We all live by rules. Rules govern us or protect us, without rules everything goes. There are no universally applicable standards for managing your budget, savings, retirement planning, or other elements of your financial life, thus the important word when it comes to personal finance is “personal.”
Having said that, making your financial life a priority can be helped by following some broad, tried-and-true standards. Although you may choose to modify these guidelines in practice, they can be useful for assisting in your financial decision-making. Below, we have compiled 10 money rules everyone must know and pondered on by now.
Rule No.1: Set Financial Goals
We don’t want to be just existent in this world. Our goal is to have a financial target. For instance, your short term goal is to pay your debt, your medium term goal is the educational fund of your children, purchase a car or have your own house, while your long term goal is your retirement plan. These should be settled first because if you don’t have a goal, you don’t have a target. Afterward, that’s when you will create a strategy regarding finances.
Rule No.2: Create Multiple Sources of Income
You should not only have one source of income. For instance, your needs like water, internet and electricity bills will come from your monthly salary while your wants such as cellphone or laptop will come from your sideline. You can also make a business opportunity intended for your investment. As you can see, you can make a strategy if you know your financial goal.
Rule No.3: Budget your Money Well
If you don’t know how to budget or manage your finances, regardless how large of amount you accumulate, you will easily lose your money. Because the more money we make, the more money we spend. When your income comes in, you should know the amount you’ll allot for specific bills such as electricity and water bills as well your children’s educational fund.
Rule No.4: Live in Simplicity
We are the only ones making our life complicated. Live everything as simple as possible. This COVID-19 pandemic taught us to live our life in the simplest form. We stay at home and seldom go outside. In other words, in order for your life to be simple, you should control your spending. Never allow money to control you, instead you must control money. Don’t be an impulsive buyer and ask this question to yourself first, “Can I live without it?” If yes, then you can delay the purchase or look for cheaper alternative.
Rule No.5: Prioritize Savings
Put savings in your priority list. Formula income minus savings equivalent to expense. In order for you to prioritize savings, you can automate your savings. Like for example, you have a monthly salary to your ATM, you can open a second account and tell the bank to put a certain amount monthly (P2,000, P,5,000, P10,000) to your other account.
Rule No.6: Avoid Getting into Bad Debt
There are two types of debt, the good debt and the bad debt. When you borrow money with a goal of accumulating a profit, that’s a good debt while bad debt is borrowing a money intended for paying your debt or any other expenses like rent. If a person wants something like new gadget or clothe, he tends to borrow money to acquire it ASAP and people are not getting rich because they want to get something as soon as possible. Do not tolerate debt, do not allow your kids to borrow and teach them the 3 Ms (Magtiis, Magtiyaga, Maghintay) instead.
Rule No.7: Prioritize Retirement
Sometimes, we think only for short term plan or the “now” and we often neglect the future. Like for example, an Oveseas Filipino Worker (OFW) went home without enough savings, his family may survive for a while but what happens next? If you really want to ease your life after you stopped working, treat your retirement saving as your regular bill.
Rule No.8: Reinvest your Income
Rich people don’t get satisfied with their money or income, they want them to continuously balooning through investment. Think like them. Be strategic. Be opportunistic. But remember, you should always take calculated risk, don’t be too aggressive that you forget to introspect. Never invest in something that you do not understand, no matter how profitable it may be.
Rule No.9: Protect your Income
As you learn how to invest, you should protect your money too. Although, you can manage your finances well if you don’t know how to protect your money, every cents of money you worked hard for might disappear like a puff of air. Protect your health and life with a life insurance. What if you got contaminated with Covid-19, one sickness can costs you P500k-1M. Protect your assets with a non-life insurance. What if you got into an accident or your house got into fire incident? Prevention is always better than cure.
Rule No.10: Invest in Yourself
This is the foundation of all the rules abovementioned. If you don’t invest in yourself and you don’t learn, you cannot do the numbers from 1 to 9. It’s hard to do something that you do not know. It’s hard to save, budget or even start a business if you have a little knowledge about them. Do you want to make your life easier? If yes, never fail to invest in yourself.