Financial education

by Admin
Updated: June 21, 2018

The financial education you need is the one that puts you in control of your own money

Regardless of your level of formal education, you’ve almost certainly never been taught the precise things you need to do to increase your personal wealth. You’ve also been brought up with wealth-defeating ideas accepted as normal.

Manage your money yourself. It’s OK to delegate some activities to others but you must always know what they’re doing with your resources and why. Be in control of your financial reputation. Minimize your costs. Concentrate on increasing your income. The details of how you do these things are important.

A comprehensive financial education - including accounting, economics, business etc. - takes years of full-time study and, even though you might then be able to get a good job, you’d use only a tiny fraction of that knowledge in your own life and there would still be gaps. It’s good to have, but it’s more in the realm of a career path than personal wealth development.

There are no reliable rules

I know people at all levels of education who are wealthy and I know people at all levels of education who are not. The ones who are wealthy learned most of what they needed as they went along.

Study, play, win

This is the learning process I use: Whether I’m buying food or a foreign currency, I try to know as much as possible before committing (making my “play”). I don’t always “win” at the first attempt but I do always pay attention to what worked and what didn’t so I can do better next time. I call it applied self-directed learning.

Financial management

Do you know how much cash you have and how long it would last if your income took a hit? Are you monitoring your credit? Are you monitoring your net worth and is it increasing or decreasing? How much spare money do you have to invest?

Minimize ongoing costs

Maintaining your lifestyle has “fixed costs” a.k.a. “overheads” a.k.a. bills! You have to bring in this much money just to reach zero. Yes, adjust your HVAC. Yes, turn things off when you’re not using them. Yes, buy in bulk and split the costs with your friends & neighbors. Etc. Wasting money is bad for your wealth.

Convert shopping into investing

Paying for quality can pay you back: I wanted a new watch. I did my research. I got my choice at a good price (not a Rolex, it cost about a week’s pay at the time). Sure, it was money out of my pocket then but now it’s worth 5 times what I paid for it.

Income

With your costs covered, all the remaining income is yours!

There is a principle of diminishing returns which applies to costs: The time & effort required to save more keeps increasing, i.e. gets more expensive. Beyond a certain point you need to concentrate on income. The maximum you can make from reducing costs is the total of the costs. The maximum you can make from extra income is unlimited.

Capital gains

This is usually where the big bucks come from.

Put your spare money into something that beats inflation and preferably that you can add value to. Buying real estate usually qualifies. A savings account never does.

If you can get an income from your investment, even better!

More info

Internet resources include non-profits like The National Endowment for Financial Education (NEFE) nefe.org, government such as Federal Deposit Insurance Corporation (FDIC) fdic.gov and privately owned such as investopedia.com.

General resources - those that have comprehensive education plans - are useful for identifying gaps in knowledge, but there is no substitute for drilling down through the search result to find true answers to specific question. Note that dates are important - what was true last year might not be true anymore.

wikipedia.org can be a great resource provided you remember that it is user-editable and therefore inherently unreliable.

I have personal experience of Wikipedia pages being deliberately corrupted so I strongly advise double-checking any information you find there.

If you meet someone who is successful financially, ask them to share some of their experience with you. People love to share and this is especially true of successful entrepreneurs.

Internal links

Sharing to get things for free Diminishing returns Bootstrapping a business Go to Articles
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