We live in an era where everyone wants to become rich. We hear stories of people becoming millionaires overnight, but most of these stories aren’t true.
In reality, wealth takes years to accumulate. And once you reach millionaire status, you still have to maintain it.
Money is one of those things that most people don’t think much about until they run into trouble financially.
It’s easy to spend too much money without realizing it. And once you realize you’ve spent too much, it’s often too late to fix the problem.
Breaking financial rules can have serious consequences, both short-term and long-term. If you want to stay on track and achieve your financial goals, make sure to avoid these common mistakes.
There are certain financial rules that you should never break if you want to stay on track with your finances. Here are 3 Financial Rules You Should Never Break:
- 1. Don’t spend more than you earn: This is one of the most basic financial rules, but it’s also one of the most important. If you want to get ahead financially, you need to make sure that you’re spending less than you’re bringing in each month.
- 2. Make a budget: Another important financial rule is to make a budget and stick to it. By knowing where your money is going each month, you can make sure that you’re not overspending in any one area.
- 3. Invest for the future: It’s important to think about your future when it comes to your finances.
There are times when saving money isn’t possible. For example, if you’re going on a trip, buying groceries, or paying bills, you don’t have much control over these expenses.
However, you can save money whenever possible. This means cutting back on unnecessary spending and using every opportunity to save money.
For example, if you go grocery shopping once a week, you can cut down on trips to the store by stocking up on items you need.
Or if you pay your bills online instead of sending checks, you can save money on postage.
My favourite advice, which I also follow in life is to Use Rewards Programs Wisely.
Rewards programs are a great way to save money. Many companies offer rewards programs that allow you to earn points for certain purchases.
Once you reach a certain amount of points, you can redeem those points for discounts on future purchases.
Some rewards programs even let you transfer your points into gift cards.
But you have to be careful about what you buy. Some rewards programs limit the number of points you can earn for each item purchased.
So if you spend too much money on a specific item, you may not be able to earn enough points to redeem your reward.
That said, there are plenty of rewards programs out there. Just do your research before signing up for one.
So here are 8 rules you shouldn’t break when it comes to finances.
Rule #1: Always Pay Yourself First
This rule sounds obvious, but it’s amazing how many people forget to pay themselves first. If you’re going to save any money, you need to set aside money for yourself first.
Pay yourself first means putting away AT LEAST 10% of every paycheck into an account that you control. This allows you to decide how much you want to save each month and allows you to save more if you want to.
For example, let’s say you make $500 per month. That would mean you’d need to save $50 per month.
That may seem like a lot, but if you were saving $50 per month instead of spending it, you’d have $600 saved in 1 year.
It’s a lot of money, which you can invest further.
By paying yourself first, you give yourself the chance to save more money than you otherwise would.
Rule #2: Save Money Every Month
When it comes to saving money, it pays to save regularly. Saving money doesn’t happen overnight. It takes discipline and consistency over time to reach your goals.
Start small and gradually add to your savings. For example, if you want to save $100 per month, you should aim to save $25 per week.
To save $25 per week, you need to save $3.5 per day (which is easy, just skip 1 cup of coffee).
Over time, you’ll find that you naturally save more money.
Start small. Even $10 a week can add up to thousands of dollars over the course of a lifetime.
Rule #3: Don’t Spend What You Can’t Afford
Spending money isn’t bad, but it’s important to avoid spending money on items that you simply cannot afford.
If you buy something that costs more than you can comfortably afford, you won’t feel happy about buying it. But you’ll still feel guilty about spending money on something that you couldn’t afford anyway.
Instead of spending money on things that you can’t afford, focus on saving money instead.
Rule #4: Pay Off Credit Card Debt ASAP
Credit card debt is one of the most common types of debt. And unfortunately, credit cards often come with steep interest rates.
When you first open a credit card account, you may think that you’ll be able to handle the monthly payments. But after a while, the interest charges add up quickly.
If you still owe money on your credit card after six months, you should contact your bank and ask for a loan modification.
A loan modification allows you to repay your debts at a lower rate. However, you must act fast if you want to qualify for a loan modification. Contact your bank as soon as you realize you can no longer afford your current payment schedule.
Rule #5: Don’t Forget to Save for Retirement
Saving for retirement is another type of financial goal that most people overlook. The truth is that you don’t have to wait until you retire to start saving for retirement. You should begin saving for retirement even before you retire.
You should plan to contribute 10-15% of your income towards retirement when you are working.
This will allow you to build up enough money so that you can live off of your investments during retirement.
The earlier you start saving for retirement, the better. By starting early, you’ll be able to take advantage of compound growth. Compound growth means that the amount you earn each year grows faster than the amount you earned last year.
The general rule of thumb in finance is that you should invest money today to get a return tomorrow. If you invest money today, you’ll receive a higher return than if you invested the same amount of money next year.
Rule #6: Don’t Neglect Your Emergency Fund
An emergency fund is an important part of any financial plan. It’s designed to help you deal with unexpected expenses.
For example, suppose that you unexpectedly lose your job. An emergency fund would let you pay for basic living expenses without having to borrow money from friends or family members.
In addition, an emergency fund could also cover some of your medical bills.
It’s always good to keep an emergency fund handy. This way, you’ll never find yourself in a situation where you need to use your credit card to pay for an emergency expense.
Remember that your Credit cards aren’t an emergency fund. So, use them wisely.
Rule #7: Keep Track of All Your Expenses
Keeping track of all your expenses is essential if you want to save money.
To do this, you’ll need to write down everything that you spend money on. For example, you might record every penny that you spend on food, gas, clothing, entertainment, etc.
Once you’ve written down all of these expenses, it’s time to calculate how much you’re spending per month.
Then, compare this number to what you make per month. If you’re spending more than you make, then you’ll need to cut back on some of your expenses.
However, if you’re making more than you spend, then you’ll need to increase your savings.
Rule #8: Make Sure You Have Enough Insurance
Insurance is important because it protects you against unexpected events.
And while most people think that health insurance is the only type of insurance that they should consider, it’s also wise to look into other options.
For example, life insurance can protect your family financially if you die. And car insurance can cover damage to your vehicle in case of an accident.
But what about home and auto insurance? What are some things that you need to know before buying a
If you follow these eight rules, you’ll be well on your way to building wealth.
What are some common financial mistakes people make?
The two most common financial mistakes that people make are:
- 1. Not having a budget: Without a budget, it’s difficult to track your spending and see where your money is going. This can lead to overspending and getting into debt.
- 2. Not saving for emergencies: Unexpected expenses can pop up at any time, so it’s important to have an emergency fund to cover them.
Other common financial mistakes include: failing to save for retirement, buying too much debt, making poor investment decisions, and not having a plan B when things go wrong. The biggest mistake people make is thinking they don’t need to prepare for retirement. If you want to retire at 65, then you should start saving now.
What are the 5 rules of finance?
There are five major rules of finance that everyone should know to make sound financial decisions.
- 1. One should only spend the money that they have. This may seem like a no-brainer, but many people fall into the trap of using credit cards or taking out loans to finance their lifestyle.
- 2. One should always save for a rainy day. No matter how much money you make, you should always have some saved up in case of an emergency.
- 3. It’s important to live below your means. Just because you can afford that new car or designer handbag doesn’t mean you should buy it.
- 4. Invest in yourself. Investing in your education and career will pay off in the long run.
- 5. Don’t be afraid to ask for help.
What is the 50/30/20 rule?
The 50/30/20 Rule states that you should spend no more than 50% of your income on yourself (your personal needs), 30% on your family (including children) and 20% on your friends and community.
If you’re not careful, however, you may end up spending too much on yourself and neglecting others. So be careful when deciding where to allocate your resources.
One of the best ways to ensure that you make good financial decisions is by avoiding bad ones.
Bad financial decisions include making impulsive purchases, failing to save money, and not paying off debt.
Don’t buy things on impulse. If you find yourself in a store with no cash or debit card, it can be tempting to purchase something without thinking about whether you need it or not.
But if you do this, you could end up spending more than you intended.
Instead, try to avoid buying items unless you have a clear reason why you need them.
Credit cards can seem like a great idea at first. After all, they offer instant gratification. But the problem is that many people end up spending more than they planned because they don’t pay their balance off each month.
So, before you decide to apply for a new credit card, ask yourself whether you need one.
Pay off debts as soon as possible. When you owe money, it makes sense to pay as little interest as possible. But when you pay off your debts, you’ll end up earning interest on top of the principal.
So, if you have multiple debts, it may be worth waiting until you have paid off all of them before applying for another loan.
Avoid expensive habits. There are lots of things that cost money but aren’t necessary. For example, eating out regularly isn’t very economical.
You could easily eat at home and still enjoy the same quality of food. You could even cook meals for less money.
Use budgeting software/Apps. Budgeting software will help you stay organized and manage your finances better.
For example, you can set up automatic transfers from your checking account into your savings account so that you won’t miss any payments.
Investing is a smart way to build wealth over time. But you shouldn’t invest just anywhere. Instead, choose a reputable investment firm that has a solid track record.
And the most important one. Keep your emergency fund handy. An emergency fund is a collection of money that you keep aside in case of an unexpected expense.
This includes medical bills, car repairs, or other emergencies.
Always remember that No matter how much money you make, you will eventually run out of it.
That’s why you need to plan and save regularly. You may not see results right away, but you will eventually reap the rewards of your efforts.
Remember, financial success doesn’t happen overnight. It takes discipline, determination, and dedication.
Now that you know the Financial Rules You Should Never Break, go forth and succeed!