Here's A Few Money Rules For You

Money Rules

I began reading a little 100-page book called Money Rules written by Jean Chatzky about personal finance and the path to lifelong financial security. I am only one section in, and I am happy to report that the very short sections keep my attention tremendously. Here are some of the takeaway’s form this first section. Statistics show that 50% of people will run out of money in retirement. This stat is truly horrifying as not being able to take care of myself when I retire always troubles me. Knowing that half the population MUST work until they can’t anymore to afford daily life is scary for sure.

Personal finance is more personal than it is finance. Most people have extreme emotion when it comes to finances. Everybody also has different stories and different situations for spending their money. There are over spenders that can afford it, over spenders that can’t afford it, people supporting seven kids, and many many more different situations that I can’t possibly name.

Earning power is your greatest asset. Better than any stock investment, better than any amount of real estate. If you learn a skill and bump your pay up $10,000 a year for the rest of your life it is the best thing you can do. Really invest in yourself and your skills to develop them so you can earn better. And not just that, earn easier. Working eighty hours a week is a lot tougher than working 40 or less hours a week. The impact on your family is huge when it comes to that as well. Be more efficient in those working hours. Also, try your best to not bring your work home with you and truly be in the moment with the people you care about most, easier said than done I know.

Moving along similar topics about money the more money you make doesn’t make you any happier after a certain point. Scientists have come up with a magic number that has probably changed since this book was published and that number is $75,000 a year. Enough so you don’t have to worry about the mortgage, the car, the pile of insurances, you have a well-funded emergency savings account, you are on track to retire, give back, and you can even vacation a few times a year. I know my goal is to make that type of money the easiest way possible. I have a long way to go but that is my goal. Having time outside of work to spend with the people I care about and have absolute autonomy in my finances are my biggest goals. I hope one day I can hit those goals so I can raise a family and care for others the best way I can.

Living below your means is key to have more money coming in than going out. Usually when our level of income rises our level of spending rises. We forget how far money goes and we hand tie ourselves in a house we shouldn’t have gotten and two brand new cars in the driveway with a 72-month car payment looming over our heads. A quote I read from a book was when the tide rises so does your boat, a metaphor for income and spending. Try to not let your spending rise when that new income feels because if you do that raise at work won’t feel very much at all.

If you can’t see it, you can’t touch it, then you won’t spend it. This is why saving for a 401(k) is much easier and why Uncle Sam takes his portion before it hits your account. This is also why I advocate for having automatic transfers into a goal savings account that isn’t with your normal bank. The money transfers straight out of the account your direct deposit goes into, and it goes right to your goals. Of course, you could transfer it back, but it has an added hoop to jump through. Name it, house down payment, emergency fund, a back-to-school fund or even a vacation account. Being able to make saving as easy as possible will make it happen more.

Sticking with saving there is another rule. Nothing is chump change. If you can’t afford to invest in your 401(k) as much as you would like to, any type of investment will compound. There are no minimum amounts, and your money will be invested in the markets just the same. Saving $10 a week out of your paycheck seems insignificant at first but given enough weeks you can go on a nice cruise vacation.

EMERGENCIES WILL HAPPEN. This is a fact of life. Hopefully the emergency isn’t serious and being able to cover your butt financially will go a long way into the road for recovery or whatever life throws at you. It is extremely tough when enough of these events compound with one another. A divorce, on top of a lost job, with no emergency fund. Setting yourself up for failure, that is one of the worst-case scenarios, but it can happen. You can lose a job; you can be put injured outside of work, so no income comes in. I have had that happen and luckily, I had an emergency fund to fall back on.

You will spend more with credit cards than you will with debit or cold hard cash. Some credit card companies offer no interest for a set amount of months but eventually you rack up that balance and only pay minimum payments and that 25% interest is going to hit like a truck.

Count dollars like calories. Know where every dollar goes and budget it effectively. If you don’t keep track it can get out of hand pretty quickly.

Save for something. Saving for something just makes you feel good, it is taking concrete steps to hit a goal that means something to you, try your best to get some money saved up to spoil yourself with nice shoes, a nice vacation, or something you’ve always wanted to do.

Don’t borrow more for college than you expect to earn the first year out of school. More years doesn’t always equal more money and you could be setting yourself up for a college payment until you pay it off in your 40’s. Be creative with the ways you can pay for your schooling. There are many tuition reimbursement programs even from part-time jobs now. There are also plenty of scholarships available so be on the lookout for anything you qualify for.

Sleep on a money situation that isn’t an emergency. If you think you HAVE to have it at the store, go home and sleep on it. Usually, you don’t have to have it.

There is no such thing as a free lunch. Opportunity costs have to be taken into account when brought a once in a lifetime deal! A cruise line offered me a $500 cruise from Australia to Seattle that lasts 22 days. That is $22 dollars a day with all meals, lodging, entertainment, and a trip to tropical islands. When you factor in the cost to flight out there which is a 22-hour flight from Florida that costs well over $3000 for a one way. Then you have to fly back from Seattle. You can see how the costs are stacking up. Not to mention the implicit cost of missing three weeks of work at least. Adding in the implicit and explicit cost of this deal of a lifetime you would be looking at around $4000 for the explicit cost and however many workdays you miss for it because you run out of vacation time.

Typically, not always, but most of the time if it is good for the environment, it is good on your wallet. Growing vegetables in a garden as an upfront cost but years of benefit after. Reusuable watter bottles are a big one in my life as my parents used to buy case after case after case of water which was just such an unnecessary expense and also terrible for the environment.

Surround yourself with cheapskates and you can’t help but be influenced by others. Every time I spend time with my brother, I can’t help but spend ungodly amounts of money. We once had a $150 a person meal and it was incredibly mediocre. Each time we go out to dinner I know my wallet is in trouble. You become your surroundings quickly, hang around the cheap people when you have a spending addiction and see how it fades away.

Make your investments very boring, make it automated, and have someone else take care of it for you so your emotions are out of it. Investing with my emotions getting involved was how I lost a lot of money in my standards. I took out all my investments far too early and I invested heavily in single stocks being too cocky then I should have been. Greed and immaturity lost all that money. Some of which I would love to have today.

Keep your hands off your retirement funds. I hear more and more people taking out their retirement accounts sometimes without reason and lose a huge chunk from taxes, penalties, and the compound growth it will accrue by the time it is ready to withdraw.

Don’t drink all the koolaid, some companies have a company stock purchase plan for discounted rates for the employees but people a lot smarter than me say don’t let this make up more than 10% of your portfolio. If hard times come, you could lose your job and your investments could go in the tank as well. Be well diversified.

Another huge threat to financial security is your health. Medical debt adds up quickly and they have the potential to be very very expensive depending on the situation you need. Quit smoking and exercise regularly because being obese costs more than cigarettes.

Spend more time building a great family rather than chasing promotions at work. The 80-hour work week is a badge of honor for most people. This is way too much for you to have your own life and spend the time needed to nurture all the relationships in your life. If you die tomorrow, the company will have a moment of silence for you during the staff meeting and your job will be filled within the month. This is terrible to talk about, but it is the sad truth. Create more time for the people you care about. That will never be time wasted.

Don’t lend money to your friends and relatives. Just gift them it, if you want it back that is bad business. Don’t ruin relationships over that.

Also give money and time to the less fortunate. You have luxuries in your life that some people only can dream of. Give back and it will make you feel amazing.

But to do that you will have to declare some financial independence which is one of the most satisfying feelings in the world. No debts to pay off, just enough money where you don’t need help from anyone to survive. That is when you can help others on their own way to be patient and get through the debts that seem to be never ending. There is a light at the end of the tunnel. Keep pushing towards it. This book was a quality read, short and poppy chapters with some good information in it. Go read it and in a couple hours you will have some more knowledge about money and the more knowledge you have the better you can be in your financial future.