguard offers great options.
Book recommendations:
6. Passive or semi-passive income & Compounding is the game
“If you don’t find a way to make money while you sleep, you will work until you die”.
~Warren Buffet Your income can only get you so far. You want your investments to earn money while you sleep. This means dividends, rental income, interest income, semi-passive businesses. The more you earn passively or semi-passively the faster and easier they compound.
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