Section 3: Personal Finance 101

Personal Finance Learning Guide

<aside> 🗒️ In this section: We learn the basic building blocks of personal finance: making money (income), spending money (expenses), and a plan to make sure you make more money than you spend (budget).

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Making Money (aka Income)

Income is a fancy word for money that you make. There are two main ways to make money: trade in your time & energy for money (a job), or allowing your money to make money for you (investments). The second way sounds amazing, right?! - check out Section 7 to learn more.

Some countries are beginning to experiment with a 3rd way called Universal Basic Income (UBI), where governments directly give money to citizens (enough to cover the basics such as food, housing, etc). The potential benefit is that people will no longer be forced to work jobs they don't enjoy, and can instead use their time in more productive ways (being better parents, volunteering, creating art, etc). To learn more, check out this Youtube video.

Spending Money (aka Expenses)

Expenses represent money that you spend such as food, rent, and credit card bills. Lowering your expenses is 🔑 to having good personal finances - check out Section 4 on how to do this.

What's a Budget?

<aside> <img src="https://s3-us-west-2.amazonaws.com/secure.notion-static.com/dd78b8da-6bc6-4275-af97-3ea8c794609e/yawn.png" alt="https://s3-us-west-2.amazonaws.com/secure.notion-static.com/dd78b8da-6bc6-4275-af97-3ea8c794609e/yawn.png" width="40px" /> TLDR: A budget is a plan for how you spend your money.

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Having a budget is important to ensure you are spending less than you make. Doing this will allow you begin saving money and over time, grow wealth (aka get rich).

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While having a budget might sound obvious, 1 in 3 adults do not have a budget and 60+% of adults live paycheck-to-paycheck - this means they spend as much as they make and need the next paycheck to pay their bills. Worse, 85+% of families find themselves in debt, owing more money than they have 😢. If you don't budget and save, you give away the freedom that having money buys you. Instead, money controls you ☹️.

Having a budget doesn't mean you can't spend money - it's just a plan!

Budgeting sounds like a good idea, how do I get started?

<aside> <img src="https://s3-us-west-2.amazonaws.com/secure.notion-static.com/ed4687fe-f311-42c0-990f-c1ae9783a242/Favicon-simplify.png" alt="https://s3-us-west-2.amazonaws.com/secure.notion-static.com/ed4687fe-f311-42c0-990f-c1ae9783a242/Favicon-simplify.png" width="40px" /> Start with the basics and spend less (check out Section 4 on Expenses).

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Interested in becoming a budgeting ninja 🥋? Check out our favorite budgeting techniques.

Want to learn more about how taxes work, check out our section on taxes!

>>> Section 4: Expenses