Financial Principals #1 and #2

Well, I have been enjoying other people's blogs so much I forgot that I once started a blog on personal money management.  I thought I would make a short mention on a couple of financial principals that I don't see other's mentioning very much and I think are very relevant.

Principal #1

Do you want to be rich or do you want to look rich? 

This especially applies to cars and homes.  You should probably care more about your own personal finances than caring about what others think about your personal finances.



Principal #2

It is never as much as it seems.

When you come into some money, get a new job or just get a new raise, you mentally tend to spend it more than once.  It also changes your perspective of what is affordable and what is not affordable.  In possibly every single case, the money that comes your way is not nearly as much as it sounds.  This is why professional athelets manage to file for bankrupcy.  If you are a professional football player and have a four year career at $750,000 dollars per year and that is all you do, you just made substantially less than a school teacher. However, you drive a much nicer car, take much nicer vacations and will go broke much faster because its not as much as it seems.  Consider the teachers $65,000 salary times 35 years and her $40,000 retirement times 25 years. The teacher wins the money competition by earning $3.4 million versus the football player's $3 million. And the tearcher gets a lot more in health benefits and pays a LOT less in taxes. 

The point of this principal is that the money you earn and especially a new job or a new raise or an inheritance or whatever is NEVER as much as it seems.  Keep that in mind when you consider what you can afford.


Next time, we will talk about the problems with the lottery.