A First Generation Americans Guide to Personal Finance
This is not a certified guide to personal finance. This is what I’ve learned. Why am I writing this blog post you ask? Simple, If you’re anything like me, you grew up with both your parents having an insane work ethic, they worked long hours to make just enough money to raise children but never accumulate great wealth. They traded all their time chasing money to pay everyone else but themselves. I’ve learned a lot from them but now it’s my responsibility to make sure future generations don’t have to do that again. On my journey to accumulate massive wealth, Here are some lessons I’ve learned along the way:
— Learn how to make Multiple Streams of Income —
It’s important to think of your income outside of the scope of a single wage or salary. The more faucets you have running, the more water you’re likely to get. With the evolution of the gig economy and the internet you have many opportunities to take advantage of.— Pay off and avoid debt. Unless you are using it for Leverage —
Do your best to not owe anyone money, specially when it compounds against you! Debt grows if you don’t pay in adequate time. It’s the reason most can not accumulate wealth. Their debt forces them into living paycheck to paycheck. Debt should only be looked at as an avenue for Leverage; This is risky and should be handled strategically.— Budget. Budget. Budget —
Imagine all the planes in America flying without air traffic control. Thats what your money management looks like when you don’t have a budget. Divide your money proportionality to your budget rules. Example: 20% Savings, 10% Investing, 50% Expenses, 20% Entertainment— Open a High Yield Savings Account —
With the rise of online banking and reduced cost of owning brick and mortar branches, banks are allowing you to open a High Yield Savings account (2% APY) backed by the FDIC with a very low minimum. This is where the saving portion of your budget goes. Think of this as giving the bank the opportunity to hold your money, and they pay you for it. You’re in charge now.— Start Investing as soon as possible
In Investing, compound interest is your best friend. In simple terms, compound interest is when the interest(money) you made on your money, gains interest as well. Not amazed yet? Here’s a simple example, you have $100 that is gaining 10% interest every month. At the end of the first month, you gain $10 of interest from your initial $100. Next month, you gain another $10 from the initial deposit but you also gain $1 from the $10 you made last month. That is the power of compound interest. If you let your money sit long enough, the interest of your interest begins to make more money than the interest on your principal!
Let see what it looks like if we invested $100 per month, for 30 years, with a 10% interest compounded monthly.
— Pay yourself first. And make it automated —
If there is anything you can take from the book Rich Dad, Poor Dad is “Pay Yourself First.”. Too many times we pay the bills, buy entertainment, splurge on food, and pay everyone else first. The easiest way to pay yourself first is to automate it. Set up your checking account to always deposit X% of your paycheck directly to your high yield savings account on pay day. Now rest easy knowing you just took a major step to building your wealth
I hope that at least a single piece of advice resonated with you during this read. Take action today and buy my…… kidding, have a great day and good luck on your wealth generating ventures. :)
