5 Lessons most Personal Finance Books Talk About
I have been an avid reader. For the longest time that I can remember, reading has been one of the few habits that have stayed with me. However, I hardly ever read any non-fictional books. Mostly because I found them a little too preachy.
Until, one day a friend talked of one particular book in high praise. That book is “Rich Dad Poor Dad” written by Robert Kiyosaki. I know a lot of people claim that this book changed their life. Well! It is eye-opening.
And as you progress along the book, all the things that we’ve been doing and feeling about money seem naturally wrong. It simply presents the truth and you are convinced to accept them easily.
So, I decided to deep dive into the personal finance genre only to find out, that most of these books talk about some of the same concepts. There are a few basic underlying themes that are discussed over and over again throughout these books.
And if you get these basics right, you will end up creating wealth over the long term. So, here are the top 5 lessons that you can incorporate into your lifestyle to lead a financially secure life:
Manage Your Liabilities: Keep Debt Under Control
You can get a personal loan approved within a few minutes these days. And it’s alright to take a loan if you are in real need of money. But before you take a loan, you need to have a proper plan for how you intend to pay back the debt on time. Because each time an EMI is paid from your bank account, it hurts just like salt would on open wounds.
What is not recommended is using credit to satisfy impulse buying or small day-to-day purchases. You can take care of these expenses with cash or a direct UPI payment.
Hence, if you are always running behind paying your credit card bills on time, avoid using it at all costs. It’s like losing money that you haven’t even earned yet.
So, the first and foremost step is to get out of any debt you have under your name.
Save Money: Stop Spending Your Whole Paycheck
It’s not what you make but what you save that gets you out of debt.
— Suzanne Woods Fisher in Amish Proverbs
Now that you have your debt under control, start saving. Saving your hard-earned money is one of the simplest and straightforward ways to become rich.
The first step is to open a small savings account if you haven’t already. Start making regular deposits into it, aiming for at least Rs 10,000 (almost $125 per paycheck), or more if possible. If you aren’t able to save this, you can make the first payment into your savings account as you receive your salary. Having a savings account will stabilize your finances and provide you with a safety net for any emergencies.
This way, you won’t fall into debt or financial hardship, as you’ll have funds available for unexpected expenses.
Start Investing EARLY: Start as Soon as You Can
The next step is to invest these saved funds into different asset classes. When Einstein said, “Compounding is the 8th Wonder,” he was not kidding. If you save your money in the most disciplined manner and invest in equity, bonds, real estate, or any type of appreciating assets, you will see your money grow.
Now, coming to the second part about investment, i.e., starting early. If you start early, you will see a higher compounding of your investment returns. Most people start in their 30s, and by then it’s too late to witness the effects of compounding.
When it comes to investing, Warren Buffet’s only regret is that he didn’t start his investment early. So, I would request my readers to set aside some funds every month from their paycheck and invest it in an asset class they please.
I have also been in the Indian stock market for 3 years now. I do my bit by investing Rs 15,000(almost $180) every month in the Nifty 50 Index. I check on my savings from time to time and it’s a good feeling to have saved up what I have.
$81.5 billion of Warren Buffet’s $84.5 billion net worth came after his 65th birthday. Our minds are not built to handle such absurdities.
— Morgan Housel in The Psychology of Money.
We all know good things take time, and this too shall take time. But trust me it’ll be worth the time, money, energy, and effort.
Managing your Money Mindset
Mindset is everything. You will notice that your mindset has a lot to do with your career and relationships. The same applies to money. Don’t chase money. Focus on developing your skills and habits. Go on to portray those skills in the public eye. If someone likes your work, they will approach you and then you can charge them a fee. That’s how money walks in. Slowly and steadily.
It’s not what you say out of your mouth that determines your life, it’s what you whisper to yourself that has the most power!
— Robert Kiyosaki in Rich Dad Poor Dad
Here’s a breakdown of the money mindset that you can try to cultivate:
- You must also ensure that you do not have a fearful relationship with money. Rather adopt a mindset of abundance by focusing on opportunities rather than limitations.
- Concentrate on the value you gain rather than just the price. Aim for long-term benefits, satisfaction, and fulfillment instead of short-term costs.
- Cultivate gratitude. Appreciate and celebrate your unique financial journey, achievements, and blessings. True wealth goes beyond material possessions.
- Take charge of your finances and empower yourself to make positive changes. Focus on the stuff that you can control. Take charge of budgeting, saving, and investing. This will automatically improve your financial future.
Don’t over-stress about Money
Now, this is one point that’s not presented directly to you but creeps up from time to time. We all have an element of fate involved in our lives. You may wonder why you aren’t the richest person around. You’re working hard and have maintained a fair share of patience. But still, you think you deserve better or more.
The answer to this boils down to the fact that there is only a certain portion of your life that you can control. You won’t win a deal every time, but you certainly can win sometimes or even most of the time. So, try to be content with the things that are in your control.
Persistence is what makes the impossible possible, the possible likely, and the likely definite.
― Saurabh Mukherjea, The Unusual Billionaires
What you must not do is “give up!” Rather, be as consistent as possible. It will reap the best fruits.
Summing up
When it comes to money, doing the simple things matters. Doing the things that only you can control matters. These simple and controllable tasks are nothing but saving and investing. If you follow a disciplined approach towards saving your money and investing it in appreciable asset classes, it will take you on the road to wealth creation.
Remember, The goal isn’t to earn more money. The goal is to live life on your terms.
