With the knowledge accumulated over the past 30 years (and with the added benefit of hindsight), I can positively conclude that the two most important lessons in personal financial management, for me, at least would be :-
a) Pay myself first, or create automated savings, or live below my means
This, in my mind, is the grand daddy of all the personal finance management skills or disciplines. No matter how much we earn, without managing our expenses, and living below our means, we would still end up somewhere at the bottom of the heap.
Somehow, it appears to be a universal rule, that our paychecks are never enough. In fact, we declare to all who listen that if we only had x% or y% more, everything would be better. As the value of our paychecks increase, so do our expenses. Sometimes at a faster pace. It is a vicious cycle, paychecks increase, expenses increase.
This discipline to pay ourselves first, i.e. to regularly set aside a sum for savings and / or for long term investment, and making do with the balance is, in my mind, the key to financial success.
b) Forming a group of like minded friends, or a peer group.
We make friends in school, in University and at work. Some of these friendships span over almost our whole life. The friends, I have and have had, have contributed enormously to my life. One friend started me off on reading, and at a relatively young age. (Thank you, Yew Ken). Another awoke me spiritually. Others have helped me on my career progress, travel etc. Unfortunately none of my friends professed interest in improving his or her personal finance…..then.
When we got together, the topics of discussions were almost always non financial.
This powerful and positive peer influence, would have worked wonders, had we included improvement of personal finances as an “agenda item” in our get- togethers.
The journey on improving my personal finances, I started on my own. This was when it was clear that my financial responsibilities were heavy and that I was ill prepared, to say the least. Coincidentally, my closest friends, too, started at about the same time. Unfortunately, almost 15 years of our working and earning lives had passed us by.
It’s no wonder that many personal finance management experts promote the formation of teams.
Well, these are my two lessons. What are yours? And how do we impart these disciplines to our children? I welcome your comments and views.