The Five Personal Finance Principles

Episode #49
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Research done by LendingClub Bank found that almost 40% of US citizens with incomes over $100,000 a year live paycheck-to-paycheck. Since engineers and other people in STEM make a pretty good salary, all you need to do to be part of the remaining 60% is learn the basics of personal finance. And that’s exactly what this episode will do for you.

Today, you’ll learn the five principles you need to start taking control of your financial life. The first principle will teach you how to properly deal with your income, instead of simply spending it all right away. Even though you want to buy or experience more and more things as your income grows, you should know how to balance the emotional and rational aspects of money.

The second principle focuses on how you can leverage your income. Monitoring your expenses and keeping them in check is crucial, but increasing the amount of money you earn can completely change the game. And in today’s world, increasing your income has become way easier than ever before.

Also, since money management is also emotional, most people struggle with the third principle: planning for emergencies. They are not disciplined enough to see a certain amount of money in their bank account and not spend it. Contrary to what most people do, however, you should have enough money set aside to cover unexpected expenses as they come up.

In addition, while most people know of their credit score, they don't know how it affects their financial life. A good credit score can save you tons of money down the road on interest payment, APRs, etc. Therefore, taking care of your credit score―as well as credit card usage and payment―is crucial.

The last principle focuses on your older self. Saving for retirement is something you should do on a monthly basis over the course of many years. There are many different investment options you can use, from the usual IRAs and Target-Date Funds to buying and holding your own shares in the stock market. Regardless of which option you choose, the key is to start as early as possible.

By elaborating on these five main principles, Luis lays out the things you need to know to start making the most out of your financial life. He uses examples from his personal life about how he manages his own money, the resources he uses to learn about it, and how you can do the same. After all, money management is a matter of specifying what you care enough about to spend your money on, and cutting back on what you don’t.

What You'll Learn:

  • Why You Should Learn and Talk About Money
  • The Five Basic Principles of Personal Finance You Should Know―And Apply
  • How To Properly Deal With Your Higher Income as a College Graduate
  • Money Managing is Both Emotional and Rational. How Do You Handle It?
  • Different Money Management Methods (Envelopes, 50/30/20 Rule, etc.)
  • How Budgeting Will Get You in Control of Your Financial Life
  • Why You Should Look at Your Expenses as Percentages
  • How to Spend Your Money Effectively
  • Why Increasing Your Income is Just as Important as Cutting Back on Your Expenses
  • Finding Other Ways to Make Money―And Why It's Easier Than Ever Before
  • Why You Need an Emergency Fund
  • The Rule of Thumb for the Size of Your Emergency Fund―And Where to Save It
  • The One Percent Rule You Should Follow For Home Maintenance
  • How a Good Credit Score Can Save You Tons of Money in The Long Run
  • Saving for Retirement: Colombia vs USA
  • Roth IRA vs 401k vs HSA
  • The Benefits of an HSA Account
  • Why You Should Start Saving for Retirement as Early as Possible

Resources:

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Music by Jack Winders

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