Generally Good Money Rules
This post is 810 words, a 4-minute read. Enjoy!
Unfortunately, I won’t be able to deliver the third installment of the Everything to Know About Your Money (Improved) series. If you missed the first two parts, check them out here and here.
To satiate, your personal finance knowledge thirst. Here are some generally good money rules to abide by. Most of these rules are unoriginal; however, I have tweaked them to make them my own. I say take them and make them your own.
Life Guiding Rules on Money
These rules are specific to my life and my money scripts. It highlights the things that I value or want to value. However, I break these rules all the time lol
Give
Not all advice is good, and not all good advice is good for me
Live on Less than I make
Invest at least 20% of income. Save at least 10%
Short-Term Pessimist, Long-Term Optimist.
Always have a 3-month emergency fund in Cash. When married get that to 6 months
No consumer debt aka car loans, credit cards, wedding loans, etc. If I can't afford to pay cash, I don't need it
Invest in Myself.
Books, classes, courses, health
No running.
Always face difficult situations and conversations head-on
If you can’t do it bravely, do it scared
Numbers Never Lie but they never tell the whole truth.
Some things won't make sense financially but will make sense life-wise
Fight for simplicity because complexity will find me
Marry the Right person
Contentment is the ultimate goal not more
Have Fun but Don't Eff It Up
Savings Rules
These rules are more specific to how I save. They are designed to be a bit more nuanced than the general rules. They provide some guidelines to allow me to step away from my big life vision. Of course, this is not everything.
Automate! Automate! Automate!
I will always have an emergency fund that can at least cover all my deductibles.
I will save cash for large purchases such as big vacations, cars, phones, laptops, weddings, furniture, etc.
I will save to always have a fund to take care of home items
I will have savings to help my parents
I will save ahead of time for big one-time annual payments like car insurance or taxes.
Debt Rules
Most of these are just great guidelines. I don’t abide by all of them because Rule 1 for me with Debt is
Avoid Debt as much as possible. It is a two-edged sword that cuts way too quickly and deeply.
It is okay to put down 3-5% on your first house, but there are caveats regarding how much you can afford.
Total housing can be no more than 30% of net income or 25% of gross income
This includes: mortgage, taxes, insurance, utilities, maintenance, HOA
You must have an emergency fund outside of your down payment.
Before you buy a house (primary residence), ask two questions
will I be here for 5 years or more?
Do I have the ability to put down 20% on the house?
Credit Card Rule
If you do not have the cash for the item, do not buy the item
Auto Loans: 20-3-8
20% Down payment
Finances from no more than 3 years (36 months)
Total Ownership Cost can be no more than 8% of your take-home pay. This includes:
The car note, gas, insurance, parking, maintenance, tickets, registration, etc.
In total transparency: I have never taken out an auto loan and have no plans to ever take one out.
Student loans: First year of estimated income
The maximum amount you should take out in loans should be no more than the salary you expect to make in your first-year post-graduation.
Investing Rules
"The first rule of compounding is to never interrupt it unnecessarily". - Charlie Munger
Rule of 25
Be Boring. Separate fun account from Retirement account
If I need the money in the next 3-5 years, I will not invest the money. Emergency Fund will never be invested
I will always max out my Roth IRA and get my company 401k match
Cashflow rules everything around me
The goal is Financial Independence. The best way to get to that goal is an average return over a long time.
Taxes are important but never make decisions allowing taxes to be a driver.
Wealth in and of itself is pointless
It is to be spent in three ways: removing the unhappiness of not having money for certain things
Allowing me to explore things that fulfill me
MOST IMPORTANTLY giving me time to spend with those I love.
Next week, I return with Everything to Know About Your Money (Improved): Part 3 - DEBT.
Remember Generosity>greed
✌🏾
Great stuff👏🏿👏🏿