40 Rules of Personal Finance

During the coronavirus pandemic, personal finance is more important than ever. The unemployment rate is skyrocketing and in many industries, revenue has gone to virtually zero. This is a moment in history where financial strength is essential to make it through these tough times. 

The thing is, many people strive for financial freedom, yet only few achieve it. Why is this? Well, there isn’t a direct answer, but one cause is from lack of knowledge. If more people knew about personal finance, less people would be living paycheck to paycheck. 

Follow these 40 rules below to improve your personal financial knowledge and make it through the coronavirus pandemic. 

  1. Pay yourself first

This is a concept where you put money aside for investments and savings before you pay any bills every month. If you get paid every other week, before you even spend any of that money, set aside a certain amount for your savings and investment funds. This forces you to grow your investments every month and it will stop you from spending on things you don’t need. If you only have $1,000 left after paying yourself and your mortgage is $900, you will only be left with $100 in extra spending money. If you do this every month, your savings and investments will grow dramatically. 

  1. Spend less than you earn

Keep it extremely simple and spend less money than you earn. Track expenses and income, and simply don’t buy more things than you make. Do not put things on credit that you can’t afford. Grant Cardone said, “If you can’t buy it twice with your own cash, you can’t afford it.” Stick by this fundamental rule of personal finance and save/invest the difference every month. 

  1. Simplicity is bliss

I’ve talked about this in other articles and it is to keep everything as simple as possible. This will help you succeed in the long run. The more bills you have to pay, the more investments accounts you have, the more credit cards you own, the harder it is to keep track of everything. You have a greater chance of making a mistake or missing a payment. Make your finances simple and transparent to yourself. This will entice you to keep going on your financial journey to independence. 

  1. Build an emergency fund

GoBankingRates put out a study that revealed over 69% of Americans have less than $1,000 in savings. Even worse, 45% of Americans stated they had $0 in their savings accounts. If you are in this situation, your number one goal with your finances should be building up your savings. It is imperative that you have an emergency fund to weather any financial disasters that might strike. 

  1. Have the correct mindset

Your mindset is extremely important when it comes to personal finance. The way you think and the things you tell yourself is what drives your everyday life. You need to stay disciplined on your financial journey and have a positive mental attitude. Follow sound financial advice, be consistent, and stay disciplined. 

  1. Eliminate debt

After you have a solid emergency fund built up, start focusing on paying down your debts. Use the debt snowball, debt avalanche, debt consolidation, and debt management plan talked about is 7 Financial Tips to Focus on During the Coronavirus Pandemic. These strategies will help you eliminate your debt as efficiently and quickly as possible. Keep repeating these strategies until your debt is gone. 

  1. Build up your retirement accounts

The sooner you can start saving for retirement, the better off you will be. If your company offers a 401(k) plan at work start adding to it as soon as you can. And if they offer a 401(k) match, always invest to get the full benefit of that match. You should also open a Roth IRA account. They are a great tool for retirement and you can learn more about them here. Contribute to both your 401(k) and Roth IRA every month, even if it is just a few hundred dollars. Start sooner and contribute often. 

  1. Buy life insurance

Term life insurance is important to have if you have dependents. If you do have dependents, it is in your best interest to get a term life insurance policy. Be sure to get a proper policy that pays out enough money to care for your dependents in case you end up passing away early. Don’t be fooled by insurance agents offering other plans; they are typically filled with things you do not need and they are costly. 

  1. Track your net worth

Tracking your net worth is a very important number to track. Simply put, your net worth is the assets you own minus your liabilities. It is a snapshot of your overall financial strength and it is important to track because over time you can ensure that your wealth is moving in the right direction. Take some time every month and write down everything you own (bank accounts, house, investments, etc) and everything you owe (mortgage, car loan, student loans, etc). Simply subtract the two and you have your net worth. 

  1. Check your credit reports

Checking your credit report a couple of times a year is very important. Once per year you get a free credit report from each of the three major credit reporting agencies; Experian, Equifax, and TransUnion. The best strategy is to spread out each credit report request throughout the year, instead of getting them all at once. Every four months, request your credit report from a different agency, that way, you can check it three times a year. Be sure to look everything over and to find any errors/inaccurate information if there is any. 

  1. Have proper home and auto insurance

Proper auto and home insurance are vital to having a strong financial position. One accident or disaster could ruin you financially, without them. Make sure you have enough coverage for both your auto and home insurance and shop around for the best rates. Don’t overlook local and regional insurers, ask about discounts, and pay your bills on time. This will ensure you are getting the best rates and saving the most money. 

  1. Set goals

Setting goals helps you define what you want in your life and when you want to accomplish them. Set massive goals for yourself and then multiply it by 10. This is what Grant Cardone preaches and I believe it is some of the best advice he gives. Write your goals down every single day, in the morning or before bed, to remind yourself of what you must accomplish. This will keep you on track with laser-like focus. 

  1. Create a budget

Building a budget can be difficult, but don’t make it more complicated than it has to be. Budgets are simply a way to allocate funds. They also help you discover how much you are spending on entertainment, eating out, gas, housing, and everything else you buy. Patterns will start to form overtime and you will be able to cut back on many expenses you never knew you had. Make sure you calculate your budget correctly with actual numbers and not estimates. Go through your bank statements, credit card statements, and track your cash spending. The more accurate you are, the better off you will be. 

  1. Diversify

In order to have a strong investment portfolio, you need to diversify. This will spread your risk out over multiple assets and protect your wealth. Consider not only investing in equities, but also mutual funds, ETFs, commodities, real estate, foreign investments, etc. Be sure to invest in what you know. If you choose to invest in something you are not familiar with, do your research and talk with experts in that field. When diversifying, don’t go too far by investing in 100 different vehicles. Keep your portfolio manageable and limiti it to around 20 to 30 different investment vehicles. 

  1. Invest in yourself

The biggest asset in your life is yourself. While this sounds funny, without your health or knowledge you won’t get very far. Stay healthy, exercise, eat right, learn new things, read books, listen to podcasts, and better yourself every single day. This will keep you on track with your financial journey and when you finally become successful, you will be healthy to enjoy it. 

  1. Work at the right job for you

Deciding where you want to work can be a stressful and difficult search. The factors to take into account when searching for the right career include: skills, values, constraints, ambitions, opportunities, and personality. Many people work at jobs they don’t enjoy and it only brings them down in life mentally and it could ruin their prosperity in the future. Don’t let this happen to you. Take a career test, drill down on the factors that go into deciding a career, and interview at many companies. If you are in the wrong career, don’t be afraid to move onto a better opportunity for yourself. You are only on this planet once, don’t waste your time in a career that you don’t enjoy. 

  1. Save for large purchases ahead of time

Before purchasing something on credit, such as a car or furniture set, save up for them years in advance. If you know your current vehicle only has about five years left on it, start saving now before you buy a new one. Or if you already bought a new vehicle, start saving up for your next one right away. This will allow you to buy things with cash and not on credit, saving you money from interest. Products only last so long, prepare to purchase new ones in the future at their average life expectancy. 

  1. Max out employer matched retirement 

If your employer offers a 401(k) or 403(b) retirement plan, where they match funds, be absolutely certain you are contributing enough to get all of your employer match. If your employer offers a 6% match up and you put in 6%, that is automatically a 100% return on your money, risk free. Be sure you are capitalizing on your employer matched retirement accounts or you are giving away free money. 

  1. Lower your taxes

One of the easiest and most effective ways to save money every year is through your taxes. If you have complicated taxes, own a business, or have multiple investments, I highly recommend talking with a CPA. (Even if you have very simple taxes, you can benefit from meeting with a CPA) Tax law is very complicated and there are many ways you can save money that a CPA will be able to help you with. 

  1. Find your hourly net worth

Finding your hourly net worth is important because it allows you to leverage others and hire out things that aren’t worth your time. If you calculate your hourly net worth to be $40 an hour, it doesn’t make sense for you to mow the lawn anymore. It is more efficient and profitable to focus on what you are good at and what makes you money, rather than mowing your lawn for two hours. The higher your hourly net worth becomes, the more you can leverage others to do the things that aren’t worth your time anymore. 

  1. Buy used

Whenever possible, you should always look to buy second hand, used items. If you drive a new car off the lot, it will lose 20% of its value instantly. After one year, it loses 30% of its value. Therefore, instead of buying a brand new car, buy a one year old model and instantly save around 30%. This same concept applies with most products, such as electronics, furniture, lawn mowers, etc. Also consider shopping at thrift stores to find used clothing and used products you may need. While buying used isn’t the most luxurious thing you can do, it is a great way to save a ton of money. 

  1. Invest in index funds

A great way to invest in the stock market is with low cost index funds. Index funds are mutual funds with a portfolio structured to match or track a market index, such as the S&P 500. This type of investment provides broad market exposure, offers low operating expenses, and is meant for low portfolio turnover. They will follow the trends of their benchmarket index, which over time, tend to go up. 

  1. Don’t go grocery shopping without a list

Grocery stores are specifically designed and set up to get you to spend the most money possible. Going grocery shopping without a list, could be a death sentence for your wallet. If you don’t have anything to buy at a grocery store, don’t just go there to hangout. Go to the grocery store with intentions and armed with a shopping list to stay on track. This will force you not to get sucked into impulse buys. Stay focused and disciplined to your shopping list to save yourself money at the grocery store.

  1. Find inexpensive hobbies

While it is completely fine to choose hobbies you enjoy, try considering ones that don’t require costly upkeep. Many hobbies require you to buy fresh supplies and equipment, which end up costing your hundreds, if not, thousands of dollars. Golf, for example, requires you to buy new balls and green fees every year. Not to mention, new golf clubs can be pretty pricey. If you do choose an expensive hobby, try limiting yourself to only one expensive hobby. Don’t have several expensive hobbies because you probably won’t have time to do them all anyway and you’ll end up wasting a ton of money. 

  1. Don’t keep up with the Joneses

It can be very tempting to keep up with the Joneses. Materials things are tempting to buy, but it is a losing battle. This is because using material items and looking at others to boost your confidence to give you any kind of security, is only temporary. In the long run, material things will never bring you happiness and you will continue spending to keep the buyer high going. As soon as you buy the latest gadget or toy, a newer one comes out and someone else sets the bar higher. Make financial decisions on the things you need and can afford, not on what you think you need to keep up with the Joneses. 

  1. Never play the lottery 

Gambling and playing the lottery is one of the easiest ways to lose money. Sure it can be exhilarating to play, but it is a bad habit to start. Lotteries and casinos are for-profit businesses, therefore they keep more money than they pay out. You’ll likely end up losing money and paying more in than you’ll ever get back out. Before playing the lottery or gambling, take a step back and stop the urge. Even if you play $1-2 tickets, they are still a waste of money. If you enjoy playing games, play these games for free or find other hobbies like we talked about earlier. 

  1. Start a side hustle with something you are passionate about

I’ve talked about side hustles in previous articles and they are a great way to earn extra income. And if you are persistent and dedicated enough, they can replace your full-time job altogether. If you decide to start a side hustle, choose something you are passionate about. Do you enjoy working on the computer? – Consider starting an online business. Or maybe you like the outdoors – try combining your hobby of fishing with offering guided fishing trips in your local area. There are so many side hustles you can start, but be sure you choose something you enjoy doing or you won’t keep it up over time. 

  1. Watch less TV

While many of us enjoy watching television, it has many drawbacks. Consider these reasons for watching less TV:

  • It influences your spending habits
  • It takes away from the people around you
  • It is robbing you of precious mental energy
  • Cable, satelite, and TV subscriptions are expensive. 
  • It can be bad for your health
  • It results in less satisfaction in life

Skip the television and instead, spend your time exercising, meditating, reading, spending time outside, working on a side hustle, or fulfil your dream to financial freedom. 

  1. Cut back on addictive habits

While cutting back on addictive habits can be difficult, it is the best thing to do for many reasons. Some of these habits include drinking, smoking, gambling, drugs, coffee, soda, sugar, etc. All of these addictive habits are not only bad for your health, but also your wallet. If you know you are someone who has one of these bad habits, make an effort to cut back and eliminate them from your life as they offer no benefits. 

  1. Cancel unused memberships and subscriptions

A survey of 2,500 people, done by the Waterstone Management Group, revealed that the average person has $237.33 worth of subscriptions every single month. Many people have subscriptions they don’t even remember signing up for. People are wasting money every single month for these services they don’t use. If this is you, eliminate these subscriptions and save money you didn’t even know you were spending. 

  1. Wait 10 days before buying an item over a certain limit

Before you buy on an impulse, simply hold off and wait 10 days. Throughout that time, think of reasons why you shouldn’t buy this item. Will this product help you towards your goals? Does the price justify the value that it is bringing? Take 10 days to really think about the product that you want and figure out if it passes all the questions you are asking. Be very true to yourself and even ask friends and family what they think. 

  1. Use coupons

A great habit to get into is using coupons when you shop. You can use physical, paper coupons or you can use apps like RetailMeNot or Groupon. These are simple ways to save money and get the best deals possible when shopping. After time, using coupons will become a habit and they will be easier to use. At the end of the day, this will lead to more savings in your pocket. 

  1. Buy in bulk

Whether you have a large family or a small one, buying in bulk can help you save money on a per item cost. Focus on buying non perishable items in bulk like paper products, canned items, office supplies, etc. Buying in bulk will help you spend less as long as they are items you need. Don’t buy things you don’t need just because it is a good deal. 

  1. Lower your utility costs

There are many ways to lower your utility bills. This will not only help you save money, but also the environment. One of the easiest ways is to install LED bulbs throughout your house and unplug unused electronic devices. Other ways to reduce your utility bills are by installing programmable thermostats, air sealing your home, and using high efficiency appliances. 

  1. Drive the speed limit

While this might sound obvious, following the speed limit will save you gas money as well as an expensive speeding ticket 😉 Most cars are engineered to have the highest fuel efficiency from 55 to 65 mph. And on average, for each mile per hour over 65, your fuel efficiency goes down by 1%. By dropping your speed from 70 mph to 65, you save nearly 5% in fuel efficiency and you only lose four minutes per. 

  1. Build strong relationships

Make relationship building a priority in your life. This will make you happier and can lead to new opportunities. By creating professional relationships, you can leverage them as long as they are mutually beneficial.  If you can provide enough value in other peoples’ lives, they will return the value in equal or greater quantity. Spend time on building relationships and help people out when they need it. Your life will be more fulfilled and you will have a greater sense of pride.

  1. Use public transportation and carpool

If your city provides public transportation, it can be an inexpensive way to commute to work and other destinations. You may not have the freedom of your own car, while using public transportation, but how often do you go out of your way to and from work on any given day? Give public transportation a try for a week and see if it is a fit you. Oftentimes it is faster than rush hour driving and it will save you a ton of money on fuel and maintenance costs of driving your car. 

  1. Eat leftovers and pack lunches

If you can save leftovers, do it. They are free meals that would have otherwise been wasted. Leftovers are easy to spice up with different kinds of seasonings. A great use for leftovers is for lunches at work. When you are packing your leftovers after dinner, separate them into meals that you can take to lunch the next day at work. Take the time to do this right after dinner because in the morning, you will probably have less ambition to do it. Skip eating out and save a ton of money with leftovers by bringing sack lunches to work. 

  1. When you have a problem, try fixing it yourself first

Trade services can be very expensive and they may not always be worth the money. If you have a minor issue with your home such as a leaking faucet or toilet, attempt to fix the problem yourself first. While it is tempting to call a plumber or repairman right away, the problem may be simple enough for you to fix it. Use online resources like Youtube and forums, to find out how to repair almost anything you own. The worst case scenario is that you have to call the repair person anyway. 

  1. Discover your “why”

The reason for doing anything on this list stems from your “why.” This is the most important thing when seeking financial freedom. It will get you through the toughest of times and keep you focused along your journey. To discover your “why” you need to think about what you really want in life. Do you want your time freedom? Do you want to spend time with family? Or do you want to travel the world? Ask yourself, why do you want to be financially free? Only then, will you know the true reason why you are doing what you are doing. 

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