5 Financial Tips for Everyone

Personal finance comes with good news and bad news. The good news is that it’s almost exclusively common sense. One of the paramount principles of properly managing money is spending less than you earn. How hard could it be?

The bad news is that personal finance is almost exclusively common sense. And if there’s one thing about common sense, it would be our reluctance to pay attention to it. Because we are so smart and sophisticated, commonsensical information is usually perceived as a waste of time. At some point we all realize, after squandering a lot of money, time and opportunities that it’s not the waste of time we had originally thought. For some reason, things don’t “just work themselves out” – you work them out.

Our problem is not that we just don’t know. Nobody walks into Krispy Kreme and says, “My God, where’s all the broccoli??” The problem is that we don’t do. And that’s what I’m focused on: How do we take common sense and make it common action?

We can start with these five tips:


Now vibrate your vocal cords and release your tongue. It may take practice, but eventually you will get the hang of it. Once mastered, it should sound something like this: No.

No, you don’t need a new phone. No, your kids don’t need more presents. No, you don’t need a bigger house. No, you can’t go on vacation right now. No. It’s quite powerful.

Our world is based on instant gratification, where we’ve replaced enjoyment with pleasure. Billions of dollars are spent in advertising trying to persuade us to buy something now. With one swipe of a card and a click of a button we can have anything we want. But does that mean we should get it?

Learn to say a few more smaller No’s so you’re ready for that one big Yes.

A legitimate question is “How do we know what to say No to?” It’s easy to believe and act as if each financial transaction is an isolated event; that buying a coffee has nothing to do with buying a house. But in reality everything is connected. To become wealthy, we must treat every dollar as a reflection of the much larger pattern. We must look at the entire picture.

And how do we do that?


Here’s what a budget is: Telling every dollar where to go before it’s actually used. It’s not about being cheap. It’s not about being miserable. It’s about doing more of the things you want to do and less of the things you don’t. A budget does not prevent you from spending money. It just prevents you from spending wastefully or unwisely.

A monthly budget looks at the total money available for that particular month. And then allocates that money based on our predetermined priorities (a mixture of opportunities and obligations). By doing this, we see the tradeoffs being made with each dollar. If we put a dollar towards, say, Qdoba we have one less dollar to put towards, say, a new car. It’s hard to see these tradeoffs (opportunity costs) without looking at the big picture with a clear mind.

One of the biggest problems in personal finance is ignorance, not stupidity. We are simply unaware of what we are doing with our money, thus wasteful. Within the first couple months of creating and following a budget I guarantee two things: First, you’ll be amazed at what you were spending your money on. And second, you’ll be amazed at what you weren’t spending your money on.

Our budgets (or bank statements if you don’t follow a budget yet) are a reflection of what’s important to us. Is your church important? Is financial security important? Are your spouse and family important? It should be reflected by what you buy and what you don’t buy.

If paying interest and allowing a bank to be your Master(Card) is important to you, then I suggest you have debt. But if it’s not…


It is largely impossible to build wealth while in debt. You have to hate it! But let’s remember the purpose of building wealth. It’s not so you can call yourself a millionaire or sit and gleefully watch your bank account grow. We build wealth to buffer emergencies; to buffer other people’s emergencies; to give more; to help more; to enjoy more; to follow opportunities; to do more of the things we like and less of the things we don’t.

Debt is the modern equivalent of slavery. It’s the difference between being free or enslaved, mobile or hemmed, able to participate in our passions or prevented from doing so. The borrower truly is slave to the lender.

Take it upon yourself to change your life using money to enhance it, not destroy it. Debt-freedom is for any and every one. All it requires is a desire, a plan and execution of that plan.

Begin you journey towards debt freedom using the Debt Snowball Method. Rank all of your debts (excluding a mortgage) from smallest to largest and begin paying off the smallest balance with as much money as you can find, while paying only the minimum payments on all other debts. Once the smallest debt is paid off, proceed to next smallest debt.

The Debt Snowball gets its name from the fact that, over time, the debt repayments get larger and larger – like pushing a snowball down a hill. Regardless of how many debts are outstanding, you’re total monthly debt repayment amount never decreases. Once the first debt is paid off, the amount of your monthly repayment gets rolled into the second largest debt. The second debt will be repaid in the amount of your first debt PLUS the minimum payment of the second debt PLUS any extra money you find. And so on until all debts are paid.

It may take some time to pay off the first debt, but each subsequent debt will be paid faster and faster.


Our first line of defense is the Emergency Fund. After we have paid off all of our debt (except mortgage), we have one more short-term goal: Setting aside three to six months’ worth of expenses. If we, for whatever reason, were to have no income for three to six months, we would still be able to pay for all bills and necessities without needing to borrow money.

An Emergency Fund is a form of self-insurance. Put it into a separate checking account; an account in which no other money, except for the Emergency Fund, is located.

Do not use this money for anything other than, you guessed it, an emergency. (You’ll be amazed at how few emergencies you have with an Emergency fund.)

Do not invest this money! Yes, it will earn negative interest (because of inflation) sitting at the bank. But remember, this is insurance – it costs us money to protect our money.

Speaking of protection…


There are generally two forms of protection in personal finance. The first is insurance. As previously mentioned, insurance cost us money to protect our money. Our first line of defense is our Emergency Fund. Our second line is traditional insurance. We have to have it – life (preferably term), health, auto, home and disability. It’s nonnegotiable. Opt for high deductible plans which, over time, don’t erode your bank account like low deductible plans and offer the same amount of coverage.

The second form of protection comes from investing. Although investing costs us money to make us money, it is not a builder of wealth. It’s a protector. We build wealth by things we control – living within our means, avoiding debt and building margin into our financial lives. We cannot become wealthy by investing alone. Because remember, wealth is not defined by an amount (that’s riches). Wealth is defined by our ability to spend, save and give responsibly.

However, I can’t underestimate the importance of investing. It’s mandatory. Although not a builder of wealth, investing allows our money to grow. (Confusing, I know. But there is a big difference between building wealth and growing money.) Without it, what we have today will be less than what we have tomorrow. But through sensible investing, over a period of decades and unemotional decisions, we can accumulate wealth – not to transfer our hope to our riches, but to be able to provide for ourselves and others.

Our biggest financial provision against future uncertainty is to plan, save and invest.

How Hard Could It Be?

You would be surprised. Although these tips are very easy to understand, they are often difficult to put into consistent practice. My suggestion: Start slow. Don’t have a budget? Just track all of your xpenses for the first month. The next month only make a grocery budget. Add another category in for the third month.

Consistently implementing all 5 tips is your Rome. And as your know, Rome wasn’t built in a day. But bricks were being laid by the hour.

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  1. You must be a Dave Ramsey fan : ) He’s the reason we’re on our journey out of debt. We finished $102,000 worth of debt snowballing in June, and now we’re saving up our emergency fund. It just isn’t as satisfying as killing off debt somehow. We are tempted to just put it all against the mortgage – but we’re committed.
    I’m interested in what you say about “building wealth” vs. “growing money”. Have you written more extensively about that concept?
    Prudence Debtfree recently posted…Budget “Date”? Not Even Close!My Profile

    • Whoa that’s so awesome! $102K! I agree – there isn’t much excitement to building and maintaining an e-fund. I guess what we have to remember is that the e-fund itself is not supposed to be fun. It “just” ALLOWS us to have fun and enjoy life (whatever that means to you), with much less risk.

      No, I have not written about building wealth vs growing money, yet. I need to! Hopefully soon!!

  2. “It sounds something like this: No.”

    Seriously, this is the best tip, and one that is all too easy to forget. Love these common sense tips.

  3. Ah, common sense, the bane of whimsy. But smart and it brings a lot more happiness in the long run than most whimsical spending brings.

    You’re right that most of PF is common sense. (See the infamous SNL skit.) The hardest part for me is usually limiting spending on others.

    I can tell myself no for things I want. But something that would make him happy? Eesh. I still say no most of the time, but it’s just so much harder. (Cue violin music.)
    Abigail @ipickuppennies recently posted…Black Friday sales suck. Shop now.My Profile

    • Yes I can see where you’re coming from. What I have to keep reminding myself is that you’re not saying No just for the sake of saying No; it’s not just for deprivation sake. We say more smaller No’s so we can say those bigger Yes’s.

      Talk about hard: Distinguising between what we “think” will make us happy and what will “actually” make us happy. You shouldnt say No to the latter (or at least as little as possible), but what I think most people find is that certain things that we “thought” made us happy actually really didn’t. And so we miss doing more of the things that “actually” make us happy. Maybe saying No is the best way to distinguish the two?

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