How To Be Better With Money

A Path To Financial Independence.

Arun Agrahri
10 min readJun 6, 2018

What’s our relationship with Money?

Does Money make us Happy?

Does Money motivate us to do great things?

In the end, money isn’t what we’re after. What we really after are is the economic independence.

But most of us struggle to be better with money. We are afraid to know how are we doing in our finances. It’s like stepping on the scale. We know that we’ve gained weight, but don’t want to know how much. We can’t manage our health if we can’t measure it. The same goes for managing our finances. And when it comes to managing money, everyone has a plan and opinion from budgeting to saving to investing. Until it becomes so complex that it halts the execution.

The truth is that majority of the country can’t survive for more than three months if they lost their job today. And it’s not specific to age, income or financial literacy. Indeed, it’s more challenging for the population with unpredictable income. But the general struggle with managing finances exists everywhere. It typically goes like this — anytime there is a spike in income, we increase our savings. Anytime there is a dip in income or spike in expenses, we quickly run through our emergency fund.

The goal of this blog post is to share a system with tips and concrete actions that enables one to better manage their finances. We will discuss step by step guide to living happier financial lives.

The secret of getting ahead is getting started — Mark Twain

Building an Emergency Fund

The purpose of an emergency fund is to have money in case of an unplanned event like a layoff or medical bill. The easiest way to start is to open a savings account and commit to depositing regularly weekly or monthly. Whenever you have some surplus, put it aside into this savings account. Take it slow and redirect the new income into your savings account. Start by trying to account for one month of expenses and go from there. Don’t go after six months all at once; you’ll soon get discouraged.

Next you want to make it harder to reach this savings account and only use in true emergency situations. For instance, a bank account that’s located in another town or an online account that penalizes for withdrawal. We understand that it’s inevitable that you would need access to this fund. And making it harder to access the account protects it from us defaulting to it.

If you have more debt than your credit, pay down debt judiciously. Once the balance hits zero, allocate the monthly contribution you were paying the credit card company to your savings account. Do the same thing whenever you earn a raise, bonus, or if a fixed cost, like a car loan, fades away.

Finally, don’t force yourself to remember to contribute every month. Automate.

Saving for Goals

Goals take us from struggle to stability, from stability to success. And still, a lot of people don’t get started on goals because of beliefs that they will fail. The key is to start small. Don’t set a goal to lose 20 pounds in a month but set a goal to run for 30 minutes every day. Don’t set a goal to read one book every week but read one blog post every week. Once you achieve the small goals and then build on it for bigger goals⁵.

A journey of thousand miles begins with a single step — Lao-TZU

8 percent of new year resolutions are kept by end of the year⁶. Willpower doesn’t work for most of us. If you have weak willpower, pre-commit yourself. For instance, if you don’t want to eat something delicious & unhealthy that’s better eaten warm, make it difficult by freezing it. Do the same by putting your money with high withdrawal penalty if you think you will withdraw.

1 in 2 Americans have less than $1000 saved while an average American spends $1,000 a year on lotteries³

We all understand the need to save more but we don’t it. Perhaps, this is an overwhelming problem, we tend to just freeze and do nothing. And because of the complexity, we stick with whatever is chosen for us — Tax withholding, Social Security, 401(k) auto enrollments.

Another hurdle to saving for tomorrow, is the complexity. No one wants to do one more checkbox. Germany and Austria are neighboring countries. Germany has 12% organ donors versus Austria has 99% of the population as organ donors. The one more checkbox creates a huge difference in overall adoption of organ donors.

Modern behavioral finance theory aims to remove that extra checkbox from our lives. This is why we have seen several programs that auto-enrolls us in our 401(k), auto-savings that deducts money from your paycheck and increases that by a percent every year. We can further improve savings rate by moving raises, bonus directly to your savings account.

A part of the hurdle is how’s savings makes us feel. Saving sounds like we’re giving something up, we’re losing something today. But we’re not. It’s giving our future self a gift today.

In any moment of decision, the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing — Theodore Roosevelt

If you’re looking for ways to save — checkout curated list of apps to help you start saving today.


Investing to most of us sounds like the right thing to do, a smart thing to do when you have a surplus but also feels very daunting and complex. The general perception around the word ‘investing’ is that it’s about picking stocks, buying them low and selling high. Since most of us don’t have a clue about investing, we return to professional fund managers to invest our hard earned money.

However, none of us know (even experts) which way the economy will be headed in the future. Will there be inflation or deflation? A bull market or a bear?

In fact, among professional fund managers who do this for a living, Of all 203 mutual funds with at least $100 million under management from 1984 to 1998, only 8 managed to beat the Vanguard 500¹. That’s less than 4% odds of picking a winner.

It’s also important to understand the cost of owning a mutual fund. The average mutual fund investor made just over 2.54%. And the average cost of owning a mutual fund is 3.17% per year!² So we put up our savings to invest, take all the risk, and the fund managers made money no matter what happened.

Surprise, the returns reported by mutual funds aren’t actually earned by investors — Jack Bogle

Investing has been around for over a century but why has it not caught up?

The answer is Complexity and it’s the enemy of execution.

Today there are more than 10k mutual funds, 1400 different ETFs and hundreds of global stock exchanges to choose from. That’s a lot of choices.

The other deterrent to getting started with investing is trying to time the market: “buying low and selling high”. A lot of people get burnt out trying to time the market, without protecting themselves. The last thing you want to do is buying high and selling low.

The answer is: instead of trying to compete or beat the market — there is a passive way to win. We need to understand how to survive and thrive in any market condition. There is a well-known principle in investing called DCA, i.e. instead of trying to time the market, we invest a fixed amount on a regular schedule. Thus, you buy the same amount in a bull or bear market.

It is important to protect yourself against all downsides because every investor no matter how smart, is going to be wrong in a lot of cases. Thus, protect yourself for 6–12 months of savings in case you hit a down market.

It is not fair to talk about investing without talking about the power of compounding. Here is the simplest explanation. Say you’ve got one hundred dollars, somehow you’re able to double it every year for 10 years.

After year one, you’ve doubled your dollar to $200.

Year two: $400

Year three: $800

Year four: $1600

Year five: $3200

If you’ve to guess, what do you think your dollar has grown to by year 10?

$102,400. That’s the incredible power of compounding. Of course, this is a fictitious 100% annual return, as the market wouldn’t double your money every year but you get the point. With ~8% annual return, you would double your money every 9 years.

Majority of the investors fail to take advantage of the power of compounding. For example, James and John both twin brothers, both retired at age of 65. James started contributing to a traditional retirement account at an age of 20 with $4,000/year. He contributed until the age of 40 and stopped funding the account but left the money to grow in a tax-free environment at the rate of 10% each year. John, on the other hand, started saving for retirement at the age of 40 and contributed the same amount $4,000/year until he retired at the age of 65. In sum, James the early started, invested a total of $80,000, while John, the late starter, invested a total of $100,000. James, who started early and contributed less end up with $3.2 millions at retirement, while John, who started late and invested more, end up with $470,000 in retirement.

Average American spends $1,000 a year on lotteries. A $1,000 or $2,000 compounded over time could become half a million or more in retirement without spending any time to manage.

If you’re looking for tools to get started in investing — Checkout this Robo-Investing list.


You can be young without money, but you can’t be old without it. — Tennessee Williams

2/3 of the Americans don’t have enough to retire, averaging 25k in their 401k⁴. 1 in 10 who are saving is not saving enough to retire.

With the advance of science and technology, we live longer now on less money. Thus, it’s not realistic to finance a 30-year retirement with 30 years of work and only put 10% of your income aside for retirement.

Only half of the US private sector workforce is covered by any kind of retirement plan at all, and of those are now DIY, take all the risk models. This is a huge friction and becomes yet another checkbox. Employers should implement auto-enrollment under a low cost managed retirement account. We are better off by paying a small fee to a managed retirement account that invests in low-cost ETFs compared to we not knowing and picking a high-fee mutual fund in our portfolio.

Often, we start late in contributing towards our retirement plan. Investing in your future versus pleasuring your present. We are more likely buy a new iPhone than investing in our 401k. The latter has no dopamine effect. Discounting the future self to pleasure present is a natural human tendency.

For motivation, imagine taking a picture of yourself 20 years from now. Without a strong retirement plan, I bet that picture looks sad. Investing in your future, aggregated over many years will produce significantly higher results than any pleasure in the present. We are living in the world of certainty. If we smoke, the likelihood of us getting cancer in the future is high. If you invest in your future, your retirement is safe.

If your employer doesn’t offer a 401(k) — Checkout this Robo-Retirement List.

Financial Independence

Once we’re on track for a successful retirement plan, we can consider working on a plan to achieve financial independence. The core premise of financial independence is simple: Grow your savings to a point at which the returns from your investments will generate enough income to support your lifestyle without having to work.

The question to ask ourselves — what portion of our paycheck we get to keep and how much will we pay ourselves — before we spend a single dollar on day-to-day living expenses? This money that we set aside for savings will become the core of our future financial plan. Don’t think of it as savings. It’s the path to achieve financial freedom.

It’s important to note that this money represents just a portion of what we earn. It’s for us and our family. Start by saving a fixed percentage each pay period, and then invest it intelligently through an automated recurring investment strategy. Over time this will accumulate wealth and enable us to live a life where our money works for us instead of we working for it.

The best way to save is when we don’t see the money in the first place. No bill is more important than contributing to this future fund. When we get paid, always pay our future fund first.

In the end, wealth is not same as income. Wealth is what we accumulate. Wealth is the result of hard work, planning and self-discipline. Otherwise, we can always find a way to spent it and lost it all. That’s the whole secret: earn more, spend less and automate it.

For just $40 a week, a small shift in your spending can save you $2080 each year. With the power of compounding, it can help you realize a huge gain. With 8% annual return for 40 years will net $581,944.



Arun Agrahri

Builder: Products, Teams, Companies. I write about entrepreneurship, team building, and my intellectual curiosity.