23 Rules of Personal Finance

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  • Personal finance and accountingLow on cash? Always behind on your bills? Interested in starting to save up for a big purchase or investment? Here are 30 tips for your personal financial life:

    1. Spend less than you have

    In a world of easily-available credit, this is perhaps the most important and overlooked rule. Spending less than what you have allows for all the other maneuvering of financial success because you can start saving money on the side. The sum that you save, over time, will become the money that you either invest or play with in order to make even more money.

    2. Emergency management

    Your first concern should be a stash of readily-available emergency cash for that moment in life when an unexpected event leaves you in need of a large sum of money. Such unfortunate events could be anything from identity theft to medical emergencies or a hostage situation. Start building up a savings account by scheduling automatic transfers form your checking account – that way you don’t even have to think about it.

    3. Cancel cards

    If you have more than one or two credit cards, you’re clearly spending more than you should be and more than you have. Start canceling the extra cards and paying off the debt with saved money. Also, with multiple accounts in different places, you’re very likely to miss errors that companies make or potential account breaches.

    4. Eliminate debt

    Being in debt can often mean that no matter how much you earn, you’re actually making no profit because your debt is costing you a high interest rate. After starting your savings fund, your next focus should be on eliminating costly debt. Make double payments each month – not minimum payments – to start reducing the debt itself. Start with whichever loan has the highest interest rate.

    5. Retirement fund

    We often ignore the eventuality of old age and the fact that we’ll need a lot of money for care at that point. Open up a retirement fund, sooner rather than later – either a 401K through your place of employment, or a Roth IRA account – and start saving. Contributing a small fraction of your salary each week will make a small dent in your budget and pay off in the end.

    6. Balance a checkbook and build a budget

    The process of balancing a checkbook or bank statement is becoming a lost art in the digital age. Similarly, building a budget can teach you valuable lessons about financial responsibility. It will be helpful to know how much you actually spend each month and on what, versus what you make on an hourly or weekly basis. This can put many purchases and expenditures into perspective.

    7. Slim down

    Look over all of the monthly bills that you usually ignore. Do this every month, checking for mistakes and cutting them down where possible. This could involve canceling cable altogether and starting to watch TV online or simply turning off more lights at home to reduce your electric bill.

    8. Figure out your hourly wage.

    If you don’t know this outright, figure out how much you make per hour and use this figure as a reference point when making purchases from now on.

    9. Set goals

    What do you want your future life to look like? What do you want it to consist of? A house? Vacations? Start planning for your goals in terms of time and money and they will become more realistic and attainable.

    10. Rent your house

    You should not own a house unless the total monthly cost of keeping and funding it (utilities, etc.) is less than what you would be paying for rent. While the idea of home ownership is attractive, it should be approached only after you’ve saved enough money. The money that you save while renting can eventually go to a down payment on a home.

    11. Obey traffic laws

    It’s shocking how much money people throw away on parking and traffic tickets. Start obeying traffic laws and eliminate this expense from your life. Driving slower also saves gas, one of the biggest expenses in a person’s daily life.

    12. Rate reduction

    Whatever loans you have outstanding could have their interest rates reduced, depending on the bank or company that lent you the money. Be sure to explore the options they offer for rate reduction. Sometime debt consolidation can achieve the same outcome.

    13. Don’t touch

    Once you have a retirement fund, keep your hands off of it. It can be tempting to dip into these savings to pay for big purchases, but it’s a slippery slope.

    14. Invest

    Once your savings start adding up, you should start to think about investing, where your money could be making a lot more returns for you than if it stayed in your savings account, where it earns a low amount of interest. For long-term investments, safe stocks are usually a wise choice. Don’t be bothered by temporary volatility – if you hold for the long term, they usually offer good returns. It could also benefit you to have some money invested in United States bonds and Treasury notes. These are very safe investments, although they only show significant returns after long periods of time.

    15. 401K matching

    Many employers offer to match their employee’s contributions to an individual retirement fund. Read up on the rules of such arrangements and make sure that you are getting every penny you could be form your employer’s matching program. This is free money – take it.

    16. Shop the list

    Go grocery-shopping with a list – it will prevent you from wandering aimlessly and picking up unnecessary food items along the way. It will also allow you to incorporate your weekly food expenses into a budget and try to reduce it with time.

    17. Weekly review

    Once a week, review what you’ve spent, saved and how you’ve done so. Think about your work week, its achievements and mistakes. Plan your next week and what you would like to take care of in the coming days. This is a very beneficial practice for people with solid goals.

    18. Start your own business

    Almost all of us have some kind of career dreams – a job we have always wanted to try. Start spending some of your free time learning or planning whatever needs to be done to eventually open up your own venture. Don’t be afraid to start small and slow: a website or YouTube vlog or local group related to whatever your passion is.

    19. 30 days of thought

    Before making very large purchases, think about the product you’re considering for 30 days. This will let the excitement dissipate and give you time to evaluate whether you REALLY need this item in your life. This time can also be used to research cheaper options and competitor’s prices.

    20. Bad habits

    Start eliminating the completely unnecessary habits that cost a lot of money: parties, alcohol, fancy coffee, cigarettes, taxis, etc.

    21. Compare

    Start visiting supermarkets you wouldn’t usually go to and compare prices in your area. You’d be surprised how much you can save over time, simply by shopping at stores with cheaper prices for the exact same products. Many times you’re paying for a store’s real estate and ad campaigns rather than the products you need.

    22. Get on the bus

    While initially unthinkable to many people, using public transportation or carpooling can eliminate a lot of expense and stress from one’s daily life. Think of all the gas money you’ll save! Do you even know your neighborhood’s bus routes and schedules? The commute to your place of work might be as simple as one bus line.

    23. Realize

    It’s time to come to the realization, if you haven’t already, that “stuff” will not make you any happier, more popular, loved or successful. This knowledge allows you to stop wasting a lot of the money many people do on stuff that will never retain its value. The real way that money can improve your life is by reducing stress and providing security.

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    Sophie Wolfson

    Sophie Wolfson is the main contributor to the informative FinanceNow podcast As well as Director at ReFinanceMe, a privately held company that provides smart loan advisory services for its vast number of clients. Sophie has helped thousands of people design and manage their loan programs more effectively through her enormous experience in the field of personal finance, insurance, loans and mortgages. Her articles on TheMoneyExpert will give you important insights on how to manage your debt more effectively, potentially saving you thousands of dollars.

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