Most people want to reach a point in their lives where money is no longer a problem, and this often makes them to turn to financial solutions that promise quick fixes. But here is the truth, the road to attaining a thriving financial life requires time, effort, and most importantly, discipline. The subtle interplay between these three ingredients will help you cultivate healthy financial habits that will push you towards significant wealth accumulation. If you are looking to climb your way to the top, you have to change how you view and spend money and here are 10 principles you can use to do just that!
Principle #1: Don’t Spend More Than You Earn
Now this is one money principle that will help you build a significant amount of wealth, and as a result, elevate your lifestyle. As simple as it looks on the surface, a lot of people still struggle with aligning their spending habits to match their income, and this often leaves room for financial trouble to seep into their lives. Extravagant spending is the easiest way to impede your financial security, and if you want to be broke, retired, and drowning in debt a couple of years from now, this is the path to go.
But once you break the habit of hopping onto an expensive lifestyle that strains your income, you will find saving easier down the road. For one, living within your means enables you to restrict your daily spending to essential needs and secondly, it will help reduce your susceptibility to debt by a significant margin. If you want to attain financial sanity and freedom, there has to be more money finding its way into your pockets than that which is going out. Start tracking your spending as early as now and block any expenses that could be wasting your hard earned cash.
Principle #2: Always Pay Your Debts
Now truth be told, millions of people are currently stuck in loads of debt, and no matter how hard they try, it seems like the cycle never ends. Now in case you didn’t know, debt is one financial black hole that is very difficult to get out of, and if not checked, can morph into lingering addiction.
The more you use accessible loans as a crutch for your financial emergencies, the deeper this hole gets, and before you know it, you will have no savings or investments under your name. Instead of pushing you forward financially, paying debts only adds up to your expenses and eats up money that you would otherwise save or invest. This is why most individuals cultivate an anti-debt mindset earlier on in their careers, and trust me, it really goes a long way.
Principle #3: You Can Never Learn Enough About Money
Moving on, another money principle that you should start getting a grip on is that the learning never stops when it comes to money. As a matter of fact, enlightening yourself on money matters is an investment that will carry you through your whole life. As someone who has their eyes fixed on making more money, you need to read about money, because the more you read, the more you learn, and the more you learn, the more you earn.
As a rule of thumb, set aside at least 30 minutes of your day for reading money-related books, articles, and publications. If used well, these few minutes spent reading the right books will help give you an edge when it comes to saving, managing debt, making brilliant investment choices, and financial risk-taking. Besides these areas, you can also read about some successful people and use their stories to inspire your own financial journey.
In case you are feeling clueless as far as investments are concerned, don’t worry. Even some of the wealthiest people today started with a less than expert level of knowledge, and what made the difference is that they kept acquiring topnotch financial knowledge and skills through learning.
Consistent reading helps you gain insights on the direction the world is taking, and by staying financially updated, you will find yourself being intentional with where you channel your money. No matter how high up you are on the financial ladder, the learning curve will always get steeper and you will have to keep acquiring knowledge on how to live with money. Because as your wealth grows, your perspectives about money evolve with it, which necessitates the need to always stay informed.
Principle #4: Have An Escape Plan For Emergencies
Another money principle that we should all live by is:
Always have a financial escape plan
And by this, I mean a properly structured plan that can get you out of financial trouble whenever it strikes. No one is immune to unforeseen financial emergencies, and we can all agree that they tend to hit hardest when you least expect it. For most of us, such emergencies include things like getting fired, losing a loved one, and in some cases, abrupt travel plans.
As you draft your financial game plan, always remember to leave some wiggle room for unexpected occurrences like losing your job, a divorce, bankruptcy, or even for when your car breaks down. With a pumped up emergency fund, you can then focus on other financial ventures knowing that when things go South, you will always have a way out.
If you are just starting out, there are different strategies that you can use to set up an emergency fund that will save you from even the deepest financial pitfalls. Different strategies work for different salaries and different budgets, hence these are factors you must rethink before setting up your emergency fund. As a rule of thumb, always make sure to have 6 months of expenses set aside for when such emergencies strike.
Principle #5: The Budgeting Rule
Budgeting is another money principle that will break you out of tight financial situations. For starters, you may find proper budgeting quite an uphill task, and this is where the different budgeting rules come in. Depending on your income, you can come up with a figure-centric budgeting strategy that will help draw the line on how much money you spend on different things. If your income allows it, the 50/30/20 budgeting rule can be of help. This rule dictates that you should direct 50% of your monthly paycheck towards basic utilities (food, housing, education, and bills), 30% towards lifestyle choices, and the other 20% towards other top priority bills like debt repayments. This is one of the best ways to keep track of your spending, while not compromising on other crucial lifestyle needs such as going to the gym and other forms of entertainment.
Principle #6: Never Settle For Less
Despite having millions of dollars in their bank accounts, rich people are always looking for ways to make more money, and this brings us to the next money principle. You see, when it comes to solidifying your finances, you can’t afford to get comfortable with your current income earnings. Whether you have a salaried job or not, always be on the lookout for opportunities that can propel your earnings and grow your businesses.
Even if your current monthly salary is relatively low, this should not discourage you from working to improve the value that you bring to your employer. By making yourself invaluable, either through initiating brilliant ideas for your company or by leveling up your education and acquiring new skills, you will be making yourself an invaluable asset to your employer. Consequently, this will give you a head start when negotiating for a salary raise and bonuses, which translates to increased income. Simply put, never settle for less when it comes to earning money. If a salary raise is off the limits for you, consider pumping your money into investments such as stocks and bonds which tend to snowball over time.
Principle #7: No Money Is Too Little
Moving on, the seventh money principle that we should all live by is that there is no such thing as too little money. If you allow this principle to guide how you spend your money, you won’t have to worry about finances ever again. Even for those who you would refer to as rich, maintaining a wealthy status is as important as attaining it, which makes discretionary spending a top priority.
In this regard, always aim to get value for every dollar you spend and stay away from any impulses to throw your finances on whatever your heart desires. Because as little as your pocket change appears at face value, you’ll be surprised when you see how much it amounts to over the long haul. To help keep yourself in check, you can come up with a designated coin jar that secures your coins for you until they add up to a solid amount of cash. On top of that, take full advantage of any opportunity you get to pay less. Snatch the best deals when purchasing anything, and whenever possible, bargain your way to better deals or use discount coupons.
Principle #8: Save Before You Spend
Another money principle that will set you on the path to financial success is saving first before you spend. We all know that consistent saving is easier said than done, especially if you push your savings goals far behind. In order to stay on track with your savings, you will have to put them before anything else. As a rule of thumb, always put aside 20% of your total income in a secure saving nest, then allocate the remaining amount to other personal needs. Saving is not just good for your financial future, but it can help you stay stress-free when times get tough.
Principle #9: You Are Never Too Young To Start Making Money
When you were young, your capacity to dream big was limitless and you probably had some of the most ridiculous dreams at that age. But as we grow older, the realities of self-doubt start to kick in, and this makes the possibilities of being young and wealthy too elusive. Looking at some of the world’s billionaires today, however, you will come to the realization that age is just a number and that so long as you are smart enough, you can get rich at any age.
Actually, making money is easier when you are young since you have all the time and energy in the world. You can draw inspirations from some of the youngest self-made billionaires which will help kickstart your own journey towards financial success. In fact, I believe that the second part of your life truly begins when you realize that becoming wealthy knows no age. Truth is, you can start making serious money moves as a teenager, during college or soon after. As long as you are providing enough value, the money will soon follow!
Principle #10: Aim to Have Specific Money Goals
Having a rough picture of where you desire to be financially is one thing, but getting a grip on the exact figures is another. When it comes to money matters, you can’t afford to be skimpy with the figures, because even the slightest mistake will cost you.
Therefore, always ensure that your financial goals follow a clearly defined path and that you can account for every financial decision you make. If your goal is to be a millionaire by 30 for example, work towards investing in profitable ventures that will increase your chances of getting there. Create a habit of writing down your financial goals, whether monthly or annually, and then start working towards bringing them to fruition.
There you have it, 10 money principles you don’t want to skip out on!