Step 1. Invest in Financial Education: (Cont.)

Ingredients for a Successful Personal Finance Management

To be successful in managing your finances, your Cashflow (Income and Expenses) should be managed with Discipline so you can build up Savings that will utilize Time and Compound Interest so that these Savings will generate additional income for you without your Active Effort.
Therefore, it is important to have a good understanding of financial planning basics and the right information about the different financial products available so you can let your money work for you.

Step 1. Invest in Financial Education:

"Spend" time and effort to research and study on the following important financial planning basics:
 
   > Goal Setting and Budgeting
   > Difference between Active Income and Passive Income
   > Difference between Good Debt and Bad Debt
   > Time, Compound Interest and Inflation
   > Going from Saving to Investing
   > Risk / Reward Trade-off
   > Different Financial Instruments available in the market - (Insurance, Mutual Funds, Stocks, Bonds, etc.)

This "investment" in knowledge will help you make sound financial decisions in the future and will help you avoid making costly mistakes in money management decisions. This is the first and most important "investment" you need to make before you venture out into actually investing (and risking) big sums of your hard earned cash in the business or financial world.

Important Advice: Do not invest in anything which you do not understand.

Important Steps in Personal Finance Management

Step 1. Invest in Financial Education
Step 2. Establish Goals
Step 3. Develop Discipline to Reduce Expenses and Increase Cash Flow
Step 4. Eliminate Bad Debts
Step 5. Create Emergency Fund
Step 6. Get Protection or Income Replacement Strategies (Insurance)
Step 7. Invest to beat inflation (Long term asset accumulation)