How To Manage Your Money Well: The 3 Essential Principles Of Personal Finance

How To Manage Your Money Well: The 3 Essential Principles Of Personal Finance

I learned about personal finance through practice. And this experience allows me to advise you on how to manage your money well. Advice that allowed me to pay off a mortgage, create a 6-month precautionary fund and invest in life insurance and a PEA. While continuing to live as I wish.

Do you dream of not having money problems anymore?

Do you dream of early retirement?

Do you dream of financial independence?

So do I!

That being said, in order to achieve this financial independence, you have to take a step-by-step approach and start by having healthy personal finances.

My reading of books and sites, discussions with people with good advice and my personal experience have given me the necessary foundations to get my personal finances in order and start investing.

I have been able to :

  • build up regular savings
  • build up precautionary savings
  • pay off my mortgage
  • invest in the long term to enrich myself sustainably
  • while continuing to live as I wish, to please myself and those I love.

All of this was made possible by a few elements of personal financial management that allow you to manage your money well.

In the end, it all comes back to a fundamental and unavoidable subject: how to manage your money well.

This is the question this article answers.

But rather than giving you a guide or a modus operandi that might not be adapted to your situation, or explaining how to manage your budget (even if it comes into play at some point), I prefer to give you the advice that I believe to be essential when it comes to personal finance. And above all, useful for a lifetime. Whatever the regulatory changes.

So inescapable that I consider them to be the essential principles of personal finance.

Take full responsibility for your finances

The usual pattern is to entrust your money to a banker, fund manager or investor and then follow their advice. You can imagine that, with more training, experience or tools at their disposal, they are bound to be more effective.

Sometimes they do.

But often not…

The fact is that your banker has a double hat: advisor and salesman. The relevance of his advice is therefore suspect, because he will be as careful to defend your interests… as his own and those of the bank, his employer.

You can’t do without a bank entirely. But giving him complete control over your personal finances is not a good thing.

Likewise, those around you most certainly want what’s best for you. But is their advice relevant and sound for all that? What is their experience?

Besides… giving advice when it’s not about their money is easy. But when it comes down to it, you’ll be the one to foot the bill if things go wrong.

The fact is that nobody cares as much about your money as you do. Or at least you should be the one who cares the most.

How do you do that?

Learn more at

Get trained and familiarize yourself with the workings of money.

It has never been easier to train today. You’ll find great resources on the Internet, not to mention books. Take a trip to your nearest library. You’ll find treasures there.

Being able to make informed decisions is one of the best things you can do for your future, financially and in general.

Don’t take advice for granted

Cross-check any tips you receive with others. And make up your own mind.

What I have just said is also valid about me: don’t trust me blindly.

Likewise, never sign any document the very first time it is presented to you. Take the time to read this document. Take the time to make sure you understand it.

Again, if things go wrong, you will be the one to foot the bill.

Make a budget

The angry word…

And yet…

How can you manage your money well without a budget? How can you save and invest regularly without a budget?

You need a budget.

Having a budget is the basis for managing your money well, building wealth and getting rich (the idea is not to get rich just for the pleasure of accumulating money, the idea is to secure your daily life, your future and those of your loved ones).

A budget will allow you to know where your money is going instead of wondering where it has gone. And that, in terms of financial security and peace of mind, couldn’t be better.

But don’t do things the wrong way around! Don’t pull a fixed, hard-to-fulfil budget out of your hat. Your budget must be realistic and reflect your consumption and lifestyle habits. It is your budget that fits your life, not the other way around.

First write down all your expenses for 2 months. This will help you understand where your money is going. In my opinion, the ideal is to use a small notebook. But any budget management tool that works for you will do.

Then analyze and reduce your expenses, either by removing unnecessary items or by reducing their amount.

This will allow you to :

  • increase your savings capacity
  • keep your expenses and standard of living under control if your income soars

Spend less than you earn…

The purpose of a budget is to know where your money is going and to spend less than you earn.

This may seem obvious. But for many, it just isn’t.

The simplest way to pay down debt, get out of debt, secure your life, increase savings and invest all at once is to spend less than you earn.

Look no further.

This is the first major objective that you must achieve as soon as possible.

Why should I do this?

Because what makes you rich is not the money you earn.

What makes you rich is the money you keep and invest.

And in order to keep money, you have to spend less than you earn. Period.

Don’t confuse need with desire

How can you sort through your expenses and reduce them?

There are several ways to spend less. But above all, there is a basic principle: don’t confuse need with desire.

In reality, there is very little that we really need.

The only things we really need are food, shelter, clothing and health.

The rest (a plasma TV, an HD audio-video system, a state of the art phone with a broadband subscription, fashionable clothes, a nice car, … ) is not part of the needs. They are desires, desires.

Of course, there are some essentials, such as a car or Internet access, which are part of the basic needs of our modern society. But know how to distinguish the tool, really necessary, from the superfluous and decorative, useless.

When making a purchase, ask yourself these simple questions:

  • Is it a real need or just a desire, a craving?
  • Can I postpone this purchase to see if it is really necessary?
  • Can I moderate this expense by buying only what is necessary?
  • Can I get this item cheaper elsewhere (second hand, loan, …)?

Of course, you have the right to afford pleasure purchases. You have earned this money, you have also earned the right to indulge and relax.

But if you act too often like this, you risk not reaping the fruits of your efforts and not being able to secure your daily life and your future.

The previous few questions will help you to master this temptation.

Pay yourself first

Probably the best advice I’ve ever been given on personal finance.

Before you pay anything or anyone else, pay yourself first.

Paying yourself first means withdrawing money from your current account to build up your precautionary savings and investments.

  • Withdraw a portion of your salary and other monthly income as soon as it is available in your accounts.
  • Set this amount aside in a savings account.

This is not yet an investment. It’s just savings.

But it is the most effective way to save and then invest regularly and sustainably.

Initially, it may not be a large sum.

No problem.

The important thing is to start and never stop. Then, if you can increase the amount, do it at your own pace. The budget we talked about earlier will help you do this.

How do you use the money you set aside every month?

Well, there are two ways…

Do you set up a precautionary fund

A precautionary fund is one of the money that is readily available to deal with the unexpected and hard knocks.

It is also known as precautionary savings.

There are expenses that you can plan for:

  • the unavoidable expenses that come up regularly: rent, water, electricity, food, …
  • small leisure expenses that you allow because you need to know how to relax and enjoy yourself: restaurant, cinema, …
  • gifts and projects : the next holidays, a birthday, …

All these expenses are already included in your budget (him again!).

And then there are all the expenses that you can’t foresee: the car that breaks down, the roof that blows away in the wind, …

Good money management also means planning for unexpected expenses. And you can achieve this through precautionary savings.

This advice and the previous one complement each other:

  • You pay yourself first: you take a share of your salary and other monthly income as soon as it becomes available.
  • With this money, you start by building up your precautionary savings for the unexpected.
  • When your precautionary savings are built up, you can start to really invest or build up the financing for a project (housing, …).
  • keep your expenses and standard of living under control if your income soars

A few questions that come up regularly about precautionary savings…

When do you build up your precautionary savings?

There’s no easy answer. It depends on you, your situation and your need for security. It is often advisable to set aside between 3 and 6 months of monthly expenses. And if you need more, do it right! But after one year, you can consider your precautionary savings as having been built up.

What to do when you use some of your precautionary savings?

You can already start by congratulating yourself!

I know a lot of people who have been in trouble because of the lack of such savings. Like me several years ago. But that’s not the case with you: you have avoided this pitfall with mastery. Bravo!

Then you’re putting money back into your precautionary fund. You were able to create it. You will be able to replenish it again, with the same methods.

What do you do when your precautionary savings are built up?

Then you go to the next step: you invest.

Precautionary savings help to secure your daily life and your future. An investment allows you to prepare and secure your distant future. But that’s a completely different subject…


It’s a long way to achieve financial independence, or a certain “financial carelessness” (in the sense of “not having to worry anymore”). And there is no magic bullet.

The first step is knowing how to manage your money well.

The 3 principles in this article are the perfect starting point:

  • Take full responsibility for your finances
  • Make a budget
  • Pay yourself first

You may be disappointed because this article does not propose a precise method to follow. But the principles presented are both essential and timeless. They were essential 30 years ago. They will still be essential 30 years from now. And they are effective, no matter what organization or budget you choose.

Follow them and you’ll have sound finances.