Personal Finances for Beginners

I wish I knew some of these things when I got my first allowance as a young man – so here are some “Personal Finances for Beginners” tips that I’ve learned the hard way.

Your Budget should have Structure

I have always thought of a budget of something where you track your income and expenditure only and never thought of it as a tool to plan your finances.

I am well aware that this may seem obvious to some, to me…not so much. It is should also be fairly obvious that if you “fail to plan, you plan to fail” and that your budget should be divided into sectors that you would like to spend your money on.

Here is an excellent guideline on how to structure your budget:

Lets check what you have left:

• 25% housing + 10% transport + 10% for retirement = 45% of your income spent
• That leaves you with 55% of your income, now lets put at least 10% one side for your other income generation ideas, but ideally we want to make that 25%

To get some input on different income ideas, you could download my free e-book called “” by clicking on the title.

Only live off 25% of your income

At a 10x conference in a conversation between Kevin Hart and Grant Cardone, Kevin explains how he divides his income het receives from making a movie:

• He takes 50% and puts it in his “IRS account” to pay taxes to the government – he doesn’t count it as his money
• Then he takes 25% and puts it in a different account which is for his next real estate deal – regardless if he knows where that deal will be or not
• He only lives off the remaining 25%.

I can literally hear you say “That’s easy for him to say, the money he makes from a movie is in the millions of dollars”.

Yes, this is true, but the point I am trying to bring across is that if you want to make changes in your finances, you must be willing to make the sacrifices. I love this illustration of how different spending habits produce different results:

Strategy for creating wealth

In a previous post, and probably in a few future posts as well, I discuss the simple steps for creating wealth:

• Step 1: Earn income
• Step 2: Live below your means
• Step 3: Use the surplus to generate more income
• Step 4: Repeat consistently

Click on the title to read the full post named “Why the rich get richer“.

If you train yourself to manage your finances this way, you can and will become better at increasing your income and be able to save up for the things you want to buy in your life.

THIS IS VITALLY IMPORTANT:

• Only buy things that really add value to your life
• Only buy things that you can afford to pay twice, if this is not the case, you cannot really afford it and should wait until you can

Practical Advice for your finances

Dave Ramsay is a well respected author and personal finance expert. Here are his 7 baby steps:

As mentioned before, you should live below your means. For me these 7 baby steps is practical and gives you great advice on what to actually do with the surplus between your income and your money spent.

Thank you for visiting this blog post. Here are a few book suggestions: