You may have adopted some rules of personal finance whether through your parents, finance teacher or friends. But when it comes to money nothing set in stone. Some decisions you have to decide for yourself if these rules are the best course of action. Here is a list of rules that you should apply to get your personal finances on the right track.
1. Salary and saving are two different things.
Your net worth is highly important compared to how much money you can make. People need to come and realise the simple truth that having a high salary does put you as a rich person while a lower salary does not mean you are poor. What matters most is how much money are you willing to save from your salary.
2. Saving is much more important compared to investing.
The better investment decision you can plan is set a high savings rate because it provides you with a huge margin of safety in life. Alternatively, you can lower the level of risk of investing by spreading your money across multiple types of investments.
3. Avoid getting into a credit card debt.
It may not be possible to completely remove yourself from student loans, personal loans and business loans. Getting in a credit card debt can negatively affect your net worth. With budgeting, you can significantly improve your financial future.
4. Spend below your means, not within your means.
The best way to get ahead financially is to spend each month less than or at least equal to the amount of income you bring in every month. Even though credit cards, loans, savings and your emergency funds can give you more buying power. That kind of lifestyle will not be sustainable in the long term if there is no restriction to your spending habits.
5. Having a solid credit score is important.
Having interest costs on your mortgage, car loans, student loans, etc can easily become the biggest expense over your lifetime. But if you have a solid credit score, it will save you a lot of cost by reducing your borrowing costs. Utilise your credit card wisely and remember to pay off the balance every month.
6. If you want to set your priorities right, observe your daily spending every month.
It is important to understand your daily spending habits if you want to have full control of your finances. The aim is to only spend money on things that are considered important to you but you have cut back on everything else.
7. Automate your finances.
Having your finances automated can help you achieve specific goals by systematically setting up positive long-term habits while combating your temptation to diverge from your financial plan. You will need to prioritise your financial goals so that you can focus on the tradeoffs such as investing or paying down debts.
8.Getting your big purchases right.
Making the most important purchases in terms of maintaining your finances such as transportation and housing will require you to take a big leap. If you can be rational, frugal and not overextend yourself on these two purchase decisions, you will save yourself a lot of money.
9. Covering your insurable needs.
Buying life insurance is an important financial decision especially if you happen to be the sole breadwinner in your family. To secure your family financial future, purchasing life insurance when you are young is the least you can do. The need for life insurance changes throughout your lifecycle which depends on your financial obligations and dependencies.
10. Every saving matters no matter how little it is.
They key here is to increase your savings rate each time you receive a raise so you will never bother that you had more money to start with. Spending money to keep up with the modern lifestyle is not easy but that is how you can build your wealth.
11. Have a conversation about money.
You may feel stressed out about talking about finances especially when emotions are in play. The key here is to figure out what you want to say to make the discussion flow a lot easier. Set financial goals that everyone can agree on both in the short and long term. From there plan out how to reach your common goals be it cutting down on certain expenses.
12. Buying stuff doesn’t always make you happy in the long term.
Purchasing materialistic items will not make you any happier. Spending is fine as long as you set a budget for yourself and you can afford while making yourself happy.
13.Know where you stand financially.
It is important to know how much money you have going out on a consistent basis. Even if you make large sums of money, it would be all for nothing if you spend it all. If your expenses are too high, your goal is to start cutting down on your spending until you have more money saved than you spend.
14.Income tax matters.
Familiarising with your own taxes can be complicated but it will save a lot of money over time if you figure out where to look. Take the opportunity from any tax breaks that you can muster and always understand your personal tax situation.
15. Think about financial independence, not about retirement.
The aim is not about making it to a certain age so you can spend your remaining days looking at the sunset, but instead of reaching to the point where you don’t have to be concerned about financial issues anymore.
What are your golden rules in saving money? Leave us your thoughts and suggestions on the comment sections below. Head over to Jobstore.com and unveil your next job opportunity.
You Jing is a content writer who writes career and lifestyle contents to inspire job seekers and employers alike on their journey to work-life balance, empowerment and transformation in their career path.
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