Making Money 101

If making money is a journey, then it is one best broken up into three stages. The first stage is all about ‘getting your financial house in order’ …

… kind’a like packing your bags and getting everything ready for a long-journey before you even leave your house.

 This (first) stage happens to also be the one that is well covered by many books (Rich Dad Poor Dad, The Richest Man In Babylon, The Automatic Millionaire, and many more) and many blogs (I Will Teach You To Be Rich, Accumulating Wealth, The Simple Dollar, and many, many more).

I have read them all and I am sad to say that not one of these will actually teach you to be ‘rich’ … but, some will set the stage …

… and, this stage is really just about paying off debt and starting a sensible savings strategy. It’s also about learning the rules about what you should buy and when and how much you should spend and save.

It’s really about ‘clearing the decks’ to lay a solid foundation for future wealth; the earlier in your life that you start this stage the more ‘runway’ you will have for letting your financial wealth really take off later.

This stage is not fun!

The tools of this stage are debt repayment strategies, tricks to save a little extra money or earn a little extra income, paying yourself first, savings accounts, index funds, and dollar cost averaging … there ain’t no ‘rich’ going on here but, it’s a start …

Keep reading this blog as I will be sharing many of these rules and strategies for breezing through Making Money 101 in upcoming posts.

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67 thoughts on “Making Money 101”

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  4. I really enjoyed reading your articles, they were very insightful. However, it is hard for me to see how I can achieve those goals because every penny I make goes straight to bills. As soon as I make money, I turn around to have breathing room and another bill or unexpected cost takes my money. I do have lofty goals and I believe I can make them happen but “financially getting there” seems to be a big stumbling block.

  5. @ Lisa – Thanks. I write these articles just for people like you … struggling to pay their bills and looking to get ahead.

    Take a look at the Making Money 201 page and start finding ways to INCREASE YOUR INCOME; you’ll need to do this if you truly want to break out of the rut and have a chance at achieving those “lofty goals” – you deserve the life that your mind has planned!

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  8. Thanks for your reply to my question about index funds. For some reason I could not post a response on that page.

    What you say does make sense and I intend to go for 5-6 index funds, and possibly one low-cost managed fund for emerging markets.

    Bearing in mind I am 25, my permanent home is the UK, have savings to spare, and am willing to lock it away for at least 10 years, what do you think my asset allocation should look like? I am thinking along the lines of:

    20% USA
    20% UK
    20% Europe
    20% Japan
    20% Emerging

    Should I have more in USA? More/less in emerging? Is this too biased towards Europe? Should I have some in bonds? Would you bother with gold? Anything else you can think of?

    Final thing…

    What proportion would you look to invest in stocks if you were me? Let’s say if you had c$200,000 in savings, and were saving about $20,000 net per year. Would you think about moving entirely into property – instead of stocks? I don’t need a property to live in as I am an expat and rent is paid for. But with property prices coming down I could potentially get something in London, though I would still need a large mortgage for that. Long-term (and in very general terms) what is the better investment – property or stocks?

    Thanks so much for your advice.

    PS – yes it is Papua New Guinea!

  9. @ Chief – What do I look like, a lowly paid Financial Advisor?! 😉

    Seriously, for asset allocation within funds you probably need to seek specialized fee-only advice (choose your advisor VERY wisely).

    And, as far as allocation ACROSS the major investment classes i.e. business, real-estate, stocks, the ALREADY Rich are spread roughly 50%, 25%, 25%. Here’s why in one word: Leverage.

    Leverage decreases as you move across those classes … I have a couple of posts coming up in April on leverage as applied to real-estate and why it can be a DUMB idea to pay off certain Consumer/Bad Debt (now, that’s controversial!).

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  15. I am nearing 50. I was very dissipline in my savings and spending habbits for the last 35 years. I paid my self first as much as 15 percent monthly. I put money into CD’s, Mutual Funds and an IRA all were High risk and were very deverse as to not take a major loss in any one area. I brokered with the 2nd most successful organization in the US. And after the Dot.com bust, Y2K, Enron, Comcast, and 911. My portfolio only took a 16 percent drop. Thank God for being deverse… Any how, by 2007, my funds came back to life but not as good as they should have. Anyhow, at my age, if you haven’t got atleast 500K or better in the bank, give it up. If you have student loans, a mortgage and other debt, ask how you can roll it over to pay your debt with out incurring penalties, fees or taxes. Its possible. My particular situation shows that for the past 10 years, the money invested only earned aprox $200 annually compared to what I was paying in interest on a monthly basis which was just short of $1000. Cashing in the investments to pay off debt was the best thing I could have done. People individually will never achieve financial freedom (which is still the dream of everyone) by being an employee/self employed business owner or by savings or investing. Become a student of those who have success by leveraging your time with others.

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  24. @ Chiko – Sorry but had to remove most of your note because this is not an advertising or product sales site. I don’t accept any advertising or sell any product or take any ‘kickbacks’ of any kind on this site … it helps me to stay focused on my prime objective: to give good ol’ fashioned financial advice 🙂

  26. I enjoyed your articles. I just wanted to tell you that everyone have their opnions about becoming a millionaire. And with your own method, you can be a millionaire. But not evryone can be. As the saying goes, ‘There are millions of ways to be a millionaire”.

  27. @ Workplace – I agree that there a “million ways to become a millionaire”, but I think that there are general principles to becoming Rich(er) Quick(er) that we can all benefit from.

    BTW: We’re here to discuss becoming MUCH wealthier than just mere millionaires … almost anybody with a house, a 401k, and a spare 20 or 30 years will be able to claim ‘millionaire status’ soon 😉

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