Personal Finance

5 key things you need to know about money

“Make everything as simple as possible, but not simpler.” – Albert Einstein

There is no shortage of information on the topic of personal finance but, at the end of the day, building a solid financial foundation boils down to a few key principles. There are plenty of different ways to apply those principles but in the end, no matter how much we might want to take shortcuts or find a quicker/better/easier way of doing things if we ignore those basic building blocks, we’re unlikely to succeed. As I navigate my own money journey, I’m often reminded that getting “back to basics” is the best way to keep myself on track. Here’s my list of five things you need to know about money:

1. Know yourself

In every aspect of life, our perspective makes all the difference. Often we don’t realize how deeply connected our perspective is to our conditioning and this is especially true when it comes to money. It makes sense that in order to be financially successful we have to be able to manage our money well but in order to manage our money well, we have to understand how our own personal psychology influences our ability to earn, hold and grow our money. Factors such as our money personality, money thermostat and limiting beliefs can sabotage our best efforts without us even realizing it. Taking the time to understand our personal “money blueprint” and making the changes necessary to set ourselves up for success is a critical part of our money journey that is often overlooked.

2. Know your net worth

Our net worth is simply the value of our assets minus the value of our debts. It’s a critically important number to know because it’s the most tangible way of tracking our progress when it comes to building wealth.

Related article: How to calculate your net worth?

Figuring out our net worth gives us a starting point and allows us to see just how much progress we’re making each year. We live in a society where easy access to credit often makes it hard to distinguish the “haves” from the “have-nots” but calculating your net worth makes it very clear where you stand and whether you’re moving towards or away from your goals.

3. Know your cashflow

I’m a big believer in the theory that “what you focus on expands” and I’ve learned that this is especially true when it comes to finances. Understanding your cashflow means knowing how much is flowing in and out of your accounts each month.

Related article: Do you know how much you are spending?

Tracking your spending is a critical component of financial success because it forces you to be aware of what is going on in your financial world. It helps you identify spending habits that you need to change as well as to create opportunities to save more.

4. Know your “why”

Why do you want to build wealth? Why are you saving money? It might sound like a silly question but there’s a good chance that if I asked ten people the same question, I’d get ten different answers. Just because you have the same savings goal as someone else, doesn’t mean that you have the same motivator to achieve it. Research has shown that it’s not the goal itself that drives people to succeed, it’s the reason behind the goal. Understanding your “why” helps you visualize your goals more clearly and it’s those visual images that will keep you going when you get discouraged or off track.

5. Know a little about investing

The reality is that when it comes to building wealth, investing your money is likely to net you higher returns than tucking it away in a savings account. However, the value of investments can go up and down so it makes sense to understand a little about the different types of investments and how to build a portfolio that matches your goals, timeframe and risk tolerance.

Related article: Basics of investing – how to get started?

Whether you prefer to learn on your own from blogs, websites, books, etc. or whether you choose to seek the advice of financial advisors or successful investors, it makes sense to learn the basics. At the end of the day, you work hard for your money, and no-one should care more about how hard it’s working for you than you do.

Managing your money and building wealth isn’t rocket science but doing it well involves learning a few key principles and applying them consistently. These are five principles that I’ve adopted… I’d love to hear about yours.


  1. Stephen Weyman

    Taking a thousand foot look at things is a very smart thing to do and that’s exactly what this article does. It forgets the minute details of things and reminds you to think of things simplistically and to remember the bigger picture.

    I particularly like point 4 “Know Your Why” because so many people just have a vague idea what they are saving for and often that doesn’t provide enough motivation to actually save. Knowing exactly why you are putting your hard earned money away will keep you on track to reaching your financial goals.

  2. Sarah

    Thanks for the feedback Stephen! I’m glad you liked the post. I totally agree with you about point 4… figuring out my own why was one of the key factors in changing my own savings habits. It definitely keeps your motivation up and it’s a powerful thing to be able to share your true reasons with people who question your goals.

  3. Andre Monk Book

    …point 4 and 5 😉

    learn, learn, learn and invest, invest, invest…

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