Basics

Let’s start off with the basics of personal finance.  
 
Income vs. Expenses
 
Assets vs. Liabilities
 
In general, to get ahead in life we want our income to be greater than our expenses and our assets to be greater than our liabilities. 
 
Income for most people comes from working at a job.  The time we spend gives us a weekly, a bi-weekly, or a monthly paycheck.  Other forms of income include methods like rent, dividends, interest, royalties, and business profits. 
 
Expenses are everything we spend our money on.  The basic expenses are food, water, shelter, clothing, phone, utilities, and transportation.  The list of additional expenses can vary including items like entertainment, vacations, gifts, etc.
 
Assets are items that add to you total net worth.  These can include items like stocks, bonds, real estate (minus loans), and cash.
 
Liabilities are items where you owe money to another entity.  They are mainly debts or payables.  Examples of personal liabilities include a mortgage, car loan, credit card debt, college loans, and auto loans.  
 
In order to move towards financial independence, we need to have enough income to cover our expenses.  With the extra income, we want to pay off the liabilities and add to the assets.  Think of the flow of money starting with income and flowing to expenses, then to liabilities, and finally to assets.  

Why?

For many years, I have been thinking about how we spend most of our time working for someone else.  Many of us only spend a few hours on the weekdays with our family or friends.  We look forward to the weekend to have a little time off before getting back to the grind at work.  Once or twice a year, we take a long weekend or possibly a week off from work.
 
We work for a couple of reasons.  If we are fortunate, we work at a company or a field where we fill a sense of purpose and are productive.  We also work in order to earn income to cover the costs of life for our family.
 
It’s a cycle in which the costsmay fluctuate up or down, though they will not go away.  Therefore, we need to have income to cover the costs of life.
 
For many years, I have been thinking of how to get out of this cycle to spend more time with family and friends and take time off more than the sporadic short vacations.
 
Financial Independence in my humble opinion means not having to work to cover the costs for your family.  In simple terms, it means having a monthly income that is greater than the monthly expenses.
 
This blog will cover practices and ideas that I have used towards getting to financial independence.  Friends who I have shared this with had encouraged me to share this with more people.  I hope this helps you take steps to financial independence.