Why are some people so bad with their money?

But other people seem to fall into money every time they walk out the front door.

Today we’re talking about money. For the average American, curiosity about  everything economic is crushed by total ignorance. 

Our education system rarely covers money management or personal finances. 

And our parents are so scared, or ashamed or embarrassed about their money stories and financial hang-ups.

So what?

Most Americans uneducated about basic economic facts.

The problem?

Most of us have financial struggles, money anxiety and a ton of debt. 

I had 10 thousand in credit card debt, twenty thousand on a line of credit, and 60 thousand in student loans by the time I was 30.

But it’s all gone. And now I actually have saving and investments.

What do I know that you don’t?

Learning the basics of finance and economics doesn’t require hours of study.

In ten minutes, I can cover all the economic basics of Financial Literacy. But I’m gonna go fast, so stick with me. 

We’re going to explore key economic terms across five simple categories:

1. Income & Earning: You’ll learn how to maximize your income by understanding different income streams.
2. Spending & Budgeting: You’ll make more informed spending decisions by using economic principles.
3. Savings & Debt Management: Learn about time preference and interest rates to better your savings potential.
4. Investing & Trading: Learn how to use economic theories to build a healthy investment portfolio.
5. Protection & Insurance: And now that you’ve got something worth protecting, learn to manage your risk and insure your financial well-being.

You still there? Great, let’s dive deeper.

Why you need multiple income income streams?

God, grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference. 

Multiple Income income streams are a cheat code.

There are 6 types of income. I used to make 1 or 0. Now I consistently make 4 every month. 

Income is not like spending, which requires will power and luck.

You don’t choose real estate prices.

You don’t control the price of gas or electric.

But long term, you control how you generate income.

• Earned Income: Money you receive from working (e.g., salary, wages).
• Profit Income: Earnings from selling goods or services. Like a side hustle or profitable hobby.
• Interest Income: Money earned from savings accounts or investments.
  1. Side note: This is real passive income. Money that makes money. 
• Dividend Income: Payments from owning shares in a company. See above. This should be your goal. Money making money. Totally passive. You don’t do jack. 
• Rental Income: Money received from renting out property. This seems like passive income, but it can get complicated, and become a job. 
• Capital Gains: Profit from selling assets (e.g., stocks, real estate). In general, you shouldn’t have to do this, unless your old or a serious hustler who knows how to win deals. 
• Royalty Income: Earnings from creative works (e.g., books, music). This can be a side hustle, or your main hustle. But it’s basically you create an income stream through intellectual property. As in the creator economy. Like this video. 

So, those are the 6. Now you want to know:

How do I increase my income?

4 Tips to Increase your Income

• Diversify: Explore different income sources (side gigs, investments, freelancing). Everyone can and should have multiple incomes. 

• Side Hustles: Turn hobbies into money-making opportunities (e.g., tutoring, selling crafts, making mugs, customizing sneakers).

• Education: Invest in learning new skills (even free options) to qualify for better-paying jobs. YYoutube, skill share, read a book, even big universities post lectures online now. The only thing holding you back is your effort.

• Seek Higher-Paying Roles: Ask for a raise. Go to where your skill is scarce. Marketing real estate in Dubai pays big money. Making fliers for your small town college band pays fuck all. Think about it. 

Now that you have income, time to go out and spnd it all with som retail therapy. Right? Wrong! 

Get smart with your spending decisions by using these simple ideas:

1. Opportunity Costs:
   • Opportunity cost means considering what you give up when you make a choice.
   • When you spend money on one thing, you miss out on spending it elsewhere.
   • You want an example? An Iphone costs as much as a weeklong trip to Mexico and an affordable laptop. You choose your choices. (Graphics)
2. Trade-offs:
   • Trade-offs involve balancing different needs or desires.
   • If you spend more on dining out, you might have less for retirement savings. Lots of people say that cutting out your morning coffee can’t save you money. Lots of people are stupid. Make coffee at home, save the environment, and save your money in a 401K. 
3. Prioritization:
   • Prioritize expenses based on importance (family, education, travel).
   • Distinguish between needs (essential expenses:house, transport, food) and wants (non-essential desires). 
   • Graphic: Maslow’s hierarchy as budget percentages.
4. Budgeting:
   • Categorize and track spending over time.
   • Create a budget for housing, transportation, and food. 50-60% MAX. 
   • If you’re over, get a cheaper car, or move to a place with public transit. And buy a bike. 
   • Split what is left between savings/debt and fun aka disposable (trash cookie monster) income. 

Simple savings & debt tips

Debt tips:

Whats the fastest way to pay off debt?

I prefer the avalanche method of pouring all your money into one debt at a time. Make sure it is your debt with highest interest rate (APR).

But don’t waste your income on good debt aka leverage. I’m not talking about your mortgage, or car lease, or even student debt.

Focus on credit debt first. Aim to put 30-40% of your take home income into these payments till they’re under control.

How do I avoid paying interest?

Call every company you owe money. And ask to reduce your interest rate by %5.

Just tell them you have a financial plan. The lower rate would make it much more likely that you will consistently meet your monthly payments on time. 

Savings strategies:

What if I can’t stop myself from spending?

Imagine having a delicious chocolate bar. You can eat it now or save it for later.

Time preference is how much you want something immediately versus waiting.

Picture a kid gobbling popcorn by the handful.

If you have a high time preference, it means you want instant satisfaction. Being impulsive sucks. It means you have NO control.

You are a slave to the lizard brain. Eliminate the pesky lizard by automating your savings. Take 10-30 percent and put away on pay day.

Do not pass go. 

Why is saving now important?

Just like you pay interest on your debts, banks and investments pay you interest for parking your hard earned cash.

Interest rates reward patience. Especially, through dividends.

But for now, know that interest is the best passive income. When you save money, you get paid. Now that’s interesting.

Higher interest rates mean more earnings over time—like rental income for your money. Automate savings and let your money grow through interest while you patiently count your earnings. 

I own my home, isn’t that an investment?

No. Real estate prices are more volatile (read: risky) than the stock market. And annual returns in the last century were about half what of stocks.

Please, do not ask a baby boomer for advice. They lucked out. Don’t bank your savings on luck.

Investing is where money talk gets too complicated

Actually, financial literacy is just a secret the rich don’t want us to know.

The financial literacy gap keeps them rich and everyone else on the outside. 

Here’s a breakdown of the key concepts mentioned:

Risk-Return Trade-offs

Sounds complicated but it’s not. This is when you are forced to choose between one thing or the other.

Yes or no. A or B. Black and White.

• Option A: Immediate gratification, like buying a toy or indulging in luxury items. This is risky behavior because the value of your purchase can and will diminish over time due to damage or loss of interest.
• Option B: Save your money. Less thrilling but it offers security and potential for future wealth.

Impulse Spending vs. Future Planning

Avoid impulse buys (like cars, fancy clothes, or extravagant weddings). This is crucial.

Prioritize investing in your future. Squirrel away a tiny bit of your income each day, week and month. It adds up, slow but steady.

Budget 10 – 30% of your income for investments. This number depends on your monthly costs.

But if you aim for 50-70%, you can and will gain exponential returns and the fast track to financial freedom. 

Diversify your Investments & risks

Spread your investments across different assets (stocks, bonds, real estate) to mitigate risk. You want to have a variety of risky and less risky assets in your portfolio

Start with a product like Vanguard total market index. If you can’t afford a single share, that’s okay. Lots of places let you make fractional buys.

I’m serious. By whatever you can afford. Wash, rinse and repeat.

This strategy works. Automatically reinvest your dividends and compound interest will continue to grow and earn you wealth over time.

This is the single most important lesson to learn if you want to systematically build wealth in your life.

I repeat, that is the most important sentence in this whole article.

Last up is the most boring category.

I hear the word insurance and immediately want to fall asleep.

But once you’ve got something worth protecting, you’re going to need to insurance.

Risk Management:

Life is like a game—sometimes you win, sometimes you lose. Even optimists need to plan for downturns.

Risk management means making smart choices to protect your future self. Think of the children, you may or may not have popped out yet.

Do you want your kids to be broke?

Emergency Fund (Rainy Day Fund):

Create an emergency fund by saving money. Until you have an emergency fund, I would budget 20% to savings & debt, 10% to rainy day fund, 10% to fun times. If you’re intense about debt payments, it’s the 60/40 needs/debt budget.

If you’re spending more than 60% of your income on basic essentials, you’re screwed!

No, seriously. Make a change now.

You need to make more money and generate more income streams. Work smarter, not harder, and start diversifying your income. 

Finally, we come to the big sleep.

Insurance:

Think of insurance as a superhero in a cape. It’s Clark Kentish. When something bad happens like a car accident, broken window or broken knee, insurance has got your back.

The deal is, you pay a monthly premium aka a fee to cover big costs when you least expect it. Think about the worst case scenario. The big one that wipes out your health, car, or home

Ok that’s it, Congratulations. You’re financially literate.

If you know anyone else struggling with money and debt, do them a solid and share the wealth. 

Thanks for reading.

I write copy & content. I teach courses. I show up everyday.

But I do LESS. Learn. Earn. Save. Sleep.