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The biggest complaint that people have about money is that it’s too complicated. But it doesn’t have to be A good money management strategy will help you avoid the pitfalls of money problems. This article contains 11 money rules you should start following.
If you haven’t started following these 11 money rules, it’s time to start now! The sooner you begin, the better off you’ll be when it comes to your finances and everything else in life.
But if you have been following them all along, pat yourself on the back! You are well on your way to a better financial future! Here are 11 money rules everyone should be following now.
11 Money Rules You Should Start Following
PAY YOURSELF FIRST
Many of us budget backwards, paying all of our expenses first and then putting the rest of our money into a savings account.
To prioritize savings, change your mindset. Before paying off your monthly bills, put aside a portion of your income that you’re comfortable with for an emergency fund.
The most crucial thing, according to panelist Darcy Beeman, a financial advisor at Edward Jones, is to “stay consistent.”
“Make it systematic so you don’t have to worry about it.” No excuses—make it a regular line item in your monthly budget.
LIVE BELOW YOUR FINANCIAL RESTRICTIONS
Resist the impulse to expand your spending habits when your income improves. Let’s say you earn a 3% raise: Increasing your 401(k) contributions by 3% is a wonderful method to boost your savings without disrupting your daily routine.
Dr. Julie Gurner, doctor of psychology and managing partner of DrGurner.com, says, “This is an approach my family employed growing up, and it’s relevant no matter how much money you had.”
“In life, extra and unexpected costs arise—vet bills, house repairs, and so on—and it’s prudent to always have that cushion.”
GET INVOLVED IN YOUR MONEY MANAGEMENT
“If you’re married, don’t give your spouse complete authority over your assets,” says attorney Jessica Markham. “You should be a partner in your own future.”
Budgeting, saving, and investing should be done by both parties. Consider holding a monthly or quarterly money meeting to go through your finances as a family.
START INVESTING RIGHT AWAY
It’s never too late to start putting money down for retirement. Don’t worry if you have no idea where to begin.
You may build a diverse portfolio with the guidance of a financial advisor, putting you in the greatest position for long-term success.
Jenine Garrelick, Senior Managing Director of MFS Investment Management, which works with financial advisers across the country, believes that investing isn’t about becoming rich. “It’s about becoming financially self-sufficient so you can make better decisions,” she says.
SET IT TO AUTOMATIC
Tanja Hester, a former senior executive who retired at the age of 38, says, “The finest thing I ever done was automate all my saving and investing.” Growing your money is simple with a set-it-and-forget-it strategy to saving and investing.
IT’S OK TO TAKE CARE OF YOURSELF (IN A REASONABLE MANNER)
Don’t develop a financial plan that is so rigid that you won’t be able to enjoy your life.
“Allowing ourselves a weekly splurge of $50 or $100 on anything we want not only makes us feel less constricted with our money,
but it also makes us more driven to stick to a financial strategy that will lead us to long-term success,” explains business expert Andra Popescu.
RETIREMENT SHOULD BE A TOP PRIORITY
Your golden years may seem a long way off, but the sooner you start saving, the better. If maxing out your 401(k) proves difficult, begin by contributing enough to qualify for any workplace match. As your income grows, progressively raise your payments.
You may also utilize any monetary windfalls, such as bonuses, increases, and tax returns, to add to your savings account. “Preparing for retirement is what sends individuals through my door nine out of ten times,” says counselor Darcy Beeman.
“Getting a jump on it as soon as possible is the only way to give your retirement fund a fighting shot.”
WHEN IT COMES TO BUDGETING, USE THE 50/30/20 GUIDELINE
Try allocating 50% of your take-home salary to basics (food, shelter, utilities, clothing, etc. ),
30% to lifestyle choices (vacations, gym fees, hobbies, cell-phone plans, etc. ), and 20% to financial objectives and priorities if you’re new to budgeting (extra debt payments, savings, etc.).
This isn’t the ideal budget, but it’s a decent place to start.
50%: Needs
Needs are the costs that must be paid and the items that are required for survival. Rent or mortgage payments, auto payments, food, insurance, health care, minimum debt payments, and utilities are just a few examples.
These are the “must-haves” in your life. Extras like HBO, Netflix, Starbucks, and eating out are not included in the “needs” category.
It should be enough to satisfy your requirements and responsibilities with half of your after-tax income. If you’re spending more on wants than necessities, you’ll have to either cut back on desires or downsize your lifestyle, possibly to a smaller home or a less expensive automobile.
Carpooling or using public transit to work might be an option, as well as cooking more at home.
30%: Wants
All of the items you spend money on that aren’t absolutely necessary are considered wants. Dinners and movies out, that new handbag, sporting event tickets, vacations, the newest technological gizmo, and ultra-high-speed Internet are all examples of this.
If you break it down, everything in the “wishes” bucket is optional. Instead of going to the gym, you may work out at home, cook instead of dining out, and watch sports on TV rather of purchasing tickets to a game.
This category also covers upgrading selections such as choosing a more costly steak over a less expensive hamburger, purchasing a Mercedes over a more affordable Honda, or deciding whether to watch free television via an antenna or pay for cable television.
Wants are basically all the small things you spend money on to make life more pleasurable and engaging.
20%: Savings
Finally, save and invest at least 20% of your net income. Contributing to an emergency fund in a bank savings account, making IRA payments to a mutual fund account,
and investing in the stock market are examples of this. If you lose your job or face an unanticipated disaster, you should have at least three months’ worth of emergency funds on hand.
Following that, concentrate on retirement and other long-term financial objectives.
Debt repayment may be a part of savings. While minimal payments are considered “needs,” any more payments lower the principle and future interest payable, therefore resulting in savings.
Importance of Savings
Americans are famously lousy at saving money, and the country is heavily in debt. Americans owe $14.9 trillion in overall debt as of the third quarter of 2020, including $756 billion in credit card debt. 2 In January 2022, the personal savings rate was 6.4 percent.
The 50-20-30 rule is designed to assist people manage their after-tax income so that they can save for retirement and have money on hand in case of an emergency.
Every family should set aside money for an emergency fund in case of job loss, unexpected medical expenditures, or any other unforeseen financial costs.
A household should focus on refilling an emergency fund if one is utilized.
As people live longer, saving for retirement has become increasingly important. Calculating how much money you’ll need in retirement and working toward that goal from a young age will help you retire comfortably.
GET OUT OF DEBT
One thing is a mortgage; another is high-interest credit card debt. It all boils down to using credit cards responsibly—avoid carrying a load and restrict your spending to less than 30% of your overall credit limit.
According to Jessica Iclisoy, Founder and CEO of California Baby: “Credit cards are merely for convenience.
You can’t afford it if you can’t pay cash. Pay your credit cards in full every month; never pay the minimum since you’re incurring interest at an astronomical rate that will rapidly put you in debt.”
KNOW YOUR VALUE
Tonya Rapley of My Fab Finance succinctly highlights a typical problem for women in the workplace: “One of my biggest regrets from when I was younger is not demanding what I was worth, instead feeling like it was a privilege simply to be there.”
Farnoosh Torabi, a personal financial specialist, adds: “Remember that when you bargain more for yourself, you are negotiating for all women. When we start making more, we raise the bar, which benefits others who come after us.”
CREATE AN EMERGENCY FUND
According to the most recent statistics, just around one-third of Americans have enough money saved to cover an unexpected $1,000 bill. Experts advise increasing your emergency fund until it is equal to three to six months’ worth of costs.
Conclusion
When it comes to money, there are many rules to follow. This list of 11 money rules you should start following will show you how to live life on the right side of your bank account. Pay close attention, and soon you’ll be on your way to financial freedom!
