Personal finances: Reality check

The aim of this final post in the personal finances series is to ensure realistic expectations regarding the benefits of taking full responsibility for personal finances. Two primary reality checks are discussed: 1) the large amount of time it takes to build financial resilience and 2) the great uncertainty in today’s global economy. Let’s take a closer look:

It takes time…

Building financial security, financial freedom or even financial power takes many years of financial discipline. In essence, all that is needed is that you adhere to the simple ten word secret – spend less than you earn and save/invest the difference – for an extended period of time. If you do that for long enough, your personal finances will be in a very healthy position. The graph below shows the outcome of two saving philosophies discussed in a previous post.

Getting to the point of true financial freedom will therefore require that you accept this fundamental truth and commit to patiently building up your financial resilience. If you want faster gains in financial resilience, you can invest some time and effort into streamlining your life so that you reduce your costs of living. Intelligent lifestyle changes that will grant you more life for less money really lies at the center of financial resilience and is the best place to start.

We live in crazy times

Our modern economy is a place where people can conjure trillions of dollars out of thin air by pressing a few buttons on a computer, where a few words from an important central banker can move markets and cause trillions in instant wealth transfers, where governments do their level best to make all their citizens go broke, where rich people borrow trillions of dollars from poor people and refuse to take the cuts necessary to restore balance, where it is more profitable to trade in fictitious paper wealth instruments than to produce real goods and services, and where our entire global economy is based on the fundamental impossibility of perpetual exponential growth. This really is sheer madness and building financial resilience within this crazy system is unfortunately much harder than it actually should be.

What this ultimately means is that you will have to be very careful to preserve the purchasing power of your accumulated savings and to ensure that you remain fully employable. These topics featured regularly in this section of the One in a Billion project and will require quite a bit of self-study in order to enable informed and independent financial decisions. Our economic systems really have become so complex, unpredictable and downright insane that you really need to be well informed to safegaurd your wealth. This is your responsibility. Take it.

One thought on “Personal finances: Reality check”

  1. I realize finances involve patience. It took years to clear up date from when I was younger and now I am focusing on retirement and savings. Every little bit does add up.

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