This is just a quick list of topics I plan to cover in the coming posts; a little cheat sheet for both you and me. It doesn’t mean I will never deviate from it. I may talk about something else in-between if somebody asks me questions, or if I feel like there is another topic I want to cover. But I plan to stick pretty close to it.
1.1. Net worth = Assets - Liabilities. So, in order to increase our net worth, we need either to increase our net worth, we need to grow our assets, decrease liabilities, or both.
1.2. Fixed and variable expenses. Easier to change variable expenses. They can be changed in the short run. Fixed expenses can be changed in the long run through lifestyle changes.
2.1. The importance of budgeting. “If you don’t know where you are going, then you’ll end up someplace else.”
2.2. How do we have positive cash flow? Our income should be higher than our expenses for the period. So, we need to either increase our income (getting a second job, or a better paying first job, monetizing one or our hobbies, starting a business) or decrease our expenses, or both. Budgeting will help us to review our expenses and see what can be reduced, or rearranged.
2.3. Budgeting tools.
2.3.1. The most basic one: pen and paper or Excel spreadsheet.
2.3.2. Automatic. If something can be done automatically and by itself, without your constant effort, let’s automate it. Note: This automated monitoring will work only if most of your expenses are paid by card, not in cash.
22.214.171.124. Sberbank expense monitoring for Russia
126.96.36.199. TD MySpend for Canada and US
188.8.131.52. Mint for North America and accounts at multiple institutions
184.108.40.206. QuickBooks for self-employed
Savings vs. Spending
3.1. Cover the debt with the highest interest rate first. Consider consolidating your debts and looking for an option with lower interest. Took to a financial advisor at an institution you bank with. Credit card debt should be covered first!
3.2. Once all the debts are paid off, start saving. Set up automatic savings plans. “Pay yourself first.”
3.3. Create emergency savings account for three but better six months of your living expenses (all your fixed expenses+transit+groceries).
3.4. Apply for credit when you don’t need it to create a safety cushion. If you apply when you desperately need it, most probably it will be too late, and there are higher chances you will be declined.
4.1. Start investing. Learn about any tax-free or tax-deferred accounts in your country.
4.1.1. How much should I save? 18% of your gross annual income for the previous year (according to actuaries).
4.1.2. Financial Instruments from the least to the riskiest
Term Deposits & GICs.
Cash and Money Market instruments.
Mutual funds and ETFs.
Individual stocks and bonds.
Hedge funds, derivatives, forwards, and futures.
4.2. If you don’t know anything about financial or instruments, DO NOT buy it. Get an advisor.
4.3. Invest in yourself first. Education.
5.1. In countries where you have to file a personal tax return, get a good tax advisor and don’t mind paying them well. They are worth it.
6.1. Royalties from books, music, and other intellectual property rights
6.2. Ad revenue from your blog, vlog, social media account
7.1. YouTube video “How To Properly Manage Your Money Like the Rich” by Tom Ferry