Personal finance is more than just revenue / expense accounting


I want to open with this topic in a series of articles about personal finance, in which I will try to briefly outline the essence of personal finance and personal financial planning, based on my practical experience, as well as the knowledge that was gleaned (and filtered) from books and seminars. I want to share this because “money loves an account”, and we often forget about it, which, in the future, will come out sideways to us. Personal finance is not only the accounting of income and expenses in Excel or on a smartphone, it is the achievement of life goals in a more concise and perhaps the only right way. This topic is not about how and where to invest! On the contrary, I will dissuade you from doing many stupid things, because I myself am specifically stuck in due time. This topic is about how to save and increase safely.The most interesting thing is that everything is quite easy, it does not require infringement on yourself in something - you live the same way you did. But at the same time you achieve more.


There is simply an incredible amount of information on this subject. Almost every day we are offered to “preserve and increase” our savings using Forex, the stock market, real estate and land, banking and insurance products, etc. In this article I will describe the main points - where to start. If you try to cover the whole topic - you can read for a very long time. You need to start somewhere, take the first step. It may seem strange, but I took my first step only three years ago (I do not regret it a bit - the result is pleasantly surprising), and in theory I knew that it should be done back in 2004. It’s hard to explain why this is necessary until you try it yourself. I tell my friends what I achieved in just three years of proper planning - and they ask to help them do the same.

How do I know

It should probably briefly talk about my experience, who will be interested - I will describe in more detail somehow the whole story. In 2003, he read to everyone already tired of Kiosaki. From that moment, I burst through, I wanted himbecame interested in personal finance and investing. During these 10 years, I managed to earn and lose money (mostly to lose and VERY much, because the main movements came in 2007-2008, when even the most intelligent eXperts started to lose, not to mention ordinary people) on the following tools: banks, credit unions, stock market, Forex, land, real estate, foreign exchange transactions - this is what I remembered. Only three years ago, finally, “awareness” came and I began to do adequate things in this direction. Prior to this, actions were taken based on theories and thoughts / advice of other people. The crisis taught me to think with my own head and I have no regrets.

To business

Now to business. I will describe only what it is worth starting with “yesterday” - that which works at 100%. This is personally verified by me, it works, I am responsible for these words.

The basic principle is time and money.
Moreover, in this order. If you are doing something in the direction of personal finance - time works for you. If you do not - against. Money to start can be minimal if there is a lot of time in reserve (you are young) and, at the same time, there should be more money if there is not so much time. I will give an example:
You are 20 years old and you deposit $ 100 at 5% per annum. This is just an example, the amount is not important, the percentage is not important - time is important. So you put $ 100 at 5% per annum and when you are 50 - the amount on deposit will be about $ 430. If you are 33 years old, then you already need to put $ 200 under the same 5% in order to get the same $ 430 by 50. Yes, at first glance it’s easier to find “$ 100” at age 33 than at age 20, but it only seems. You need to understand the main thing - the amount is not important, it is important to start early. Even if you are 33, not 20, you still need to start.

Three personal financial plans
I heard this concept in 2006. It is very simple and, at the same time, incredibly effective. I will not write about ways to implement this concept, this will be the next topic, I think. So far, just “what and why?”. There are three plans that everyone should have if they are not indifferent to their fate and the fate of their loved ones:

1. Plan of financial protection and security
2. Plan of financial independence
3. Plan of financial freedom

Plan of financial protectionimplies that you have funds in reliable and easily accessible (this is the most important!) places that will allow you to live at the same level of expenses that you currently have for 6-12 months in case of some life upsets. I will explain with an example. Now you are a young and successful IT specialist, make good money and, in general, everything is fine. You go to the mountains to ride a board, at a bend you fly a healthy bumpkin skiing (or vice versa, you are skiing, he is on a board - who has what preferences) - you fall and severely damage your hand. So much so that for its restoration it will take from 6 to 12 months. There can be no talk of any work. An example, maybe not entirely successful, but not the essence of the example. So, the financial security plan implies that you will continue to live by the same standards, without prejudice to yourself for six months to a year, while not receiving income (you cannot go to work). For example, you are now consistently spending $ 1,000 per month, which means you should have 6-12 thousand dollars in savings. If something happens to you, you get those savings and live the way you lived before. You are safe. 6 months or 12 is individually. I used to think that 6 months is normal, now I understand that it’s better than 12. In life, things happen. But 6 is a "commitment". This is an untouchable reserve, it must not be touched if it is not a force majeure situation, for which it is intended. You are safe. 6 months or 12 is individually. I used to think that 6 months is normal, now I understand that it’s better than 12. In life, things happen. But 6 is a "commitment". This is an untouchable reserve, it must not be touched if it is not a force majeure situation, for which it is intended. You are safe. 6 months or 12 is individually. I used to think that 6 months is normal, now I understand that it’s better than 12. In life, things happen. But 6 is a "commitment". This is an untouchable reserve, it must not be touched if it is not a force majeure situation, for which it is intended.

The financial independence plan says that having all the same $ 1000 of expenses (for example), you must have passive income of $ 1000+ so that you are not dependent on anything. What is passive income? This is when you do not need to do anything to get it. And if necessary, then spend on it no more than a day a month. The rest of the time, you can smoke bamboo, but the income from this will still not go anywhere. For example, you have an apartment that you rent out - and once a month you need to go and collect your $ 1,000 from tenants. Or you have deposits and interest runs in 1000 dollars once a month. We are not talking about ways, just about meaning.

Financial freedom plan- the tidbit. And the most elusive. He says that you must clearly determine (!) For yourself the amount that you need per month in order to be financially free. For example, now you spend $ 1,000, but if you lived as you want, you would spend $ 10,000 (if you had them, of course). And here the scheme is the same as in terms of financial independence - you must find a way to get this amount in the form of passive income. Then and only then can you be free! We are not talking about yachts for millions of dollars, just elementary to feel like a man and live in pleasure.

I am currently working on Plan No. 2. I’ve finished financial security (you still shouldn’t forget about it, because today it’s 1000 costs, and tomorrow it could be 2000 - you will need to return to plan No. 1 again) about six months ago, it’s even difficult to convey how confident you feel in life when you remember about this NC.

On this major note, I will end this opus, because so many letters have come out. Next time, I think it will be possible to walk through the ways of implementing Plan No. 1.

So far, you can read a simple, short, but incredibly sensible instruction on how to live a book on this topic: "The Richest Man in Babylon."It’s like a Bible with 10 commandments for those who want to take care of their finances. The first reading did not bring me anything - I read and forgot. Then, when I lost a lot of money and stepped on dozens of rakes, I remembered about it, read it again and realized what an idiot I am. If I consciously read it, I would not have made so many mistakes. And these are not empty words.

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