MANAGING PERSONAL FINANCE Flashcards
Five Basic Principles
Risk requires a reward
Money has time value
Market prices are generally right
Conflict of Interest can cause agency problems
Money Management Cycle
Earn
Spend
Save
Invest
Equation
Wealth= what u earn - what u spend
Three Essential Skills
Earning
Spending
Saving
Your ability to bring in money
Earning
ability to live frugally and spend wisely
Spending
ability to produce surplus and ti make that surplus grow
saving
Maximizing Performance in all three Areas
Mastering the Art of Earning
Developing Discipline in spending
Discovering the secret of saving
Investing
Mastering the art of Earning
- Become better educated
- Choose a career you love
- Maximize your salary
- Make money from your hobbies
- Turn your clutter into cash
Developing discipline goal
To create as big a gap possible between earning and spending
Developing Discipline in spending
Embrace Frugality Practice conscious spending Avoid paying interest Reduce recurring Focus on big wins
Discovering the Secret of Saving
Successful savers:
Understand the importance of creating a plan
Make logical decisions instead of succumbing to emotion
Avoid fads
Embrace diversification
Fundamentals of personal finance
Build an awesome and genuine personal network
Actively expand your horizons
Start a side business
Spend time everyday thinking
