Saturday, May 21, 2005

Personal finance: The Principle

At different stages of life we need to make financial decisions, critical personal financial decisions that will have long term irreversible impacts upon our financial well being and quality of life, e.g. buying a house, going for studies, sending our children to college, getting a loan to start a business, etc.

These decisions are critically important due simply to one reason - we are not rich enough, yet. We need to be careful in making these decisions simply because it may cost us dearly. Sure, it is all about assets(i) building, wealth creation and to be rich enough one day so that error in such decisions will be affordable and will not require thinking too deeply. However, along the journey for affluence we must ensure these personal financial decisions will not lead to financial disaster that will hamper our wealth building efforts.

In short, the single most effective way to deal with personal financial issues is to be RICH enough that mistakes are always within our budget. When we are not rich, when we are still on our path in search of wealth, we must then be careful of making such personal financial decisions. We make these decisions in a way that they will not obstruct our wealth building efforts.

This is the basis of all personal finance ideas. This is THE principle of Personal Finance.