PDF Summary:9 Rules to Dominate Your Money and Learn What 67% of Adults Don’t Know, by Finley Lewis

Finances are an aspect of life that many people struggle with, often due to a lack of proper financial education. In 9 Rules to Dominate Your Money and Learn What 67% of Adults Don't Know, Finley Lewis aims to fill this gap by providing essential financial knowledge and strategies. Whether you're a young adult just starting out or simply seeking to improve your financial management skills, this guide offers insights into the basics of currency, earning money, budgeting, taxes, and credit.

Lewis emphasizes the importance of setting specific, achievable financial goals and developing a growth mindset. The book explores practical approaches to generating multiple income streams, managing expenses effectively through budgeting, minimizing debt, and building a strong credit history. By demystifying financial concepts and sharing actionable advice, Lewis empowers readers to take control of their financial well-being.

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Developing a growth mindset and avoiding common money myths

Lewis emphasizes the importance of establishing objectives that are precise, quantifiable, attainable, pertinent to your aspirations, and constrained by a clear timeline. Simply wanting wealth is insufficient. Establishing a specific goal, like accumulating $1000 before the end of June, enhances productivity by offering a goal that is measurable, achievable, relevant, and time-bound. Goals can be organized by their expected completion timeline: those aimed to be reached within a year are identified as short-duration objectives, ambitions set for a two to five-year timeframe are deemed mid-term, and aspirations intended to be achieved in more than five years are regarded as extended-duration goals. By allocating $100 monthly, you could create a short-term goal for purchasing the newest smartphone, strategize for the acquisition of a second-hand vehicle over an intermediate period, and set a long-term aim to accumulate funds for a college savings plan or to afford the down payment on an ideal beachfront property. Elevate the effectiveness of your objectives by identifying your core motivation. Understanding your desires doesn't require complexity; simply delve into the underlying motivations for your aspirations. Identify the reasons first, then reassess if your objective remains pertinent.

Other Perspectives

• While creating multiple streams of revenue can increase economic stability, it can also lead to overextension and burnout if not managed properly.
• Part-time employment and starting businesses are good strategies, but they may not be feasible for everyone, especially those with significant responsibilities or limited time and resources.
• The emphasis on compound interest assumes a stable economic environment; during periods of high inflation or economic downturns, the real value of savings could be eroded.
• Setting well-defined and achievable financial goals is important, but rigid adherence to specific goals may limit flexibility and the ability to adapt to changing circumstances.
• Harmonizing goals across different time frames is strategic, but it may also lead to conflicts in prioritization, especially when short-term needs clash with long-term objectives.
• The S.M.A.R.T. criteria for goal setting are widely recommended, but some critics argue that this approach can stifle creativity and overlook the value of more abstract or evolving aspirations.
• Categorizing goals by completion timeline is helpful, but it may oversimplify the complexity of financial planning and the interplay between different financial objectives.
• Understanding core motivations is important, but overemphasis on personal desires might lead to self-centered financial planning, neglecting the importance of community and shared financial responsibilities.
• The advice to avoid common money myths and develop a growth mindset is sound, but what constitutes a myth can be subjective, and a growth mindset may not always be applicable in every financial situation.

Budgeting, Expense Management, and the minimization of monetary obligations.

Developing a sound budgeting system

The author emphasizes the significance of establishing a strong budgeting system to manage expenses and boost savings. Lewis highlights that the predominant reason many adults are trapped in a pattern of receiving and instantaneously expending their earnings stems from insufficient monitoring of their monetary expenditures.

Monitoring your spending involves differentiating between essentials and desires.

Lewis encourages teens to treat saving money as a game, where they try to win every month by saving more than the previous month. Young individuals can still master the discipline of adhering to a financial plan, even when unforeseen expenses arise. The essence is in charting a course from your current financial position to the financial targets you aspire to reach. The method commonly used for financial management is frequently referred to as the "50-30-20" approach. Dedicate 50% of your earnings to essential expenses, allocate 33% for personal spending, and reserve 20% to enhance your savings. Essential expenses include items such as phone bills, fuel for your vehicle, public transportation costs, and the purchase of educational materials. Initiating your journey into financial management sooner rather than later simplifies the process of achieving and maintaining your monetary objectives. Without careful financial planning, you might end up just scraping by, paycheck to paycheck, a situation that is all too familiar to numerous people.

Allocate half of your income to necessities, 30% to discretionary spending, and direct the final 20% into your savings by establishing automated deposits.

Lewis acknowledges the usefulness of the commonly known budgeting principle, often termed as "allocating fifty percent to needs, thirty percent to wants, and twenty percent to savings," for adults, but he also notes that teenagers, who typically have fewer financial responsibilities, can often apportion a larger share of their income and modify the principle to fit their circumstances. They too must adhere to financial guidelines. He recommends a method for devising a personal budget that aligns with your economic circumstances. Initially, individuals ought to calculate their mean monthly earnings, particularly when these figures fluctuate. Then comes tracking expenses. Monitor all your expenditures, from the trivial purchase of cosmetic products to significant expenses incurred during group vacations. After completing the task, organize your expenditures by distinguishing between essentials and desires. Calculate your current savings by deducting your earnings from all your expenditures. Assess your financial goals and compute the contributions needed to reach your immediate, mid-term, and long-term dreams to figure out the monthly savings required. Designate specific segments of your earnings for the fundamental purpose of budgeting, which includes managing necessary expenses and personal wants. You can modify the amount incrementally until it aligns with your requirements. The principle focuses on reducing expenses while simultaneously increasing the amount saved.

Avoid falling into the snare often referred to as the "Diderot effect," which can lead to unnecessary expenditure.

This section explores the psychological pattern known as the "Diderot effect," which influences consumer spending habits. Lewis underscores his argument with an anecdote about a philosopher from France. He counsels individuals to maintain command over their spending by distinguishing necessities from desires.

Understanding the perils associated with borrowing and the significance of postponing immediate rewards.

Lewis recounts the tale of Diderot, who received an opulent red robe as an accolade for his contributions to science and philosophy. Upon acquiring the garment, he realized it made his home's other furnishings seem dull by contrast. Consequently, Diderot's purchases, such as an exotic carpet, an assortment of artworks, and a collection of modern furniture, in addition to a mirror, resulted in mounting debts due to his increased expenditures. We can all understand Diderot's situation - Lewis depicts a circumstance where acquiring a fresh gown might spark the urge for complementary new footwear, and perhaps a novel purse to perfect the outfit. Our yearning is unending, thus the cycle of desire is continuous. One must exercise caution with this particular cost pitfall. Building the practice of setting aside funds for our wants instead of using resources we lack is crucial.

Prioritizing asset-building over liability accumulation

Lewis highlights that although Diderot's era was centuries ago, the compulsion to continue purchasing items has intensified in our modern age. The constant bombardment from technology, e-commerce applications, and social media platforms influences our purchasing decisions. Lewis points out that many adults are caught in a cycle of spending money on items before they have actually earned it. They utilize borrowed funds and credit facilities to acquire financial obligations. The typical American pair accumulates sixteen thousand dollars in debt due to the expenses associated with their nuptials! Understanding the difference between what constitutes an asset and what is considered a liability is essential for decreasing your debt. An asset is defined as something that enhances your earnings, while a liability is distinguished by its propensity to incur costs for you. Understanding can be elusive since a single entity may embody dual aspects. For the tenant, being responsible for a leased residence represents a financial obligation. The fundamental rule is to reduce your liabilities while at the same time building up income-producing assets.

Other Perspectives

• The "50-30-20" budgeting rule may not be practical for everyone, especially those with lower incomes or living in high-cost areas, where essentials may consume a larger portion of income.
• Treating saving money as a game might trivialize the complexities and challenges some individuals face, particularly those with fixed or low incomes.
• Early financial management is beneficial, but the text does not acknowledge systemic barriers that may prevent some individuals from saving, such as income inequality or lack of financial literacy education.
• Automated deposits into savings are useful, but they require a stable income; this may not be feasible for gig workers or those with irregular income.
• The advice to modify budgeting principles to fit individual circumstances is sound, but the text does not address how to adapt these principles for those with fluctuating or unpredictable financial situations.
• Tracking all expenses can be time-consuming and may not be sustainable long-term for everyone; some may benefit more from a simplified tracking system.
• The emphasis on reducing expenses and increasing savings doesn't account for the reality that some people's expenses are already cut to the bare minimum and they have little to no room for savings.
• The "Diderot effect" is a valid psychological pattern, but the text could be seen as oversimplifying consumer behavior by not considering the impact of marketing and social pressures that influence spending.
• The distinction between assets and liabilities is important, but the text does not consider that some liabilities, like education loans, can lead to long-term financial gain.
• The focus on asset-building over liability accumulation may not take into account the need for balance and the potential benefits of taking on strategic debt, such as mortgages at favorable interest rates.

Tax Planning and Credit Building

Understanding the purpose and importance of taxes

This section discusses the often-dreaded concept of taxes. Lewis highlights the importance of adding to public funds, which in turn bolster community services. He advises budding entrepreneurs to grasp how taxes correlate with earnings and to seek legitimate methods for minimizing their tax obligations.

Recognizing the government's role in providing public services

Finley Lewis references the well-known adage attributed to Benjamin Franklin, which states that the only sure things in life are death and taxes. Abide by legal requirements by remitting solely the taxes that are due. Public services such as law enforcement, fire protection, education, infrastructure, and recreational areas are funded through taxation. Failing to fulfill your tax obligations can lead to severe repercussions, such as monetary penalties, legal fines, or incarceration.

Exploring legal tax minimization strategies

Lewis emphasizes the necessity of comprehending the tax responsibilities associated with your earnings. A portion of your income is set aside for taxation when you're employed. A percentage of your income is withheld by your employer for payroll taxes, which in turn fund programs like Social Security. As an entrepreneur, you have access to a variety of lawful strategies to minimize your tax obligations. Costs associated with computer use, vehicle operation, or meals during business discussions can be subtracted from your earnings prior to tax calculation. Lewis delves into the taxes imposed on the returns from investments, often referred to as "capital gains taxes." Earnings from the sale of investments such as stocks or bonds held for less than a year are taxed as short-term capital gains. By retaining your investments for over a year prior to disposal, you qualify for a tax category on profits from assets held long-term, generally levied at a lower rate.

Establishing and maintaining a strong credit history

This section introduces the importance of a strong credit profile. Lewis emphasizes the importance of beginning sooner rather than later, as establishing a strong credit score is a process that unfolds gradually. He provides insights on how credit scores can shape one's financial future and imparts practical tips for judicious use of credit cards.

Grasping the significance and elements of credit scores is crucial.

Lewis describes "credit" as the trust placed in an individual's capacity to settle their debts. It involves the capacity to utilize a service or acquire a product with the understanding that payment will be made at a later time. Financial institutions extend credit after evaluating the financial dependability of applicants. Having a superior credit score reflects greater fiscal dependability, easing the acquisition of a house or car, landing a job, or being approved for credit. Lewis explains that companies like Experian and Equifax track how consumers spend and pay bills to develop an index of creditworthiness, which lending institutions often call a credit score, used to evaluate a person's dependability with finances. The FICO scoring system designates 300 as the minimum achievable score, while the maximum is set at 850. He recommends prudent management of finances and prompt settlement of debts as essential measures for building a solid record of creditworthiness. The author also suggests acquainting oneself with factors that affect your credit score, including how often you make payments, the amount of your credit limit that is utilized, the length of your credit history, the diversity of your credit accounts, and how often inquiries are made into your credit.

Establishing a credit history through prudent credit card use.

Lewis recommends that prudent management of one's credit can aid in establishing a solid financial history. Ensure that the credit card selected either has no annual fee or provides benefits that justify any fees charged. Examine the annual percentage rate, or "APR," across various credit options, since a reduced APR indicates that the overall interest accrued will be lower. If you don't have a well-established credit record, think about getting a secured credit card from your bank or looking into alternatives designed for students. He recommends using your credit card for small, manageable transactions and emphasizes the importance of paying off the full balance before the monthly due date. Establishing credit can also be achieved by putting utility accounts like your cell phone or vehicle insurance under your own name, as well as initiating a loan specifically designed to enhance your credit standing with your financial institution. You might also consider seeking assistance from an individual with a strong credit background by asking them to endorse a financial agreement on your behalf, specifically for the acquisition of a car, or by having them add you to their credit card as an additional user (though Lewis advises treating this option as a last resort due to the shared financial responsibility it entails).

Other Perspectives

• While taxes are essential for funding public services, some argue that the tax system can be overly complex and burdensome, especially for entrepreneurs who may not have the resources to navigate it effectively.
• The idea that failing to fulfill tax obligations can lead to severe repercussions is true, but it's also worth noting that the tax code can sometimes be ambiguous, and well-intentioned individuals and businesses can find themselves in violation due to misunderstandings or errors.
• Legal strategies to minimize tax obligations are valid, but there's a perspective that these strategies can sometimes create an uneven playing field, where those with more resources can afford sophisticated tax planning to reduce their tax burden disproportionately.
• The focus on credit scores is important, but it's also argued that the credit scoring system can perpetuate inequality, as it may disadvantage individuals who have less access to credit-building opportunities or who have been financially marginalized.
• The recommendation to use credit cards for small transactions and pay off the balance to build credit history is sound, but it also simplifies the complexities of credit card debt and the potential for some individuals to slip into debt if not managed carefully.
• The suggestion to get a secured credit card or be added as an authorized user on someone else's credit card can be helpful, but it also assumes that individuals have the initial capital or a willing and financially stable partner to support this, which may not be the case for everyone.