We are all looking for financial help in one way or another. Whether it’s getting out of debt, cutting back on expenses, saving more or making more money, the surprise is that the general rules that govern sound financial management are fairly simple. The difficulty lies in getting ourselves to do what is necessary to implement the solution. The devil, as they say, is in the details.
This website is dedicated to helping us all think about the choices we make as they pertain to our finances, to hopefully help us make better decisions and lead more fulfilled lives free of financial stress. Thousands of pages of advice on this site remarkably boil down to 14 simple rules.
Financial Help From The Founder Of The Simple Dollar
Trent’s “Money Rules” were developed in a series of posts on simple financial help. Each rule below is linked to the original post and gives a more in depth explanation of the rules.
Rule #1:Spend Less Than You Earn
In order to eliminate debt or save more money, you need to spend less than you earn, period. This is remarkably simple, but it can be painful to implement. Everyone wants to buy a new car, or a bigger house, but the key to helping your financial situation is to have more coming in than going out. Everything else flows from this one rule.
Rule #2: Don’t Overthink Your Investments
The financial product landscape is complicated, but it doesn’t need to be. Instead of trying to understand how a mutual fund manager intends to beat the stock market indicies, you can simply invest in the index and get the same return without additional fees. Seek out a financial advisor that talks in plain english, and invest in a broad range of assets like stocks bonds and real estate. Then, leave it alone and let it work.
Rule #3: Stop Wasting Time
Time equals money. Being productive with your time can literally make you more money. You can also set up investments that put your money to work for you, and literally earn while you sleep. Starting as early as possible is critical.
Nothing destroys financial momentum like having to pay high interest on lots of debt. Some debt is unavoidable. But large amounts of high interest debt can lead to a spiral that is difficult to recover from. It is important to build a plan, and attack that high interest debt as quickly as possible.
Rule #5: Talk About Money and Be Honest
When you avoid talking about money, you put off the problem to a later date. Meanwhile the problem keeps getting worse. It is best to attack money problems sooner rather than later. It also pays to be open and honest with those involved. This may be your spouse, parents, kids or lenders. These can be difficult conversations, but usually the best path is to confront the issue head on.
Rule #6: Stop Trying to Impress Other People
Keeping up with the Joneses is expensive. When you focus on what other people think, you spend more money. When you focus on getting a job done efficiently, you save money. So “Stop Trying to Impress Other People” boils down to taking care of the essentials like your health, hygiene, and family while recognizing when you want to buy things to impress people rather than fulfilling a need. Some examples are: buying an expensive car, overboard clothes shopping, and buying the latest tech gadgets.
Rule #7: Watch Your Progress and Make it Fun
One of the best motivators for keeping up with progress is to actually track your progress over time. When you see incremental improvements, you want to keep doing more. The simplest way to track your progress is to calculate your “net worth” each month. This is simply the difference between your assets and liabilities. You can increase your net worth in a number of ways: decrease your debt, increase your assets, earn more and spend less.
Rule #8: Take Care of Your Things
There is a direct correlation between how well you maintain your possessions, their useful lives and their lifetime costs. Well maintained items can be used longer and thus are less expensive over a long time horizon. For example, an unmaintained air conditioner sucks more power and will fail sooner than one that has been properly maintained. The little you spend to properly maintain the air conditioner pales in comparison to the thousands you will shell out to replace the unit early.
Rule #9: Do it Yourself
There are simple ways to do everyday things on your own that can save you money. NOT everything should be DIY, but significant money can be saved by doing some things on your own. Examples include cooking at home, lawn fertilization, vehicle oil change, trimming bushes, and car washes.
Rule #10: Plan Ahead Every Time You Spend
We live in an information age, yet most people give little thought to planning everyday purchases. Getting to know the prices of items you buy at a grocery store can save you hundreds per year. Same with shopping for cell phone service and other utilities. Plan what you need and stick to that plan to save big.
Rule #11: Find and Work Towards Your True Passions
We are more effective when we work on what we like, so spend some time trying to find your true passions. You will be more engaged, and likely to make more money as a result of being the best at what you do because you like it. The money quote from this post is: “I’ve watched it over and over again: the people that succeed in a particular career path are the people who are able to tap into their natural passions and aim that fire hose into their professional life.”
Rule #12: Build Real Friendships and Relationships
There is inherent value in building and maintaining strong interpersonal relationships. Most business is relationship based and transactional in nature. To become successful at what you do, you need to build strong lasting relationships. Whether that be with customers, suppliers, advisors, friends, or blog readers.
Rule #13: Improve Yourself Every Chance You Get
Self improvement is like compound interest – small accumulation overtime is transformative. There are lots of ways to improve yourself and have a positive effect on your finances. For example, getting in shape can lower your medical bills, improving your skills can get you a higher paying job or improving your knowledge on a subject can help you make better decisions. Your ultimate asset is you, and your ability to earn a dollar. Make the investment to improve yourself daily, and you will come out ahead.
Rule #14: Give Without Strings or Regrets
Giving is a reflection of what truly matters to you in the world, and I am a firm believer that you must give before you get. That mantra and its eastern equivalent, karma, are linked. This is a tough concept, but you can actually improve your financial situation by giving first. I’m not just talking about money, but also your time, skills, and abilities. When given freely can strengthen relationships (Rule 12), improve yourself (Rule 13), and helps you work towards your true passions (Rule 11). There are infinite ways to give. Always think “give first.”