Every one of us makes several “money decisions” every day. Some money decisions involve major long-term plans that affect the future –taking out grad school loans, buying a home, opening an investing account or adjusting your asset allocation. But the majority of money decisions are seemingly minor: Cook at home or eat out? Buy a new dress or suit for that event next weekend, or re-wear an old outfit? Large or small, both affect your financial health.
Too often, those money decisions are unguided. Many people mirror their parents’ habits, follow the advice of friends, or – unfortunately – get swept up in lifestyle creep without thinking about it. This means that much of the time, financial decisions are made reactively.
As adults, we learn by trial and error, but life, and the markets, charge very expensive tuition bills. Better to take charge of your financial life, make a plan that suits your unique situation and needs (read: what works for family or friends isn’t necessarily what’s best for you), and approach personal finance proactively.
Here are five simple, straightforward financial rules to live by, to help you make that change.
- Follow a simple, strategic money plan so you can live below your means.
- Be debt free. Pay credit cards in full, on time, every month.
- Make sure to have an emergency fund set aside.
- Don’t just save, invest.
- Start planning for retirement decades before you plan to retire.