Top 6 Money Rules that Rich and Successful follows
Managing your finances can sometimes seem like a full-time job, with lots of decisions to make and things to learn. But, money management does not have to be complicated if you just step back and look at the big picture.
If you follow best practices for how you spend and save your money, your finances should essentially take care of themselves — and you should be able to benefit from the financial security that comes with making smart money moves. What are best practices for money management? Just follow these four money rules and you’ll be on the path to a worry-free financial life.
Always have 1 year of emergency fund cash.
If a financial disaster happens and you’re not prepared, the effects can reverberate throughout your life.
Emergencies happen. Cars break down, kids get sick, jobs get lost. Unfortunately, A broken down car leads to missed work or reduced income. A lost job leads to foreclosure or the repossession of your vehicle. Delayed medical care leads to a serious illness.
A financial cushion protects you from the far-reaching damage unexpected expenses can cause — and can keep you out of debt.
Hence 1 year of House Hold expenses should be kept as a Emergency Fund.
Invest 20% of gross income minimum
The interesting fact is 40% of respondents said in a survey said they simply hadn’t had the time to set up a savings plan.
Even if you have the best of intentions, unexpected expenses often come up throughout the week that empty your bank account. More than 60% of all workers live paycheck to paycheck, leaving little chance for savings.
Always save and invest wisely atleast 20% of your Gross Icome
Diversify your Assets and Investments
An asset allocation plan defines the allocation of money between assets and is a base for wealth creation. No wealth creation is possible without a scientific asset allocation plan. Always remember this classic saying, Never put all your eggs into one Basket.
Never go into debt for depreciating assets
One of the keys to becoming rich is to avoid making bankers and credit card lenders rich.
There are assets don’t go up in value. so if you’re borrowing to buy them, you take a double hit: interest plus depreciation. A Car is one of the worst depreciating assets you can go into debt for, as it loses value very quickly and interest can be very costly.
For any depreciating asset — including your vehicle — make it your goal to pay cash. If you cannot afford the item, delay the purchase or look for a cheaper alternative.
When you’re spending less money on interest — and aren’t seeing your net worth decline each month because most of your assets are depreciating — it is a lot easier to accomplish the other key goals, like living below your means and saving for a rainy day.
Live below your means
Most of people whom i meet say that they don’t have enough money to Save and invest. The one habit you need to stop today is spending beyond what you earn. With rapid penetration of credit cards, spending beyond your earnings is ridiculously easy.
Have strict limits on your discretionary spending. Use credit cards only for planned purchases that are necessary. Always save and spend later.
Never Spend more than what you earn
Have an Expert and Trusted Financial Advisor
With the economy doing well & people are earning astronomical salaries, but very few are ‘financially literate’ to take care of their funds. Many can’t differentiate between financial products based on risk, tenure, tax and returns. Hence it is always prudent to have a Expert and Trust Financial Consultant by your side.
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Equity Fund Manager | Wealth Consultant | Blogger
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