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

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Weekly Finance Time
  • Schedule a “weekly finance time”, even just for 30 minutes on your day off
  • You won’t know how to be better with money unless you have an open mindset to actively learn, like with a new language
  • Whether or not you choose to learn the rules and how to play the game, you are a player nonetheless
    • Just because you choose to neglect your finances and/or didn’t know what you were doing, doesn’t mean you can’t get burned
Mind Your Mindset 
  • Everyone has subconscious beliefs about money, usually learned through parents or past experiences
  • Take the time to weed out what’s a rational belief and what’s not 
  • Feelings of scarcity or being “behind” in life (specifically about money), invokes stress 
    • When stressed → Our brains don’t work as well (scientifically proven) → Leading to more bad decisions
  • Work in your circle of control and don’t think as much about things outside of it
Get A Grip On Spending 
  • Make a spending plan
    • It’s a “spending plan” not a budget because budgeting invokes a scarcity mindset
    • For example, a budget (scarcity) mindset says, “What can I afford?” while a spending (abundance) plan’s says “How do I want to spend this?”
  • A spending plan gives comfort, even if you don’t have money left over
    • You’ll have an understanding of your financial situation and how any potential situation will affect you
  • De Leon suggests 3 categories:
    • Bills/Life (groceries, gas, rent/mortgage payments, etc)
    • Fun (dining out, hobbies, vices, entertainment, etc)
    • Future/Goals (retirement, investments, emergency fund, etc)
  • Have multiple accounts for each category
  • Give yourself a buffer and don’t fix expenses too tight
    • For example, have an extra $1,000 in your Bills/Life category in case of something unexpected
Deconstruct Goals Into Habits
  • Paco’s law → your spending will equal what you have available to spend
    • People with high incomes aren’t necessarily more financially secure because their spending rises as their income rises
  • Create a system that imposes limits
    • When you don’t set artificial limitations, you have to rely on willpower
    • For example, have a separate account for “fun” spending where you only allocate a certain amount a month
    • Atomic Habits by James Clear teaches readers how to stick with habits through processes
  • Well-being and happiness do not come from external pleasure
  • Let go of the outcome and implement processes / systems
    • For example, don’t have a goal of saving $10,000, have a system of saving 20% of your income
  • Deconstruct the goal you are trying to achieve into a behavior that would proceed reaching it
    • If you need $5,000 for a trip to Europe in 2 years, start saving at least $210 a month
  • Consistency is boring, but is often what separates the good from the great
Get Good At Earning Money
  • You can’t out-frugal underearning and you can’t out-earn overspending
  • The personal finance equation is:
    •  What you EARN = what you SPEND + what you SAVE/INVEST
  • Negotiate better pay by getting into alignment with the value you create, how much it’s worth, and what your employer believes it’s worth
  • Unpack your beliefs about earning
    • For example, “You can only make money by working really hard”
  • There is no clear-cut way to make money because the world changes so fast
    • Common advice sounds like “go to school and be a doctor, they make a lot of money”
    • Now, Youtubers can make millions of dollars a week
Plan For An Emergency
  • Protect against an unexpected financial shock
    • There is always something out of your control
  • It is not a matter of if something happens… it’s a matter of when and to what severity
    • Global recession, job loss, illness, root canals, freak accidents
  • Reorder the personal finance equation to:
    • SAVINGS = INCOME – EXPENSES so the only way to save more is by adjusting income up or cutting expenses down (preferably both)
  • An emergency fund should be your first financial priority, then focus on other goals
Make Better Decisions
  • Calculate the true motivations, costs, and benefits of each financial decision
  • Understand the fine balance between risk and reward
Reframing Debt
  • Debt used correctly can be used to build wealth and fuel economic growth, but used incorrectly, can also be used to destroy wealth and inhibit economic growth
    • First To A Million by Dan Sheeks defines the difference between a “real” asset and “fake” asset
    • Good debt is used to buy a real asset
    • Bad debt is used to buy a fake asset
To Borrow Or Not
  • Borrowing is essentially taking money from your future self for the present
  • Analyze:
    • What you can afford
    • The impact on your future wealth
    • How much can the lender possibly screw you (what were the terms of borrowing)
    • If the true cost of paying back the debt is worth it to you (will having this note make you more stressed, even if you can easily afford it?)
Invest In The Market
Finding A Financial Advisor
  • Nobody can predict the market
  • A good adviser must be valuable outside of investing
Build Wealth
  • Financial security means being able to live independent of a paycheck from a job
  • When you’re genuinely wealthy, earning money isn’t dependent on working
  • The whole point of investing is this idea that at some tipping point, your income will actually come from your wealth instead of your wealth being built by your income
Protect What You’ve Got
  • Four ways to deal with risk 
  1. Transfer
  2. Avoid
  3. Accept
  4. Mitigate

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