Good Advice On How To Better Manage Your Own Money

Waialae Golf CourseFor two decades I've been managing my own money. It all started when I saved up $3,000 from random minimum wage jobs to open up an online trading account under my father's guidance. This was in the early 90's when Charles Schwab first came out. One time I bought a company which I thought sold software, but was actually a bank! Clearly, I had no idea what I was doing. Thankfully, when you start off with only $3,000, the most you can lose is $3,000.

When it takes you several summers at $4 an hour to squirrel away $3,000 only to see half of it vanish in a matter of months due to poor investment decisions, you kind of curse the world. But, you also learn from your mistakes so you can minimize the experience of feeling that dull knife slicing through your financial security. Losing money early on taught me the importance of managing money.

Although the financial crisis of 2008-2009 certainly gave my net worth a massive uppercut to the chin, I didn't panic. I just started this site and have more than doubled my net worth since then as everything has more than recovered as well. I credit net worth diversification to surviving the crisis and not jumping off a bridge when the S&P 500 hit 666. I also credit my childhood stupidity.

In this article, I want to provide the best advice on how to manage your own money. We will talk about fundamental principles as well as mental states you should accept if you want to continue growing your wealth over the long term.


* You are not a genius. If you think you know everything, you have no idea. By definition, most people are average. I was overly confident about my investing and money management skills in 2007. After all, I worked in finance, graduated magna cum laude, got an MBA in finance, saved over 50% my after tax income, and accumulated a large nut before 30 years old. Who cares? I still lost around ~30% of my net worth in 2008 because I had too much in stocks and real estate. If I was smart, I would have sold all my property by 2007, shorted equities, and loaded up on gold and bonds. But I didn't, because I was greedy and couldn't recognize that trees don't grow to the heavens forever.

* Bad things will always happen. Whenever you have a particular win in your finances, such as scoring a cheap rental property with a 8% rental yield, or reaching a savings milestone of $100,000, expect something bad to happen soon after. Your first tenant might end up being a deadbeat who doesn't pay on time. You end up buying something with your savings that turns out to be a financial albatross because you lose your job. You might simply get robbed. There is a reason why so many lottery winners and multi-millionaire athletes go bankrupt. Part of the reason is due to money mismanagement. Another part of it is that the more you have, the crazier you get, and the more you have to lose. Once you expect bad things to happen, you become mentally ready for anything. Here are some things to do if you receive a financial windfall.

* Feel blessed every day. If you are privileged to live in a developed country with a developed legal system, solid infrastructure, and a free society you have the ability to make more money if you so choose. Do not let pessimists with defeatist attitudes get you down. If scores of immigrants who don't even speak English can strike it rich in America, why can't those who are born in America and speak English fluently? If you do not believe in yourself, nobody else will believe in you. If you still think life is fair, take the next flight to Calcutta, India and tell me why your life is so tough again. I guarantee you will stop feeling sorry for yourself, stop over eating, and start believing that you can make things happen for the better.

* Someone will always have more than you. Don't worry. As soon as you get that 50 foot boat, someone will berth next to you with a 75 foot boat. It is an inevitability that someone else will be smarter, better looking, richer, and seemingly happier than you. You're either going to get jealous, or get inspired to figure out what allowed them to succeed. At least once a month, I go jogging around Pacific Heights, the most expensive area in San Francisco to gain some inspiration. I marvel at the mansions owned by Larry Ellison, Gap founder Don Fisher, and many more. The list goes on and on about people who created, took risk, and succeeded. I use their success as motivation to work harder every single day.

* It's better to make less money than lose money. This is a conservative way of thinking which is often compared to “playing not to lose, rather than playing to win.” Those who are able to manage their money the most effectively are the ones who minimize their losses. If you lose 50% of your money, it takes a 100% return to get back to even. There were people who made fun of me for investing 35% of my wealth in 4.2% yielding CDs during the bull market. They weren't making fun of me when some lost 60% to 100% of their net worths given they were 100% to over 100% tied to the markets due to margin. People talk about losing out on inflation all the time. That's true, but you'd much rather have an erosion of buying power rather than a decline in principal.

* Your actions will make a difference. There are those who think hope is a strategy. Hopefully you are not one of them. Small actions over a consistently long period of time make a tremendous different in the amount of wealth you can create. Examples include: 1) raising your savings rate by 1% every month until you cry Uncle, 2) refinancing your mortgage every time rates are at least 0.5% lower to save tens of thousands of dollars in interest, 3) reading a new book on money management every six months and 4) not eating so much sugar so you don't die early. Do not bury your head in the sand and think everything will be OK. Take action! I'm so thankful there are now free wealth management tools like Personal Capital that have allowed me to easily track my money and optimize my finances. It's almost unfair the advantages we have today vs. folks from yesteryear. We'd be foolish not to take advantage of all the internet has to offer.

* Nobody cares more about your money than you. Get on your money like a gorilla on a banana because you care more than anybody about your finances. Not even your handsomely paid financial adviser cares as much because s/he is busy juggling multiple clients. Always have a little devil on your shoulder questioning whether you are making the right investment or spending properly before you do.


Everybody should be saving at least 10% of their income a year, and preferably MUCH more. Once you start getting the ball rolling, it's pretty easy to continue. The goal is to continue growing your savings while maximizing your returns. If you want to know whether you are on track, here's a realistic post on how much savings you should have at various ages.

I suggest people diversify their liquidity for the following three reasons below:

1) You need to protect yourself from yourself. When all your cash is sitting in one account for you to easily withdraw, you have a greater tendency to spend your savings on things which are not necessary. I am a prodigious saver, so when I started seeing my money market account grow to over six figures, I started to waste money on things like cars and fancy watches. It was as if my savings was burning a massive hole in my pocket!

2) Each financial institution has different strengths and weaknesses. Some might have more readily accessible ATM machines. Others might have higher savings rates. While still others might provide better concierge service. Try as banks might, they can't be all things to all people. It's important to spread your money out, especially if you have more than $250,000 to maximize your returns.

3) The FDIC only guarantees your money up to $250,000 per individual. It's not a good idea to put $1 million in savings or CDs all with one bank because you never know when economic Armageddon could result in another bank run.


1) The Operationally Efficient Bank. The first bank account is for working capital needs, namely where your paycheck goes, and where you pay all your bills. This bank has the best tools for bill pay with the most branches for accessibility. Citibank is a good example of a ubiquitous bank with good online tools. Unfortunately, their savings rates are paltry, so I do not hold much in terms of savings here. Your operationally efficient bank is where you are constantly “Going Broke.” In other words, you run a tight ship of having just enough to pay all your bills, and have nothing else left over.

2) The Freedom Bank. The second bank is strictly for long term savings via money markets and CDs. This bank may not have as big of a footprint, but it doesn’t matter because you don’t need to access money from this bank. That’s what bank #1 is for. Due to lower overhead, Bank #2 provides better long-term savings rates. Do not tempt yourself by creating a checking account with your Freedom Bank. You want money to easily come in (ever notice tellers don’t require IDs when depositing?), but very difficult to go out.

3) The Lockdown Bank. 
The third and final bank is for your debt, namely mortgages, personal loans, and car loans. By loading the majority of your debt with one bank, you compartmentalize your debt which may relieve you of any mental stress related to this debt. It’s easier to tackle your debt at one bank and employ the “Snowball Method.” Furthermore, from the bank’s point of view, you may get better rates given you are such a good debtor customer. You’re buying debt in bulk from Costco if you will, and in normal times, they want your business and will give you discounts. During crisis times, it’s also good to have all your debt in one place because your bank will do their best to work with you, especially if you live in a non-recourse state where they can't go after your other assets if you default on your mortgage!

If you've got one bank that can do it all, then great! I don't know one that exists, but at the very least, consider one bank for your operational transactions, and another bank to that provides the best rates for your savings and loans.


You need a budget because you need to know where your money is going. Have you ever withdrawn a hundred bucks from the ATM machine only to peak into your wallet a days couples later and wonder where the hell most of your cash went? The same thing happens on a much grander scale with your finances if you do not create a budget.

* Create a budget. If you don't have Excel, use a Google docs spreadsheet. If you don't leverage free tools like Personal Capital to keep track of your money, then write everything out by hand! Make sure you list every single expense you incur per month, give it an extra 10% increase for cushion and then add up all your incomes. Chances are, the number of line item expenses way outnumber your income. On trick is to try and match the number of income line items with the number of expense line items. If you can get the ratio to two expense items for one income item, you are doing a great job!

* Stress test your budget. You've got to stress test your budget by creating a worst case scenario where all your income goes to zero and your expenses increase by 50%. Chances are this will not happen, but you've got to figure out how long you can survive if this happens. It's all about calculating your expense coverage ratio. If your expense coverage ratio is less than 1 year, then you need to start cracking on contingency plans and developing alternative income streams.

* Do a little dreaming. On the flip side, you should create some X Factor line items in your income and asset category which could happen. No, winning the lottery should not be a positive X Factor. I'm talking about things such as: side business, inheritance, second jobs, company sale, private investments, and so forth. It's always good to do a little dreaming if you do get a nice boost in income. Now pretend what are the first three things you would do if your dreams came true. Make sure your spending does not surpass your income boost. Otherwise, you'll stay stuck in neutral.


Everybody's risk tolerance is different, so it's important to understand what you're willing to handle. I only invest about 35% of my net worth in the stock market, because my pay and career were already levered to the fortunes of the stock market. Now that I'm an entrepreneur with little correlation to the stock market, I'm increasing my stock market allocation. Besides, I'm pretty sanguine about the market's outlook.

* Ask yourself how much you are willing to lose. I wasn't willing to lose more than 35% of my net worth in the stock market hence why I didn't allocate more than 35% of my net worth in equities. At the same time, I wasn't willing to lose more than 30% of my net worth in the real estate market either. Real estate can be a riskier animal in down times due to leverage. If everything went to hell, I knew I would at least have roughly 35% safe in FDIC insured CDs and savings accounts.

* Aggregate all your investments. If you have multiple accounts like me, but only pay attention to a few of them for whatever reason, you are not properly rebalancing your portfolios to adjust for risk. I have a 401K and a Fidelity account. My 401K is more long-term, while my Fidelity portfolio is more speculative in nature. Furthermore, I have deferred company stock and a couple private equity investments ranging from alcohol to real estate. Without aggregating all my investments, I am only guessing at what the right exposure should be. This is why leveraging the internet makes a lot of sense. Before you can effectively manage your money, you've got to make sense of your money.

* Always continue learning about yourself. You will find that your attitudes towards risk change as you get older. Some people nearing retirement get so afraid of losing money they put everything into annuities and CDs (Related: CD Investment Alternatives). While other people might decide to take on more risk because they have more money. Children or a non-working spouse might also play a huge role in your risk tolerance. Whatever the case may be, find your own congruency and invest accordingly.

* Always continue learning about your investments. The reason why I recommend everybody rebalance at least twice a year is because it forces you to learn about your investments. Lots of things change throughout the year. There are quarterly earnings reports, political regime changes, and loads of economic data that come out that alter risk parameters. If you are a do-it-yourself type of investor, it's up to you to stay on top of your investments. Listen in on the management calls, follow their social media presence online, set up a Google alerts about your biggest investments. There are a lot of landmines in this world to avoid!

* Keep your mind active in finding new ideas. How many of you actually spend at least 30 minutes a week thinking about new investment ideas? Do you put two and two together when every single woman you see on the street starts wearing Lululemon yoga outfits? Do you automatically think of shorting municipal bonds with Obama as President given he wants to raise taxes? There are money making ideas right now. You just have to spend some time looking, or associating yourself with someone who is looking!


One of the good problems of building wealth and following my advice is that you end up with a diverse amount of money accounts. You've got one of your rental property mortgages with one bank because they were running a special to boost their market share. You've got three CDs with another bank because they were providing higher than market rates to win more capital. Meanwhile,  you've got an investment account open with another bank because of their diverse array of structured note products.

The internet has made it easier than ever to move capital to where you will make the highest return. It's easier than ever to shop around for the lowest mortgage rates, car loans, and credit cards as well. Keep track of your money by opening up a free account with Personal Capital where you see all your money in one place. Personal Capital helps you track your net worth, minimize investment fees you probably have no idea you are paying, and managing your cash flow and budget. There's no better free money management tool out there on the web that keeps on innovating.

They came out in 2H2015 with an amazing Retirement Planning Calculator that produces realistic results using real data and Monte Carlo simulations. I'd definitely sign up and run your numbers.

Retirement Planning Calculator
Sample retirement planning calculator results

After a while, it becomes a game to see where you can maximize and make the most. Eventually, you'll get to the point where money becomes less of a focus because you know in great detail how your money is working for you. At this point, you'll have all the time in the world to spend more time on things most important in your life.

Updated for 2019 and beyond

38 thoughts on “Good Advice On How To Better Manage Your Own Money”

  1. I want to improve my financial situation this summer. Thanks for explaining that it would be smart for me to get a professional to help me improve. That does seem like it would be best because I am pretty young and don’t know much about financial planning.

  2. When it comes to investing you have got to banish your doubt and remove your fear of failure. I lost a lot of money in the stock market, however I had several chances to redeem myself but my fear of failure got in the way. I had an opportunity to buy Citi Group at $3 and at one stage opened a position for $20,000 with a put option as protection but then decided against it due to fear, had I invested a lot of my problems would be solved now. I think keeping a lid on all your emotions makes you a better investor. Thanks for sharing your ideas, I’m really starting to like this blog.

  3. This is an amazing post! Some things are refreshers but I am also going to start paying attention to things that I usually ignore that could be tellers on how and where to invest next in the financial markets (if I only paid extra attention to what was going on around me). No one should ever be satisfied with their successes. We should always strive for more. You couldn’t have said it any better. I usually drive around rich neighborhoods too to inspire and motivate myself. I thought it was only me!! Thanks.

  4. Your post is inspring. I really enjoyed the stress test your budget and a little dreaming. We can all use a little push and motivation to improve.

  5. Anton Ivanov | Dreams Cash True

    Outstanding article – a definite must read for anyone wanting to take control over their finances and begin working toward financial freedom! Although you touch on it in many of your points, I would suggest adding “Get Organized” as a separate piece of advice. When you organize your finances, you are able to clearly see exactly what is happening with your money and are likely not going to find any nasty surprises. Organization definitely helped me tremendously.

  6. My million dollar question: I am in the AMT due to a high salary, but I’m pretty sure that if I worked less (and therefore escaped AMT), I would come out ahead; both money-wise and time wise. How strange is that??

  7. Wow, you really covered everything, didn’t you Sam? I love the idea of different levels of liquidity. I have my checking accounts, then less-liquid savings accounts (not attached to a card), then online money Market close to 1% that takes a few days to get to, then my retirement accounts that are on lockdown.

    And I did re-balance my 401k this year thanks to your post earlier. I feel much better about my position, especially after consulting with a few professional CFP’s :)

    I LOVE managing my money. I love telling it where to go (hence my blog), I love finding better places to stash it, I love trying to make more and I love using it wisely. If you think of yourself as the CFO of You, Inc. (stole that from Dave Ramsey), then you might have more of a sense of responsibility about your finances. Being an active money manager is an awesome thing to challenge yourself on where you reap all the rewards, and like you said, it can even be fun.

    1. Best to be thorough right Jacob? If you can sleep well at night with your stock positions, that’s very important because otherwise, investing becomes really counter productive!

      Makes sense that those who write about money are most into managing their own money!

  8. Love me some spreadsheets. I just got tired of updating them, especially after free software like Personal Capital, Mint, and others just do it for me now and send me an email :)

  9. This is a great post Sam, one I wish everyone would read (and remember, and act on).

    When it comes to finances, so many seem to just have a fixed idea in their head and refuse to adjust. I know so many that don’t change their portfolios as their life circumstances change, or as they get older. They are also hampered by that fear of “what if I sell and the stock takes off”. (Ignoring the fact the exact opposite could happen and they could be stuck with a worthless stock.)

    Life is always changing, and attitudes need to do the same. Can be easier said than done.

  10. Fantastic post! I’m going to have to bookmark this one and come back to it, lots here.

    While multiple things resonated with me here, one in particular that jumped out is the reality that nobody cares more about your money than you do. Very true.

  11. Don’t forget to add Money Manager EX to the list. It’s free and it also graphs/provides charts over your financial situation. I like that feature and I don’t have to run any reports in order to be able to see where my money is going.

  12. I used to have all of my money tied up at one bank thinking that was the smart thing to do. The more I got involved with my finances I realized I was losing out on better rates and service just for the convenience of having everything in one place. Now I have multiple accounts across several different banks and it’s worked out well for me. Solid post Sam. Lots of great advice!

  13. I like how you split your banking into categories depending on the liquidity requirements, and spreading across banks to keep under the $250K FDIC insurance limit. I’m leery of leaving significant deposits in a bank both from a currency devaluation perspective as well as the failure risk. What’s your hedge strategy if US bank depositors get a haircut similar to the recent Cyprus debacle?

    1. My “hedge” is owning foreign assets – stocks, real estate, and some gold. I pray the government doesn’t screw us like Cyprus, but if they give us bank shares in the event of a crisis, who knows, the bank shares might double or triple in value over time given they’ll be swapped for our cash at depressed prices.

      I hope to be able to recognize when things are way too frothy and move my assets before the crash occurs!

      1. “Before the crash occurs”. Is a crash coming? That sounded like a prediction, or are we just thinking out loud? I hear the Obama administration is changing the way GDP is calculated. The end result will of course give us a much more positive GDP. Same as they did with the CPI when they excluded things like fuel and food. The joke is, CPI is the price of all goods and services consumed, minus the ones that went up in price. Hey, as long as everyone is pretending that the fundamentals are sound, the economy seems to keep rolling along, backed/subsidized by the $84 billion/mo Fed injection. I’m wondering what the pre-planned catalyst is going to be that leaves us all holding the bag. Uhhhh, I’m just thinking out loud.

        1. It’s just a general term, as there will ALWAYS be crashes, just like there will always be bubbles.

          There’s opportunity everyday. Just need to be aware and look for them.

  14. Great advice! As an old(er) person, I tend to want to simplify my life much more. I do many of the things you suggest, but certainly not all of them. I tend to think long term so volatility is less of an issue. I think it is very important to have a deliberate approach in personal finance, but it has to be your own.

  15. The First Million is the Hardest

    Wow, that’s a post I’m going to have to read more than once to make sure I didn’t miss anything!

    The one area that really stuck out to me as something I don’t focus enough on is finding new investment opportunities. I have a ball tracking the investments I already own, but I don’t spend nearly the same amount of time thinking/researching about the next opportunity for my money.

  16. Giddings Plaza FI

    Sam, I believe you invest in P2P lending? Given that, and owning investment property, what’s your opinion: if I can ONLY do one OR the other, which makes more sense, and why? To do P2P requires a min of $250K in assets. If I buy an investment property, I’ll go under that amount, which is why I need to do either / or. I’ve been working on numbers for both, and am looking at things like tax rates for both types of income, property tax rates and related investment property costs, reliability of income, amount of income. What am I missing, do you think, in order to make a good decision?

  17. I’m on the defensive side now as well. I have a 10% trailing stop order on most of my equity because that’s all I’m willing to lose at this point.
    I also sold off all the equities in my IRA now. I’ll get back in at some point, but I’m already happy with the gain for this year.

    1. Dividend Growth Investor

      Ouch, so what if your stocks fall by 12%, and then recover? If you have cash you can sell cash secured puts.

      I do have a few stocks with very high gains that are overvalued, but I am hesitant to pull the trigger. That’s because their business is going well, and would probably be fine in 20 years. Also, if you look at future earnings ( within 1- 2 years) they look fairly valued. The other reason to be hesitant is that I do not see as many good companies to replace those overvalued stocks.

      My one issue is that I do not have much in fixed income. I am considering working on this over the next several years.

  18. This is quite the extensive list Sam, and great insight as always. I love your sentiment on continuing to learn about your investments. Too many retail investors take buy and hold to an extreme of buy and forget. That philosophy will almost always end you up wallowing in losses. Losses are inevitable, but by staying on top of them you can mitigate them many times.

  19. Wow, this is the most comprehensive post I’ve seen on managing your money. Do you use Mint. Dont you think it has a role to play for most people?

    1. I use Mint because my financials are simple. If they were complicated, I would use Personal Capital which looks very comprehensive. Yes, It plays a role in budgeting and tracking income and expenses. The saving part is still up to us.

    2. Dividend Growth Investor


      This is an awesome post. I actually have several brokerage accounts. I stop adding money to a brokerage account when my contributions reach $100,000. I then withdraw dividends and put them in the next account/s I am building up. This is because I want to be under the SIPC limits, and I also expect my accounts will increase in value over time.

    3. From what I can tell, Mint does a great job for basic budgeting and tracking as well. I just am not a user, hence I can’t recommend them for certain. I am a Personal Capital fan because I’ve got around 25 investment related accounts to keep track of. My budget is also pretty much set.

  20. This is the best advice ever. So many money magazines and websites give a management by recipe type of advice without pointing out real life pitfalls. Especially true, for me least, are the two segments entitled ” you’re not a genius” and “bad things will always happen”. In the eighties, I decided to start a small payphone side business. I attended seminars at a convention here in Las Vegas. It all seemed so easy. I purchased five of the money machines (payphones), got a license and tax permit and set out to get rich. I listened to the advice of industry experts and placed them in high density, low income areas. I monitored their progress remotely by computer. I could see how much was in the coin box and more importantly, how many long distance calls were racking up with my operator service provider. At the end of the month, I declared myself the smartest person in the universe! All my locations were winners.

    I got a call one morning from the management of a HUD apartment complex I contracted with. They asked that I come recover the pieces of payphone laying in their parking lot. Hmmmmm, low income neighborhoods may have drawbacks? Undaunted, I ordered parts, fixed the unit, and waited until a month later when I was asked to pick up the entire payphone that had apparently been tied to the back of a vehicle and dragged around the streets. Slightly daunted, I replaced the unit after welding a steel cage around the coin box to give it a look of invincibility. HUD, however, now wanted me to provide a million dollar liability policy on the phones. Someone might hurt themselves smashing the crap out of it or hurt their foot stepping on the jagged broken pieces. Teetering on being officially daunted, I endured a year in which my other locations met a similar fate. Broken hand units, gum on the receiver, cola in the keypad, you name it. Each repair meant spending my off time in seedy neighborhoods with my attention buried in a circuit board while hooligans gazed at me and planned my demise.

    I gave it a year. Expenses outweighed profits. Aggravation overcame the initial elation. I was daunted……so very daunted. I sold the equipment to a competitor who had the juice to contract with the Vegas hotels and convenience stores where the phones would be less likely to be chained to the axle of a pickup truck and drug mercilessly around the streets in order to pilfer the pocket change from them.

    Indeed, I was not a genius and bad things did, in fact, happen.

    Life is so good today, I can look back on the experience fondly.

    Steve H
    Las Vegas

    1. Steve, what a great story! Thanks for sharing. This is why our government needs to make things EASIER for entrepreneurs and folks who want to start a business, not harder with so many tax forms and annual dues.

      You took a risk, so why should you experience even more roadblocks? Real life happens all the time. Extrapolating good fortune to the stars is never a good idea.

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