Here’s 20 personal finance rules:
1. Salary is not the same as savings. Your net worth is more important than how much money you make.
2. Saving is more important than investing. The best investment decision you can make is setting a high savings rate because it gives you a huge margin of safety in life.
3. Avoid credit card debt like the plague. Carrying credit card debt is a great way to negatively compound your net worth.
4. Live below your means, not within your means. The only way to get ahead financially is to stay behind your own earnings power.
5. But credit itself is important. Having a solid credit score can save you tens of thousands of dollars by lowering your borrowing costs.
6. If you want to understand your priorities look at where you spend money each month. You have to understand your spending habits if you ever wish to gain control of your finances.
7. Automate everything. The best way to save more, avoid late fees, make your life easier and get out of your own way is to automate as much of your financial life as possible.
8. Get the big purchases right. Personal finance experts love to debate the minutia of brown bag lunches and lattes but the most important purchases in terms of keeping your finances in order will be the big ones — housing and transportation. Overextending yourself on these can be a killer.
9. Build up that savings account. You have to have liquid assets to take care of things when life inevitably gets in the way.
10. Cover your insurable needs. This is another huge personal finance margin of safety item. Just remember that insurance is about protecting wealth, not building it.
11. Always get the match. I can’t tell you how many times I’ve talked to people who aren’t saving enough in their 401(k) plan to get the employer match. That’s like turning down a tax-deferred portion of your salary each year.
12. Save a little more each year. The trick is to increase your savings rates every time you get a raise so you’ll never even notice that you had more money to begin with.
13. Choose your friends and neighborhood wisely. Trying to keep up with spendthrift friends or neighbors is a never-ending game with no true winners.
14. Talk about money. Talk to your spouse about money. Ask others for help. Don’t allow financial problems to linger and get worse.
15. Material purchases won’t make you happier in the long-run. There is something of a short-term dopamine hit we get through retail therapy but it always wears off.
16. Read a book or ten. There are countless personal finance books out there. If it bores you to death then at least skim through a few and pick out the best pieces of advice from a few different sources to test out.
17. Know where you stand. Everyone should have a back-of-the-envelope idea about where their net worth (assets – liabilities) stands. Before knowing where you want to go you have to know where you are.
18. Taxes matter. Take advantage of as many tax breaks as you can and always understand your personal tax situation.
19. Make more money. Saving and/or cutting back is a great way to get ahead, but it’s an incomplete strategy if you’re not trying to earn more by enhancing your career. Too many people are stuck in the mindset that there’s nothing they can do to get a better job, take on more responsibilities or earn a higher salary. That’s nonsense.
20. Don’t think about retirement, but financial independence. The goal shouldn’t be about making it to a certain age so you can ride off into the sunset, but rather getting to the point where you don’t have to worry about money anymore.