On personal finance

They want you to be a slave. They want you to be dependent. They want you to consume beyond your means until you hit a point of being indebted, obese, lazy, and too stupid to protest let alone understand how you ended up in this situation. And why? It’s good for the bottom line. Capitalism CANNOT exist in a stasis. It needs to continually consume and expand like a growing fire or it will risk extinguishing itself and languishing in depression. That is the predicament we find ourselves in currently, and although we all seek to see economic growth further and further we must look after our own economies.

The word economy derives from a much older Greek word which meant household management. Thus, the earliest economies were of individual households. How many acres of land did the family have under the plow? How much wool had been harvested from the sheep? What would be the cost to purchase new plows to till the fields and what kind of yield could one expect? Nowadays it is easy to get caught up in large macro economic blocks such as the United States or the European Union, but it is important to remember where economics originated from and return our focus there. To put it frankly, we can’t control the larger economy and it would be futile to try as an individual investor or household. Instead, we should focus on what is in our immediate control: our own household budgets and balance sheets. How much do you earn a month after taxes? How much do you pay for all expenses? Take a moment and grab a piece of paper, and divide it into four squares. In the first put your income. In the next your monthly and yearly expenses. How does it all add up? Are you running a surplus or slowly slipping below? Then, in the next square jot down any assets you own which hold value or can bring in additional money such as ownership of a company, securities, bonds, or land. In the final square place any lasting debts you may hold, be they your mortgage, car note, student loans, or consumer debt. How does that picture look? Be honest, for the average American it is probably a scary picture, but we all have to start somewhere and honestly assessing our situation will enable us to plan accurately.

Why did I ask you to do this? Investing is great. My passion for it and a desire to help others starting on their path and seeking to learn more is what inspired me to start this blog. You know what else is great though? Becoming debt free (if you haven’t already) and living below your means ensures that you can personally not only survive any dips in the market or your personal life (and not have to worry about cashing out your portfolio to make ends meet), but you will have the potential to thrive when the economic world is crumbling around you. For that reason, I recommend everyone pay off all their personal debts in whatever forms they may be and then save an emergency fund of a couple months expenses before jumping into the market feet first. Why do I recommend this path? It is what I personally did for one, living far below my means for YEARS until I was able to pay off my debts and build up some savings. Beyond that, lets do some simple math. For example if you were putting $10,000 into the market and expecting a return of 7-9% you would have between $10,700- $10,900 by the end of the year. Not a bad return on your investment assuming everything goes well. Now lets assume you have some debt. The average American is carrying an interest rate of 15.32% on their credit card so only $5000 of credit card debt can quickly balloon to $5750 in a year if left untreated (obviously the numbers are more complex than this but for simplicity lets all play along). That debt of half the invested money would effectively wipe out all the gains your modest portfolio had earned ASSUMING you hit your goal of growth. What about in a bad year? You would have not only had a dip in your portfolio from a market downturn but would also now be in additional debt. Therefore, I contend that one of the best investments you can make is in yourself, and by freeing up your cash flow to move into a direction of your own choosing rather than continuously being vacuumed out of your pockets by your creditors is a smart move for anyone.

Put simply, debt is slavery, and they want you to be a slave. Those of us living deep in debt are quite literally staying in shakels of our own creation. If you find yourself in this position which most if not all of us have been at one point or another my advice to you is to shake violently until you destroy the chains holding you back. A prosperous nation will start with successful communities. Successful communities will arise from exceptional families. Exceptional families are built on the backs of incredible individuals. We are living as a nation in servitude and unless we can free ourselves as individuals and eventually as a collective the weight of our burdens will eventually drown us. Are you looking for additional resources to continue learning more on the topic of personal finance? Please check out our recommended readings , and purchase a book to support the blog and the author. For this particular topic the two books I would most recommend are “The Total Money Makeover” and “Rich Dad Poor Dad“.

Questions? Comments? Have something you would like to see featured? Please write to me @ Reinvested@yahoo.com.