If you’re like most people, personal finance can seem complicated and at times confusing. When you consider all the different financial concepts and investment strategies available, it can make you feel overwhelmed, too!
Luckily, there are 10 simple money rules that you can follow that will streamline the process of building wealth. Rather than having a complex system, you’ll have a straightforward path that will lead you to financial success!
Money rules are a set of best practices that will all but guarantee that your financial position improves. Aside from being simple, they’re direct, too. Still, they require that you have financial discipline. You need to adhere to them over and over until they become automatic. Once they’re engrained, then it will only be a matter of time until you’re successful with money!
Despite their simplicity, these money rules have the power to not only change your finances but your life. With them, you can pay down debt, increase your net worth, and feel less stress – all of which yield a better quality of life!
Here are 10 simple money rules that will help you build wealth!
For many people, becoming rich and wealthy is a pipe dream. While financial freedom seems wonderful in theory, they’ve yet to realize that it’s also a real possibility!
Improving your balance sheet (or anything else for that matter) starts by setting SMART financial goals. With them, you’ll have the specific details of the outcome you want to achieve. Rather than it being a dream, you can reverse engineer the steps that are needed to turn it into your reality!
In addition to that, the process of setting goals also helps you establish new behaviors. If you’re going to achieve something new, you’re going to need to invest in yourself and learn new skills to make it happen. Aside from that, setting goals gives you something to strive for which makes it much more difficult to settle for the status quo!
Goal setting shouldn’t be reserved for just the financial side of life, either. Regardless of whether you want to improve your health, relationships, or any of the other types of wealth, then setting goals will help!
Truth be told, the key to achieving your dreams is living below your means! As long as you can save each month, then you’ll have money available to improve your financial situation!
You have to save money to build wealth. After all, it allows you to pay down debt, establish an emergency fund, and buy equity investments and real estate. But if you can’t save, then none of these things will be possible!
One way to live below your means is by budgeting. In doing so, you begin to realize the limitations of your income and the amount you have available to spend. Not only that, but it establishes a spending plan for your money which helps you to save it, too!
The more money you save, the higher your savings ratio will be. Not only that, but the faster you’re going to accumulate money and achieve your goals!
When it comes to building wealth, people tend to focus on their income. While earnings are part of the equation, more often than not spending is the most important determining factor!
For example, consider Workers A and B. Worker A earns $100k per year and spends $95k of it whereas Worker B earns $60k yet spends $45k. Even though Worker A earns more money, Worker B has a higher savings ratio. They’re able to build wealth and live free at a much faster rate!
Depending on your goals, aim to save at least 20% of your income. This way, you won’t spend all of your money today, you’ll keep some of it for tomorrow as well!
Even if you plan to save money, it doesn’t mean that you will. You still have to resist retailers’ marketing gimmicks and fight the urge to buy impulse goods so you can stay on budget!
When you are unable to follow your spending plan, then you end up going over budget. Not only do you save less money, but your goals get delayed, too!
One way to follow through on your savings plan is to track your spending. In doing so, each of your budget categories gets monitored, allowing you to determine where your spending needs to get reigned in. This way, you can make adjustments throughout the month and save while you still have time!
In the past, tracking your spending required hours of work. Now, there’s Personal Capital which makes the process fast and easy! Not only that, but it comes with many other FREE financial tools as well!
Too often, people are in such a rush to accumulate wealth that they don’t take the time to build a strong financial foundation. Without rainy day savings and an emergency fund, a large unexpected bill may spark a financial hardship!
When it comes to emergencies, a common rule of thumb is to set aside 3 to 6 months’ worth of expenses. But, if you work in a volatile field, receive irregular income, or are an entrepreneur, then it pays to save even more!
One safe place to keep your emergency fund is in a high-yield savings account. It allows you to earn interest while keeping your money liquid. This way, you’ll have immediate access to cash when disaster strikes which can prevent it from becoming a personal financial crisis, too!
Once you have an emergency, don’t forget that you also need to replenish your fund. After all, you’re going to experience another one, it’s only a matter of time!
In America, it’s normal to live beyond your means and spend money that you don’t have. Rather than building wealth, they’re spending habits are handcuffing them to a job and making it harder to make ends meet!!
Not only that, but debt causes a great deal of stress for most people too. It causes them to worry about their income and whether they’ll have enough money to pay bills. Not to mention, living in a constant state of stress makes it difficult to enjoy life, too.
If you have consumer debt one of the best money moves you can make is paying it off. Not only will your burn rate fall, but it also allows you to experience peace!
Once your debts get paid, keep a watchful eye on your spending. You may even want to switch to a cash-based budget to endure that they never come back!
At a certain income level, your day-to-day expenses won’t have a large impact on your savings goals. Spending an extra $5 for a cup of coffee won’t send you to the poor house. But, big ticket items, like homes and vehicles, still can!
When it comes to buying a home or vehicle, many people purchase ones that are at the top of their budget. At times, these two expenses can consume over 50% of their gross income. By the time repairs, maintenance, and other hidden costs of ownership get factored in, little is left for much of anything else!
People are most prone to extreme lifestyle creep when they receive a promotion, raise, or a financial windfall. In the excitement, they’re likely going to splurge and spend more than they should!
But when you have a plan to manage lifestyle creep it’s easier to keep it under control. You can set limits and determine how much will be allocated to spending and savings. This way, you’ll still get to spend more, but the limits can keep it from getting out of hand!
Whether you realize it or not, everyone tends to waste money one way or another. For some people, it’s needlessly spending on late fees and interest. For others, it’s buying too many groceries that end up expiring.
Regardless, it’s important to realize that financial waste often stems from your habits. You may be habitually buying goods and services that aren’t aligned with your current needs and wants.
Over time, your spending preferences change. The things that are important to you today won’t necessarily be the same tomorrow!
To stop habitual spending patterns and from wasting money, determine your priorities. Understand which types of expenses are most and least important. This way, you can cut and eliminate meaningless spending, allowing you to save and thrive!
According to one article, 25% of workers don’t receive their employer match. It’s estimated that they miss out on roughly $1,300 in benefits each year. If that wasn’t bad enough, when you account for the power of compounding and time, it might even turn into a five or six-figure mistake!
Making contributions to your employer’s retirement plan is one of the easiest ways to build wealth. Especially when you consider that most of them are giving away free money!
As if that wasn’t good enough, getting your employer match also gives you an immediate return on your investment. If you receive a 100% match, then you earn a 100% return on your money on day one!
Oftentimes, people tend to focus on living in the moment. So much so, that they spend freely on things that don’t matter which postpones the ones that do, like their hopes and dreams!
Every decision you make today has an impact on your financial future. When you take on consumer debt, you’re choosing to spend your time working so that you can earn money and pay it back.
However, when your money mindset shifts towards the future, you begin to look ahead. You understand that achieving your long-term goals doesn’t happen overnight. Instead, they take years if not decades of work and perseverance before they’re gained!
Unfortunately, too many people read an article like this one, where they learn how to be successful, and yet they still fail to take any action whatsoever!
But, if you don’t start now, then how is your financial situation going to change? Truth be told, it won’t and in some cases, it’ll get even worse!
Rather than waiting, start today. Pick one item on this list and begin working on it. Take one small step, then another, and then another. As long as you keep going, you will experience a financial transformation!
Most people want to build wealth and unfortunately, few actually will. While the process is simple, it’s far from easy. After all, it takes determination, perseverance, and sticking with these money rules to become a financial success!
Are there any other money rules that you follow? Comment below.
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