Starting Blocks of Personal Finance

Donovan Vogel
5 min readNov 23, 2022
Image courtesy of Ibrahim Boran on Unsplash

Personal finance is an important part of not only managing your day-to-day financial needs but also planning for your financial future.

The sooner you understand the basics, and get a grip on personal finance, the better your long-term financial potential will be for things like investing or planning for retirement. Let’s begin!

Income and Expenses:

Income is what you make.

Expenses are what you spend.

When income > expenses you have a surplus.

When income < expenses you have a deficit.

There are 3 ways to make up a deficit:

  1. Earn more money
  2. Spend less money.
  3. Borrow money (*do your best to avoid the third option)


A budget is simply a spending plan.

Most people see budgets as restricting, but this is the wrong mindset to have.

Budgets give you permission to spend your money.

They show you exactly what you can afford, and what you can’t right now.

Assets and Liabilities:

Assets put money in your pocket.

Liabilities take money out of your pocket.

Common assets are:

  • Stocks
  • Bonds
  • Real Estate
  • Cash

Common liabilities are:

  • Car
  • Debt
  • Designer clothes

In order to master your finances, increase your assets and decrease your liabilities.

Time Value of Money:

$1 today is worth more than $1 tomorrow.

This is because of a few unique factors:

  • Inflation
  • Liquidity
  • Opportunity cost

$1 today is liquid, meaning I can invest it and increase its value faster.

This allows it (you) to keep up with rising inflation


Surplus cash you need in the short term (1–3 years) should be saved.

This includes your:

  • Emergency fund
  • Vacation fund
  • Car fund

You need to keep this money in a savings account. Preferably a high-yield savings account (something earning you ~ 3%-4% per year).


Surplus cash you need in the long term (10–20+ years) can be invested.

This can be in:

  • Stocks
  • Bonds
  • Exchange Traded Funds (ETFs)
  • Index Funds
  • Real Estate
  • Bitcoin/Cryptocurrency

Because you’re giving up more liquidity, your return should be higher in order to compensate (~8% — 10% +).

Compound Interest:

Compound interest is when your interest earns interest. Essentially, your money is earning money too. It’s the 8th wonder of the world!

A 5% gain on $100 is $105.

A 5% gain on $105 is $110.25.

The $0.25 is from compound interest.

Change/increase the numbers are add more zeros and you’ll start to get the bigger picture.


Here’s a quick breakdown of what you need to know:

Taxable income = money you must pay taxes on.

Deductions = expenses that reduce your taxable income.

A tax refund = you paid too much in taxes for the given year.

A tax credit = a dollar for dollar reduction of how much taxes you owe.

Fore more information or questions on your taxes/current tax situation, please speak with an accountant or CPA.


Transportation is one of the biggest expenses you’ll have.

Trust me I just purchased a 2019 Nissan Sentra last month in the beginning of October. After I was driving a Toyota Camry passed down to me in our family for 13 years. The car market is a fascinating place right now, that’s all I will say!

Before buying a car, ask yourself these four questions:

  1. How will you afford and pay for the car?
  2. How long will you keep/use the car?
  3. What kind of vehicle do you really NEED?
  4. How often will you drive, and how far (how many miles) each year?

For more information on cars and transportation, feel free to speak with a great car salesperson.


Housing is usually going to be your biggest and most balling expense.

Here’s a good rule of thumb for how much you should spending on housing (owning or renting):

  • Homeowners can spend up to 36% of their gross monthly income.
  • Renters can spend up to 28% of their net monthly income.

*Don’t exclude taxes and insurance!

My partner and I currently rent, so for more information on homeownership, or if you’re looking to buy a home, please speak with a licensed realtor and real estate professional.


Insurance is transferring your risk to someone else (typically a large insurance company or an individual).

Here are the main types of insurance out there for which you can get yourself or loved ones coverage for:

  1. Life
  2. Auto
  3. Health
  4. Renters
  5. Homeowners
  6. Disability

Everyone should have some type of insurance in those main areas. Yes, there are other types of insurance as well but those are for specific/special instances.

For more information, don’t hesitate to reach out to me or speak with a licensed insurance professional who specializes in those specific areas/niches.

Retirement Planning:

Retirement planning is about funding your life when you can’t work and don’t want to work anymore.

This involves retirement income goals and what’s needed to achieve those kind of goals.

Retirement planning also includes identifying income sources, sizing up your expenses, implementing a savings program/automated system, and managing all of your assets and risk tolerance.

To do all of this, you must know:

  1. Expenses in years of retirement.
  2. Duration of your years of retirement.
  3. Return on investments (ROI) during your retirement years.

You won’t be exact, but it’s a good guide and starting point.

People typically put cash into/invest in the following types of retirement plans or funds:

  • 401(k) which is a type of employer sponsored savings/retirement plan which you as an employee contribute money to (a certain %) and your employer may match money too.
  • 403(b) plan
  • A traditional IRA
  • Roth IRA
  • Pension plan (which your employer funds and invests in)
  • Real estate

For more information (because I can talk about this topic(s) for days upon days), please reach out to me. Along with a financial advisor, Certified Financial Planner (CFP) or a Fiduciary.

Again, here are the basics and starting blocks of personal finance:

  • Taxes
  • Saving
  • Investing
  • Housing
  • Budgets
  • Insurance
  • Retirement Planning
  • Transportation
  • Compound Interest
  • Assets and Liabilities
  • Time Value of Money
  • Income and Expenses

This is only the tip of the personal finance iceberg. If you want me to dive deeper in the future to any of these topics, (or specifically something that interests you/you want to learn more about) please let me know which resonated with you.

My Very Best,

Donovan Vogel



Donovan Vogel

Philadelphia based teaching financial literacy | Prospering all other hours | Writer | Lifter | Reader | Traveler | Freedom & Wellness