How to Adult: Personal Finance for the Real World

by Jake Cousineau

I now know a person who makes $50,000 per year can be significantly wealthier than a person who makes $150,000 per year, depending on their spending habits and lifestyles.

Value considers how much benefit the purchase is going to give you, but also considers what else the money you are spending could be used for.

Opportunity cost

Rather than being cheap, you should be frugal. Being frugal means trying to get the most value from each purchase, not just the lowest price.

Using this method, 50% of your budget goes toward needs (rent, food, insurance, transportation, and other necessities); 30% goes toward wants (entertainment, eating out, and other fun lifestyle choices); and 20% goes toward debt and savings (student loans, your 401(k), and so on).

The biggest mistake people make with credit cards is only paying the minimum on their balance each month

But why should we invest? The short answer is because investing helps you grow your wealth more quickly and efficiently. If you choose not to invest, you will probably put your money into a savings account at a bank instead.37 If you do this, your money will be safe, but it will hardly grow.

In reality, if you can average around a 7% ROI, then you are doing well.