While some fads come and go, there are some timeless things that always ring true. Money has been around in one form or another for ages; it only makes sense that certain truths have been discovered in wise ways to make the best use of this asset.
Here are 10 rules that will never steer you wrong:
1. Grow your knowledge around getting better. We don’t do better until we know better. So, always work on improving your thoughts around money, and improving things that you know you should be doing to improve your money situation. This includes having an accountability partner to hold you accountable to what you should be doing.
2. Have an emergency fund. Without some savings to handle the inevitable hiccups that happen to everyone, your long-term plans can be in jeopardy. With an emergency fund, when a big financial challenge comes into your life, you can avoid having to dip into your retirement to pay your bills.
Recommend an emergency fund consisting of 3 – 6 months of your monthly expenses.
3. Know where your money is going. A spending plan or budget allows you to know where your money is going and identify how extra dollars can be used to improve your financial situation. You can alter spending from one area to another or increase income in order to increase savings or reduce debt.
4. Eliminate Debt as quick as possible. No one wishes they had more debt. While the debt required to buy a house is acceptable within reason, any other debt should be eliminated as soon as possible.
5. Maintain a healthy credit score. Increasing your credit score takes work and patience. But it’s worth the effort as having a good credit score can help you improve your financial health by allowing you to receive approvals at lower interest rates which translates in to lower monthly payments.
6. Be cheap. When you're buying anything, let’s make sure we are getting the most for our money. For managed investments like mutual funds, take a look at the management fee. Are you really getting your money's worth? Be sure the management team is worth the extra money.
7. Diversify your Investments & Be Patient. Putting all your eggs in one basket can be catastrophic if something happens to that basket. A significant financial loss to your portfolio can take 10 years or more to recover from which is why it’s important to diversify and let the power of compounding interest work overtime.
8. Properly Insure against unexpected losses. The best financial plans can be ruined if they are not properly protected from unplanned losses. It’s best to start with basic term life insurance to make sure your family is covered if something was to happen to you. Next, look to see if you have appropriate disability insurance which usually replace 50 – 65% of your salary.
9. Do everything (legal) you can to avoid taxes. Minimizing your taxes is work that's well worth the effort. Everyone should pay as little in taxes as possible. Don't just give away your money unless it's charitable, and the IRS doesn't count as a charity.
10. Do something, implement your plan. Wishing and thinking require as much energy as making and executing a plan.Instead of daydreaming all the time, just do something. Even a little financial planning and some minimal, but consistent, action make a big difference over time. So, let’s get going.
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