Personal finance: How to save, spend, and think rationally about money
4 layers of financial independence
Layer 1: Free your mind Sovereign Being
"I will move my sovereign self into the economy for my own purposes rather than I am a schlump, the economy is my boss and I let my life run by the economy and the tax system"
Layer 2: Debt Free
The first step is to stop going into debt, the future is more important than immediate pleasure
Layer 3: 6 months emergency fund
You want to get out of the zone of precariousness, You need savings,
Layer 4: Invest your surplus savings
Surplus savings can be invested in such a way that it throws off an income. Track your spending, use a debit card (not a credit card)
Layer 5: Understanding Expenses
You need to be numerate (the ability to work with numbers) for certain decisions. Understanding compound interest makes a huge difference. Frame things broadly, most of us tend to respond to gains and losses.
Money can buy happiness - if you spend it right.
The percentage of money that you spend on stuff for yourself is completely uncorrelated with how happy you are with your life. Giving rather than keeping = Happiness. When people tend to buy experiences it tends to pay off in more happiness than buying stuff for themselves. Talking to people makes us happy, even casual interactions with other people make us happy than sitting by ourselves.
Teaching our children about money
- Don't avoid talking about money with children
- Try to limit the influence of money, Do not associate chores with allowance.
- Give children control of their money, and try not to intervene, allow mistakes to happen.
"It's much better to make a mistake with a six-dollar allowance than a $ 60000-year salary or $6 million inheritance. The point is when the kids are young when the stakes are lower, let them make their own mistakes then you get to pick them up.
New Road map (Enough)
Awareness about the flow of money and stuff in your life in light of your true happiness and your sense of purpose and values. having enough is having everything you want and need to have a life you love and full self-expression with nothing in excess.