The Best Financial Advice I Can Give, Part 2

Here's part two of our series asking five top personal finance experts to offer their single best piece of advice:

“Spend less than you earn. Successful financial planning really stems from that simple statement. If you retain a portion of your current income, you’ll soon ask yourself a question: what should you do with that money? And that question is the beginning of wealth creation. It is essential that you do not spend 100% (or more) of your current income on current expenses. One day, expenses – housing, education, medical, retirement – will exceed your affordability if you are relying solely on current income. That’s why you’ll be glad (and relieved) that you’ve got past income to rely on.  Spend less than you earn. That’s how rich people got rich.”

Ric Edelman, author of several best-selling books on personal finance, including “Ordinary People, Extraordinary Wealth.”

Principles 1 and 2.  Maximize income, minimize expenses.

Continue to part 3 of The Best Financial Advice I Can Give.

Update: Time to join the Traffic Jam at Outside the Beltway.

Comments

[Michael]

I agree completely. It is the most important facet of successful personal finance, and also the most difficult to convey. In my experience, getting most people to purposely spend less than they earn is often a herculean task.

They've done the opposite (without negative incident) for so long, and seen their peers and models do the same, that any necessary change in lifestyle is practically unthinkable.

[FMF]

Michael --

Yep! And no matter what their income levels, people can (and do) certainly overspend. I've seen people making $140,000 per year and deep in debt because they spent $170,000 per year!

FMF

[Mike]

I agree that saving is important, but you also have to take care exactly how you invest your savings. Just saving is not enough, you have to know how to invest it properly.

[FMF]

Mike --

Of course. Saving money to waste it is not a good strategy. :-)

We'll be covering basic investing in later posts. Thanks for stopping by and hope you do so again.

FMF