The 3-Account Strategy

Personal finance is about managing your own money - how much you spend, save, get into debt, and invest.

How you manage your money will depend on your age, education, ambition, family, and country of residence. While this guide will give you enough input to work out a strategy, you should always consider your own personal situation.

1. Do a personal finance assessment. Ask what's coming in, what's going out, where's it going, and what's left. That is all you need to know.
2. Proactively try to negotiate lower interest rates on your debts.
3. Make extra payments. Pay off the loan with the highest interest rate first, or pay the smallest loan so that you feel you're winning.
4. Temporarily live on a strict budget if your debts are overwhelming.
5. Cancel all the unnecessary memberships and habits. The best way to save money is to desire less.

First manage the money you do have, then use your money to generate more money. You don't need to think about investing until you're out of debt and have multiple ways of generating income.

• Use the 90/10 rule, where only 10% is used on speculation.
• Find the type of investment that best fits your personality. Some people will invest in commercial real estate, while others prefer index funds and bonds.

It is too risky to rely on one source of income. Try to generate income without trading your time for money.
Ways to generate extra income:

1. Start a web-shop - Sell something you use yourself.
2. Write and publish a "how-to" book about something you know.
3. Create a product you can sell. What can you design and produce within two days?
4. Buy and sell objects you know a lot about. This is the easiest way to generate cash and help people get what they want.
5. Build an app.

Consider where you find yourself as each phase requires a different strategy.

1. From nothing to something. This is where you live from paycheck to paycheck without any savings. Try to build a financial buffer of at least one month of expenses.
2. Gaining traction. Once you've saved at least one month of expenses, aim for saving six months of expenses.
3. Peace of mind. Put your money in a savings account and don't touch it. Everything else you save from now on is meant for investing.
4. Financial freedom. This is the stage where you have enough cash and investments to cover your cost of living.

• The Richest Man in Babylon, by George S. Clason. The message of this 1926 book is that rich people are rich because they save their money and don't get into debt.
• Your Money or Your Life, by Vicki Robin and Joe Dominguez. This book will change your relationship with money.
• The Little Book of Common Sense Investing, by Jack Bogle. This book is about index funds. Jack Bogle founded Vanguard and created index funds.

Debt is a liability unless you use it to finance income-generating assets. Don't take on debt for anything that does not increase in value over time.

Suitable forms of debt include buying real estate as a rental property, investing in your business, or a student loan.