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Financials

Money Management 101

Managing Money is a skill that must be learned.

The basics are simple but it takes patience and discipline to become financially free.

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Prepare these Personal Financial Documents:

1. Monthly Budget: Cashflow-in (eg. income) versus cashflow-out (expenses, taxes, bills). The goal is to cut expenses, while increasing income. Invest the difference.

2. Net Worth Calculator: Assets minus Liabilities (eg. debt). Purchase assets that appreciate in value over time (eg. real estate). Do not purchase depreciating assets (eg. cars). 

3. Debt:Income ratio and Debt:Asset ratio. If your debt is too high, then create a "debt snowball" to get it under control. If you are asset heavy, then borrow against the asset and invest the cash (financial leverage).

4. Determine your % Active Income vs Passive income. Your goal is to have 100% passive income.

5. Forecast your net worth in 10, 20 and 30 years using compound interest. 

6. Create a gameplan for acquiring affordable education & training to increase your income. Is there a Return on Investment (ROI) within 3 years or less?