Annual Personal Finance Program
Every year, we coordinate a personal finance program to help lower and middle income families understand how to create and prepare for financial independence.
This is often one of our most difficult programs to run, because many families we work with struggle to meet many of their needs as is.
However, regardless of your income level, there are a few key tips you can keep in mind.
- Pay Yourself First. Perhaps the most basic rule of personal finance is always to pay yourself first. While the amount you save and invest will vary depending on your individual circumstances, we recommend following the general rule of thumb of 10%. If you can’t afford this, save whatever amount you can and try to gradually work yourself up to the 10% target.
- Invest Consistently. The second rule is to invest those savings consistently. Many families start the savings habit, only to dip into those savings shortly thereafter. Investing the money not only ensures that you keep it long term, but puts it to work for you, so that you can earn interest on the money, and grow your overall portfolio.
- Pay Down High-Interest Debt. It’s also important to understand that there is both good debt and bad debt. This depends on what the money is used for and the interest rate owed. Good debt includes debt for a house or education, while bad debt often involves credit cards and unnecessary spending. If you have bad debt, make it a first priority to pay it down, and then use the extra money you save to invest in yourself.
Why is Financial Literacy Important
Understanding these basic principles of financial literacy is absolutely essential in order to gain a strong economic foothold. These principles can be applied both at the personal and organizational level.
Don’t spend more than you earn, and invest what remains.
This simple principle, if followed consistently, over time, will lead anyone to financial independence, wealth and success.
Spending more than you earn, accruing liabilities like high interest debt, will lead anyone into a position of feeling trapped and enslaved, unable to make ends meet.
Where Can I Learn More?
If you want to learn more about these principles, there are a few books we recommend.
Money: Master The Game
The First is Money Master The Game, by Tony Robbins. This book is an excellent resource on how to create a plan for saving and investing, and how to determine how to pick your investments, even if you know nothing about managing money.
It’s an interesting read, and we recommend you check it out here.
Secrets of the Millionaire Mind
Another great resource is Secrets of the Millionaire Mind, by T. Harv Ecker. This book doesn’t deal with how to invest, specifically, but rather how to think about money.
We love the ideas he suggests about creating a wealth mindset, and how by doing this consistently, changing the way you feel about money, you’ll be able to better manage it, and manifest more of it in your life.