We hate rules. Maybe it’s the rebel inside all of us. But, if you really think about it, rules serve us well. They keep us safe. They help us achieve our goals. Rules of the road, for instance, ensure that we’ll arrive at our destination safely without accident.
There are rules to the money game as well. Unfortunately, too often we ignore them resulting in financial carnage. But if you follow some of these money rules, you’ll achieve financial success. Consider these financial rules for a prosperous 2017.
1. Pay yourself first.
YOU are the most important person in your financial universe. Unfortunately, we pay everyone else first, leaving only leftovers for ourselves. Make sure the first payments of the month are used to fund your financial priorities. Then worry about everyone else.
2. Remember, it’s not how much you make, it’s how much you keep that matters.
We’d all love a high paying job, but earning a large salary will not necessarily make you rich. Likewise, bringing home a meager salary will not keep you from achieving financial prosperity.
3. The true path to wealth is found in spending less than you earn.
Use what’s left over to pay off debt or to build money producing assets like stocks, bonds, savings accounts, or your own business.
4. Lifestyle inflation will gut your financial dreams.
As we earn more money, our tastes become more expensive. It’s almost inevitable. We trade McDonalds for Five Guys Burgers, Target for Macy’s, and our Toyota Camry for a Lexus ES. And in the process, we end up spending just as much as we earn…ruining any ability to create wealth.
5. The true scorecard to financial success is your net worth.
The scorecard of financial success is not the size of your home, labels on your clothes, or brand of your car. Net worth is the value of your total assets minus your total debts. No matter what stage your financial journey, you should always strive to increase your net worth.
6. Your willpower is fragile.
That’s not a criticism. It’s just human nature. In the end, we too often give in to financial temptations. That’s why it’s important not to rely on willpower alone. To get ahead financially, put your financial life on autopilot. Automate your savings, your 401K contributions, and your bill payments.
7. Stop leaving money on the table.
Have you had a car accident in the last year? If not, why are you paying the same insurance premium? Too often we fail to shop around for the lowest rates on insurance, cable television, cellphone plans and a host of other services.
8. Invest in your greatest asset.
You are your greatest asset. You, with your knowledge and skills, create your income. Therefore to increase your income you need to invest in you. Increase your knowledge. Learn new skills or earn new certifications that will allow you to command a higher salary.
Control your money or your money will control you.
9. Pay attention to the big purchases.
Get the big purchases right – transportation and housing, and you’ll be way ahead in the financial game. Unfortunately, people continue to buy more house than they can afford. They spend little time searching for the best mortgage rates and they spend more time planning their weekend than researching a $35,000 automobile purchase.
10. Run your own race.
You’ll never get ahead trying to keep up with your neighbor who is drowning in debt financing her new Mercedes. Don’t worry about the Joneses. Worry about your finances.
11. Give every dollar a purpose.
Give your Washington’s, Jefferson’s, and Benjamin’s their marching orders. Tell each and every dollar where it is going. Remember, control your money or your money will control you.
12. Understand that experiences will always trump material possessions.
When you sit down with friends and reminisce, do you discuss the things you purchased, or do you relish the time you spent with friends and loved ones? Experiences always appreciate in emotional value, while material possession almost always depreciate in monetary value. So if you have the choice between buying a new toy or going on a trip, for instance, chose the trip every time.
13. Don’t be afraid to earn more money.
Your ability to earn money is only limited by your imagination. We all have talents and experiences that others would be more than willing to pay for. A side hustle is the perfect opportunity to offer your talents to the world.
14. Invest as early as possible.
Compound interest has been called one of the most powerful forces in the universe. It is what allows small investments to grow over time. However, for compound interest to multiply your savings, you need time. The earlier you invest, the more time you allow compound interest to increase the size of your investment.
15. Realize that your kids are always watching you.
They are learning from both your success and mistakes. This may provide you with the greatest incentive for practicing great money habits, as these habits will become the basis for your children’s financial practices in the future.
BMWK, what are some of the money rules you follow to achieve financial success?