Through the basics

Imagine competing with someone who is busy spending 10% of their profits with 95% of your principal.

Hello and welcome to another issue of this newsletter. If this newsletter has been beneficial to you, please share.

Today, we go through the basics of personal finance again.

The few things to note and take care of are:

1. Earn more than you spend: This one looks trivial, but it is very important. Stop trying to impress anyone by spending above your means. Once in a while, you’d feel the urge to overspend, go for it, but not above your means. Taking out loans shouldn’t be how you indulge, find cheaper ways to do so.

   Admittedly, a better way to phrase this is to spend less than you earn.

   To be accountable for your spending, you can create a budget. If that sounds too restrictive, then write down all your spending for the month, or biweekly, and go through them to see how you spend.

2. Save the difference: Once you can live off less than you make, keep the rest for the future. The future is to some extent unpredictable, in numerous ways. Sometimes, the only buffer between a person and unpleasant situations is the money saved. This is an emergency fund.

   The emergency fund is used for what the name implies, emergencies. Beyond a certain threshold, the amount of cash or cash equivalent (anything that can be turned to cash quickly and easily) would be too much. At this point, you begin to invest.

3. Investing: This means further multiplying your money without your active participation. At this stage, you combine different assets depending on your goals, personalty and time horizon to further help you grow your wealth.

4. Investing +: At any stage you find yourself, one of the best ways to live is by been true to yourself. Find friends whom you trust and support each other through your journey. Having a good partner, whatever you define good to be (if you decide to find one). People are one of the most invested “assets”. People are not things we own, they simply make life more colourful, meaningful and pleasant to live. Having your people makes life suck less. Invest in relationships.

   A healthy life should not be taken for granted either.

   Readings

   Personal Finance 101

   A recurring theme

   my new communication guideline