5 Golden Rules to Live By to Improve Your Financial Life
Achieving financial freedom is a goal for many people but sadly, it’s not an easy goal to attain. What financial freedom means for most people is having a healthy savings account, a diverse investment portfolio, and a decent net worth to afford the lifestyle you want. Unfortunately, as the cost of living increases, so do our debts and financial commitments. Unforeseen circumstances such as economic downturns and global pandemics can easily add to our financial burdens.
How you manage your finances today determines your future. If you haven’t already started or aren’t sure if you are on the right track, we have put together 5 generic rules to help you improve your financial life.
Rule 1: Set a personal budget
The first step to being financially healthy is to set a personal budget. Planning a monthly budget and being disciplined enough to stick to it is the best way to keep your finances in check. This will ensure that your bills are paid on time while having enough savings. The 50/30/20 budget is a general guide to allocate your funds, but it will be different for every individual depending on your needs. The generic rule is that you allocate 50% of your income toward expenses such as food, transport, and medical necessities, 30% toward leisure and entertainment, and 20% toward your debt and savings.
Rule 2: Set your life goals
Life goals and financial freedom are different for everyone. Setting your life goals can help you see a bigger picture of how to go about planning your finances. If you are planning to start a family and have children or are saving up for retirement, work backward to your current age and devise a realistic plan to help you attain your financial goals. From there you will be able to determine how much money you need to save and what kind of lifestyle you can afford in the meantime. The more specific your goals are the higher chance of you achieving them as you put a concrete plan in place.
Rule 3: Pay off your bills in full
An important rule to live by is to never let your debts accumulate over time. In today’s society, it is easy to fall prey to high-interest credit cards and loans, and these can be detrimental to your financial health if not managed properly. While credit cards and loans can be useful in times of emergencies, you should not be over-reliant on them for your expenses. Make it a point to pay off your loans in full every month. Not only will this build a good credit rating, but this regular routine can also help bolster against the temptation to splurge unnecessarily. Remember, a debt-free life is always a better life.
Rule 4: Start saving and investing as early as you can
Savings and investments play a huge part in your financial health. Time is money. The earlier you are able to start saving and investing, the closer you can be to attaining financial freedom. Having a healthy savings account ensures that your emergency fund is taken care of and allows you to focus on investing your money to make it work harder for you.
While investments carry a certain amount of risk, it has been proven that there is no better way to grow your money than through investing. Never underestimate the magic of compound interest. The earlier you can start investing, the earlier you will start to notice growth. There are plenty of investment options in the market such as stocks, Robo-advisors, and cryptocurrency. Learning how to invest as soon as you are financially able to will give you an edge.
Rule 5: Find a financial advisor
If you are not as financially savvy, there is no harm in finding a financial advisor you can trust to advise and plan your finances for you. A reliable financial advisor can help you understand where you are financially and help you plan for your life goals.
On the other hand, if you have managed to amass a decent amount of wealth in liquid investments or tangible assets, you can consider getting a financial advisor to help you reach greater heights with your money.
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