The Basics of Personal Finance You Need to Grow Your Net Worth

basics of personal finance

Increasing your net worth is easy if you follow the basic fundamental tips of personal finance. Don’t overcomplicate things. Take small actionable steps today that will increase your net worth tomorrow.

Starting with the basics

“I read your article and it was mostly common sense.”

A friend brought this up to me. He commented about how everything about my financial advice seemed so simple. While I agreed with him that most financial advice would seem like common sense, I also acknowledged that he had just complained to me about his finances and how he had no money.

You see, we’re all looking for secret hacks when we need to master the boring fundamentals first in order to grow our bank accounts. Let’s look at the boring advice that will get us to the next level with our finances.

There are many people looking for hot stock picks and the next big thing that will get them rich. However, there aren’t enough people building their net worth up with the basics (cutting out the crap, growing a side hustle, investing in things they understand, and so on).

I spent an entire year reading the “get rich quick” kind of content as I tried to figure out what to do next with my life in 2008. I eventually discovered that you couldn’t get 6 figures or a 6 pack overnight. I wasted the entire year and had neither to show for it.

So what did I do? I focused on mastering the fundamentals, and I finally got to where I wanted to be (enough money in the bank to travel and enjoy my life).

What are the boring basics that need to be mastered if you want to grow your net worth and actually have money in the bank?

Figure out where your money’s going

Do you know where your money’s going?

Nobody’s saying that you have to track every purchase on a spreadsheet or that you have to count pennies. This isn’t 1999, where you have to write everything down with a pen and paper. Your phone does everything for you automatically.

It’s important to see where your money goes so that you know what your problem areas are and how much money you need to be making to maintain your desired lifestyle.

How do you figure out where your money’s going?

  • Use your banking app: Track where you’re spending your money. Most apps will organize your spending by category. You just use your debit/credit card as you normally would. Then you check in occasionally to see what’s happening. You can do this weekly or monthly or whenever you feel like it.
  • Have a rough idea of your weak spots: What do you struggle with? Where could you improve? What’s your main problem area? You don’t need any fancy apps or an Excel expert to see where your hard-earned money goes.

The good news is that you find holes that you want to fix so that you can save more money and have more money for what you actually enjoy in life. You may also discover that there are things you absolutely can’t live without.

I realize that it can be stressful to look at the numbers, but if you never address the problem, you’ll never solve it.

How do you fix problem areas?

  • Cut something out.

Can you eliminate a fixed cost? Can you cut just one thing out of your spending?

  • Work on it.

You only get better by working on your problem areas. The only way to work on them is to make them a priority. If you always eat out, maybe you can try to watch some cooking channels in your spare time to work on cooking up a few meals so that you can save some money and eat better.

  • Negotiate.

Call your cell phone provider or your car insurance company to ask for a discount. I did this with my cell phone and got $30 off. Every little bit helps. It’s your money. Nobody’s going to call you to offer a discount. You have to ask for it.

What if you don’t want to stop spending money on something?

Don’t. It’s your money and your life. Work on problem areas and then spend lavishly on what you enjoy.

For example, I would never consider “eating food” a problem area. I train hard and prioritize proper nutrition. I have no issues with spending money on food. Clothing? Meh. I try to shop on a budget. Cars? Meh. I never care for cars.

What I’m getting at is that you have to find ways to cut back on what you don’t want to have more of what excites you.

On that note…

Find ways to have fun on a budget to grow your net worth

Your compliance with any plan goes up when there are fewer restrictions.

Nobody wants to follow some “budget” that doesn’t allow them to ever do anything. This is why I always highly recommend that you sneak some fun into your life so that you don’t get bored and you always have something to look forward to.

Can you have fun without going broke? Of course. I’m at the point now where I can have a blast for under $20.

Here are some ideas for having fun on a budget:

  • Find hobbies that don’t cost you a fortune: Your hobbies don’t have to be expensive. You can easily find hobbies that keep you busy, provide you with a social life, and let you do something without breaking the bank.
  • Turn a hobby into a side hustle: I turned my love of coffee into an Airbnb Experience where I drink coffee with strangers.
  • Earn your fun: If you do things right most of the time, you shouldn’t feel guilty about putting some cash aside for a trip or some adventure.
  • Try low-cost activities: Grabbing drinks in the park won’t cost you a fortune and can lead to some fun memories. You ever try walking the slackline while strangers silently judge you?

Whatever you do, it’s important that you find a way to have fun without spending a fortune. You don’t have to get bottle service at a club to have an enjoyable evening. It’s possible to have a memorable weekend without being in a club.

Save money from every paycheck

Your goal should be to save money from every single paycheck. You can’t wait until you’re making lots of money to save. You have to start right now regardless of what your situation’s like.

How do you do this?

Set automated payments with your bank/employer.

When I was 18, I started putting aside $50 bi-weekly. I took out money a few times for emergencies. When I turned 30, I cashed this investment in and treated myself to a trip around the world with half of the money. The other half went towards my savings.

The goal is to always be putting money aside so that you build the habit of saving money so your net worth is always going up. If you don’t start when you’re making a little bit of money, you won’t suddenly become good at saving money when you’re making more of it.

Figure out how to make more money

This is the part of personal finance that most people get stuck on. Anyone can cut their expenses down to the point that they’re not spending any money. Not just anyone can make more money. This is where you’ll spend a long time trying to figure out what to do.

The reason that I’m a huge proponent of making more money is that there’s only so much that you can cut before you drastically reduce the quality of your life. When you make more money, you have more options.

How do you make more money?

  • Find ways to make more money at your current job: Take some courses and certificates to ensure that you make more at your current job by becoming more valuable.
  • Start a profitable side hustle: Look into different side hustles so that you can make more money.
  • Upgrade your skills to land a better-paying gig: Pick up new skills or upgrade your credentials so that you can make more money.
  • Sell your crap: Get rid of junk around the house for extra cash. Find stuff that you don’t need and list it on Facebook Marketplace to make some money.

Those are just a few options. Each option will obviously take a long time. This is why it’s important that you stick with one thing until you see results because most people give up too easily.

You’re in luck because every source of income has been covered on social media platforms (YouTube, Spotify, and so on) so that you don’t have to guess about how to start. All of the information is available for you out there when it comes to earning more.

My best advice is to choose on strategy for making more money and to follow it through until you increase your income. Don’t try to tackle everything at once.

Look into investing to grow the net worth

Have you looked into investing your money?

Before you get into crypto, please take some time to learn about what a stock is, if index funds are for you, and if you have enough money saved to take some risks.

What should you know about investing your money?

  • There’s no such thing as a low-risk/high-reward.
  • You have to understand what you’re investing into.
  • Your uncle doesn’t really have a hot stock pick.
  • You should do your research.

That’s how you can handle your finances for now so that you can start growing your net worth. Mastering the boring basics will easily take a few years. Build up your savings so that you have more money to take on some risks in the future.