I came across this YouTube video from Betterment Boss, titled The 7 Golden Rules of Money | How To Be Good With Money. Seems like a worthy topic. A “Golden Rule” is something we all want to adhere to and knowing how to be “Good With Money” is a no-brainer. So I figured I’d share the rules from the video and my thoughts on those rules. Let’s get started…
Rule 1: Spend Less Than You Earn
This is a no-brainer yet so many people have a problem with this one. This is because our impulses can get the best of us. And when we make more money, we tend to spend more money. Sort of like Parkinson’s Law applied to money…The amount of money we spend extends to the amount we have. In order to adhere to this rule, consider implementing a Pay Yourself First strategy and then adjust your expenses to what you have left.
Rule 2: Know How Much Money You Earn Per Hour
You have to know how much money you make per hour. This allows you to start valuing your time and not wasting it. When knowing how much you make per hour, you can better decide what things you spend your time doing. Additionally, you can make purchase decisions based on your hourly rate. For example, if you make $25 an hour and you want to buy a $100 pair of shoes, those shoes while cost you 4 hours of work. This can help you put what you spend in perspective. Are those shoes worth 4 hours of your time?
Rule 3: Build a Budget and Track Your Spending
61% of adults don’t use any kind of budget. A budget is critical if you want to stay in control of your money. Even the wealthiest of the wealthy use a budget. You need to know where your money is going. How much are you saving? How much are you spending? Where are you wasting it? A budget can answer these questions, so budget!!!
Rule 4: Simplify Everything
Managing your money can take a lot of effort, but it doesn’t have to. Your job is to simplify your money management as much as possible. Things like automatic bill pay, limiting the number of credit cards you have, automated investing, and regular times where you review and manage your money can make it simpler. For example, I automated my investments, use one primary credit card, automated bill pay, and check my accounts every Saturday. It only takes a few minutes. I don’t focus on the money I have during the week. I focus on the money I’m making. Then on Saturday, I focus a few minutes on what I have and what I owe.
Rule 5: Eliminate Your Highest Income Debt First
This is considered the Debt Avalanche method and it can help you save the most amount of interest payments. You pay the highest debt first and knock it out. Another popular method is the Snowball method where you pay the lowest credit card debt first, getting the win of knocking out that debt, and then taking the money you were putting into the first debt into your next debt. This way your money snowballs down your debt. Note that in both methods you’re still making the minimum payments on each debt. Personally, I prefer the Snowball method.
Rule 6: Have An Emergency Fund
An Emergency Fund is critical just in case an emergency happens. No one knows what Life will drop on your doorstep. It’s been reported that the average American household could NOT afford a $1000 emergency right now. Set a goal to get your first $1000 saved in an Emergency Fund as soon as possible. As soon as you are there, establish a plan to contribute a portion of your earnings each month to build this fund up to three months of your expenses. That way you have a nice reserve of money in case Life is cruel.
Rule 7: Money Only Buys Happiness When Properly Spent
Money can buy you happiness if you spend it on the right things. No, buying that $700 purse will not make you happy. Well, it may for a short period of time, but that’s not long-lasting. You want happiness that is long-lasting. One of the best ways to buy happiness is to spend your money on worthy causes. Perhaps you spend your money on others. Buy your family something they need and watch how it helps them. Spend it on travel and view other cultures, being thankful for what you have. Money can bring you all kinds of long-lasting happiness if you use it to help others and appreciate what you have. If you use it for silly purchases, that happiness is fleeting.
I agree with all seven of these rules. Will these rules alone make you rich? I don’t think so, but they will teach you how to be good with money and that is what the Betterment Boss promised in this video. These are some pretty obvious rules that can make the difference between living paycheck to paycheck or being in control of your money. Look to implement these rules as soon as you can if you want to turn your money situation around. Again, these are simple rules, but it takes a little work to get them going.
Here’s the full video from the Betterment Boss: