6 Golden Rules of Personal Finance
Knowing how to handle one’s money properly is perhaps one of the most important skills needed to thrive in today’s economy. But that doesn’t seem to be the case. In fact, a surprising 69 percent of Americans have little to no money saved for the rainy days. That means a majority of the American population may be just a paycheck away from being homeless.
Fortunately, there’s no such thing as too late. If you want to learn money-management skills, the best time to start is today. Start shaping your financial future by learning the golden rules of personal finance.
Money Rule 1: Spend Less Than What You Earn
Every cent you spent that is more than what you earn is a potential crisis just waiting to explode. Binging on luxury cars and clothes may bring you joy for a while, but the headache that comes with debt will make you age a decade in just one bad week.
Discipline yourself to prioritize your expenses and spend only within your means. The less you spend, the more money you will have saved for financial emergencies.
Money Rule 2: Think Long-Term
What will you do when an unexpected health issue comes up and you are discouraged to work for some months? What if your old car breaks down and you need money to replace important parts? Is your child’s college fund going to be enough?
There are questions that warrant healthy introspection. Most of all, they require planning. Having money saved for the unexpected is always a good thing. That way, you can rest with peace of mind. After all, you know that you or your family won’t have to stress about being sucked into debt just to pay the bills in times of dire need.
Money Rule 3: From Money Comes More Money
Don’t just stash all your money in some low-interest savings account. Invest in real estate. Take interest in stocks. Make money while you sleep.
A good example of a low-capital, high-return investment that many people are looking into nowadays is online selling. You only need a small initial capital sufficient for an adequate initial inventory, a domain, and an online selling platform. You can sell anything from clothing to gadgets. From there, you can basically run your own online empire right at home.
The trick is to earn profit from the money that you have now. There are so many ways to reinvest your money into something lucrative and profitable. There’s no gain if there’s no risk. The question is, do you trust yourself enough?
Money Rule 4: Be in the Know
Tabulate your expenses so you can understand how much you are spending on what. Being observant of where your money goes allows you to gradually be conscious of your spending habits. Understanding your way of spending will open your eyes to your subconscious wants and needs.
From there, you can start drafting a budget that works.
There are plenty of free expense-tracking and budgeting apps you can download and use to record your daily spending. Some apps allow you to send certain alerts or signals when you’re going above your intended limit. Explore these tools to find out which ones suit you best.
Money Rule 5: Consolidate Your Debt
Gather all your financial obligations in one umbrella, and pay them in bulk. Instead of paying them individually, consolidating your debt can help you save on interest payments and even pay your debts sooner. That is, given you are able to acquire a low interest.
Debt consolidation also saves you the headache of forgetting your individual payments.
Money Rule 6: Start and Don’t Stop
A lot of people who get curious about money management don’t follow through. The idea may be interesting, but much like everything else in life, it requires real work—and a sheer amount of patience. Keeping your budget sheets, logging your expenses on the daily, and doing everything you can to distract you from your favorite store’s latest sale all need dedication and personal discipline.
If you fail once, that’s okay. Failure is a natural part of the learning process. But failing to get back on track is the ultimate error.
Follow personal finance gurus, but don’t follow all of them. Instead of them helping you out, the overwhelming number of money preachers can also work counterproductively and exhaust you after a while. Choose one or two who really inspire you to change your ways. Carve your own path from their advice, and fine-tune as you navigate your own road to financial freedom.
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