With all the conflicting financial advice you get from TV, magazines, newspapers, and the Internet, it’s easy to conclude that personal finance is about as difficult as putting a man on the moon; However, nothing could be further from the truth. The fact is that the financial media have 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 have that, right?
Easy as one, two, three
Just about everything you need to know about personal finance can be summed up in three rules. Sure, you could do hours and hours of research on advanced trading techniques, but these three simple rules will get you 95% of the way.
- 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 any 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 typically outperform bonds and savings accounts for long periods of time, but that extra return only comes at the expense of extra 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 are constantly paying huge commissions to snooty, know-it-all financial advisors? Investing is not complicated and you don’t need any help outside of what you can get for free at your local library. There are literally hundreds of good popular investment and personal finance books that are easy to understand. 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 adviser.