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Everything You Ever Really Needed to Know About Personal Finance
On Just One Page
by Trent Hamm - The Simple Dollar - http://www.thesimpledollar.com /
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Introduction
The cover of this document tells you the whole story. Everything you really need to
know abut personal finance can be summarized in just one page. Spend less than you
earn. Earn more. Live frugal. Do something sensible with the difference. Control your
own destiny. All of the other writing out there on personal finance is just details.
In fact, the rest of this document is just details. What youʼll find in the rest of this
document is a lot of additional detail about the points made on the cover. Beyond that,
this document is heavily footnoted. If youʼre reading this document on a computer, you
can click on those footnote numbers and immediately jump to online resources that
expand upon that point.
The hardest part of personal finance is just having the courage to take that first step.
Sharing This Document
This document is being freely distributed under the Creative Commons Attribution-Share
Alike 3.0 United States License. What does that mean? It means that this document is
free - you can send it to your friends, put it up on your website, or print it out. You can
also use if for commercial purposes - if you want to format it as a book and sell it, feel
free. You can also modify the contents to your heartʼs desire as long as itʼs shared in
the same way - any derivative works must also be shared under the Creative Commons
Attribution-Share Alike 3.0 License.
I only have two requests. One, if you write about this on your website, include a link
back to the original source of the document - http://www.thesimpledollar.com/onepage/ .
Doing this enables new readers to always be able to retrieve the latest version of the
document. Two, if you do something interesting with this document (creating something
new and compelling with it, use it in a classroom, use it in a major media source),
please let me know by dropping me an email at trent@thesimpledollar.com .
All uncredited art was produced by me and is also shared under the Creative Commons
Attribution-Share Alike 3.0 United States License.
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My Story
I was born in raised in downstate rural Illinois. Growing up, my family didnʼt have a lot
of money [1] , but they did have a lot of love. They taught me the value of living frugally
[2] , but it wasnʼt always coupled with great financial lessons. In short, I had little idea
how to manage my own money, and when I left home for college, I made a long
sequence of financial mistakes. [3]
Flash forward to April 2006. I had a good job, was married, and had an infant son, but I
still hadnʼt learned the value of managing my money. To put it simply, I had a financial
meltdown [4] , capped off by a long night of soul searching while facing a pile of bills that
I simply couldnʼt afford to pay [5] .
That experience woke me up. I dove into personal finance books, reading them by the
hundreds [6] . I started throwing the book at our terrible financial state, trying every
tactic that I read about. And it worked. Over the course of two years, we paid off two
car loans, five figuresʼ worth of credit card debt, five figuresʼ worth of student loan debt,
and several personal loans. This turnaround laid the foundation for many things we had
only dreamed about to that point - we bought a home, had another child, built a strong
emergency fund, and, eventually, I was able to change careers and become a writer,
taking a pay drop but living out a dream Iʼd had since I was a child.
How did I do it? The cover of this document tells the truth of the matter. Itʼs the
blueprint for all of these great changes in my life.
Want to know more? Letʼs go.
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Idea #1: Spend Less Than You Earn!
Annual income twenty pounds, annual expenditure nineteen nineteen and six,
result happiness. Annual income twenty pounds, annual expenditure twenty
pounds ought and six, result misery.
Charles Dickens, David Copperfield
In the end, this is the fundamental rule of personal finance: spend less than you earn
[7] . Itʼs the one point that comes up time and time again in almost every personal
finance book you read [8] or talk that you hear.
Itʼs easy to see it when you look at each side of the coin. Letʼs say you earn $30,000 a
year and you spend $31,000 a year. That extra $1,000 has to be borrowed, often from
sources like credit cards. The following year, in order to maintain your lifestyle, you still
spend $1,000 a year more than you make, plus you spend $300 more than that just
making the minimum payments on your debt, leaving you a total of $2,200 in the hole
(the $1,000 extra you spent the first year plus the $1,000 extra you spent the second
year plus the $300 extra you spent repaying that debt minus the $100 you actually
managed to pay off). The debt builds - after the third year, youʼre $3,600 in debt. It
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keeps growing and growing and growing until that debt is eating up all of your income,
leaving you in misery.
On the other hand, letʼs say you only spend $29,000 a year - only $2,000 less in
spending. That extra $1,000 goes into your savings account and earns 3%. The next
year, you drop another $1,000 in the account and now you have $2,030 in there. The
next year, another $1,000, bringing you to $3,060.90. That money builds up and soon
you have a house down payment or the seed money to start the small business of your
dreams - or even something as simple as the ability to easily pay for a car repair without
your heart skipping a beat.
The difference between these two stories is only $2,000 a year . There are two avenues
to achieving this goal: spending less and earning more. By working on either (or both) of
these areas, you can increase the gap between those two numbers - and that gap is
your ticket to freedom [9] . The harder you work on either spending less or earning more,
the bigger that gap will become and the quicker that train to your dreams will arrive at
the station.
Letʼs look at each side of that coin.
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