While I have generally been a wise financial steward, I am not perfect when it comes to managing finances and my approach has certainly improved and evolved over the years.  Here are some core financial principles that I live by and am trying to pass on to my children. 

Know your why

Over the years, the reason I wanted or needed money, my “why”, has changed. In my early years, I feared debt and running out of money, and that was enough to motivate me to save and spend wisely.  However, as I have aged and my family has grown, my why has changed and affects how much I spend and where I spend it.  I now save more money to prepare for my future and the future of my children. But I also spend more in certain categories like vacations because I value the quality time and experiences that it creates with my wife and children.  Knowing and understanding your why is what gives you the needed motivation to make wise financial decisions.

Maximize your earning potential

One of the easiest ways to improve your financial situation is to increase what you earn. Some key ways to improve your earning potential can include formal education, technical education, on-the-job training, applying for different internal positions, exploring other opportunities regularly whether you take them or not, building passive income streams, taking calculated risks, etc.  All these principles have helped me increase my earning potential at some point in my career. 

Spend less than you make

This seems like a no-brainer and yet nearly half of all Americans spend more than they earn and have revolving credit card debt on which they are accruing and paying interest each month.  As a general rule of thumb, we try to save at least 15% of what we make every paycheck to invest for retirement or save for other financial goals.  Doing this monthly is a good way to make sure your outflow doesn’t exceed your income.

Avoid debt wherever possible

Debt has always scared me because it’s a machine that is constantly accruing and increasing what you owe.  I try to avoid going into debt for anything other than buying a home.  This isn’t always possible and sometimes accruing debt for education or a reliable vehicle may be acceptable, though I have always tried to pay for these items upfront to avoid paying more than the value I’m receiving over time.

Only use credit to build credit

I only use credit to build credit.  Having a good credit score is important any time you are applying for financing on a home, a vehicle, or other financial transactions.  Having a good credit card that you use and pay off every month is one of the best ways to build your credit score over time. Find a card that you can use almost anywhere, has a good cash back rewards program, and then use it for everything and pay it off every month. Building your credit score should be the primary purpose of having a credit card.  It also helps to call the credit card company every year and ask them for a credit limit increase.  The higher your limit, the lower your utilization, which also helps improve your credit score. 

Invest early and often using a low-cost diversified approach

Compound interest is often referred to as the eighth wonder of the world because like debt, it never sleeps, it’s always working in your favor. Investing earlier is almost always better than investing more dollars later.  If you started saving and investing $500/month when you were 25 years old and were able to earn an average of 7% annually over 40 years, you would have over $1.8MM without ever having to increase your monthly investment.  If you waited until you were 35 years old to start saving, you would have to invest $1,500 every month to retire with that same amount.  Time is the greatest factor that can work in your favor when saving for retirement. 

So often we hear younger people say, “I will start saving for retirement when I get a more senior position that pays me more”. This is a mistake.  Start early, start now. When it comes to choosing your investments, I am huge believer in minimizing costs (using low-cost index funds) and making sure you have a diversified portfolio that becomes less risky over time (like target-date funds).  Some of the brightest minds in the world have a difficult time outperforming the market over extended periods of time, so I don’t bet my retirement on my ability to outsmart the market and pick winners. 

Mitigate risks where you can

Carry adequate life insurance to help your family in case something happens to you and try to take risks that don’t put everything you have on the line.  Even though I have spent most of my career building and selling startups, I have always found a way to acquire some equity or upside in these businesses without having to risk everything I own. According to recent studies, 95% of small businesses fail in the first 5 years.  Those aren’t great odds on which to risk everything.

Be generous with others 

I’m a big believer in the power of giving and we donate 10% of our gross income every paycheck to a charitable cause. This practice is something that helps us remember that our purpose here is to learn to love others and also helps us be more frugal with the dollars we spend.

Seek and follow inspiration

Everyone has their own ideas of where inspiration comes from.  For me, the source of that inspiration is a loving God who cares about the lives of His children.  For others, that inspiration is intuition, gut, conscience, universal power, or something that helps them feel right or wrong about critical decisions in their life.  Regardless of where that inspiration comes from, pay attention to it and follow it when it feels right.  Many of my greatest financial wins and blessings have been a result of following the inspiration I have received.


Your financial future starts today

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