Simple rules of money

 

So I was thinking today that I should write about some of the simple rules of money I have learned over the years, mostly by making mistakes.  They may seem very fundamental, but can be easily forgotten as we go through the grind of daily life.   And yes I know, rules are boring and don't leave much room for spontaneity; trust me, if your finances are in order, you know you can pay your bills, you have money in the bank, you will have less stress and be able to have more freedom to do the things you really want to do.



Rule #1 - Don't spend more money than you make.

This seems so simplistic and yet the amount of credit card debt is staggering.  For some, credit cards are used for basic needs, for others it is for wants.  In either case, it's important to understand how much you are making and how much you are spending.  Once you understand this by tracking your income and expenses for a month, there will be an opportunity to review and decide whether you can cut expenses or try to bring in more money.

Rule #2 - You can not reach your full money potential if you are paying someone else interest.

If you are paying interest on a credit card, mortgage, or loan;  you can not reach your full potential.  Your first priority before investing or saving is to pay off all debt to minimize the amount of interest your are spending.  I am not saying don't save money while you are paying off debt; you should be saving something for a rainy day; but you also do not want to be in a position to be saving money, only to run out of cash and have to use your credit card as a fall back.

Rule #3 - Have a budget.

Write down what your income and your expenses, not for the next week or month, but for the next six months.  If you know you are going to have a large expense in six months, save a small amount each month, rather than having to take a huge hit in one month.  I know this can be hard, as something always comes up, it does take a bit of discipline and trial and error, but once you get into the habit, it takes a stress out of our life.

For me, these are the fundamentals that will help to simplify our money life.  I will be posting more on the budget process, taxes, and how to get out of debt.