With all the conflicting financial advice you get from TV, magazines, newspapers, and the Internet, it’s easy to conclude that personal finance is as hard as putting a man on the moon; However, nothing could be further from the truth. The fact is that the financial media has a vested interest in making things look difficult. If your readers/viewers knew how easy it is to save and invest their hard-earned money, they might conclude that they don’t need any professional help. Of course, then their ad revenue would plummet and everyone would be out of a job, and we can’t allow that, can we?
Easy as one, two, three
Pretty much everything you need to know about personal finance can be boiled down to three rules. Sure, you could do hours and hours of research on advanced investing techniques, but these three simple rules will get you 95% of the way there.
- Spend less than you earn – Sounds obvious, right? Well then, how come most Americans just don’t? It doesn’t matter how high your return on investment is if you never have capital to invest. The first is the first.
- Higher returns mean higher risk – If there is an immutable law of the financial universe, it is that higher returns cannot be obtained without assuming higher risks. Stocks generally outperform bonds and savings accounts over long periods of time, but that extra return only comes at the expense of added risk. Anyone who promises you big profits with little or no risk is a scammer. There are no exceptions to this rule.
- costs matter – How do you expect to get rich if you’re constantly paying huge commissions to snooty, know-it-all financial advisors? Investing isn’t complicated and you don’t need help outside of what you can get for free at your local library. There are literally hundreds of good, popular, easy-to-understand personal finance and investing books. Read a few of them and I promise you’ll do just as well as the guy in the corner office with the expensive financial advisor.