Money is like everything else in life, it is a decision. It doesn’t feel like that though most of the time, does it? You grow up and get a job and start to earn income. The ladder is in front of you, and you begin your ascent. The only problem is this doesn’t feel like a choice, it feels like a slog uphill! Growing your income, for most of us, has felt hard. This is also why when I first heard things about how I could have complete control over my income and my money, I didn’t believe it either.
I graduated college and with student loan debt like millions of others I assumed a degree was my lottery ticket. It was not. The piece of paper hangs in my office and while I am proud of the grit it took to obtain that degree; it wasn’t what got me on the path to wealth and success. As I still feel like I am at the beginning of my journey, I feel led to let you in on a few money rules to live by.
Money Rule #1
You need an emergency fund. How many times do experts and articles have to say it? It’s true. You need six months’ worth of expenses tucked away for emergencies. They will come. The car will break down, the electric bill will double, the kids will get sick. Things happen and not being prepared is an excuse. The amount can be negotiable but the rule stands. Set up an automatic draft from your checking to your savings account each payday. On this payday automatically transfer what you can to savings. This could be $50 or $500. The amount is irrelevant, it’s the habit you are building to save and pay yourself first. *Side note; having a HELOC you are calling an emergency fund is NOT a savings account. If you lost your job, you’d be having a hard time making payments and that is the actual definition of when to use an emergency savings.
Money Rule #2
Don’t over leverage your life. Yes, most people may have a mortgage, two cars, a student loan, a few credit cards, and a boat. That does not mean its normal. While debts are a necessary means of growing as you grow your income there does come a point you must decide, who are you buying this stuff for? I’ve often heard and even used to say, “I worked so hard, I deserve this.” You deserve a lifetime of freedom from financial concerns and restraint. You deserve to not stay in a job you hate because you have to pay the bills. You deserve the peace that comes with not floating checks to get by. Before you borrow, assess the plan – is this a need or a want? When you get to retirement the less you have that is going out to pay for the debts, the more you will keep in your pocket. If you’d like to retire at some point, I suggest you mind your debts.
Money Rule #3
Pay yourself first. Many people make the mistake of saying they will save for retirement later. When your young it seems, you have forever. You do not. In fact, the younger you start, the more your money has time to compound and grow. For example, if you invest just $1,000 in your company retirement plan and contribute $500 a month, and the investment grows at an average of 7%, in 30 years you will have over $600,000. If your company or employer offers a retirement plan, take it. If there is a match, invest at least enough to get the match. Seek to understand the amount you are investing and how the investment will work to your benefit. If you are unsure, discuss with a money professional, not your neighbor or work buddy. Their plan is just that, theirs.
Money Rule #4
Grow your income. Most money rules say cut expenses to grow wealth and while that can be a method, it seems a better one and more effective measure is to adjust your income as you can. You can negotiate a higher salary, beef up your resume and apply for another job, have a side gig or even look around your home and sell something you haven’t used in a year online. The possibilities today are endless. With the rise of working from home (thanks COVID-19) and the ability to connect from anywhere, you can grow your income and grow your wealth.
Money Rule #5
Set a goal. You can’t hit the target if you do not know where you are going. Money is simply a tool to expand on the life you have envisioned. The biggest problem with most people is they don’t even know what all this money is for. You buy things you don’t need, to impress people you don’t like, and at the end of the day, what are you left with? If you don’t tell your money what to do you will be at the mercy of what your money will allow you to do and that’s no way to live. The ideal is to set a goal for your money. What is the life you want to live? How many vacations with the family? What car will you drive? What is the exact picture of the home you want to live in? Now, build the vision of your life and that will tell you the money goal.
I have been lucky to visit with millionaires who’ve never invested in the stock market and seem happier than anyone I’ve ever met. I’ve known widows who prefer to garden and take their grandkids to Disney than buy a bigger home. The price of the life you want is built is the experiences you seek. Money doesn’t have to be scary, or too big to conquer. There isn’t a magic number. There is only your life, your goal, and your number that supports your dream. Don’t let anyone tell you it’s wrong.
