Why Personal Finance is important to me

As a child growing up, I thought about money and making money a lot. I was fascinated about how my parents earned money, how my dad ran his business, how my grandfather ran his, and how banks operated like the one my grandmother worked at. I was intrigued by money, by saving, and by investing. When I was real little money wasn’t an issue to me, I didn’t grow up wanting a better lifestyle. I was happy in our small home and playing pretend. Sure, I didn’t have all the gadgets, technology or toys that other kids had, but I had a brother and our combined imaginations kept us busy for weeks on end.

As I grew a little older, I became more aware of my family’s money situation. I would listen to my parents discuss money issues or decisions regarding my father’s logging business. Anyone that knows the Northeast’s logging industry, knows that anyone who owns a logging company isn’t on very stable financial ground, and we were no exception. My dad worked long hours and was really good at his job, but no matter how much he worked and how good he was, fate just had his business destined to fail. But, it was this failure that really began to open my eyes.

I had been saving every penny I ever came across from the minute I was five years old and began investing at age 11, when my nana bought me five shares of Coca-Cola. But, when my father’s business went under I really began to realize the importance of saving and investing. My father had never been one to save money and my mother liked to try, but bills always saw that money right back out in no time. So, when the business went under, we had no emergency fund to hold us over.

It was my parents’ tight financial situation and the choices and situations that followed, that really impressed on me that I needed to get my money straight. Of course it helped to that I was obsessed with becoming wealthy enough to retire early. Since then, I have devoured every text on personal finance, investing, budgeting, saving money, earning more money, and running a business that I can get my hands on. I have notebooks and notebooks full of scribbles where I planned out my financial future.

I now realize that while the best of plans may fail, the act of planning at least gets the ball rolling and headed in the right direction. While, I don’t wish what happened to my parents onto anyone else, I hope that everyone is able to come to the realization that I did before they ever leave high school. Going into college well aware of my financial situation and where I wanted to go and how I planned to get there was probably the best thing that could ever happen to me financially. I know am actively planning for my retirement, paying back my student loans, saving for a house, funding an emergency fund, saving for a wedding, and getting my girlfriend involved in our finances. The advantage of starting so early, is that I now have many extra years of compound interest on my savings and will benefit from starting my financial future out with good habits.

How have you or how did you start out your early adult years financially? What do you wish you would have done differently? What made you wake up and begin to worry about your financial future? Let me know below in the comments section!

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Automating your Financial Future and Security (Pay Yourself First!)

If you Google something like how to become wealthy, or how to build wealth through passive income, you are going to find articles and blogs that list off steps to becoming rich. I have read and scoured through many of these blogs and articles in search of a way to get rich without really trying. Sure, some of them tout up different ways that you can get extremely rich and others talk about how live an ultra frugal lifestyle is the best way to become wealthy. I disagree!

Many of us have the desire to have more money so that we may enjoy the many different pleasures that we can afford. As our wealth grows, so does our desire to use our money for our own enjoyment. We purchase luxury cars, we buy vacation homes on a lake front, we buy designer suits, we buy a big boat, and we take family vacations to Europe. What good is money to us if we can’t use it?! The truth is, it isn’t! Many frugal living blogs talk about how limiting consumption has been the most rewarding part of their lifestyle and that accumulating wealth has just allowed them to retire early and enjoy the free things in life. Of course, we can all thorough enjoy that kind of lifestyle but at some point there is normally something we find that costs money that we want. The point is that to keep ourselves sane while we budget and try to control our spending, we have to indulge ourselves a little bit. If giving up your $5 a day coffee and investing the money instead is your plan, but you really enjoy your morning coffee, find a way to do both! Perhaps, brewing your own coffee at home costs you only $1 a day, so you are still able to sock away $4 a day! Or maybe, you indulge only on Monday mornings when it is especially hard to drag yourself into work but skip it the rest of the week. Either way, you need to make sure that you aren’t giving up everything that you enjoy to chase the all-mighty dollar. Remember your sanity and your health are priceless and no amount of riches will make up for regretting how you lived your life. Of course, I am not advocating irrational spending either!

THE REAL SECRET TO BUILDING WEALTH- isn’t even a secret. It is the most boring piece of information or advice you will ever receive. JUST AUTOMATE IT. Yes I said it, just automate it. Put your savings and investing first. Track your spending and your income, create a budget and allocate a portion to savings and a portion to invest for your retirement. Then, make it automatic! Each pay period have your desired portion of income deducted and moved to chosen investments and savings. But, make sure that your deductions occur BEFORE you can see that money! If you never see it in your checking account you will never miss it!

Say for example that you take home $800 per week AFTER taxes and get paid each Wednesday morning:

– Have all $800 of your paycheck direct deposited into your checking account

– Then have your automatic transfer of $50 to your savings account occur that afternoon

– Have the brokerage firm that handles your IRA (individual retirement account) automatically be credited with $50 a week from your checking account on each Wednesday afternoon as well.

– then subtract the $300 each week to pay for your monthly fixed expenses

-the rest ($400) is what is left for discretionary expenses (or expenses that can be cut back on if necessary!)

This way, you can be sure that you will at least save your set amount each pay period since you will be forced to go without that money. It also helps to limit the amount you spend since the money available to you to be spent on discretionary expenses such as entertainment, is smaller than it otherwise would have been. The BONUS is, that if you happen to spend even less than what you allocated, you can save even MORE!

This strategy is by far the easiest and most efficient way to build wealth. Just by paying yourself first, you are forcing yourself to make decisions to save yourself money and setting aside a certain amount of money each pay period! If you like the idea of not having to think about saving and investing, take it another step further by investing in mutual funds and index funds!

While mutual funds generally have higher fees as they tend to be more actively managed, they can also be quite diversified and thus less risky then individual stocks. Index funds tend to be the least expensive investments and are passively managed as they are tied to a specific benchmark such as the S & P 500. By tying your investments into mutual funds or index funds you are reducing risk and avoiding the difficulty of having to pick out individual investments for yourself. Generally these two types of investments tend to involve the “buy-and-hold” strategy as they often gain value over time. So, plug your savings into these funds and kick back and wait as your money grows for you!

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