That is why it is a good idea to follow these 2 rules. Why only 2? Because you only really need 2 money rules to live by and anyone can remember just 2 rules.
1. Spend less than you make
Can it get any simpler than this? In order to never find yourself in debt, you need to spend less than you make. This is true if you earn $25 000 or $250 000.
I always find it funny when I hear that a celebrity has been declared bankrupt. I'm not being jealous, mean nor spiteful but how can you be broke when you have earned in excess of $10 million? That is more than enough money to live in unrivalled luxury for the rest of their days!
Spending less doesn't have to be hard. It is easier than you might think:
I. Go through your bills
Go through every single one of your bills. Ask yourself, Do I really need this service? If you have cable but don't watch much TV then cancel it or at the very least choose a cheaper package. The same applies to your phone bill. Do you really need unlimited texts or minutes?
II. Track your spending
With the internet and smartphones being commonplace, it is now easier than ever to keep track of your spending, either with an app or online. Every time you pay for something, write down the amount you spent.
At the end of the month, analyse the list and ask yourself, Did this expense really add any joy or value to my life? This is a great way to find out where your spending is going to waste.
III. Change your routine
Every day, you undoubtedly do little things that cost money. You might get a cup of coffee from Starbucks; Why not find a cheaper coffee shop or cut down the amount you drink? You might eat out; Why not bring lunch from home a few times a week?
Saving as little as £1 a day for both of these things adds up to £730 a year; a substantial amount of money.
2. The 20% Rule
You might have heard of the 10% rule, where you put 10% of your paycheck into your savings account. That rule is simply bad advice. It only works if you start saving 10% of your pay check at 25 years old and never stop saving until you are 65. It leaves no room for buying houses, cars, putting the kids through college, vacations etc. Following the 10% rule can soon leave you broke.
The 20% rule is a far better rule to follow. For every pay check you receive, save 20% of it (If you are 40 and have never saved a dollar then you will obviously need to save more).
It is easy enough to do, even if you are like me and at times lack self discipline. You can have the amount automatically deducted from your pay check every month leaving no room for temptation to enter.
So there you have it, the only 2 money rules you need to live by in life. Money management comes down to spending less than you earn and saving enough money to become financially secure. That is all there is to it.
