Six Rules of Personal Finance, Part 1 – Best Way to Make Money

This website, and blog, focuses primarily on the analysis and interpretation of numbers.  And let’s face it, usually the numbers of greatest interest to us happen to have dollar signs (or any other currency) in front of them. For all of us, to greater or lesser degree, and to very varied times in our lives, the numbers pertaining to our own financial well-being and position are of particular interest.

I’m going to turn my attention for a while to matters of personal finance, drawn from a lifetime of experience (I’m sixty-two), rather than from formal education. I have no certificate of professional authority, but have done alright if I may say so. The ideas to follow over the next number of sessions will share lessons learned and observed; they are heartfelt. And they will reflect on how I have pursued my own (and my family’s) financial well-being. I believe strongly that as with any life lessons learned, of any variety, some will resonate much more than others simply because of our experiences, the values we cherish, and our own very personal insights, intuitions, and frameworks. Whether we’re aware of it or not, we each have our own set of rules of personal finance that we follow and that we evolve, for better or worse. I humbly present my own set of “rules” of personal finance.


  1. Best way to make money: don’t spend it

I’m going to resist the temptation here, at least for now, to wax philosophical on the purpose of money. Suffice to say that for most there’s usually a desire for more of it. And invariably, the more one makes, the more one spends. Our personal desire for things from clothing and jewelry, to houses and cars, requires some given level of income – all too often a level higher than the one we’re presently at.  In collecting the things of life, we also collect debt.

It is remarkable how much pressure we can take off ourselves by being content with less, by simplifying our lives. We will always have basic human needs to meet – food, shelter, clothing, good health. For some, that last category can be extremely expensive, particularly if you’re unlucky enough to contract a disease or malady, and live in the United States. This country has found a way to make healthcare punishingly expensive. I’m not going to suggest here that “simplifying your life” is necessarily achievable if you have major health conditions to address and struggle mightily to have the funds to treat them properly. Some have to make horrendous decisions on whether to buy certain medicines or to buy food for the table, unable to afford both.

Nonetheless, there is much to be said for asking ourselves from time to time if we could get by with less; in fact, might it indeed be possible to thrive and “prosper” on less?  One less car, nice secondhand coats, a smaller home: downsizing can change our orientation on life to free us to think more and enjoy more of the things that really matter in life – family and friends, beauty and serenity.

One of the easy mistakes we make about the things we purchase is to think that the price tag reflects the “true” cost of that item. Say you’ve got your heart set on a car that cost $10,000. Assume further that you don’t have any extra money in the bank, and you want to pay cash, and you decide to take on a second job to pay for it. You’re going to have to go out and earn $10,000 to afford it, right? Wrong! The “true” cost of that car is much higher.  Of course, there’s sales tax which perhaps adds $500. But much more significantly is that the income you earn to pay for it is in turn subject to income tax. Depending on your tax bracket, you may in fact have to earn $12,000, $13,000, or more, in order to be able to pay out a few thousand for the state and federal income tax before you have enough left over to pay for the car and its sales tax.  Of course, if you buy it on credit, there will be the additional hundreds or thousands of dollars in interest owed the bank over the years taken to pay off the debt (and of course, you’ll be paying income tax on that money earned to pay that extra interest). All this additional money that must be earned to pay for stuff is strong support for the notion that the best way to make money is to not spend it.

Years ago I read a book called The Millionaire Next Door. My memory being what it is, I only recall one central item from that 1996 bestseller. The authors’ observations then likely still hold true today: most millionaires don’t live in big houses in the expensive part of town, they live “next-door”. All too often, the folks who live in the million-dollar homes and drive the expensive cars are deeply in debt and have their own substantial financial struggles despite enjoying incomes far higher than the rest of us. Meanwhile, the millionaires next door live much simpler lives, quite contentedly (hopefully) getting by on much less, and carefully spiriting away and investing well a little bit of each paycheck. Sometimes we read in the paper of some “pauper” who bequeaths millions to a university or library or cause. Much more common though, is the family that has simply been careful with their money, ever striving to put some away all life long, to be able one day to retire at an age more to their choosing.