7 Financial Rules You Need To Live By. We’ve all been there; one day, you have money, and the next day you don’t. You’re left there wondering where the money went. Maybe you went out with your buddies and spent more than you typically would. Or the bills had piled up, and it was time to pay up.
With a few tweaks to your spending habits, you can live a comfortable life and enjoy some financial freedom. The other option is to spend money as you earn it, and hopefully, you’ll earn some more.
The second option can backfire on you, especially if you lose your job, business, etc. Therefore, the best alternative is to learn to live life with a few financial rules. Here are some rules that you can adopt:
7 Financial Rules You Need To Live By
Check Your Ego
Sometimes people live above their means because they have to keep up with friends, colleagues, or family. It doesn’t hurt to admit that you can’t afford to live such a lifestyle. For example, living in a posh apartment because that’s what your colleagues are doing.
If, after settling your bills, you’re left with nothing or have to borrow to make ends meet, it’s time you reviewed your lifestyle. You don’t need to spend money to please or outdo your friends. Sometimes a simple no can save you hundreds or thousands of dollars, which can be spent on more meaningful activities.
Be Wary Of Debt
If you can finance a project without taking loans, then don’t take on the debt. Before you take on any debt, ensure you understand the nitty-gritty details about that debt. For example, what’s the repayment period, what’s the interest rate?
Try to limit the use of credit cards if you can. This is because you’re taking on more debt, the more you use the card. Most people are conscious of their spending habits when they’re spending cash. However, with a credit card, you can swipe as many times as the card allows.
Understand when it’s wise to take on debt and when it’s not. Know how to differentiate between good and bad debt. For example, when taking an installment loan, especially auto loans, go for a loan you can handle. You don’t need to get the most luxurious car when you can get a well-maintained vehicle at one-third the price.
This is not to say that installment loans are bad. Installment loans can be a good or bad debt; it all depends on why you’re getting the loan and where you’re getting the loan. This will determine your interest rates and the repayment period. If you need a loan, you can check out installment loans online from direct lenders at Personal Money Market.
Learn From Your Past
You have made a few financial mistakes in the past, whether it’s lending people money or taking loans to spend on friends. You can learn from such mistakes. For example, if you’ve ever invested in an idea or business without due diligence, next time, conduct all the research you need about the business.
Calculate Your Monthly Expenses
It’s easy to spend money without second-guessing, especially if it’s available. However, the moment you run out of money, you start to question your spending habits. Instead of waiting till you have nothing, why don’t you calculate your monthly spendings?
How much is your rent? How much are you paying for utilities? Do you go out with friends? How much do you spend on transport, groceries, etc.? Try to figure out how each dollar is spent.
Create An Emergency Fund
If 2020 has taught us anything, it’s that you need an emergency fund. Millions of people lost their jobs and businesses in 2020. And while the stimulus check was a welcome relief, it wasn’t enough.
Folks who had saved in an emergency fund had an easier time adjusting to the lockdowns. You, too, can enjoy better financial stability by creating an emergency fund. You never know when something might go wrong, and you want to be ready when that happens.
You can save up to 6 months of your living expenses in your emergency fund. In case you use the fund, ensure that you replenish it. Remember, it served its purpose; thus, you need to replenish for when you need it again.
Pick A Stable Career
If you’re young, choose a stable career that pays well. Some will say that you need to pursue your passion and get a job you love. However, think about your life and later years. Right now, you have the energy, but a few years later, you’ll have bills, mortgages, and kids.
All these will need to be settled, and your low-income passion job might not cut it.
Have A Financial Goal
What would you like to do with your money? It could be that you want to buy a house, take your child to school, get a new car, upgrade your PC, start a New Venture Start-up, or invest in stocks? If you have a financial goal, you’ll try to reduce your spending to save enough to reach your goal.
You can do more if you plan to do something with your money. When planning your financial goal, choose something that matters to you. Sort out your goals into short-term and long-term financial goals.
Take a look at your budget; see what you can sacrifice to achieve your financial goal. Also, set realistic goals as the more you achieve these goals, the more you’ll want to save. Monitor your progress, and if you’re lagging, reevaluate your plan and budget to see what you can change.
Wrapping It Up
These are your finances; the least you can do is learn how to handle them. It doesn’t matter if you’re a young adult or on your way to retirement; you need financial rules. Don’t just spend money because you can afford it. Sometimes ask yourself if you really need what you’re trying to get, or it’s another impulse buy.
Does adding that item to your credit card help you in any way, or are you doing it to please your friends? Grab ahold of your finances by implementing some of the financial rules listed above.
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