All You Need to Know for Financial Success
Friday, March 5th, 2010All You Need to Know for Financial Success
Introduction:
Every one has to maintain their personal finance in their day to day life. Below are three basic principles you need to know for financial success.
Spend less than you earn
Make the money you have work for you
Be prepared for the unexpected
The principles can sound good, but the thing is to truly understand them, and more importantly, to apply them.
Spend less than you earn:
It means: live within your earnings, dont overspend, and dont get yourself into debt. Most importantly start saving. Its easy to say but its very hard to do especially when you are attracted of a new car, a sweet music system, couple of nights each week out with your friends, and a posh tropical vacation every once in a while.
You earn for a reason you want the good things life has to offer. You can avoid dining out for cooking at home; buy dresses on sale at the end of the season, and save a few dollars whenever possible. But really there are four big decisions that affect your expenses (and therefore your ability to save for other things) more than anything else. Make sure and understand the cost involved in these areas, so that you come out remaining financially strong.
Make the Money You Have Work for You:
If you are going to save $10,000 a month for the next 40 years without any interest, you would have $400,000. If you invested $10,000 a year and earned a 10% return each year, you would have $5,267,155. Why the difference? Your interest in investment earns interest, and its interest earns interest, and so on. The result is exponential growth. Remember calculus? This time it actually works for you.
Prepare for the Unexpected:
The best laid financial plan can be rapidly ruined by a streak of misfortune: job loss, fire, theft, or health problems. Its you who need to protect yourself, but its not as hard as you think.