These days, everyone is eager to give you money advice, from the tv, to the internet, to even your family and friends. This advice changes from time to time. However, there are three golden rules of money that will never change despite all the advice, tips, ideas and new digital tools to manage your personal finances.
These are the fundamentals that everyone needs to master in order to maintain stable and healthy finances at all times.
We tend to avoid some of these golden rules surrounding money until an emergency happens, and we have no choice but to face it.
However, you have the option to take action now before your financial situation gets out of control. It’s not that tough to adhere to these financial guidelines; all you need is consistency.
Here are the 3 golden money rules you should follow.
1. Make your money work for you
You must develop a financial strategy. Make sure you have some money working for you by understanding where every dollar goes.
Any fintech app, like Kuda, Trove, Carbon, or Alat, can also be used to help you achieve this. You can also do it yourself on a sheet of paper.
To accomplish that, you must allocate your income among the following goals:
Recurring expenses which are your, housing costs, insurance premiums, and food costs.
Set aside some money for investing and saving. Lastly, personal expenditures which include birthdays, vacations, and apparel.
You can also adhere to the 60-20-20 rule, which is broken down as follows:
The 60% of your income goes to your living expenses, including rent or mortgage, groceries, utilities, and transportation.
While 20% of your income should go into investments, an emergency fund, and debt reduction.
And 20% of your salary should go toward discretionary expenses like entertainment, vacation, and dining out.
2. Avoid debts
Bad debts are unnecessary loans or other debts with excessive interest rates that don’t pay off.
When you need money, it can be difficult to resist the urge not to take out a loan, that’s why you need to plan ahead. Taking a loan will take at least twice as much work to pay it back, and it will cost significantly more to pay off your balance. You need to always make wise financial decisions.
3. Guard your assets and yourself
The significance of having sufficient insurance coverage for every aspect of your life cannot be overstated.
The key word here is “sufficient,” meaning just enough defense without going overboard. If you have a family—a husband, children, and other dependents—this is much more important.
Given the economic challenges, it is likely that a single accident or serious illness might put us out of business. With adequate insurance coverage, at least, the financial load on the family during trying times can be reduced.
These monetary tenets are really not that difficult to understand. Compared to managing a bankruptcy scenario, it is a lot easier. Be financially informed and take on each aspect of your finances one at a time. You will be able to see the outcome in the long run.
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