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Personal finance is a unique topic in the sense that you will get screwed if you don’t understand it.
This doesn’t hold true for most topics. Not understanding architecture, chemistry, engineering, or botany probably won’t hurt you.
You can merrily go through your day without understanding the algorithms underlying traffic lights, how your liver converts stored glycogen into glucose, how nuclear power grids function, or the intricate details of photosynthesis.
Your ignorance in all of these topics won’t impact your quality of life.
Unfortunately, this doesn’t hold true for personal finance.
If you don’t understand how compound interest works, you might make the mistake of waiting until you’re older to invest.
If you don’t understand the benefits of contributing to a 401(k), you might miss out on tax savings and free money from your employer.
If you don’t understand the nature of individual stock returns, you might mistakenly think you can earn above-average investment returns by actively trading stocks.
If you don’t understand the impact of investment fees, you might lose out on hundreds of thousands of dollars over your lifetime by paying excessive fees to money managers.
See, personal finance has a direct impact on your life.
Vicki Robin, co-author of Your Money or Your Life, says “Money is something we choose to trade our life energy for.”
Without understanding the basics of personal finance, money will always slip through your fingers. You’ll have to keep spending life energy to accumulate more. Life energy that you could instead spend on traveling, spending time with family, and having more experiences.
This is why you should learn the basics.
You don’t have to become an expert, you just need an elementary understanding of how to save and grow your money so you don’t screw yourself financially.
That’s why, for only $9.99 per month, I’m offering financial coaching…just kidding. Everything you need to learn about personal finance can be found online for free.
For a wonderful overview of investing and how the stock market works, I recommend the Stock Series by Jim Collins and the Investment Workshop by Millennial Revolution. Both are completely free and incredibly thorough.
In fact, these two series are the reason I will probably never write my own. They’re so detailed and well-written, I don’t feel that I could add anything more to them.
To learn the basics of compound interest, debt, loans, and other core financial topics, I recommend the Khan Academy Finance Course. It’s the course that got me up and running quickly when I first became interested in personal finance. It’s also completely free.
If you want to take it one step further, start reading personal finance blogs on a regular basis. A nice place to discover these blogs is Collecting Wisdom, a site I created that collects the best personal finance articles from around the web.
A little financial education goes a long way. Learn the basics and benefit for life.
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- Sunday is for Sharing: Volume 170 - September 20, 2020
- How to Apply Zipf’s Law to Your Finances - September 16, 2020
Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see my Terms & Conditions page for a full disclaimer.