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Where Should You Begin with Personal Finance?

Personal finance is a hard discipline. What’s the best way to start?

Dolla’ Dolla’ Bills Ya’l

Of all the things we learn in school. All the tests we take in college, and all the certifications we receive, there is one that is notoriously absent in today’s education system. And honestly, it’s absence probably causes more problems these days than a lot of other things we see in the headline news.

It’s personal finance.

Books and gurus and self-help guides will try to walk you through balancing a checkbook, taking out loans, and compare bank accounts and interest rates for you. But that’s all beyond the basics. Where do you actually begin?

I believe, you start at the beginning, with three fundamental principles of every successful person.

Number one

Have a plan.

Call it a budget, call it a forecast, call it what you will. But, project forward income and expenses and make those numbers match. Work to that plan.

Have a discipline to operate within that plan.

That way you know where your money is going, You know where it is projected to go, and you know where it’s coming from. When you are surprised by a medical bill, or a parking ticket, it’s not the end of the world because you know exactly how much you have left over and what you can afford.

Number two,

Spend less than you make.

These are all what we call BGOs, Blinding Glimpses of the Obvious. If you spend less than you make, then you will be happier, less stressed, and have a successful personal finance situation.

This is possible no matter what your income is. if you’re making $1,000 a month then live on $900. If you’re making $10,000 a month then live on $9,500. The habit that most people get into, the challenge that becomes because people don’t have a plan, is that they make $1,000 a month and spend $1,050.

The old saying goes: the first rule of holes is, “when you find yourself in one, stop digging.”

All too often people in their personal finances are continually digging a deeper and deeper hole. Now, in a parenthetic comment to those starting out, my assumption is that most reading this are younger professionals or just starting out in their career. As you built your personal cost structure, (rent, car payments, credit card, travel, food) with all the rest of those things that come on, (as you graduate college, as you get married, as you start your career and family life) always go for the cheaper option.

Make sure you’re setting in place your cost structure to be less than your current income. The temptation is to build a cost structure based on projected income, (I’m going to get promoted next year, so I can afford this TV today). If you do that you’re digging a hole and I’ll refer you back to the first rule of holes.

Always make sure you’re spending less than you currently make and not what you’re projected to make.

This is a dollar bill. Your first instinct should be to NOT spend it.

Number three

Save and invest for a rainy day.

My advice for brand new folks who are starting out: put ten, ten, and ten away.

Live on 70% of your income.

Now most people are horrified when they hear that and think, “I can’t do that.” Well it’s hard to reverse engineer that into an existing lifestyle, I get that. But if you’re just starting in a new job, graduating college, entering the commercial workplace then you can. Go for the basement apartment rather than the fancy condo. Have the discipline, (the emotional discipline) to live without the fancy thing, and you will be able to live on 70% of what you currently make.

What do you do with the other 30%? You do ten, ten, and ten. You have 10% that as long-term savings that you never touch. Yes, when you’re twenty something you’re not thinking about retirement. But I guarantee you that one day you’ll be thankful that you did because those numbers compound significantly over that period of time.

The other 10% goes into what I call a medium-term savings. Something you are saving for that is purposeful and meaningful. The deposit on a house, furniture, a new car, whatever you want, so you aren’t borrowing money to buy something sooner that you can afford.

It’s specific, it’s targeted, you’re saving the money to spend on some asset-type thing that you want, that you need, but you’re getting the money first.

The third 10% is do something charitable. Give it to your church, give it to a charitable organization. Do something charitable with it because that builds you as an individual, refines your character, and gives you satisfaction beyond that which the numbers and money indicate.

First, 10% long range saving, lock it away, don’t look at it. Second, 10% medium term saving for some purposeful event. Third, 10% for charitable giving.

Be a net contributor to your future self than a net cost. “Future you” will thank you.

The Power of Long-Term Savings

“The most powerful force in the universe is compound interest” -Albert Einstein

Now, let me demonstrate to you the power of small amounts of money compounded over time.

Start with $100 a month. Now for some that is an obscene amount of money and for others that is what they blow on Starbucks and McDonalds. If you invest $100 a month, (and my guess for most reading this can invest $100 a month with some rearrangement) you start when you’re twenty, and continue until sixty-five. Assume that you get return of 10–12 percent which is probably high for these days.

You don’t want to argue with Einstein do you?

You’ve put in forty five years of $100 a month, or fifty-four thousand dollars. That’s what you’ve put in, that’s what has come out of your pocket into that long term plan.

But in an appropriate (untouched) account, over forty five years that’s going to compound to over 1.2 million dollars.

Do you want 1.2 million dollars once you retire? Then start investing $100 a month. Now, interestingly if you start that exact same plan one year later, (at twenty-one) it’s only going equal about $750,000.

You’ve lost almost half a million dollars because you delayed it by a year. Thats the power of compound interest. That’s the power of time working in your behalf. Realistically, $100 a month might be a stretch now for some, but hopefully in a few years with a stable job, $100 is petty cash.

What I would suggest you do is set it at $100 now. Whatever percentage it is of your income. Maybe it is that magical 10%. Scale that savings scheme to your income. When your income is ten times the amount you make now, (and it will be if you’re good at what you do) then that $100 a month becomes $1,000 a month. If you do that then the future value of that money is the equivalent of 1.2 million dollars now.

I know thats a lot of numbers flying around and I apologize.

If you follow the three rules. If you really try to discipline yourself. If you choose not to buy the 4k TV, and stick with your old one. If you do that, you will have peace in your life, you will find great success financially and personally, and you will be less stressed, and most importantly, prepared for anything.

You will be in a good place personally and financially.

Aaron Webber is a serial entrepreneur and CEO of Webber Investments LLC, as well as a Managing Partner at Madison Wall Agencies.

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Aaron Webber

Aaron Webber


Chairman and CEO, Webber Investments. Partner at Idea Booth/BGO.