3 Money Habits You Should Adopt Now

Academic qualifications are important and so is financial education.  They're both in important and schools are forgetting one of them. - Robert Kiyosaki

​We do not teach financial education in traditional schooling, other than maybe an elective class that is very basic.  I believe this is one of the worst injustices of our school system.  Personal and business finance are critical to succeeding the real world and we hardly talk about it.  Part of me wonders if it is done on purpose, because it is so glaringly obvious that it is needed and yet, it is give little attention.   Or maybe, it is because our school model is made to churn out employees who live off a W2 and those in power don't think they need to know finance.  

Setting aside the cynicism, regardless of school, you should make it a priority to self-educate on personal and business finance.  To help you get started, here are 3 money habits you should adopt starting today.

Understand Your Cash Flow 

"Cash flow" is just a term to define where you money goes.  First, you start with how much you make.  If you are an employee, you cannot just take your salary.  You have to look at your "take home pay" after taxes are taken out.  Once you know that number, that is the amount you have to spend on supporting your life and needs/wants.  From there, take inventory of your expenses and list them out.  If they are less than your "take home," congrats you have a surplus.  If your expenses are more than your take home, then you have a deficit.  Obviously you want a surplus and it seems like common sense, but most people rarely if ever go through a basic cashflow and budgeting exercise, even as simple as this.  As a habit, you should review your cash flow monthly and have a written budget of your take home income and expenses and watch it over time to make sure you keep a surplus.  And you should do everything you can to increase your take home and lower expenses where it makes sense.  Once you have a surplus going, that brings us to the second habit you put into practice.

Six (6) Months Expenses Saved 

The second habit I personally do and advocate is the save 6 months expenses and keep it in an interest bearing account that at least keeps up with inflation.  Why 6 months?  It's pretty simple.  If something bad happens, you will have enough to carry you through for a good while and not have to stress.  Most advocate 3 months, but in really bad times, it can take longer to get back on your feet if you lose a job or like many during Covid, their business.  A 6-month cushion would get most through the rough times.   The hard part is finding an interest bearing account that can either keep up with or beat inflation.  Right now, it is almost impossible to find an account or even a CD that pays enough to beat inflation.  But, if you don't have 6 months saved, focus on that and then once you are there, you can search things TIPS, 1 Year CD rates, High Interest Checking, or even look at things GetLinus which pays 4% or more.  

One important note is that if you have high interest debt like credit cards, etc., focus on paying that off first and then save for your 6 months.  The only debt you should have is things like mortgage and car loans at the lowest possible rates you can get. 

Start Your Financial Self-Education NOW

While you are doing the above to get yourself on solid ground, start your third habit, educating yourself in finance.  As you learn and grow and get more of a surplus, you can then invest it and begin to really see the benefits.  For example, the day I wrote this, I sold an Iron Condor trade on the Nasdaq 100 index which made me $500.  I entered the trade around 11am and exited around 3pm.  Not bad for a few hours while I was doing other work. 

If that sounds like Greek to you, I understand.  When I first started out, I had no idea what any of this stuff was, how it worked, or how to do it.  But, years later after continuous financial self-education I do and use it to my advantage.  I have learned to create income in the stock market, real estate, through private placements and small business funding, and of course by building and growing my businesses.  In fact, the tax laws are written to benefit business owners and investors, not a W2 employee.  They are written this way because those areas are where jobs are created and a W2 is the highest form of income the government can get.

Back to my cynicism - maybe that is the reason we don't teach financial education in government run schools, because those that get educated, pay a lot less in taxes and are don't become W2 employees.  But, that is not you - at least I certainly hope not, and after reading this, I hope you are inspired to self-educate and learn the amazing benefits that await you from financial education.  Get started NOW!