It’s not about how much money you make, but it’s about how much money you keep. Money makes the world go round. Do you know that cliché is one hundred percent true? Money makes the world go round and without the money, there would be a lot of uproar among people. Keeping money is an art, and it can be mastered by anyone who is willing to try. All you have to do is follow these nine personal finance rules to manage money better.
9 Personal Finance Rules
Let’s take a look at nine personal finance rules that can help you to manage money better.
#1 Follow a Budget
To manage your money better, you should always follow a budget. But this is easier said than done. It’s very hard to create and stick to a budget when you earn your income from multiple sources.
So how do you stick to a budget when you have multiple sources of income? It’s important that you stay organized so that you know where all your money is going. The first thing that I would do is create a list of all my fixed expenses: mortgage, utilities, food, gas, etc. Next, I would list all the ways that I make money: freelance work, Affiliate income, Ads income, and so on. (If you’re not earning passive income from a blog or Airbnb then this list will be shorter for sure.)
Next to each one of these entries, I would put an estimated monthly amount. This is just helpful if you need to review where your money went after the month has ended. Writing everything down on paper will clear up any uncertainty or confusion you have in your head.
#2 Track Your Expenses
Keeping track of your expenses is never easy. I’ve always had some trouble keeping track of my expenses. I have several different cards (both credit and debit) that I use for different things, which all provide me with a statement each month. Since it’s hard for me to keep everything straight in my head (and even on paper), I pay a fee from time to time for overdrawing my account (especially with the debit cards – yikes!). Tracking expenses is necessary if you want to save money and smartly use your budget, but it can be a struggle to do on your own with the information from each card company. In order to stay organized with my finances, I use Personal Capital – this tool aggregates all of my accounts into one location so I can easily see an overview of my cash flow at any given time.
#3 Use credit cards wisely
Credit cards, when used wisely and vigilantly, can be a convenient and stress-free form of payment for shopping. However, when not used wisely or vigilantly, credit cards can have negative consequences on you financially.
Credit cards are very convenient because they can allow a transaction to take place at any time during the day or night. One might consider using credit cards as a way to pay for items that are needed now. However, if you don’t think you can pay off your balance before the end of your billing cycle, you should refrain from making the purchase.
#4 Start Investing Early
You don’t need to be the best investor in the world, but you do need to start investing early if you want to live a comfortable retirement. If you start early, then you can reap the benefits of compounding interest and grow your wealth faster.
This is a fact, not a personal opinion. The sooner you start investing, the greater financial success you will have in life. Now, this doesn’t mean you have to start investing with a large amount of money or even at a young age. You can invest your time researching the stock market or find other ways to invest that won’t cost anything but your time. Even if you don’t have any money to start investing it won’t matter if you spend time learning about it and practice with free trading tools like a simulated trading account and free stock charts.
#5 Pay off debt as quickly as possible
Having lots of debt is not the best situation to be in. It can make you feel stressed out and depressed, and it makes you want to turn off your brain and hide under a pillow (maybe with some lemons).
So how do you get rid of all that debt? I’m here to tell you just one way to do it: pay off your debt as quickly as possible. There are a few things that make this more difficult than it already is. Having more than one loan makes it hard to know when and where to start. You might have a car loan payment, a home loan payment, an education loan payment, a credit card payment, or any other loans to take care of.
The sooner you become debt-free, the less money you’ll pay overall. So take it from us — once you’re debt-free, there will be no looking back.
#6 Never Ever Invest In Something That You Don’t Understand
Always know what you are investing in. Do your own research, and if you don’t understand fluff it off to an expert that will help enhance your understanding, or just don’t invest. That being said, invest wisely and only invest what you can afford to lose.
The saying should really read, “Don’t put all your eggs in one basket…unless you understand that basket”. Understanding how a company operates and what an investment offers will help you make better decisions.
#7 Save for retirement
Until the late 20th century, the idea of saving for retirement used to be a foreign concept. Most people didn’t save enough cash to retire. Instead, you worked until you died (which wasn’t that long when you had no modern medicine) or robbed a bank. As a result, most members of the working class died in poverty. But with the introduction of Social Security, things started changing. Now, Saving for retirement became a common phenomenon.
#8 Have an Emergency Fund
Having an emergency fund is a crucial component of responsible financial management. Do you have one? Are your expenses just taking over and you don’t have an emergency fund to handle unexpected events? Then hop on this article and I’ll help you build a budget and a savings plan so that you can start saving/earning money!
An emergency fund isn’t any kind of savings account you’ve heard of before. It’s a cash reserve that you call your own when something unexpected happens – like a car breakdown or a missed paycheck. Having an emergency fund can help cushion the impact of those kinds of unexpected expenses, keeping your credit in good standing and your monthly budget intact.
#9 Get insured!
After you have taken care of your emergency funds, the next step is to get life insurance. Life insurance or term plans are often sold as “protection” against the risk of an unexpected demise. But this protection is nothing more than a cushion for your loved ones if anything happens to you.
The 25X rule is a simple and optimum way to decide a life insurance cover. Although there are other methods that you can use, but this is my favorite as it is simple and gives you the optimum amount of coverage you need.
The 25X rule states that if your annual income is ₹5 lakhs, then you should take a sum insured of ₹1.25 crores so that if anything untoward happens to you, your family will be able to manage themselves for the next 25 years easily.
You can manage your money better and become good at keeping it by following these nine personal finance rules. Remember, it’s all about money. Money is what makes the world go round and without the money, things will go into shambles. Money makes us stay in control of our lives, it allows us to keep up with the pace of living, be happy and if well managed, one day we can be financially free.
Hopefully, you learned something new about personal finance and about the importance of keeping the money that you earned. I hope that you can start following these rules today and enjoy the wealth of benefits to come.
FAQ related to Personal Finance Rules
What is the golden rule of personal finance?
The golden rule of personal finance is simple: Spend less than you earn. It’s not enough to just budget for your expenses, though. You need to stick to that budget and use it in conjunction with other tools to take control over your finances.
What is the best budget rule?
Have you heard of the 50/20/30 budgeting rule? The rule is to divide up your after-tax income into three parts: spend 50% on needs, spend 30% on wants, and then save 20%. This may seem overly simplistic, but it has helped many people get their finances in order.