Top 5 Simple Money Rules: A good financial strategy is more about how you treat your money, savings and expenses. And not mostly on how much you have.
What’s your finance strategy?
Detailing your financial goal isn’t that easy, it needs in detail and better knowledge in driving your liquidity.
Take some time to write specific, long-term financial goals. You may want to take a month-long trip to Europe, buy an investment property, or retire early.
All of these goals will affect how you plan your finances.
For example, your goal to retire early is dependent on how well you save your money now. Other goals, including homeownership, starting a family, moving, or changing careers will all be affected by how you manage your finances.
Trials and tests are the innate learning experience we have all followed till date. If you don’t have a personal finance strategy, there’s a chance you will never get wealthy. The average millennial earns $40-$50K a year and has $20-$40K in student debt.
But the high achieving millennial earns up to 7X more than the average. The same is true for people of all ages. The difference between average earners and above-earners is huge.
But we must stop thinking that the solution to all our problems is more money. We’re better off by creating a strategy that helps us to manage money better—that alone will help us break away from the average earners.
Yes, earning more is important. Not only for your bank account but for your career development. As you get better and have more experience you can earn more.
1. Desire Less
Here’s some common sense: It takes more time to make money than to spend it. You work thousands of hours to make a certain amount of money. And then, you can drop it all on a new car, luxury vacation, watch, or anything else that you desire.
We all know that, right? And yet, we keep on spending money like it’s nothing. I know this is something your granddad probably said, but the easiest way to grow your bank account is NOT to spend it all.
It’s solid advice. The ancient Stoics knew about this too. True freedom means you desire less.
2. Know-How The Economy Works
When does the interest rate generally go up? When does it go down? What are bonds? What’s inflation? When do you get inflation? What’s the market cycle?
Why do economies generally collapse? What’s debt? Who prints money? Why do they print money?
I can go on forever, but you get the point. Look, you don’t have to be an economist (I sure ain’t one). But do yourself a favour, read a book like A Random Walk Down Wallstreet by Burton Malkiel. It’s an excellent summary of how the economy and investing work. Or, spend some time on Investopedia.com and figure out the answers to all the above questions—and more.
The point is that basic knowledge about how all this stuff works prevents panic. “Oh shit! The market is down! What now!!” Panicking will not help you.
3. Avoid Personal Debt
Personal debt destroys your net worth like nothing else. To be clear, I don’t think there’s anything wrong with borrowing money.
If you want to start a business or do big real estate deals, it’s often necessary and smart to take on debt. But we must be wise about taking on debt. Like investing, there are rules to it.
One thing is sure: Never borrow money to buy a car, electronics, or anything else that goes down in value.
But when it comes to more complex things like growing/starting a business, investing in real estate, or even your education, think carefully before you go into debt. Remember that borrowing money is not free.
4. Save As Much As You Can
This is obvious by now. Desireless, avoid debt and save as much as you can. Personal finance is called personal finance for a reason.
Your money strategy depends on your age, personality, a place you live, education, experience, etc. A person who lives in Manhattan probably can’t buy an apartment. It’s overpriced, and renting is probably smarter.
Buying an apartment makes more sense in a city with lower real estate prices. In that case, renting is more expensive. No matter what you do, always make sure you have enough cash so you can invest if you spot an opportunity.
How much in savings is enough? That’s up to you. If that figure makes you feel comfortable?
5. Have A Short-Term Strategy
This article is for people who do NOT want to become professional investors or traders. We invest for the long-term—not to make money today or even in a year.
The investment strategy is focused on the long-term. But that means we also need to generate income today so I can pay the bills. How do you do that? That’s your short-term strategy.
Short-term money strategy is based on improving my skills and creating multiple income streams. Investing a lot in personal education because more skills mean more earning power.
Also, don’t rely on one big paycheck. Instead, having multiple ways to generate income assures value. That means less risk. If one income stream disappears, you’ll still have others.
- Financial assistance is essential to help you reach your goals that are quintessential to all your achievements and challenges.
- Your budget is key to success. It is the tool that will give you the most control of your financial future. Your budget is the key to achieving the rest of your plan.
- You should keep contributing to long-term goals, like saving for retirement, no matter what stage of your financial plan you’re in.
- Building an emergency fund is another key factor in financial success and stress reduction.