Five Personal Finance Rules You Should Be Following – Money Perception

Managing money properly is one of the most common things that people struggle with on a day-to-day basis. Though it can be difficult to carefully track your finances, failure to do so can have a significant negative impact on your life, in some cases resulting in bankruptcy or an inability to ever create decent savings. When I was in college, I knew investing in real estate was in my near future. Before I purchased my first property to flip, I saved money by decreasing my expenses to the bare minimum, avoiding credit cards and starting a small side business marketing classic cars to generate income. This allowed me to start my education in real estate at a very early age.

As with most things, following some simple rules will give you at least a good start in managing your money. Here are five of the top rules for personal finance and money management.

1. Save Most Of What You Don’t Have To Spend 

Every month, you’ll have a certain amount of income and a certain level of expenses. Needless to say, the essential expenses — food, utilities, housing costs — have to be paid for. After you take care of these essentials, however, there’s a good chance that you’ll still have some money left over from your monthly income. Unless a very pressing need comes up, you should try to put at least half of this money, preferably more, into savings. Doing this will help you to quickly build up your savings account while at the same time still leaving you some of the leftover money to spend as you like.

2. Avoid Credit Card Debt 

In the modern world, taking on some debt over the course of your life is almost a certainty. All debt, however, is not created equal. Paying a mortgage builds equity in a home while guaranteeing that one day you will not have to pay anything monthly to live in your house. Paying down a car loan ensures that you have the necessary transportation to reliably get to and from your job, allowing you to earn a living. Credit card debt, however, is usually built up by spending money on nonessentials, luxuries and impulse purchases. This is why it is rarely a good idea to carry credit card debt.

There is, however, a more nuanced view of this issue. An important part of personal finance is having good credit, which usually involves using a credit card regularly. In order to balance the need to build your credit with keeping yourself free from credit card debt, try treating your credit card like a debit card. Use your card to buy everyday necessaries, being careful to spend only money you already have, then pay the balance off at the end of the month. This will help you to establish a credit rating that can be used to borrow money when you really need to while keeping you free from accumulating credit card debt.

3. Live Like You’re Broke…Even If You Aren’t 

Most people have a natural inclination to adjust their standards of living to their level of income. Though this can seem like a reasonable thing to do, it may actually be better to continue to live as if you’re broke, regardless of how much money you are earning. Even if you can afford a larger home, a newer car, more expensive food and a variety of other luxuries, you could also make do with less expensive alternatives and save the cost difference. By approaching your finances this way, regardless of how much money you make, you will ensure that your savings account grows rapidly. Make sacrifices today, and you’ll see financial independence in the future.

4. Find A Way To Invest 

For beginners, investing in anything can be an alarming prospect, as there is always a chance of losing money. However, learning to invest your money and make it work for you will benefit you throughout the course of your financial life. Investigate different investing options, from mutual funds and managed stock accounts to less traditional options such as real estate rentals and peer-to-peer lending, and decide what is right for you and your level of risk tolerance. Learning to invest, even in small amounts, will help you to increase your overall wealth in the long term.

5. Pay Full Price Only If You Have To 

Perhaps the easiest way to save extra money without making any significant changes in your lifestyle is to stop paying full price for things you could get at a less expensive price point. If you are going grocery shopping, look for coupons and search for generic equivalents of brand-name products. If you are buying an item online, see if a lightly used or refurbished product is available, as these will serve the same function while costing noticeably less. If you are making a major purchase, such as a house, try to negotiate the price. Of course, there will be instances in which there simply isn’t a good way to save money on a purchase, but try to make paying full price the exception rather than the rule.

By following these rules and keeping close track of your money, you will be able to set yourself on the path toward fiscal responsibility. Don’t worry if you slip up occasionally by making an unnecessary purchase or fail to save as much as you had planned in a given month. Everyone has a tendency to indulge themselves from time to time, but as long as you save more often than you spend, you’ll be able to establish a habit of managing your money well.