Learning From Literature

Finance for the People by Paco De Leon

Cover of Finance for the People by Paco de Leon

Finance For The People: Getting a Grip On Your Finances by Paco De Leon is a personal finance book published in 2022.

The advice is helpful for all but specifically tailored to individuals not interested in proactively taking control of their finances. The book, which has over 50 diagrams, makes concepts accessible and easier to understand for people not as educated on money matters.

This book is a step-by-step guide to building “financial awesomeness” (as De Leon calls it) and covers broad areas such as spending and goals and moves into more specific domains such as insurance, credit cards, investment advice, and more.

Purchase the book by clicking this link!

Enjoy!

Table of Contents

Trending
Financial Freedom by Grant Sabatier

Weekly Finance Time
  • Set a “Weekly Finance Time”:
    • Even 30 minutes on your day off
  • Actively learn about finances, like learning a new language
  • Neglecting Finances Has Consequences:
    • Whether you learn the rules or not, you are still involved in the game
    • Ignorance or neglect doesn’t protect you from financial setbacks
Mind Your Mindset 
  • Subconscious beliefs about money are often learned from parents or past experiences
    • Take time to distinguish between helpful and unhelpful beliefs
  • Bad financial decisions are caused by stress, comparisons, and other emotions factors
Get A Grip On Spending 
  • Spending Plan vs. Budget
    • “Spending plan” encourages an abundance mindset – a budget can evoke scarcity
    • Budget = “What can I afford?” → Spending plan = “How do I want to spend this?”
  • Importance of a Spending Plan
    • Helps you understand your financial situation and prepare for potential changes (windfall or crisis)
    • Allows comfort even with limited money remaining because of CLARITY
  • Spending Plan Categories:
    • Bills/Life
    • Fun
    • Future/Goals
  • Include a buffer in each category for unexpected expenses
Deconstruct Goals Into Habits
  • Paco’s Law – Your spending will match what you have available to spend
    • High income doesn’t guarantee financial security
  • Challenge of Financial Goals:
  • Instead of aiming for a specific savings goal, create a system (e.g., save 20% of income)
Get Good At Earning Money
  • You can’t out-frugal underearning or out-earn overspending
    • EARN = SPEND + SAVE/INVEST
  • Mindset Shift:
    • Focus on expanding income rather than just reducing spending
    • Avoid a scarcity mindset and adopt an abundance mindset
  • Negotiating Pay
    • Align the value you create with what your contribution to their money-making process
  • Unpacking Beliefs About Earning:
    • Challenge beliefs like “You can only make money by working really hard”
    • There is no one-size-fits-all way to earn money
    • Traditional advice (e.g., “become a doctor”) may not apply in today’s world
Plan For An Emergency
  • Prepare for Unexpected Financial Shocks:
    • Expect the unexpected: global recession, job loss, illness, accidents
    • No matter how well you plan, unforeseen events can still occur
  • Delayed gratification is linked to greater financial success
  • Personal Finance Equation (Reordered):
    • SAVINGS = INCOME – EXPENSES
    • Increase savings by raising income or reducing expenses (preferably both)
  • Prioritize building an emergency fund first, then focus on other financial goals
Reframing Debt
  • Good debt → used to purchase real assets that appreciate over time (e.g., real estate, business investments)
  • Bad debt → used to purchase fake assets that depreciate (e.g., luxury items, consumer goods)

To Borrow Or Not

  • Borrowing = Future Money for Present Use
    • What you can afford: Assess your current financial situation to avoid overextending
    • Impact on future wealth: Consider how borrowing will affect your long-term wealth accumulation
    • Terms: Analyze the terms of the loan (e.g., interest rates, repayment periods)
    • True cost of debt: Reflect on whether the debt will bring added stress, even if you can technically afford it
Invest In The Market
  • Shift Mindset on Investing:
    • “Only the wealthy invest” → “You’ll only become wealthy if you invest.”
    • Investing is a key factor in wealth-building
  • Never invest in something you don’t fully grasp
  • Learning from Experts:
    • “How I Invest My Money” by Joshua Brown and Brian Portnoy offers insights from 25 financial professionals, showcasing how top experts invest
Build Wealth
  • Financial security means having the ability to live independently of a paycheck
  • Genuine wealth is when earning money is no longer dependent on working
  • The goal of investing is to reach a tipping point where your income comes from your wealth, not just your labor
Protect What You’ve Got

Four ways to deal with risk 

  1. Transfer (by using insurance)
  2. Avoid
  3. Accept
  4. Mitigate

Check out more Business / Finance posts!