Saturday, June 4, 2011

Basic Idea?

Why I Hate “New, Unique” Money Tips

I read this article (click above) off of a FB post from The Happy Housewife. At first reading I completely agreed - stick to the basics, they are basics for a reason, no need to re-invent good financial advise. Then I read through it again and realized.... he got the basic premise wrong! How can you write an article about sticking with the basics and then not get the basics right?

The basic idea is this article is:
"Spend less than you earn — invest the difference. That’s all you need to know. The rest is developing the mindset and skills to make these things happen."

It sounded great when you read it right? Here's why it's wrong - the correct mindset: Earn, save, spend what you have to and then invest the difference. Did you catch that extra little bit? Do you know why those four little letters are the most important part?

Most everyone has the same nature. We get money, we spend money and then if there is money left over we think great!! and save it, invest it, or treat ourselves. Then the next month comes along and back in that little part of your mind you remember you had money leftover last month. So this month you earn, you spend and maybe you splurge a bit more and there is a little less money left over at the end of the month. If you are waiting until after the spending part of the formula before you are saving/investing your money you are doing it all wrong!

If you want to get out of debt, if you want to save money for an emergency fund or vacation, if you want to invest in your future - you do it first, NOT LAST. It is too easy to not have money leftover at the end of the month, especially if an emergency or such comes up. Instead, when those earnings come in, you first take out a set amount for giving, an amount to save, an amount to invest - whatever is left is what you get to spend.

And yes, then the equation is really simple and basic - spend less than what you have. If after that there is money leftover... call me and let me know how you did it, and then save it for a rainy day.

No comments:

Post a Comment