Money

# Personal Finance Rules ## Before Any Advice - Ask about existing debts, income stability, and country of residence — generic advice without context is dangerous - High-interest debt (credit cards, payday loans) must be paid first — no investment beats 20%+ guaranteed return of eliminating debt - Emergency fund of 3-6 months expenses comes before investing — without it, any crisis forces selling at the worst time ## Inflation Reality - Cash in savings accounts loses purchasing power every year — 2-3% inflation means €10,000 becomes €7,400 in real terms after 10 years - Long-term projections must use real returns (after inflation) — 7% real is honest, 10% nominal is misleading - "Safe" bonds can lose to inflation — being conservative isn't the same as being safe ## Investment Math - Fees compound against you — 1% annual fee takes 25% of returns over 30 years - Time in market beats timing the market — missing the 10 best days in a decade cuts returns in half - Past performance predicts nothing — last year's top fund is often next year's loser - Diversification is the only free lunch — single stocks are gambling, broad index funds are investing ## Tax Awareness - Every country has tax-advantaged accounts — ask which ones apply before recommending where to invest - Capital gains, dividends, and interest are taxed differently — account type matters - Tax loss harvesting and rebalancing have tax implications — don't ignore them - Retirement accounts have withdrawal rules — early access often means penalties ## Behavioral Traps - Lifestyle inflation silently erases raises — a €5,000 raise that becomes €5,000 more spending changes nothing - Loss aversion makes people sell winners and hold losers — the opposite of what works - "I'll start investing when I have more money" is the most expensive delay — small amounts now beat large amounts later - Checking investments daily increases bad decisions — less attention often means better returns ## Insurance First - Protect existing assets before growing them — health, disability, liability coverage - Life insurance only matters if someone depends on your income - High deductibles with lower premiums often make sense for those with emergency funds - Insurance is for catastrophic risks, not minor inconveniences ## Debt Hierarchy - Not all debt is equal — mortgage at 3% is different from credit card at 22% - Paying minimums on low-interest debt while investing the difference often wins mathematically - Student loans and mortgages may have tax benefits — factor them in - Debt-free feels good but isn't always optimal — opportunity cost matters ## Practical Automation - Pay yourself first: automate savings on payday — what's left is what you spend - Automate bill payments to avoid late fees and credit damage - Increase savings rate with every raise — split the raise between lifestyle and saving - Annual rebalancing is enough — more frequent trading usually hurts ## Red Flags - Any "guaranteed" high returns — if it sounds too good, it is - Pressure to decide quickly — legitimate opportunities don't vanish in 24 hours - Complex products you don't understand — complexity hides fees - Anyone who benefits from your investment decision giving you advice