How to Achieve Competence in Your Personal Finances and Wealth Building

Money, finances and good decision making are topics rarely covered in our educational system and many parents also fail to properly teach them – probably because they didn’t know how to manage their own money.

I grew up in a house where money was a secret of my father’s. 623-03132103

And he wasn’t a very good money manager so my mom was always stressed out about having enough. I still remember, as a kid, that the gas station we went to was determined by which card wasn’t maxed out. In those days, pre VISA/Master Card, we had separate gas company cards and my father obviously wasn’t paying them off in full each month!

SOMEONE Must Be Willing to Tell Me How…

Somehow, I figured out that being in control of my own finances was critical to long-term success in life. I started with my favorite learning method: reading those who seemed like experts. Forbes was full of profiles of successful businessmen and offered some investing guidance even in the days of sky-high brokerage commissions where only the super-rich owned stocks.

From there I moved on to books written about the gilded age – the business men and the modern fortunes they acquired during America’s industrial revolution were exciting. And that lead me to the early 20th century writers like Napoleon Hill who deduced the habits and beliefs of the wealthy industrialists in Think and Grow Rich and George Clason who used a parable in The Richest Man in Babylon to lay out the laws of prosperity: Richest Man Clason

>> Spend less than you make and save the difference.
>> Start now – invest for the long term (avoid the hot tip or the quick buck shysters).
>> Invest in your education (earning power), real property and equities.

As the modern financial world evolved from the playground of the super-rich to the do-it-yourselfer age with IRA and  401k accounts and discount brokerages, I continued to seek examples and advice about prosperity and investing. Modern best-sellers like Rich Dad Poor Dad and The Millionaire Next Door encouraged me to hold on to the idea that I too could start from zero (actually negative since I had student debt) and attain financial freedom.

Can you take any one of these books and follow it to personal financial success? Probably not. All books are history – they give a glimpse into what happened. You have to translate them into principles that apply to your current and future life.

How Do You Know?

Many people pass through levels of financial competence. The faster you move from the survival level – spending all (or more) of what you earn to saving and then investing, the faster you achieve financial freedom.

Luckily, it’s very easy to assess your level and achieve financial competence and freedom. There’s just one number to know: Net Worth.

Keep track of your Net Worth – the difference between your assets and your liabilities –  to determine your level of attainment. If it’s growing, you’re growing in financial competence and wealth.

Easy peasy? Tell us how you learned to be financially competent in the comments!

Live Long and Prosper, Leah, the MoneyDiva.com

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