Money. We all need it, want it, desire it. Ok, fine we don’t desire money for its own sake but we desire what money can buy. But we don’t ‘get it’.
Doing your finances is probably the most boring ways to spend your evenings or weekends. I get it.
Let’s re-imagine a way to learn about money. That was the title and theme of my TedX talk in 2016. And of every talk I have given since then. I mean it.
I am not just a 20-something blogger, having a go at the finance industry for making things complicated. I am a 40-something year old, who loves finance, built a career in finance, and still believes in finance (capitalism, that is). I also believe it can be done.
Forget the naysayers. Let’s prove it. You and me. Yep, you.
How about you take the course on personal finance…well, the playlist of videos…I have put together here.
Most of my videos are around 4-5 minutes long. So if you watch all of the videos linked here, you should be done in just over an hour. And then you give your verdict – did you learn enough about personal finance to make you want to watch more?
How about it? Come on…give it a try? The upside is that you could change your life. The downside is that you gave an hour of your time. What else can you learn in an hour?
Ok, I’ve made four modules with a few lessons each…
1 – Intro to personal finance
Lesson 1 – What is personal finance anyway? Why is it so confusing?
A lot of people find personal finance boring, confusing or intimidating. The business channels have a bunch of middle-aged boring men talking in jargon while a lot of three-letter codes and numbers flash on the screen.
Let me explain WHY finance can be confusing, but more usefully, provides a framework for how to think about personal finance. Think of it like the Mary Kondo way of organising your thoughts and anything that the finance industry will throw at you.
Lesson 2 – How to maximise earnings from passion
While parents encourage us to choose safe careers with predictable income streams, influencers like Steve Jobs inspired many to ‘follow your passion’. Then there are blogs that say why that is bad advice, and instead suggest that ‘find your purpose’ is the right answer. Let’s be practical – none of these are the solution. What if we could find a way to monetise our passion/purpose?
Let me give two mental models or frameworks on how to marry passion/purpose with careers. Learn how to earn more, rather than just how to spend/save/invest that personal finance usually covers.
Lesson 3 – How to set goals (The Money Dream Board)
The goal of learning personal finance is to have enough money to meet your life goals. Life goals usually include buying a house, children’s education and weddings and retirement.
I provide a simple way to calculate how much life goals will cost and a rule of thumb to figure how much you need to have to be able to fund all of them.
Module 2 – Spend wisely, save always
Lesson 1 – How much do you earn…really?
Personal finance starts with earning. We believe we earn what is stated in our employment contracts.
I suggest we adjust not only for taxes but also the cost of earning. This will make sense for when we learn to budget.
Lesson 2 – How much to spend on rent etc and how much to save?
A lot of experts use the 50/30/20 rule of thumb to guide on how much to spend on needs, wants and savings.
I adjust this rule a little to ensure we have enough savings to meet goals. I will also show another way to think about to motivate you better.
Lesson 3 – Set up a budget and cash flow system (The Money Trays)
Can you afford that latte and avocado toast? Most people hate having to track every expense, partly because it’s a hassle and partly it makes them feel guilty. It’s as bad as counting calories.
Let me show a simpler way to set up a budgeting system.
Module 3 – Protect with insurance
Lesson 1 – When life doesn’t go according to plan
We all face risks every day. Yet we believe that bad things happen to other people only.
I suggest a simple approach to risks – accept, mitigate, manage. You can also share or transfer the risk by buying insurance, which effectively spreads the risk across a large population.
Watch a fun way to explain this concept
Module 4 – Grow with investing
Lesson 1 – Why invest? What is investing anyway?
While many people save money, not many invest.
Hansi reminds that as store of value, money savings can deteriorate in value, just like batteries can deteriorate as stores of energy.
Lesson 2 – Building wealth is like building a house (The Money House)
The finance industry uses the concept of ‘asset allocation’ to recommend how to invest. But this approach leaves out the personal residence, jewelry, cash and insurance.
I use concepts from behavioural finance and neuroscience to come up with an easier way to think about investing. I have suggested that we use mental accounting to divide our goals and assets into 3 to 4 building blocks, and then stack them. So essentially, building wealth is like building a house.
Lesson 3 – Investing jargon simplified
When investing, you will come across many terms. It is important you understand at least the basic terms.
If you have half an hour, we recommend you read the summary of how the terms relate to one another, and watch one-minute videos of the terms individually.
Lesson 4 – How to choose mutual funds – active vs passive
Based on the previous videos, we hope you have invested your emergency cash in savings and fixed term deposit accounts, and perhaps cash/liquid mutual funds. Now you are ready to start investing for your growth pillars into some equity funds. This is where the investing process becomes hard – how to select mutual funds. This is a hard problem even for professional investors.
Now let me explain why it is hard to choose mutual funds, and suggest a simpler way to get started.
And that’s it. You have completed an introductory course to learning about personal finance.
You now know that –
Personal finance covers how to earn, spend/save, protect and invest money
Earnings can from being employees, self-employed, owning a business or investing. You can enhance earnings by leveraging your skills through traditional means such as capital/labour or newer ways such as technology/media
Goal-setting is useful for personal finance. You can divide goals into needs, wants and desires. Similarly, you can divide spending into needs, wants/desires and savings. It’s useful to save one-third of your earnings throughout your life
Managing risks is very important. You could accept, avoid, mitigate or transfer risks. One way to transfer risk is through insurance. It’s a way to protect your loved ones from financial liabilities in case you suffer any health issues
Investing is a way of converting savings into assets that provide earnings in the future. Investing can in debt or equity. Both these can be traded on the market. Both can be divided into further categories called asset classes. It’s useful to spread your assets across a number of them – this is called asset allocation
Are you ready to learn more?