[amazon-product align=”right” alink=”0000FF” bordercolor=”000000″ height=”240″ region=”us” tracking_id=”varsblah-20″]0137054254[/amazon-product]What really caused the crash?
“This financial crisis was caused by corruption at the highest levels of government and business. Like a cancer, legalised corruption eats away at the moral fibre of the world. Men and women of power, craving more power, sell their souls to glorify their egos, destroying lives and bleeding the wealth from people they are supposed to serve.”
These angry words, taken from Robert Kiyosaki’s recently released Unfair Advantage, echo a sentiment many still feel following the financial crash. But while capitalism is often blamed as the reason the world economy tanked, this isn’t true. The real problem is a lack of financial education. We’re overwhelmed by information that nobody can turn into any sense.
The fundamental rule of personal finance
Ultimately, personal finance really isn’t as complicated as we make it out to be. Trent Hamm, creator of The Simple Dollar and author of a book of said name, explains in Everything You Ever Really Needed to Know About Personal Finance: “In the end, this is the fundamental rule of personal finance: spend less than you earn. It’s the one point that comes up time and time again in almost every personal finance book you read or talk that you hear. Why? Because it’s true.”
Spending more than you earn means you have to borrow and go into debt. As this continues to happen and the interest continues to grow, you’re left in a deep and miserable hole. But spending less than you earn means you can save and invest. As this continues to happen and the wealth continues to grow, you move closer to financial freedom. That’s all there is to it.
Get Rich Slowly agrees: “None of this is earth-shattering; these notions form the core of smart personal finance… If you can teach yourself all about earning, spending, and saving — and put what you learn into practice — you’ll achieve your financial aims with surprising speed. But so long as one of these skills lags, you’ll struggle to meet your goals.”
The danger of details
Why is it that so many of us continue to ignore these basics time and again? Ramit Sethi, creator of I Will Teach You to Be Rich and author of another book of said name, explains: “Most of us fall into one of two camps as regards our money: We either ignore it and feel guilty or we obsess over financial details by arguing interest rates and geopolitical risks without taking action. Both options yield the same results—none.” Ultimately, the person who wins is the one who sidesteps the heated debates, stops blaming the institutions out to ‘get us’, overcomes the fear of losing money (it’ll happen at some point), and simply makes a start.
As Sethi continues: “Just as you don’t have to be a certified nutritionist to lose weight or an automotive engineer to drive a car, you don’t have to know everything about personal finance to be rich.” We need to stop getting caught up in unnecessary details and get back to basics. Clear thinking might save us before the next bubble bursts.
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