Personal Finances don’t have to be that Complicated

Finance Money

On the surface, personal finance may seem incomprehensible. There are financial terms to master, a host of theories and models to sift through, and even mathematical techniques to wrestle with!  Ultimately, you are expected to choose from a vast array of potential investments to create a well diversified investment portfolio. What exactly does all this mean?

Is personal finance really that complicated?

Whether you are just starting to learn about managing your money or have been muddling through the process for years, here are some core principles that I teach my clients to incorporate in their lives that may help you make desired changes in your life.

  1. Do not ignore your emotions about money. For some, emotions like fear, anxiety, sadness and anger are elicited by thoughts of budgeting, saving, or investing. You may be fearful of losing your job, house or assets. You may be anxious about making financial decisions, especially if you don’t think you have the proper training. You may be sad and angry if some of your financial goals are put on hold due to illness or divorce. Although these feelings are important to honor, you do not need to be held hostage by them. Rather, use your emotions to help you make decisions. Slow down to acknowledge your feelings, spend some time thinking about your financial options and then reflect on how you feel about these alternative decisions. Now, you may be ready to act.


  1. Live within your means. There is really only one equation that you have to remember. Income-Expenses=Savings. When your expenses are greater than your income, you have to resort to loans, credit cards, gifts from Mom and Dad, etc. How do you keep your expenses from wiping out all your income and more? A comprehensive analysis of your “wants” and “needs” is the first step. Undoubtedly, this will bring forth a host of mixed emotions. Some research studies have found that what you think you “want” is often connected to feelings of self esteem and security. In a recently published study, Tim Kasser and his colleagues found that as individuals between the ages of 18 and 30 years old placed more priority to financial success and materialist goals, their mental health deteriorated.  So, reconsidering what you want may not only help you save more. It may make you feel better.


  1. Put your money to work. Compound interest helps you make money on the money you have but it isn’t a “get rich quick scheme”. It takes time.   If you invest $10,000 today at 3%, it will be worth $13, 439.16 in 10 years. But if you keep that investment for 20 years, you will end up with $18,061, and in 30 years, you will have $24, 272.62. (For a detailed explanation of the math involved in these calculations, see Investopedia).  Keep in mind that paying down your debt may be your form of savings. After you have accumulated an emergency fund with a balance to meet three to six months of essential living expenses, funnel extra income to pay down high interest debt.

 These three points are not quick fixes, but they are a starting point to improve your feelings about money and sense of confidence in your overall financial health.

 How are you incorporating these core principles into your life?


Jean Theurer is a Registered Mental Heath Counselor Intern and CFP®