My Quick Reference For Financial Success

There are lots of finance and investment books. I find many have similar messages, with different "how to's." Some have messages and systems that don't appeal to me. For me, I try to distill concepts that are relevant to us into simple points that are easy to remember and by which I can live. Here are five points I think have helped us to be successful at personal finance:

Save, save, save. Building wealth for us has been simply spending less than we earn and putting the difference into the bank. My personal target was to save 20 times my salary before retirement. For us, that meant saving as much as 20% of my salary.

Increase earnings faster than inflation. Get a job that pays well. Work to advance oneself and get yearly raises that are greater than the rate of inflation. Keep doing this over and over again.

Invest wisely. I personally invest to preserve wealth, using an allocation between equities and CDs. Historically, I have been invested primarily in my company stock, other individual stocks and CDs. While this allocation has done well for me to date, I will be diversifying away from my company stock over the next year.

Don't use debt for living expenses. I think using credit card and debt to cover living expenses can be a death spiral to disaster. For the category of living expenses, I include utilities, food, household goods, entertainment, vacations and vehicles. I do believe a mortgage to buy a home and student loans are acceptable when used properly, i.e. one can sustainably cover monthly payments.

Money is a tool that is used to achieve other goals. It is important to learn how to use a tool properly. Used well, money can help one live well and retire comfortably. Improper use can sometimes lead to disastrous results.

For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

Photo Credit: morgueFile.com, Kenn Kiser

This is not financial advice. Please consult a professional advisor.

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