Last week, we spoke about the basic concepts you need to understand to make good financial choices. We recap those this week, because understanding these concepts will change the way you think about your money. To recap, they are:

• Interest
• Inflation
• Compounding
• Assets
• Indices and index-tracking products

We also discuss the different types of expenses that will impact how you spend your money. They are:

• Unavoidable expenses that keep you alive
• Expenses that can be avoided in the short-term, but will ensure your future financial security
• Expenses that will make your life easier
• Fees to be part of the formal financial sector. These are unavoidable

This week, we discuss how each of these expense categories will affect your spending in different phases of your life. We start with those who have no financial responsibilities and very few expenses. Then we talk about how to handle debt and finally we deal with family obligations.

The TL;DR version of this episode is:

• You want your bank statement to reflect your values, so you have to start by asking yourself what you want your money to do for you. That can be traveling the world and discovering new species or building a home for your 12 kids.
• Everyone needs the same financial base, which includes:
  • An emergency fund equal to at least three months' expenses
  • A retirement annuity
  • A tax-free savings account
  • Dread and disability cover
• If you have dependents, your financial base should include life insurance until you've accumulated enough assets.
• You should avoid debt as much as you can and pay back unavoidable debt as soon as possible.

Kris