Personal Finance in 10 Sentences

Personal Finance in 10 Sentences (1)

Personal finance sounds very complicated but it is not. It is actually so simple that it can be broken down into 10 sentences:

Spend less than you earn.

This is the most important lesson anybody can learn in personal finance which is why it is number one. Spending less than you earn sounds so simple on paper yet most people find themselves living paycheck to paycheck or buried in debt.

Take a step back and look at your monthly spending habits to separate wants from needs. Evaluate your routines and look at where you can begin to cut cost.

This will save you stress, help eliminate your debt, increase your retirement savings, and allow you to enjoy life more.

The best time to start was yesterday, the worst time to start is tomorrow.

Whether it be investing, paying down debt, or simply getting your finances in order, it is always better to start today than to never start at all. The earlier you can start setting good financial habits, the faster you can retire.

The millennial generation has the most to gain from starting early as we have time on our side. The difference between starting at the age of 22 and 30 can be the difference between $500,000 and $1,000,000. Which amount would you rather? Take advantage of the power of compounding and begin successful habits today.

Nobody can help you except yourself.

People can give you the best advice in the world but you need to act on it. There is a wealth of information available online for free about taking control of your finances but without action nothing will be achieved. Focusing on a distant goal like retirement can be a daunting task for many people so it is better to break it down into yearly or monthly goals that set you up for future success.

Stop trying to keep up with the Joneses.

Keeping up with the Joneses will keep you living the paycheck to paycheck lifestyle. Sometimes it is to not give in to the pressures of being with friends at every single event and to remind yourself of your goals and where you want to head in life. Nobody will help you out except for yourself so it is important to pay yourself first before others.

One thing I personally like to do is set a budgeted amount for social activities a month. Once that limit is reached I try suggesting free activities we can do. These can be just as much fun and are often something new to try.

Pay down the highest interest bearing debt first.

Today, millennials are graduating college with an average of two student loans and over $35,000 in debt. On top of this, many have car payments and credit card debt. Debt is a burden and a major stressor for many people at all stages through life.

The fastest, and most efficient, way to pay down debt is to start with the highest interest rate. This can save you hundreds or thousands of interest expense that can be applied to other debt payments. Don’t make the mistake of simply doing what is expected, be proactive and start destroying your debt today.

Build multiple streams of income.

Due to the increased debt burden, stagnant wages, and rising cost of living, the average person is now faced with a dilemma: Live the paycheck to paycheck life or increase their income to afford a desired standard of living.

Building multiple streams of income is important to exiting the rat trap and securing financial freedom. Begin by using additional income to pay off any debts and then use any disposable income to invest in a 401(k) with an employer’s match, build passive income, or fund other retirement saving vehicles.

Life will throw you curve balls so have an emergency plan.

Rather than having an emergency fund I thought it was important to say emergency plan. Having an emergency fund is a great asset for those that are not great at handling their money or do not know how to utilize their credit card properly. These should normally be 3-6 months worth of expenses.

However, there is an opportunity cost that is lost by having a lot of money sitting in cash rather than working for you. Some people rather have a low amount of cash in their bank account so they can invest their money and float the unexpected expenses on their rewards credit card until additional funds are secured.

Whatever approach you take, make sure you have a plan for the unexpected.

“Personal Finance is 20% knowledge 80% behavior” – Dave Ramsey

This is probably my favorite personal finance quote. Financial freedom cannot be achieved without these two elements but it is ultimately up to your behavior and commitment that will help you achieve your goals.

Income does not determine wealth.

It does not matter if your salary is $50,000 or $100,000; what matters is what you do with that money. A person may make more money than you but if they spend all their money on pleasing their friends and enjoying the luxuries of life they are most likely living paycheck to paycheck.

While a higher income certainly helps in attaining goals faster, the amount you save and invest will ultimately determine what your wealth is, not your income.

Do everything in moderation.

Most importantly, and something I heavily believe in, is to enjoy life at all stages. Many of the tips on this list have a lot to do with saving money and putting everything into a retirement account. This often comes across as making your life a boring spectacle where you go to work, come home, sleep, and repeat.

This is the furthest thing from the truth but everything needs to be done in moderation. If travelling sounds like a great idea then by all means go for it, but do what I do and set up a budget account for it. You do not need to take the enjoyment out of life to get your finances on track, you just need to remember your goals and stay committed.

Readers, what are other sentences you would add to this list? What points do you agree or disagree with? How has this advice ever helped somebody you knew?



36 comments… add one
  • Brian @ Debt Discipline Aug 24, 2016, 9:55 am

    I great list. I like Ramsey’s quote, but I think its 90% mental and 10% math. It will be a bigger challenge to break your bad habits with money that it will to add up your income and expenses.

    • Stefan Sharpe Aug 25, 2016, 4:24 pm

      Thanks Brian! I can agree with that. I think the important thing to realize is that behavior is more important than the actual math behind it.

  • Jon @ Be Net Worthy Aug 24, 2016, 10:52 am

    This is a great list Stefan and I love that quote as well. The math part of personal finance really is easy and boring! It’s the emotional/psychological part that people find challenging.

    I love #10 as well, I think it’s easy for people to forget that you have to put some money aside, but then you have to enjoy your life with the rest!

    Sorry Millenials, but here’s a Gen-X reference: To quote Ferris Bueller “Life moves pretty fast. If you don’t stop to look around once in a while, you could miss it.”

    • Stefan Sharpe Aug 25, 2016, 4:25 pm

      Can’t carry it to the grave!

  • Matt @ Distilled Dollar Aug 24, 2016, 11:10 am

    Wow, what a great list!

    If you reach each sentence and think of the opposite thing to do, you can see how people ruin their own chances at becoming financially free.

    If I had to add anything:

    11) Personal Finance is Sexy

    People often associate money with stress, but once we start gaining some clarity on steps to take that improve our situation…well, then it becomes sexy to see the confidence go up!

    • Stefan Sharpe Aug 25, 2016, 4:26 pm

      It definitely can be sexy! Loved the part about seeing it in reverse, you may have just given me another post 😉

  • The Green Swan Aug 24, 2016, 11:44 am

    Great list, Stefan! I particularly like #2. Isn’t that the truth! Too many folks are timid to jump into personal finance, do a little research, and start building their net worth. But everyone has to start somewhere and you are better off starting today than tomorrow so what are you waiting for? Right?!

    I also try to live my life based on #10. I try to do most all things in moderation, one of the few exceptions is ice cream 🙂

    • Stefan Sharpe Aug 25, 2016, 4:27 pm

      Man ice cream will always be an exception to that rule, and chocolate. #2 holds a lot of truth and was my favorite one on that list.

  • Dollar Engineer Aug 24, 2016, 3:08 pm

    Some awesome stuff Stefan! I can identify with every single item on that list and completely agree with them. I really like how you mentioned the emergency plan not just an emergency fund. Having a plan too is key and identifying missed opportunity costs is definitely a must. It just depends on what you’re comfortable with.

    • Stefan Sharpe Aug 25, 2016, 4:27 pm

      All risk and reward! A lot of it depends on your money management skills as well which can be crucial.

  • Rachel@Tidy&Teal Aug 24, 2016, 4:16 pm

    Nice post Stefan! I especially liked that you said income does not determine wealth. So many people don’t understand that it is more important to effectively manage the money you have instead of just focusing on the money you have coming in. Thanks for the tips!
    – -Rachel @ Tidy&Teal

    • Stefan Sharpe Aug 25, 2016, 4:29 pm

      Thanks Rachel! It is a myth that many people, including myself, buy into because the media makes it seem like you need a high salary to live a high lifestyle. Just takes discipline.

  • Divi Cents Aug 24, 2016, 4:31 pm

    Income does not determine wealth.

    I always have enjoyed the saying “it’s not how much you make but how much you save”

    Good article

    • Stefan Sharpe Aug 25, 2016, 4:28 pm

      Exactly! That was one of the biggest lessons I have learnt since I began blogging. More you save = quicker freedom!

  • Victoria Harris Aug 24, 2016, 7:15 pm

    Great list! I struggle with saving money. I’m trying to live by “It’s about saving, not what I make”

    • Stefan Sharpe Aug 25, 2016, 4:31 pm

      Glad it can help!

  • The Financial Panther Aug 24, 2016, 9:28 pm

    I’m a big fan of your rule on building multiple streams of income. For most people, your day job will be almost all of your income and that’s totally fine!

    But if you add a few side streams of income, you can really turbo charge your savings. If you can put away 5000 or so per year in side hustle income into a Solo 401k or something similar, it’s like getting a second IRA. Imagine what that money can turn into, right?

    • Stefan Sharpe Aug 25, 2016, 4:32 pm

      Fully agree! Side hustles are a great way to supercharge your savings and open up many doors. Something I am personally trying to work on right now.

  • Dividend Diplomats Aug 25, 2016, 2:19 am


    Awesome article and BEAUTIFULLY summarizes the 10 most important facts. Time and behavior, so so critical. Great read!


    • Stefan Sharpe Aug 25, 2016, 4:32 pm

      Thanks Lanny! Appreciate you stopping by

  • Amanda @ centsiblyrich Aug 26, 2016, 1:57 am

    Great list, Stefan! I agree with every single sentence! While every statement is necessary, I am particularly fond of #8, #9, and #10 because I think people focus a bit too much on the numbers, sometimes to the point they don’t move forward with financial goals because they have the erroneous belief they need a ton of money to do achieve them.

  • Doug Aug 26, 2016, 2:02 am

    Great article.
    To me especially in millinials it seems they want things handed to them.
    Another thing it seems is while the media does seem to imply you have to be rich to do certain things. They also bash the rich thinking that the money they earn belongs to someone else. If you make a million bucks that should be yours to do what you want to do with it.

  • Finance Solver Aug 27, 2016, 7:14 pm

    I love the building multiple streams of income tip. It’s no surprise that the average millionaire (not that millionaires are average) have more than 1 income stream. I think the statistic is around 7 income streams. Looking for ways to increase income is the challenge but anything is possible in a developed nation such as the US!

  • Elmer Anderson Aug 29, 2016, 5:39 am

    Great post. As much as it’s tempting to spend we need to be wise with our finances. Not everyday is a good day. We need to be ready for emergencies too.

  • diana di raimondo Aug 29, 2016, 8:04 pm

    We need to save money for “rainy days.” Great insights, thank you for sharing!

  • Suertz Aug 31, 2016, 1:01 am

    Wonderful article. Extremely detailed. Well, you point out how simple finance is but I’ve been asked the most ridiculous question about personal finance a few days ago LOL. I had to write about it on my Blog. It is the second most recent post!

  • Dividends Down Under Aug 31, 2016, 2:29 am

    I love each of these sentences Stefan, they’re all completely true! I think another sentence of ‘It’s not a race’ would be good. Get rich quick schemes or trying to invest the wrong way will always end in a bad way!


  • Dylan Cutler Sep 6, 2016, 5:22 am

    Thanks for these quotes and tips! I especially liked the calculator. The point about building multiple streams of income is easier said than done in this job market however…

  • Cait Sep 6, 2016, 5:36 pm

    Great post. Very helpful! Doing everything in moderation is super helpful!

    – Cait |

  • Shearly Sep 6, 2016, 6:50 pm

    Absolutely love this article! Great read and great tips!

  • CJ from Thirty30Courtney Sep 10, 2016, 9:06 pm

    My goal for the month is to start making better money decisions by incorporating a budget. Simple things like carrying more cash so I can truly monitor where I am spending my money (and if I want to spend it) have started to help make small differences. Thanks for sharing!

  • Ty @ Get Rich Quickish Sep 11, 2016, 2:16 pm

    If people were to follow these 10 rules then it’s hard to imagine them not being better off financially, so I can’t really argue with any of this.

  • Laurie Oct 16, 2016, 6:05 pm

    It is important to have a good budget in place so you can save money and invest. Great tips, thanks for sharing!

  • Personal Finance blog Oct 17, 2016, 11:24 am

    You have summarised the entire personal finance basics in your 10 point list. A great way to express your views.Building multiple streams of income or as we say passive income has become really essential looking at the rise cost of living these days.
    Thanks for the nice info.

  • Gloria Kaye Feb 2, 2017, 9:16 pm

    Excellent detailed article! Planning and budgeting are key. Focusing on needs rather than wants is a must to achieve financial success! Thanks!

  • Trisha @ MendingPockets Apr 22, 2017, 11:12 am

    Thank you for creating an easy to digest visual. I personally love the spend less than you earn and save for emergencies tips. I learned how to live on $50 a month at one point in my adult life. I had a very small salary and was able to send about 95% of it to debt – just by changing my mindset and spending choices. (Full disclosure I had a job where housing, utilities and a lot of meals came with the job). It took some creativity. I discovered that choosing what not to spend money on, in order to make larger debt payments, made all the difference in my financial future. Thanks for this post!

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