6 Financial Rules that Everyone Should Follow to Become Rich
If you want to save more money, create wealth, and achieve financial security, learn the essential personal finance rules you need to live.
Personal finances can create anxiety and overwhelming feelings. The general message is this: to make your money smarter, you need to hire a professional financial advisor, accountant, certified tax advisor for your tax, and who knows who else. A wise investment is left to the experts, and you will need high incomes and assets to play the game.
The more fear and intimidation you can instill, the more money professionals and financial institutions will make. The more confusing it sounds, the more likely it is that people will hire horrific tasks. What they don’t want you to know is that it really isn’t that hard.
I want to dispel the myth that managing your finances is a terrible test that is likely to fail you. So I’ve made a list of 12 simple money rules for life. These are simple personal finance guidelines for managing your money, growing your wealth, and living a financially secure life.
Follow these financial rules. It is very difficult to go wrong. They make progress, run up debts, and build wealth. Master these money rules and empty borders. More specifically, your goals, constrained by your restrictive beliefs, are your only limitation.
1. Track your Money
If you don’t know where you are right now, you can’t really plan your personal financial path. The first step in managing your finances is keeping an eye on your finances, whether you’re saving more money, paying off debts, or building your budget.
You need to understand where your money is going each month. Manage that money and tell them where to go instead of wondering where it all went at the end of the month. When you run out of money at the end of the month, keep a close eye on where all your dollars are going, understand your spending habits, and then find a way to cut back on your spending.
2. Live Below Your Means
There are many misconceptions about what it really means to live by your means. Simply put, you shouldn’t be spending more than you make to live below your average. So if you spend less than the amount you make each month from work or other sources of income, you are below your average.
Living below your average doesn’t mean you can’t spend your money on what you love to enjoy. If instead you want to create a more stable economic future while enjoying the occasional luxurious dinner, make conscious economic decisions like saving extra money, budgeting, and cutting unnecessary expenses instead.
3. Create a Fool-Proof Budget
Budgeting is one of the most important steps you can take to stop your salary-to-salary life. If you don’t fully understand your finances and the amount of money you’re getting in and out of, you can get caught up in a never-ending debt cycle. Create a budget by calculating your income and expenses.
In this way, you can clearly understand whether you are living within your own means or outside your own means. Your budget can help you set financial goals like debt repayment and vacation savings and ways to meet those goals. You are in complete control of how you tell exactly how to spend every penny you make.
4. Create an Emergency Fund
Emergency fund is one of the most important things you can do. It’s an essential part of personal finance. Your savings should be able to cover your main expenses for 3 to 6 months. Some of you have lost your job due to COVID-19 and you are juggling here and there to meet your expenses. You’ve probably heard of emergency funding before, but maybe you’ve never started saving for it, and now, you may wish you have it. Needless to say, you don’t have it, but you are doing our best in this unexpected situation. But now is the time when it is definitely worth thinking about how to start creating an emergency fund for the future.
5. Say NO to Credit Cards
Did you know that credit card buyers spend more than cash buyers? If you buy thing by hard cash then you would likely to spend only that much money but with credit card, that’s not the case. One of the most important rule of personal financing is never to have your credit card balance with you.
Credit card lending rates are very high, and paying these interest rates is an easy way to negatively deteriorate your wealth. If you have a credit card debt for a long time, you are not ready to invest any money in the market. You should only spend that money which you have in your hands. If that’s gone, that is gone.
6. Start Saving and Investing Early
It is often said that it is never too late to start saving for retirement. That may (technically) be true, but the earlier you start, the better it can be in your retirement year. This is due to the power of compound interest, which Albert Einstein called “the eighth wonder of the world”. Compound interest involves reinvesting income that is most successful over time. The longer the return on investment, the higher the value of the investment and the higher the return. You will need a demat account for investing in stocks and mutual funds. You can open a free demat account in Upstox.
For Example:
If you want to save 2 Crores for your retirement and you want that money at the age of 60. Now, suppose your current age is 20. So you just need 1000 INR to invest every month for next 40 years. And at the 12% interest rate, your money will become 1.19 Crores. But if you waited till 40, your monthly contribution would rise up to 11000 INR to get 1.10 crores.
The sooner you start, the easier it will be to meet your long-term financial goals. To achieve the same goal in the future, we need to reduce our monthly savings and our total contribution.
Closure
Personal finance rules can be a great tool for achieving financial success. However, it’s important to consider the bigger picture, make better financial decisions, and develop habits that lead to better financial health. Without general habits, detailed statements such as it’s difficult to follow.
