The importance of organizing finances
Most people have some idea of how they should treat their money. Obviously, the worst thing one could do would be to spend it all recklessly. But what should be done? For every person the situation is different. Getting into the specifics is where most end up confused. When this happens, their finances usually end up in worse shape than they are capable of. For instance, the time wasted on finding out how to manage one's money can add up. Forces such as taxes and inflation will then reduce it overall while the owner decides what to do. Before we move on too far, I'd like to recommend that readers buy some books on finances such as Rich Dad Poor Dad by Robert Kiyosaki or Think and Grow Rich by Napoleon Hill. These books provide a strong basis of how money works--including details on subjects that are not as clear. Or you can visit Kiyosaki's website at http://www.richdad.com and check out the various resources he and his team offer.
In this series of posts, we will be going over some general best practices when it comes to managing money. Topics will include things like savings, different investment accounts, loans, bonds, stocks, taxes, inflation, cash flow, and many more. The modern world is much more dynamic with too many new variables to count. This is why a simple strategy of just keeping all your money in the bank and letting it gather interest is not a best practice for many anymore. No. It is important to diversify your financial portfolio. Now, that does not mean to be reckless and bait a bunch of random hooks. However, an intelligent investor understands the details and power of all of these topics. From there, they are able to take calculated and informed actions when dealing with their money. The entire premise of this site (Sacco Spa = Bag Spa or a Spa of Bags) is that an intelligent investor must have multiple bags where they keep portions of their finances. Bags such as your regular checking and savings accounts, investment accounts, IRAs, 401ks, CD, etc. And then, as Kiyosaki presents in Rich Dad Poor Dad and many of his other books, it's important to have your money flowing through assets--which we will get into later on as well. Basically, an asset makes you money over time. Which stands in contrast to a liability, which will take money from you over time. When you have money flowing through your assets, it strengthens them and their ability to bring you more money. Kiyosaki calls this your money working for you, rather than you working for your money.
I'm going to wrap this post up here and leave you with this short video on understanding some basics on finances. When it is up, be sure to visit our main page where we will discuss the different bags to keep your money in, some more best practices, and the differences between assets and liabilities.