Systematic Personal Finance– Does It Work?

We all love systems and step by step guides on how to get things done. Money management is no different. Many systems are created to help us better manage our money. What do I mean by systems?

Let’s take a look at some financial systems that we tend to follow:

  • Budgets with exact percentages.
  • Arbitrary numbers for an emergency fund.
  • How-to guides for making quick money.

Some of these structured financial systems are effective for SOME people. Not for me and likely not for many of you. Systems also go much further than just personal finance. We all love to debate the minutiae when it comes to personal fitness. Fitness magazines make a fortune from offering the newest workout plan that comes with “instant results.” All of these new “ground-breaking” workouts only offer a different routine or a minor change. The fundamentals will always be the same. There are many stock market books out there that offer to teach you exactly how to make lots of money through day trading. Yet it’s funny how we never seem to meet anyone that has gotten into a Jersey Shore physique in 3 weeks or retired at age 25 from day trading.

I just wanted to say screw systems. Instead of over complicating your finances, you should consider following a few personal finance basics to ensure that you get ahead:

Pay yourself first.

Your personal savings should always come first. Instead of waiting to pay the bills and other areas, you need to take care of your savings first. No system out there can help you if you don’t make a concentrated effort to pay yourself first with every paycheck. By taking care of your savings first, you allow yourself to space to spend the rest of your income stress-free.

Spend wisely.

You don’t have to be cheap by any means. It’s highly advisable that you gain as much control over your spending as possible. Spending wisely isn’t about being a miser that spends no money at all. It’s about planning out your purchases in advance and consciously spending your money. I’m all for spending money on things that matter for me and saving by cutting back on pointless purchases. If you figure out how to spend your money wisely, you won’t have to stress about the “newest” way to save $5.

Control your debt.

There will be times where debt is a must (home purchase, car, leverage, etc.), so I won’t blindly suggest that you don’t acquire any debt at all. With that being said, it’s important that you control the amount of consumer debt that you acquire. A credit card can be a powerful tool in your financial toolbox– if you know your limits. If you don’t know your limits, a credit card can hurt your credit score and put you into massive amounts of debt.

Invest what you can.

The money that you have left over in your bank accounts can be used for investment purposes. This doesn’t have to be complex. You can try something very conservative by searching for the best online banking account. If you’re willing to take on more risk then you can look into real estate investment options and stock trading. Either way it’s difficult to find structured investing advice that fits our unique needs. We all have different financial situations.

Enjoy life a little.

It’s not all about saving every penny. Some people view money management as a boring process that brings down the quality of one’s life. In my opinion, improving my money management has allowed me to enjoy my life more. Once you’re happy with your savings and the progress that you’ve made with managing your money, there’s nothing wrong with planning a trip or going out with friends and family.

Highly unstructured personal finance advice that can really put you ahead. What do you think about highly structured personal finance advice? What money management tips have worked best for you?

3 thoughts on “Systematic Personal Finance– Does It Work?”

  1. myfinancialobjectives

    I like this message, though I feel that the systematic personal finance messages have their place. In your example regarding personal fitness – perhaps I see an article with the new latest and greatest workout, but decide not to pursue it. What that article DOES do however, is motivate me. I see it, I read about it, and it motivates me to change up what I am doing just a little bit in the gym, resulting in a LITTLE bit better results.

    On the other side, I Really agree with all of your points. I am a HUGE advocate of paying yourself first. I am currently contributing 12% of my salary towards my 401k, and intend on bumping that up once I become debt free! I always control debt, in that I don’t have any besides student loans, and indeed I invest WHEN I can…. Which is hardly ever considering I’m always paying down debt!:)

    1. You bring up an interesting point with motivation. Allow me to play devil’s advocate for a second. Does a new workout (example in this case) what you really need to get motivated? Or perhaps there could be something a little more intrinsic pushing you towards reaching your money or fitness related goals.

  2. What you recommend is a system/process with alot of room for personal customization. The structured systems/process that you mention just give individuals more of a skeleton to work with when createing a customized financial strategy.

    My system has been modified over the past three years so at this point it has become fairly structured.

    I feel the most important thing to being success in finances, fitness and any thing else that takes time to achieve is commitment and dedication. If an individual changes their financial startegy or fitness routine there is a chance they will never see the desired results.

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