The Ultimate Guide To Personal Finance

A friend emailed me this excellent guide to personal finance today. If you are anything like me you will admire it for its parsimony. Email text below in italics. I have lightly edited the text to remove some personal commentary.


The personal finance game is three steps:

Step 1 = Earn Money
Step 2 = Spend Less Than Money Earned
Step 3 = Use The Difference To Increase Money Earned, Or To Decrease Money Spent 

Earn Money

  • Think about your career.  Try to advance it so that you earn more money.
  • Take a second job to earn more money. (Side hustle might be the best marketing trick ever. Side hustle = second job)
  • Invest.

Spend Less

  • 101 Ways To Live Like A Poor Hermit.
  • Pay less tax.

Using The Difference

  • Invest.
  • Pay down debt. (this is the same as investing, IMO, it’s all allocating capital effectively)


OK I’m back. At an even higher level you can sacrifice a bit of resolution and summarize the personal finance game as:

Step 1: Generate Free Cash Flow

Step 2: Allocate Capital Effectively

All (and yes I seriously mean all) financial problems, for all entities other than sovereign governments issuing fiat currency, reduce down to issues with free cash flow generation and/or capital allocation. Thus, beyond the time value of money and opportunity cost, free cash flow and capital allocation are probably the most important concepts in all of finance.

2 thoughts on “The Ultimate Guide To Personal Finance

  1. Look, nick, i like you, but if your next personal finance post doesn’t include

    * listicles
    * 2000 more words
    * a discussion of the safe withdrawal rate
    * links to personal capital, blue host and chase sapphire reserve,

    I will immediately unsubscribe your mailing list and ask for a full refund of the course I bought.

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