Personal Finance 101

There are a great many advantages to understanding your finances. The financial planning industry is worth $60.4 Billion-with-a-B in 2019, and growing by 5% per year. It is easy to understand why; being smart and responsible with your money is really valuable. For those with significant amounts of capital at stake (you know, those with enough money that they call it capital in the first place), it is worth it to get a financial planner. For those who are getting serious about retirement and want to stick to a specific timeline, it is worth getting a financial planner. For those who are just getting started managing their finances (or unwilling to trust a financial planner), you have come to the right place.

We start by explaining what financial independence is. It is a straightforward concept; total financial independence means being able to survive without going to work. It can be achieved two different ways; either by saving enough that you can afford to live out the rest of your life, or by saving a lot more into income-generating assets that provide you with an income without going to work (and then your children, too, once they inherit the assets). This is explained further in Understanding Financial Independence.

We then discuss the basic strategies to building financial independence. As you may notice in Understanding Financial Independence, your financial independence ultimately hinges on three different factors; your cost of living, the size of your savings and investments, and the efficiency of your savings and investments. Your financial independence can be increased by any combination of decreasing your cost of living, increasing your savings, and increasing the efficiency of your savings. this is explained further in Building Financial Independence.

Getting a raise is a critical point in your journey to building financial independence. A common habit is to increase your standard of living and save the same percentage of your new salary, but this is a mistake because it dilutes the savings you have already built and actually decreases your degree of independence. It is better to save a higher percentage of your raise than you were before - a common amount is 50%, for those who can afford to - which will still set you back temporarily but it will also increase the rate at which you are building independence, so you end up better in the long run while rewarding yourself for your hard work. This is explained with an example in Getting a Raise.

Ultimately, everybody wants to retire. In Saving for Retirement, we visit the three things that people need to focus on to be strategic while they are working so that they can have a comfortable retirement afterwards.

Once you are maxing out your retirement funds, you will need to invest on your own. There are lots of websites that promise you can earn yourself a nice watch, or a new car, or a yacht, by using their tools to build a perfect portfolio. If you don’t know what you are doing, you will end up just gambling away your money online. (and those websites will be happy to take service fees from you while you do so; as in a casino, the house always wins) In Investment Advice, we offer unsolicited opinions to those of you who feel so inclined. (several of these are based on things I have seen happen to other people, for better and for worse)

Finally, in Budgeting, we walk you through one way to construct your monthly budget. Devising and adhering to a responsible budget is a critical part of establishing sustainable long-term financial habits. Our method starts by assuming you will be able to save for a normal retirement timeline and then determining your rental (or mortgage) situation, the cost of your needs, and finally how much you can afford to spend on your wants from there. Finally, the savings are revisited with an eye towards how feasible the rental, needs, and wants are in your budget.