In personal finance, you need to develop positive financial habits, and that’s why you should have some money rules to live by.
Money rules are simply “financial laws” so to speak, that you follow like a religion to better your financial life.
By implementing specific money rules in your life, you can significantly increase your savings and income!
Without wasting time, let’s get into the best money rules to live by…
Paying Yourself First
Many personal finance advocates go by this rule too. If you work for your pay, it’s only fitting to reward yourself before anyone else.
I like this rule because it doesn’t only help me achieve my goals quicker, but it also takes away the entitlement to spend frivolously.
It’s effortless to do; when you get paid, just put a set percentage of your pay directly into your savings.
I recommend setting this up to be automatically deposited; this way, you won’t forget to pay yourself first, and you will be forced to use whatever money is leftover.
Saving More Than You Spend
This ties into paying yourself first, but it deserves to be its own money rule due to how important it is!
It may seem like a simple thing to do, but you would be surprised at how many people spend more than they make.
With credit cards, many people swipe without realizing that they don’t have the money to pay off their bills each month which leads to interest, thus leading to more spending!
It’s a horrible cycle that you don’t want to be part of.
Simply keep track of your income and make sure you only purchase things you can afford.
Track Your Expenses
One of the most crucial money rules to live by is to track your expenses!
I can’t stress this enough! With all these subscription services like Netflix, Amazon Prime, Spotify, etc… money is taken out of your account without you even realizing it.
You should do your best to track all of your expenses to see if the things you are spending on are really worth it.
Even if you want to spend money on something, is it worth being stuck financially?
For example, do you really need Netflix, Hulu, Amazon Prime, and Disney Plus all together when you are struggling to save? The answer is no!
Keep one for now until you are better off financially, and then you can add on more if wanted.
By tracking your expenses, you will be able to see exactly where your money is going so you can adjust your spending.
You can do this manually or make it easier on yourself and use an app like Truebill.
Truebill is a fantastic app that will show you all of your spendings in a user-friendly interface to see exactly where your money is going.
Not only that, Truebill lets you cancel unwanted subscriptions straight from the app in just a few clicks!
I highly recommend tracking your spending now, in whatever way you choose, and giving Truebill a shot.
Spend Your Money Carefully
This ties into the rule of saving more than you spend, but it deserves its own rule due to its importance.
While personal finance bloggers and advocates might seem like they want you to stuff your money under the mattress and eat ramen every day, it’s just not true!
You should definitely enjoy your life, but you need to be cautious about how you spend your money.
Don’t spend your money wildly; think about every purchase before making it to decide if you really need or want the item.
Only purchase items that will make you happier, not just temporarily, but in the long run.
Most material items will only bring you happiness temporarily, and studies show that experiences such as vacations have a more prolonged effect on your happiness.
So, just second-guess every purchase to see if it’s really worth it!
I recommend using the 72-hour rule, which states that you should wait for 72-hours to make purchases on things you want.
This works by letting your impulsive decisions pass and letting your logical thinking take over. You might find that you don’t even want the item anymore after 72-hours.
Use Debt Wisely
You might have heard that debt is terrible, and you should stay far away from it, but this is not true.
Debt can be a useful tool when used correctly, such as for student loans, mortgages, etc…
On the other hand, it can be awful if you use debt wildly, such as swiping your credit card for everything and not paying it off!
Depending on your circumstance, you might need to take out a loan, so just make sure you can afford it and pay off the loan as fast as possible.
If you are good at paying off your bills, then rewards credit cards can be very beneficial, but you need to pay them off, or else the rewards will not be worth it.
Grow Your Wealth By Investing
Saving is not enough; your money is losing purchasing power every year, even if it’s stored in a savings account due to inflation.
So what can you do?
Invest your money in the stock market, real estate, and cryptocurrencies!
For beginner investors, the stock market is the easiest path to start with, and you will be able to grow your money over time, beating out inflation.
To start, I recommend investing in index funds, which are just a basket of different stocks, making investing super easy.
With index funds, all you have to do is deposit your money, and that’s it. It’s one of the most passive ways to invest!
If you want to invest in index funds, then I recommend using Wealthfront or Vanguard.
For real estate, you can invest in REITs which are stocks that hold real estate companies, or you can choose to invest in physical property, but for physical property, make sure you do your research.
Cryptocurrencies are a new and very volatile investment, so be careful with them; some are promising, so if you want to dabble in them, I recommend checking out Coinbase.
Simply invest your money to beat inflation and let your wealth grow over time!
Automate Your Financial Tasks
If I can preach anything, it’s to automate all your financial tasks!
It’s so easy to set up, so it should be a no-brainer.
We are just human, so we forget to do things, or maybe we just might not feel like doing it, but with automation, it’s all taken care of for you.
Set up all your bills on auto-pay to avoid late fees, and set up an auto-deposit each month into your savings account to save money automatically.
Also, set up automatic deposits into your investment accounts, so you never forget to grow your money and it can be a hands-off process.
Set these up one time and that’s it!
Live Below Your Means
Saving money is huge in personal finance due to how much of a positive impact it has on your financial life and one rule to save money is to live below your means.
Living below your means simply means living on less money than you make and avoiding lifestyle inflation when you make more money.
A lot of people increase their spending as they make more money to keep an “image” that someone that makes this amount of money should have.
This is just nonsense! You should only spend money on things that truly make you happy, not for society’s standards.
Act like you make less and live off of that and save and invest the rest!
Don’t Purchase Or Rent More Than You Need
One of the biggest wastes of money is purchasing a house or renting somewhere that is too large for your needs.
If you are by yourself then you don’t need a 3-bedroom apartment, this is just wasting money!
Simply, purchase a place that has enough space for you to live not a place with a lot of extra space.
Bigger places have higher mortgages/rents, cost more to furnish, have higher heating/cooling costs, etc…
If you are purchasing a house, then it is smart to purchase one with a bit more space if you are planning to extend your family but don’t go overboard with it.
Build And Maintain An Emergency Fund
Let’s be honest, life can suck sometimes! There are unexpected things that happen all the time and it’s best to be prepared.
This is why you should definitely have an emergency fund, it’s one of the most important money rules to live by!
An emergency fund will help you cover the expenses for those unexpected events that happen such as a medical emergency, car accident, house flood, losing your job, etc…
It’s recommended to have at least three months’ worth of living expenses in an emergency fund, but it’s better to have six months’ worth of expenses.
With an emergency fund, you don’t have to stress and go into debt when these events occur; you’ll have the money to cover them.
Start building up your emergency fund now! I recommend using a high-yield interest account with an online bank like CIT bank.
Learn From Your Financial Mistakes
One of the most crucial money rules to live by is to learn from your financial mistakes.
We are just human, and we all make mistakes; the important thing is that you learn from these mistakes, so they don’t happen again.
If you made bad financial decisions in the past, think about what caused you to make these decisions and create a plan to prevent them from occurring again.
Invest In Yourself
As you continue your personal finance journey, it’s essential to continue to invest in yourself.
Constantly read personal finance blogs and books for tips on managing your money better.
Also, invest in furthering your education to get a promotion or a higher-paying job.
This is one of the most important money rules to live by, so invest in progressing in life!
Choose Freedom And Happiness Over Money
The last rule is a significant one; it’s to choose freedom and happiness over money.
If you read personal finance books or blogs, you might feel like the message being conveyed is that money is the most important thing.
This is not true at all!
Money is simply a tool that you should use to achieve your goals.
The goal is not to acquire as much money as possible; you should have other goals in life, such as retiring, starting your own business, traveling, etc…
This is one of the most essential money rules to live by; focus on what makes you happy and use money as a tool to achieve this goal!
These are the most important money rules to live by!
With money rules to follow, you will surely set yourself up for success and greatly improve your financial life.
While these rules are great, they are not the only money rules out there so use whatever works best for you.
The most important thing is that you start making changes! Start saving money, making money, and investing money.
What works for others may not work for you, so it’s your responsibility to figure out what rules/habits/practices best suit you.
Do you have a set of money rules you live by? What do you think is the most important money rule? Let me know in the comments below!