In my last post, Basic Financial Responsibility for Beginners
, I covered basic financial literacy that everyone should know. However, if you’ve done the basics, and got the simple stuff like budgeting and diversification done, then this is perfect for you. It’s not too advanced that you need existing knowledge, but more of a guide towards things that you can look into if you want to optimize your money. There’s no specific order to do these; feel free to explore them at your own pace and based on your specific interests, as there's no prescribed order to follow.
Unhappy with your job and salary ? F.U.
Trouble in a toxic relationship? F.U
Can’t live with your nagging parents anymore? F.U
It's an amount you designate for yourself to last a specific period of time. Similar to an emergency fund, this acts like a safety net, and takes the concept of money out of important decisions.
Imagine you're contemplating whether to stay in your job or quit.
If financial incentives are the primary factor influencing your decision, you may lean towards keeping the job or risk quitting without a stable financial plan.
However, having an FU fund changes the dynamics.
Knowing you have enough money to sustain yourself for a designated period (say, 6 months) takes away the immediate need for the job's income. It doesn't mean you have to quit right away, but it empowers you to make choices based on what's best for you, rather than being controlled by financial dependence.
Of course, having an FU fund is a privilege. Many people struggle to make ends meet, let alone save money. However, if you are fortunate enough to have a stable job with surplus income, consider building your FU fund. It provides you with the freedom and security to navigate life's decisions with confidence and independence.
To begin building your FU fund, follow these steps to calculate the amount you need:
Once you have a clear picture of your monthly expenses, decide on the duration you want your FU fund to last. This could be 3 months, 6 months, a year, or any other period that makes you feel financially secure.
Having chosen a timeline, work towards saving up the required amount. This process will demand time, dedication, and financial discipline. Regularly set aside money from your income to build your fund until it reaches the desired level.
While it may take effort, having an FU fund grants you a rare freedom – the ability to walk away from situations that no longer serve you without being financially tied down. It provides you with the peace of mind to make life-changing decisions on your terms, enhancing your overall well-being and independence.
Whether you're an accountant or not, bookkeeping is a valuable skill to possess. Beyond simply tracking your finances, it enhances your ability to handle larger datasets, fosters organization, attentiveness, and transparency with your money.
Bookkeeping becomes a necessity for many of us when managing budgets for businesses, whether it's your own venture or the company you work for. Understanding how to handle different income sources and integrating them seamlessly into your financial records proves to be beneficial sooner rather than later. It ensures a smooth functioning of your finances.
Once you start earning regular paychecks, it becomes crucial to plan and allocate your money wisely before it reaches your account. Breaking down your paycheck into different categories - debt, savings, expenses, and checking - is a proactive approach to manage your finances effectively.
The 50/30/20 rule, recommended by many financial experts, provides a helpful guideline:
This is a starting point and can be adjusted to fit your unique financial situation. Utilize your bank settings to set up automatic deductions and redirects, ensuring your money is distributed into the respective accounts even before it reaches your hands. By doing this, you won't be tempted to overspend, and it helps you stay on track with your financial goals.
If you find that you're spending more than 30 percent of your income on personal expenses, it may be time to review your budget and assess areas where you can make adjustments to better align with your financial priorities. Keeping a watchful eye on your paycheck distribution enables you to maintain financial stability and make informed decisions about your money.
At every stage of life, there are unique financial opportunities or advantages available to you. These may vary based on your societal and economic status, but understanding and leveraging them can make a significant difference in your financial well-being.
Are you unemployed? Always collect your unemployment benefits.
A student? explore every possible student discount offered by large corporations like Amazon and Apple, as these can help you save money on various purchases.
Are you in a high income / high spender bracket ? Credit card points are your best friend
Travel a lot, for business or pleasure? Travel cards, and memberships can save you plenty.
You are always afforded certain advantages based on your stature in society, but the hard part is, no one will tell you what they are. Sure, some credit card companies plaster their offers to get you hooked, but the real good deals take effort, and planning. It’s not for everyone, and I personally don’t take advantage of all the offers I have. But I do know quite a few friends who have full scale google sheets with individual credit card breakdowns, so that they can understand which cards to use when, and for what purchases.
While having a stable job is certainly a good career incentive, financially it makes the least sense. Relying entirely on one income source for your livelihood is a no-no. I learned this lesson firsthand when I was unexpectedly laid off and had to scramble for a similar job due to lack of other income streams.
More recently, the concept of multiple income streams has become quite popular, especially with the burst of online enterprises and remote work options. Millennials, in particular, are embracing this idea and leaving their 9-to-5 jobs to pursue diverse income streams.
Building passive income initially requires significant effort and hustle, as you plant seeds that will reap benefits in the long run. Hypothetically and ideally, aiming for seven sources of income, both active and passive, can lead to financial independence.
While there's no rigid formula, these sources can be categorized as follows:1. Dividend income from stocks owned.
2. Earned income from a paycheck. 3. Rental income from real estate properties.
4. Affiliate marketing, earning income from promoting products through your businesses.
5. Capital gains from selling appreciated assets, including cryptocurrencies and NFTs.
6. Profits from businesses you own or partnerships with different enterprises. 7. Interest from savings, CDs, or bonds.
It's essential to recognize that achieving this level of income diversity won't happen overnight. It may take close to a decade to reach the status of having seven income streams. However, the hard work pays off because once you understand and establish systems for each stream, you can attain financial freedom. At this point, you won't have to worry about relying solely on a paycheck. If one income source faces challenges, you have six others in place to support you. Building a solid foundation of passive income offers peace of mind and the potential to create a more secure and prosperous future.
Money is a good servant, but a dangerous mistress. It can just as easily control you, as it can destroy you. But the best part is that you can tame it. If you take a little extra time, and figure out the right kinds of loopholes, you can set yourself up for some well paid funding for the rest of your life.
Build an F-U Fund
F-U Fund abv. {slang}
short for F-ck You fund, it serves as a financial safety net that empowers you to walk away from any situation that warrants a 'F-ck you.'
It's an amount you designate for yourself to last a specific period of time. Similar to an emergency fund, this acts like a safety net, and takes the concept of money out of important decisions.
Imagine you're contemplating whether to stay in your job or quit.
If financial incentives are the primary factor influencing your decision, you may lean towards keeping the job or risk quitting without a stable financial plan.
However, having an FU fund changes the dynamics.
Knowing you have enough money to sustain yourself for a designated period (say, 6 months) takes away the immediate need for the job's income. It doesn't mean you have to quit right away, but it empowers you to make choices based on what's best for you, rather than being controlled by financial dependence.
Of course, having an FU fund is a privilege. Many people struggle to make ends meet, let alone save money. However, if you are fortunate enough to have a stable job with surplus income, consider building your FU fund. It provides you with the freedom and security to navigate life's decisions with confidence and independence.
To begin building your FU fund, follow these steps to calculate the amount you need:
- Calculate Unavoidable Expenses: Add up all your essential monthly expenses, such as rent, gas, utilities, groceries, insurance, and any fixed bills.
- Allocate Savings: Deduct the amount you regularly save or invest from your monthly income.
- Consider Discretionary Spending: Evaluate how much you typically spend on non-essential items like traveling, shopping, and holidays during a good month.
- Account for Minimal Spending: Determine how much you spend during a passive month when you stay at home and have minimal expenses.
Once you have a clear picture of your monthly expenses, decide on the duration you want your FU fund to last. This could be 3 months, 6 months, a year, or any other period that makes you feel financially secure.
Having chosen a timeline, work towards saving up the required amount. This process will demand time, dedication, and financial discipline. Regularly set aside money from your income to build your fund until it reaches the desired level.
While it may take effort, having an FU fund grants you a rare freedom – the ability to walk away from situations that no longer serve you without being financially tied down. It provides you with the peace of mind to make life-changing decisions on your terms, enhancing your overall well-being and independence.
Learn basic bookkeeping skills
Whether you're an accountant or not, bookkeeping is a valuable skill to possess. Beyond simply tracking your finances, it enhances your ability to handle larger datasets, fosters organization, attentiveness, and transparency with your money.
Bookkeeping becomes a necessity for many of us when managing budgets for businesses, whether it's your own venture or the company you work for. Understanding how to handle different income sources and integrating them seamlessly into your financial records proves to be beneficial sooner rather than later. It ensures a smooth functioning of your finances.
Set up an auto-debit system
Once you start earning regular paychecks, it becomes crucial to plan and allocate your money wisely before it reaches your account. Breaking down your paycheck into different categories - debt, savings, expenses, and checking - is a proactive approach to manage your finances effectively.
The 50/30/20 rule, recommended by many financial experts, provides a helpful guideline:
- Allocate 20 percent of your income towards retirement and savings.
- Reserve 30 percent for personal expenses, allowing you the freedom to spend it as you choose.
- Use 50 percent of your income to cover essential expenses such as rent and gas.
This is a starting point and can be adjusted to fit your unique financial situation. Utilize your bank settings to set up automatic deductions and redirects, ensuring your money is distributed into the respective accounts even before it reaches your hands. By doing this, you won't be tempted to overspend, and it helps you stay on track with your financial goals.
If you find that you're spending more than 30 percent of your income on personal expenses, it may be time to review your budget and assess areas where you can make adjustments to better align with your financial priorities. Keeping a watchful eye on your paycheck distribution enables you to maintain financial stability and make informed decisions about your money.
Recognize your financial Opportunities
At every stage of life, there are unique financial opportunities or advantages available to you. These may vary based on your societal and economic status, but understanding and leveraging them can make a significant difference in your financial well-being.
You are always afforded certain advantages based on your stature in society, but the hard part is, no one will tell you what they are. Sure, some credit card companies plaster their offers to get you hooked, but the real good deals take effort, and planning. It’s not for everyone, and I personally don’t take advantage of all the offers I have. But I do know quite a few friends who have full scale google sheets with individual credit card breakdowns, so that they can understand which cards to use when, and for what purchases.
Build Passive Income
While having a stable job is certainly a good career incentive, financially it makes the least sense. Relying entirely on one income source for your livelihood is a no-no. I learned this lesson firsthand when I was unexpectedly laid off and had to scramble for a similar job due to lack of other income streams.
More recently, the concept of multiple income streams has become quite popular, especially with the burst of online enterprises and remote work options. Millennials, in particular, are embracing this idea and leaving their 9-to-5 jobs to pursue diverse income streams.
Building passive income initially requires significant effort and hustle, as you plant seeds that will reap benefits in the long run. Hypothetically and ideally, aiming for seven sources of income, both active and passive, can lead to financial independence.
While there's no rigid formula, these sources can be categorized as follows:
It's essential to recognize that achieving this level of income diversity won't happen overnight. It may take close to a decade to reach the status of having seven income streams. However, the hard work pays off because once you understand and establish systems for each stream, you can attain financial freedom. At this point, you won't have to worry about relying solely on a paycheck. If one income source faces challenges, you have six others in place to support you. Building a solid foundation of passive income offers peace of mind and the potential to create a more secure and prosperous future.
Money is a good servant, but a dangerous mistress. It can just as easily control you, as it can destroy you. But the best part is that you can tame it. If you take a little extra time, and figure out the right kinds of loopholes, you can set yourself up for some well paid funding for the rest of your life.