Golden Rules of Personal Finance

2 min read

personal finance

It is a known fact that any skill can be mastered only after having rightful mentorship. Same goes for money and personal finance. You should know basic rules before walking along the path of personal finance. Otherwise, it is easy to get lost in the middle before reaching your goals. That is what people call bankruptcy, debt loans and so on. It is easy to play the money game and avoid catastrophes if you know the basics.

Rule #1: Use money to make money.

The only way to get rid of rat race is to use your money to make more money. Every dollar you spend as expenses will block you from saving or investing. You may be planning an early retirement or doing something your own. To achieve something like that you should know how to multiply your savings and invest them to make more savings.

This does not mean you should stop eating or going to movies. But you should control yourself in a way to avoid your expenses blocking you from earning more. It is like you are giving away your assets for temporary comfort. Always look for the long term while enjoying the movement.

The biggest enemy of rule number one is debt or lease. You are creating a hole in your account when you sign up for a loan or lease. It blocks your money from growing. Be careful before you take a loan. Before buying things for 0% interest on your credit card, just check how much discount you get if you pay it in full. Don’t go for monthly payments if you are not sure you can bear it.

Rule # 2: Take control of your finances.

The first step to achieve this is plan ahead. Always keep track of your expenses. Save before expend. Always keep in mind about your debts, loan payments, lease, insurance and so on. Knowing how you spend is the best way to control yourself from financial catastrophes. Pay every bill on time, never take them to next month or next billing cycle. People face hard times but learn how to handle hard times. Always try to live below your means.

Learn to handle financial troubles like sudden health problems of yours or family, losing a job, pay cut, relocation or natural disasters. These are the situations you get emotional and lose controll. You may think that you can not overcome such situations. Yes, that is true, but learn to tackle them. Otherwise, it will be the start of your banckrupcy.

Rule # 3: Pay attention to the spending habits of people you’re interacting with.

No matter who they are, relatives, friends, spouse. There is a saying that “you will become average of five persons you spent most of your time”. No matter how hard you try to control yourself you will adapt to them, to their lifestyles or financial habits. Choose wisely, they should align with your financial goals. Then it will be easy to follow other rules.

If your friends earn lesser than you, you will become the one who always pays the bills. They think you have enough money for them. Along the way, they will drag you down to their level. This doesn’t mean that you should not go out with your friends or relatives. But choose wisely. Ultimately you are the one who should survive in the game.

On the other hand, your neioubours are the one who deside how your house will look like, what car to buy, how your garden looks like. If this is the case you are in great trouble. You should understand your economic level and you should never ever try to impress others. Practice your habits to satisfy with what you have, not what you want to compare to others.

Rule #4: Accelerate the first three rules.

Every time try to increase your savings. Cut down your expenses. Try to meet people who have the same goal as yours, talk about financial control. Learn how to improve yourself with investments. Always try to rais your bars. You will feel you are reaching towards your financial goals. That is the easiest way to manage your personal finance.

Leave a Reply

Your email address will not be published. Required fields are marked *