6 Financial Rules to live by

by Lynn

Financial Rules to live by

For you to become financially independent there are simple financial rules to live by. They may not be easy at first but they will be worth it. To become financially independent you need to be aware of certain rules and ways to handle money.

Here are some financial rules to live by if you want to attain financial freedom.

Spend less than you earn

This is one of the most important financial rules to live by. Most people live paycheck to paycheck because they don’t spend less than they earn. If you work at a job that pays you less money than usual you can always get a side hustle that will boost your monthly income. Start living frugally and watch your financial life transform. Automate your savings and spend what’s left on your paycheck. Always spend less than what you earn.

RELATED: 8 Millionaire habits you should adopt

Keep Your Finances Organized

Make a point of knowing how you spend your money. This will help you stay organized when it comes to your finances. Make sure you can account for every cent that leaves your account. You need to know where your money goes. If you are not aware, you might get yourself into debt without knowing how you’re spending your money. You can easily keep your finances organized using planners or online aps. There are so many free applications that can help you keep track of your income and expenses.

Budget

Make a budget to plan for what you intend on spending. There are several budgeting rules but you can always start with the 50/30/20 rule. This rule states that 50% of your spending should go to your needs like food, housing and essentials. 30% should go to your wants like entertainment, traveling and do on. 20% should go to your savings, debt repayment or investments. This is a simple rule that will help you achieve financial freedom.

RELATED: How the 50/30/20 Budget Rule works

Savings & Investment

It’s very crucial that you have an emergency savings account in the event of a financial crisis. Having an emergency savings account is essential. Make sure you have the discipline to only use it in the event of a rainy day. The best way to build up your emergency savings account is to automate the deductions from your bank account. This way a certain percentage of your salary is allocated to your savings account. When creating an emergency savings account, aim to save at least 3 to 6 months of your monthly expenses. After having a savings account with up to 6 months worth of expenses you can now start investing your money. The earlier you start investing the earlier you can retire.

RELATED: 10 ways to save money on a low income

Debt

There are different types of debt. There’s business debt where you acquire debt to help your business grow. This is debt that will help you multiply your money so this is a good kind of debt. Then there’s personal debt from mortgages, credit cards, and student loans. Focus on repaying your debt to avoid any unnecessary strain on your finances. The faster you eliminate your debt the closer you are to financial independence. Choose a debt management formula and plan that works for you.

RELATED: Signs You Have Too Much Debt

Financial Goals

One of the financial rules to live by is to focus on financial independence as opposed to retirement. The goal should be getting to a point in your life where you don’t have to worry about money. You need to set overall financial goals and annual goals. After this, you can now break it down into actionable steps. Your goals have to factor in the lifestyle you want in the future. With financial goals in place, you will be more determined and focused when it comes to managing your finances well. Without goals, you will not have any motivation or determination to live by these financial rules.

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