THE BROKEN WALLET

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12 Golden Rules of personal finance (get your money right…starting today)!!!

Being financially responsible takes dedication and determination — but these aren’t the only ways to get ahead. Need a little guidance and advice? Here’s a look at 12 “Golden Rules” of personal finance.

 1. Spend less than you earn

This Golden Rule falls under the 50/30/20 budget. 

This is when 50% percent of your after-tax income goes toward needs; 30% toward wants; and 20% toward savings or debt repayment.  

This is a simple, excellent way to budget your money. To be clear, though, needs are bills you must pay such as mortgage/rent, car payments, and groceries. Wants, on the other hand, include eating out, shopping, entertainment, gifts, etc. 

If you’re able to keep your needs and wants within these percentages, you’ll almost always have enough money for savings and paying off debt.

Now, this is ONLY a guide. Although an effective budgeting plan, it isn’t realistic for everyone. Therefore, feel free to tweak this based on your circumstances. Let’s say you’re currently spending 60% of your after-tax income on needs. In this case, you can try 60/20/20.

2. Save money each pay period

A savings account is essential for unexpected events. Reserve funds provide peace of mind, as you’re able to pay what you need without touching bill money. A savings account is also key to avoiding credit card debt. 

There’s nothing wrong with using credit. But as a general rule of thumb, don’t view your credit card as an alternative to a saving account. So each pay period, aim to save at least 5% of your after-tax income for personal goals.  

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3. Sell or get rid of anything you haven’t used in two years

If you haven’t used it in two years, get rid of it. You can donate or give away items in good condition. Or better yet, sell these and make a few extra dollars on the side.

4. Start a side hustle

This is an excellent way to generate more income. Money earned from a side hustle can supplement your income, help build an emergency fund, or provide funds for something else (vacation, down payment fund, etc). 

5. Use credit, but pay off balances in full

If you use credit, pay off the balance in full each month. This not only prevents debt, it helps boost your credit score. This is because the amount owed (credit utilization) makes up 30% of your credit score.

To make debt repayment easier, only charge what you can comfortably afford to pay off each month. 

6. Don’t shop when you’re upset

Mood shopping rarely ends well, and hitting the stores when upset lends its way to impulse buys. Sure, you might feel good in the moment, but emotional shopping often leads to buyer’s remorse.

7. Use the 24-hour rule

Before indulging and buying an unplanned item, take 24 hours to think about the purchase. Consider the possible negative consequences of buying it. If you feel good about the purchase the next day, then buy it — but only if you can actually afford it. 

8. Don’t let others influence how you spend your money

Peer pressure doesn’t only happen in school —  it can occur in adulthood, too, and often in the form of financial pressure.

Not everyone you associate with has the same financial goals as you. In addition, some people might simply be in a position to spend more freely than you. 

Whatever the case, don’t let these individuals influence your spending. If someone pressures you to buy something you can’t afford, ask them this question: “Are you going to bail me out when I’m short on cash?” I guarantee that’ll stop the pressure.

9. Surround yourself with those who share your values

There are many benefits of surrounding yourself with those who share your values. Being encouraged by ones who understand your financial path is a great feeling. Since they’re on a similar financial path, you can become each other’s accountability partner and positively influence one another. 

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10. Don’t pay full price

Shopping around is important when it comes to saving money. Prices vary from retailer-to-retailer. So with a little patience, you can save and get more for your money. 

Look for cash-back incentives, used items, price-drop refunds, and even coupons. Finding discounts and other deals saves your hard-earned cash.

11. Learn about money

Knowledge is power. Therefore, knowing how to responsibly manage your money can help you develop a healthy relationship with money. Proper money habits also help you understand the value of money,  which will lead to better financial decisions.

12. Don’t give up when you have a financial setback

Even if you have a financial setback, there’s always a new day to begin fresh. In fact, each day after a setback is a fresh start to a new beginning. Don’t let temporary setbacks cause you to spiral financially and make wrong decisions. It takes strength and resilience to bounce back, but it’s possible — one step at a time.