Personal Finance Rules to Live By

Most of us make financial choices every day. Whether consciously or sub consciously, we regularly make spending decisions – from the food we choose to eat to the way we travel to work and the things we do in our spare time. But how do we make those choices? Force of habit? Random decisions based on our mood? Picking the easiest option to save time? All of the above?

Chances are we could all benefit from a more ordered approach to managing our money. Why not adopt the following basic rules and see if they can give you greater control over your finances?

Don’t spend more than you earn

This might be a basic rule but, as Money Choices Today notes, it’s so easily forgotten. Sometimes it’s tough to know just how much you have coming in and out of your accounts. It’s important, therefore, to look through your finances and get a full understanding of this. Only if you know just how much money you have to work with will you be able to stick within this rule and avoid getting into problems.

Settle your debts as soon as you can

Debt isn’t a dirty word. Many of us need a loan from time to time to help pay for big ticket purchases. However, you do have to take your debts seriously. You should prioritize paying debts off and be clear about the repayments – and interest – before you take them on. Paying off debts as quickly as possible should help you to avoid paying too much interest. Also, try to pay off your existing debts before taking on new ones. It’s fine to borrow money to pay for one or two big items, but taking on too much debt could stretch your finances too thinly. If that means waiting a while to commit to a big spend, so be it.

Make sure you know where you are

How much is actually in your checking account right now? How many bills are about to come out – and how much are they for? If you can’t answer these questions then you’re going to struggle to make informed spending decisions. By downloading your bank’s app you’ll be able to check the current state of your bank balance ‘on the go’ before you make a spending choice. That way you can avoid ‘buyer’s regret’ when you get home and realise what you’ve done.

Always ask: Do I need this?

Whenever you make a significant spending choice, ask yourself whether or not you really need to do it. Sometimes a special offer or flashy packaging can be pretty tempting and lead us to pay for things we don’t use or don’t really need. It’s fine to put something back on the shelves and check at home to see if you need it – or to give yourself thinking time to ensure that you do still want to buy the item in the cold light of day. In some cases you might well want to pay for outright luxuries – things that serve no other purpose than making you happy. That’s fine, as long as you accept that’s how you’re spending your money and you know that you can afford it.

Also ask: Can I get this cheaper?

It’s good to stop and check that you’re getting a good deal. One of the clearest examples of this is when it comes to your household bills. Don’t see your current outgoings as fixed, try to cut the amount you spend by shopping around for a better deal wherever and whenever you can. That needn’t be a pain either. The likes of Bill Snip offer a bill negotiation service where you can text or email over a copy of your statement across and let them see if they can find a cheaper deal for you.

Develop a savings habit

It’s always healthy to save some of your money. Some people like to think of this as ‘paying yourself’ – so that you treat your savings as one of your fixed monthly outgoings. How much should you save? The simple answer is: as much as you can. However, as The Balance notes, ten per cent of your salary is a decent goal to have in mind.

Book yourself in for a regular health check

A regular review of your finances can ensure that you check you’re on track with things like your savings, paying your debts and tackling expensive bills. Pop a date in the diary to do this every few months so that you never let bad habits take hold.

Keep those fundamental rules and practices in mind and you’ll be able to make smarter spending choices – big and small – in your day-to-day life.



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