Personal Finance 101: Get your shit together

TL;DR: Grow your earning power to get out of debt, save money, and position yourself to start thinking about next level personal finance – Ramen Retirement!

Interest on debts grow without rain.

– Yiddish Proverb

If you consider yourself new to the world of personal finance, you’re probably not ready yet for a lot of things I cover here. For example, if you carry credit card debt, then you really shouldn’t be worrying about investing in real estate… you’ve got bigger fish to fry. The things I cover focus on reaching the next level of financial freedom. But, if you’re still at the beginning of your journey, don’t despair – the good news is this 101 stuff is simpler than you think. If you boil it all down, there’s really only a few things to keep in mind before you’re ready to graduate to the next level:

  • Stay out of debt – i.e. no credit card debt, pay down school loans
  • Live within your means to save every month
  • Max out 401K and other tax advantaged vehicles (Roth IRA, 529 accounts)
  • Invest your money in low fee index funds / ETFs – ideally Vanguard Total Market (VTI)
  • Your biggest investments should be in yourself. Look for education and experiences that will expand your abilities to impact the world and add value for others. This will expand your earning power which is the main lever you need to grow your savings rate

This is pretty much the same advice that’s been bouncing around the internet on a 3×5 index card:

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Source: Harold Pollack

Apparently they wrote an entire book about the index card. The irony of that isn’t lost on anyone. But perhaps the book is worth checking out. Other good ‘entry level’ books include Ramit Sethi’s I Will Teach You To Be Rich, and Tony Robbins’ Money: Master The Game. This stuff isn’t that complicated. Earn more than you spend, pay down debts and then invest the savings. The hardest part is figuring out how to expand your earning potential. That is by far the most important lever you can pull to propel yourself forward. So knock out the basics above and invest the rest of your energy in your personal growth.

Do these simple things and you’ll be ahead of 90% of folks out there. Then you can start thinking about up-leveling your game and moving yourself closer to Ramen Retirement.

Throughout it all – enjoy the journey.

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