The 6 Pillars of Personal Finance You Need to Know

Hello and welcome! In this series, we'll discuss the six pillars of personal finance that can guide you towards financial freedom. So, what are these pillars?

Earnings: The amount you earn is the biggest factor in how quickly you can achieve financial independence.

Savings: The percentage of your income that you're able to invest has the second biggest impact on your journey to financial independence.

Spending: While spending is important, it's less critical than savings and earnings. Spending has a floor; for example, if you spend $3,000 on everything, the maximum you can save is by reducing maybe 50% of that spending.

Investing: This is the fourth key area. By investing in assets you're comfortable with and good at, you can earn significant returns. For example, investing in real estate could yield 4 to 20% returns per year, the S&P 500 could yield around 10%, and tech companies could yield 12 to 15%.

Borrowing: How and how much you borrow can play an important role in your financial independence journey. For example, borrowing money to buy assets like real estate is generally beneficial.

Planning: This involves organizing your entire financial life. It's about knowing how much to put into which account, the types of accounts to have, and how much to save in different vehicles like a 401(k), Roth, or your own IRA.

A good plan will keep you on track for financial independence.