GoodAdvisor — Part 1: Intro to Personal Finance.

Ububele Kopo
Good Advisor
Published in
3 min readFeb 7, 2021
Image: Theirrelevantinvestor

I plan to write a series of post about Personal Finance; 1. As a way to synthesize my thoughts & observations over the last 3 years & 2. To translate those thoughts into contrarian takes on some elements of personal finance. For example, I believe people place too much emphasis on money as a store of value as opposed to a medium of exchange. I will explain some of my thoughts as the series goes. I understand personal finance & the whole personal finance blogging thing tends to draw cult-like discussions so I hope I don’t get stuck in the middle of that.

To start; I think I need a disclaimer that I am not a financial advisor & what I say does not constitute as financial advice (in a previous life I was a card-carrying member — I think? I’m not sure I will have to ask my former boss Marco. But yeah, no financial advice this side (maybe some, but don’t follow these hot takes).

So Personal Finance💸…Personal Finance consist of 6 main components:
Income, Savings, Investments, Spending, Loans & Insurance. Remember the bucket system? no man, not that bucket system🙊, the leaky bucket system (wow! I keep putting myself in a hole — 🙈).

This one:

The first point of contact is income;

Personal finance is the financial management which an individual or a family unit performs to budget, save, and spend monetary resources over time, taking into account various financial risks and future life event — Wikipedia.

Without income the bucket cannot leak water, does that mean personal financial management is for people who are employed? no, of course not but the operative work in personal finance is finance. Here comes my first personal finance hot take:

#1 The most important component of personal finance is Income — maximise that.

The more income, the more water (money) to flow to the other components like savings, investment, spending, repayment of loans, protecting assets etc.

Humans are inherently irrational when it comes to making financial decisions. There’s something about money that makes us non-self regulating. Nevertheless, we have to find some resemblance of rationality because financial decisions are not tied only to money, they are tied to time (should I save or should I spend), they are tied to risk (Car insurance, no car insurance) & they are tied to security (Mortgage or not to mortgage).

I think the problem with personal finance or personal financial management, in general, is that it takes too much brainpower for so little gratification — or delayed gratification and the thing about us humans — we love instant gratification.

Where to start? Given the definition of Personal Finance — The financial management of a household’s disposable income: You have to start at the exact point where the money comes in — The Bank Account. Now for number 2 of my hot takes:

#2 Budgets are important — but you should not think about them too much.

Budgets are administratively taxing thats why there are infinite budgeting apps. The problem with budgeting is that people try to predict spending down to the cent needed to pay for rent. That seldom works, if it did, people would stop trying to sell you on how to budget & you would stop trying to use every app & spreadsheet to teach you how to budget. Budgets should be at most high-level round amounts based on pre-historical spend amounts. If your income doesn't fluctuate why are you trying to predict the future on money you don’t have? — You should build habits based on sureties.

Having a high-level budget as opposed to predicting cents will cause you less stress. Don’t budget subset accounts, stick to high-level accounts based on the buckets.

Part 2 coming soon.

Solving #1:

Solving #2:

(Thanks to Daliso Ngoma for the proofread)