Essential Rules of Personal Finance You Should Know

What are effective personal financial rules for all ages?

1. Stay out of debt or loans
2. Plan your budget diligently
3. Create an emergency fund
4. Stick to a meal plan
5. Do not spend more than you make
6. Increase your savings goals every year
7. Put financial independence first

Personal finance is what covers managing money plus the act of saving up and investing. From retirement planning to budgeting, every move that will cost you money is under personal finance. More so, it encompasses meeting your personal goals, regardless of whether it is short or long term.

At this point, you might be feeling overwhelmed with the number of factors you must consider. But there is no need to fret, focusing on the smaller details first and taking your eyes off the bigger end-goal should help you get started somehow.

In this article, we featured seven of the most important and straightforward personal finance rules and tips to get you motivated in perfecting your personal finance journey.

Top 7 Rules of Personal Finance

Stay out of Debt or Loans

Applying for a loan after loan will further push you down the debt spiral. No matter what happens, never rely on getting a loan to pay for your previous loan. This is a habit that is undeniably practiced around the world. Get out of the habit with these two methods that are both practical and achievable.

• Snowball Method

The concept of the snowball method is in fact how you would roll a snowball to make a bigger one. When it comes to paying your debts, start with the smallest that you owe and then work your way up to the largest amount you borrowed. This concept allows you to have the motivation to pay off every single loan a lot faster and in a sounder manner.

• Avalanche Method

This method is somehow like the snowball method except instead of starting with the smallest debt, you go for the debt with the highest interest rate. For example, most credit card companies may have higher interest rates compared to your other loans from different loaning vehicles, so naturally, you will go for the credit card loan to apply the avalanche method.

Plan Your Budget Diligently

There is nothing more to budgeting than simply ensuring that you still have money for essentials after paying off your debts and setting aside your savings. Indeed, budgeting is a meticulous process but going through it diligently will allow you to completely improve your spending and saving habits.

Here is a question you can ponder: Would you rather not spend an entire month and spend on the next or be able to spend every month while saving up and paying your debts?

Your answer will enable you to prioritize the things on your budget list. Leisure should never be taken off the equation. It is what helps us be motivated. Take it away and you might find yourself spending everything on leisure just because you held yourself back for so long. Again, responsible budgeting helps you improve your personal finance drastically.

Create an Emergency Fund

Building an emergency fund comes easy if you have a budget laid out. An emergency fund, in simpler terms, is the money or savings that you use for a budgetary crisis, accidents that subject you to copious amounts of hospital bills, and any other occurrence that is out of your control.

Stick to a Meal Plan

Personal finance is indeed tedious but wait until you learn that having a meal plan aside from your budget can help you in putting more money into your savings.

The computation for monthly meal spending is different for everyone. We do not share the same appetite and cravings as one another. Which is why it is important to devise your own meal plan and not base it on others.

Say for example it usually takes you three take-outs per week to satisfy your cravings. Compute for the meal you ordered, plus the time it took for the food to get into your hands, as well as the delivery fee it cost you.

Once you have that, check the ingredients, is it something you can make at home instead? Can you make more servings if you made it yourself? Do you have the leisure to visit the market and purchase the ingredients? Do you have time to make it at home?

Cost and time are the only factors you need to consider to discover whether it would save you more if you made it yourself or if you ordered to have it delivered to your doorstep.

Do not Spend More than You Make

Spending more than you make every month means that you are failing to put a value on the hard labor you have done all throughout. Yes, you might achieve happiness from purchasing things but eventually, you are not providing yourself with a financially stable future. Live below your means and not within your means.

Increase your Savings Goals Every Year

As you see your savings every month, you are even more motivated to keep putting money in it. While you can take this motivation lightly, you can also be more aggressive. Instead of sticking to the standard amount of money you put into your savings, you can double it, or even triple it if your budget calls for it. There is nothing like seeing your savings one day and thinking how you did not miss a single shopping or take out.

Retirement Comes After Financial Independence

On a more serious note, your retirement, and the comfort you will get from it, must come after financial independence. It is your own personal achievement if you can free yourself from financial debts and be able to claim your independence before you reach retirement age. As they say, work hard now and you will never have to worry about money when you reach 60 or work hard later then you will be working for the rest of your life.

Live your daily life without having to worry about your finances!

These financial tips are merely words of encouragement unless put into action. They may sound simple but acting in accordance with whatever plan you made is not something you take lightly. Start today and not tomorrow, write it down so you can act on it instead of having it in your head where it will remain an idea.