40 Personal Finance Rules to Live By | Guide to Money (2024)

There’s no shortage of advice in the world on ways to manage your money, from how much you should save to how much you should spend. But there are some basic rules anyone can follow to help you track your money, grow your wealth, and ultimately take control of your life.

These 40 personal finance rules give you an overview of what to think about when it comes to money so that it feels more like a resource you have to improve your life instead of one that’s constantly running out.

1. Build an Emergency Buffer

One of the best things you can do for yourself is to create an emergency savings account. This is the money you use when your car breaks down, you have a sudden medical issue, or your refrigerator unexpectedly stops working. Start off by setting aside $500. Anytime you use some or all of the money, replenish the account so you always have that basic level of protection.

On top of your short-term emergency buffer, also start tucking away even more to tide you over in case you lose your job or become incapable of working. Your long-term emergency fund should amount to three to six months of your bills to get you by while you figure out a new game plan.

2. Get Strategic When Paying Off Debt

Paying off debt is great for your finances. Paying off debt in the most strategic way possible is even better. Do this by identifying your debt with the highest interest rate, since that’s going to cost you the most amount of money in the long run. In most cases, this will be one of your credit cards, but it also might be a high-interest loan or car payment.

Prioritize your extra payments and also consider when to refinance existing loans or consolidate multiple balances into a less expensive payment plan.

3. Save for Retirement

There’s no time like the present to start saving for retirement. The sooner you start, the better chance you have of retiring on your own terms, rather than being forced to work longer or feel financially burdened. Check to see if your employer offers a 401(k) plan. Also, look into tax-advantaged IRAs. A traditional IRA gives you a tax break in the year you make contributions, while a Roth IRA defers your tax deduction until you actually make withdrawals later on.

4. Check for an Employer 401(k) Match

If your employer does offer a 401(k) plan, see if you get any matching funds for your own contributions. You might get up to a 50% match up to a certain percentage of your salary. This equates to free money being added to your investment portfolio each month, so make sure you’re maxing out your contributions to take full advantage of your employer match.

5. Keep Your Retirement Savings Off-Limits

As you save money and build your retirement savings, don’t be tempted to dip into those funds as time goes by. Even if you hit a financial rough patch, you can cause lasting damage by losing that compound interest when you use your retirement money. Plus, most retirement accounts come with a 10% penalty when you make an early withdrawal.

6. Diversify Your Portfolio

A financial task to be done annually is a check-up on your investment portfolio. If you use a financial advisor, schedule a time to review your investments together at least annually, if not quarterly. If you’re a DIY investor, you can find a free online portfolio analysis tool to make sure your portfolio is well-balanced. You can also use one of these resources to calculate how your contributions and projected returns stack up against your financial goals.

7. Create Long-Term and Short-Term Goals

Managing your money effectively is important because it helps you do the things in life that make you happy. Stay motivated by having both short-term and long-term goals to work towards. They also help you have continual check-in points so you can track your progress.

8. Take Advantage of Compound Interest

Grow your savings accounts as much as possible by getting a high-yield account with interest that compounds daily. This means you’re getting paid for your daily balance, which grows little by little as the new interest payment is applied to your account. Time is your friend with this strategy, so start saving as early as possible and make sure your money is housed in the best account. Check regularly for competing accounts that offer a more competitive APY.

9. Get a Will

It doesn’t matter if you’re married, have kids, or live with your cat — everyone should have a will. Having this simple document in place makes sure your property is distributed exactly the way you’d like, and avoids going through the lengthy probate process through which the court decides on your behalf. Select a close friend or family member to be your executor for a smooth process that distributes your assets to your own wishes in the event of your death.

10. Get Life Insurance If You Have Dependents

Life insurance gives your family a lump sum pay off in case you unexpectedly pass away. You pay a regular premium (you can choose monthly or annually) and you’ll qualify for the best rates when you’re relatively young and healthy. The amount of coverage you choose depends on how much you think your family will need to cover funeral costs, time off work, and any other financial burdens you want to alieve.

Many families, for example, insure each spouse with enough to pay off major debts like a mortgage and auto loan, and sometimes even enough for college tuition for your kids. Other factors to consider is whether your child care needs would change and how much your surviving spouse could earn without you. It’s a tough topic to think about, but at least you’ll be making one thing easier for your family.

11. Make a Budget

Everyone needs a budget, but not every budget looks the same. Get started by tallying up how much you bring home each month and subtracting all of your necessary expenses. Then start assigning dollar amounts to categories that have more wiggle room. Regardless of whether or not you spend more than you earn, you need to know where your money actually goes each month.

12. Tweak Your Budget

It’s great if your first pass at a budget works perfectly, but what if it doesn’t? Don’t give up. Instead, try a different method to help you stick to your numbers. If you need to be stricter, consider the cash envelope method so that you only spend exactly what’s in your wallet. Or try implementing an app on your smartphone to better track your purchase habits. Keep adjusting things until you find a budget and tracking method that works for you.

13. Rethink Your Spending

Part of creating a lasting budget is stepping back from the way you currently view (and spend) your money. Do an initial deep dive to figure out the areas in which you spend the most. Do you tend to run into Target and drop $50 every week on home decor items? Or maybe you sign up for every streaming service available every time a new enticing series comes out?

However you spend your money, don’t assume that you actually need to, especially if you’re missing out on bigger financial goals. Figure out what’s truly important to you and adjust your spending accordingly.

14. Schedule Weekly Budget Check-Ins With Your Partner

Making a budget is tough but it can be even harder if you share your finances with a spouse or partner. The biggest part of successfully managing a shared budget is to communicate regularly. It may feel hard to talk about money, so schedule a weekly check-in to talk about what’s happening in your financial world. Being open and honest with how you both spend not only feels better but it helps you meet your goals together as well.

15. Wait at Least 30 Days to Make Any Major Purchase

This may seem like a tough call, but can save you a lot of money over the course of a year. Any time you’re considering making a purchase of $100 or more, instead try and wait 30 days before giving in. You might end up not making the purchase because you realize it’s perfectly easy to live without the item you initially eyed. In fact, you might even forget about it completely before the 30 days are up!

16. Don’t Let Other People Spend Your Money

Peer pressure doesn’t end with high school; even in adulthood, it’s easy to let other people influence how you spend your money. But do your best to give in to temptation. Whether it’s shopping at the mall with a friend (“You NEED those shoes!”) or planning a group vacation (“Let’s get the upgrade!”), don’t be afraid to stick to your guns — and your budget.

17. Save for Annual Expenses All Year Long

Always remember to save up for one-time annual expenses throughout the year so that you’re not caught off guard when a large bill arrives. Track yearly bills like insurance, property taxes, and vehicle registration, then divide the total by 12 to figure out how much you need to put away each month to be ready for these expenses when the time comes.

18. Keep Up With Routine Home Maintenance

Stay on top of your home maintenance in order to steer clear of major expenses that could have been avoided. This process includes things like changing your HVAC filters, cleaning your gutters, and replacing damaged siding. Taking care of issues while they’re small prevents them from turning into bigger problems that drain your bank account.

19. Negotiate Interest Rates Regularly

Some types of interest rates are entirely negotiable, including your credit card rates. Paying your bills on time and improving your credit score could qualify you for a better rate. But you’ll have to call your credit card company and ask in order to get the lower rate, so schedule this conversation at least once a year.

20. Pay Attention to Interest Rates

Reading the news to stay on top of national interest rates can help you decide whether or not to refinance your fixed rate loans like your mortgage, auto loan, or private student loans. When rates go low, you may qualify for a better deal. Keep an eye on where rates are in relation to when you locked in loans to see if you could pay less.

21. Negotiate Bills Annually

There are several bills you can review annually to try and negotiate a better price. Likely targets include cable and internet service, as well as insurance policies like your home and auto policies. Mark your calendar and spend some time on the phone to see if there’s any type of promotion or customer loyalty discount.

22. Meal Plan Regularly

Everyday purchases and expenses are the ones that you have the most control over so pay attention to how much you’re spending on them. The best way to keep your grocery budget in check is to meal plan each week so that you can avoid a vegetable bin full of rotting celery. There are tons of free or cheap online resources that can help you get started based on your diet and budget.

23. Also Meal Prep

Give yourself the best chance of sticking to your meal plan by picking one day a week to do some of the prep work. Chop the vegetables you need for the week so it’s easy to throw a meal together when you get out of work late. Also take a day to make a freezer meal to replace going out to eat on a whim. You should also keep your pantry stocked with a few items that are easy to bring together for a meal, like some pasta and spaghetti sauce.

24. Find the Best Grocery Store for Your Needs

Another secret to keeping your food bill down is to build good habits, including sticking to your preferred grocery store. This is especially important if you have food restrictions so that you always know where to get the best prices on higher ticket items.

Starting a grocery store habit also makes it easier and faster to research weekly specials and meal ideas. You can even find websites devoted to meal planning and budgeting for specific stores, like Aldi or Trader Joe’s. Then you can just print out your shopping list and head to the store, knowing exactly what you need and what you’ll spend.

25. Only Go to the Grocery Store Once a Week

After spending all this time mapping out your meals, stick to the plan by only letting yourself go to the grocery store once per week. If you run out of something or forget an item, get creative and use what you have on hand instead. It’s too easy to walk into the store for one item and walk out with a basket full of stuff that completely kills your budget.

26. Shelf-Cook Once a Month

Shelf-cooking involves giving up going to the grocery store for a whole week and only cooking with what you have on hand already. That means digging to the back of your pantry, unearthing the bottom of your freezer, and getting really creative with your meals. The point is to then put the money you would have spent on groceries that week towards your savings or a specific financial goal. Plus, your kitchen cabinets will look a lot nicer when you stop hoarding 30 cans of corn at a time.

27. Determine How Many Times You’ll Eat Out

Our last food-related personal finance rule is to stay in control of how frequently you eat out each month. There’s nothing wrong with going out to eat, you just need to be mindful about it and know exactly how much you’re willing to spend so that you can still meet your other financial goals.

28. Pay Your Bills on Time

This may seem like a no-brainer, but the average maximum late fee for a credit card is $36. Imagine you’re a day late making your payment every month of the year — that would total $432! Even if you don’t use your credit card or are good about making your payments on time, make sure that habit extends to all of your bills. Otherwise, you could accrue late fees from a multitude of places and potentially damage your credit score if you’re more than 30 days late making a creditor payment.

29. Cut Out Your Bad Habits

Not only do bad habits like smoking hurt your finances in the near term, they can also hurt your health. The result is higher medical bills and, more importantly, a lower quality of life later on. Even impulse buys like lottery tickets would be better off being funneled into a savings account or investment fund to grow over time.

30. Spend No More Than 30% on Your Housing

Changing your housing situation may not be a move you can make right away, but it’s something you should still consider if you’re spending too much money. Experts say you should designate no more than 30% of your income on your housing expenses. So if you bring home $4,500 per month, your total rent or mortgage should be around $1,350 using this rule of thumb.

31. Avoid Long-Term Auto Loans

More and more people are taking out larger auto loans over longer periods of time, just so they can afford the monthly payments. The problem with this is that the longer you owe money on your car, the more likely it is to have mechanical issues while you’re still paying down the loan. Your payments will be just as expensive, but your car will be worth far less because of its age and mileage. Steer clear of buying a car that’s really out of your price range if you have to take out a six- or seven-year auto loan.

32. Take Care of Your Car

In addition to paying an affordable amount of money for your car, also stay on top of regular maintenance. This includes things like oil changes, air filters, and brake pads. Routinely planning for these expenses is much more manageable both in terms of time and money compared to waiting until a larger issues arises.

33. Check Your Bank Account and Credit Cards Regularly

Managing your money well involves protecting your accounts. Log into your bank and credit card accounts on a regular basis to make sure your financial information hasn’t been compromised.

With a debit card, you only have 48 hours to report fraudulent charges in order to have most of it reimbursed by your bank. You get a little bit more time with a credit card, which gives you 60 days to file a claim. Always check your card agreements for the details on fraud reimbursement and how much you’re responsible for.

34. Figure Out How to Earn More

Saving is great, but it’s equally important to figure out how to earn more over time. Maybe it’s as simple as asking your boss for a raise or finding a way to make money through a side hustle. At the end of the day, you can only cut out so much of your budget. Plus, you still want to live a life that brings you joy. In order to do this, it’s crucial that you look at your earning potential as limitless and stay motivated to grow your income.

35. Review Your Long-Term Goals Regularly

Life changes and it’s important to make sure you’re on track to meet your long-term goals and see if you need to swap anything out. At least once a year, check in to see what’s changed in your life. Maybe you’re planning to have a baby, make a career change, or need some home repairs. Figure out how much you’ll need to save in what period of time and adjust your budget accordingly so you’re prepared for new needs.

36. Conduct a Financial Review Every Year

Not only should you review your financial goals every year, you should also review your accounts and your insurance policy coverage. Things to check include how much interest you’re earning in your saving accounts and whether or not your life insurance policy provides the right amount of coverage for where you are today.

37. Know Your Net Worth

Keep track of your net worth to get a snapshot of your financial health today — projections aside. You can also compare your net worth over the years to see how different decisions have impacted your finances. To calculate this number, simply subtract your liabilities from your assets. Liabilities include any type of debt you have, while assets include cash, savings, retirement accounts, and the value of your personal property and real estate.

38. Understand How Credit Scores Work

So much of your financial opportunity is affected by your credit score. Make sure you actually know how it works. Everything from your payment history to your current amount of debt comes together to create your credit score. Review all of the relevant information by checking your credit report for free every 12 months. You may also receive free credit score monitoring through your bank or credit card company.

39. Understand How Your Taxes Work

Income tax is a huge expense for most people, even if you don’t notice because it comes out of your paycheck before the money is deposited. But it’s smart to review how much you’re paying and read up on recent changes in the tax law. You may qualify for certain deductions or be on the cusp of a higher tax bracket. A few small changes could save you big in terms of how much you owe, especially as different life events happen.

40. Set a Daily Reminder of Your Financial and Life Goals

A final rule for personal finance is to give yourself a daily reminder or mantra to help you stay focused on your goals. Stewarding your money well is all about designing your best life around the things that really matter to you. Say your goals out loud every day in the present tense, as if they’re already in progress, to shift your mindset and achieve the success you truly want.

As an expert in personal finance with a deep understanding of various concepts, I can provide insights into the key principles mentioned in the article. My expertise is grounded in practical experience and a comprehensive understanding of financial management. Let's break down the concepts mentioned in the article:

  1. Build an Emergency Buffer:

    • Establishing an emergency savings account is crucial to handle unexpected expenses.
    • Start with a $500 buffer and replenish it after any withdrawals.
    • Long-term emergency fund should cover three to six months of living expenses.
  2. Get Strategic When Paying Off Debt:

    • Prioritize paying off high-interest debt first.
    • Consider refinancing or consolidating loans for better terms.
  3. Save for Retirement:

    • Start saving for retirement as early as possible.
    • Explore employer-sponsored plans like a 401(k) and individual retirement accounts (IRAs).
  4. Check for an Employer 401(k) Match:

    • Maximize employer 401(k) matching contributions for additional savings.
  5. Keep Your Retirement Savings Off-Limits:

    • Avoid dipping into retirement savings to preserve compound interest.
    • Early withdrawals may incur penalties.
  6. Diversify Your Portfolio:

    • Regularly review and diversify investment portfolios to manage risk.
    • Use online tools or financial advisors for portfolio analysis.
  7. Create Long-Term and Short-Term Goals:

    • Establish financial goals to stay motivated and track progress.
  8. Take Advantage of Compound Interest:

    • Choose high-yield accounts with daily compounding interest to maximize savings.
  9. Get a Will:

    • Having a will ensures proper distribution of assets and avoids probate.
  10. Get Life Insurance If You Have Dependents:

    • Life insurance provides financial protection for dependents.
    • Determine coverage based on family needs and potential financial burdens.
  11. Make a Budget:

    • Develop a budget by calculating income and necessary expenses.
    • Understand where money is spent each month.
  12. Tweak Your Budget:

    • Adjust budgeting methods to find what works best.
    • Explore techniques like the cash envelope method or budgeting apps.
  13. Rethink Your Spending:

    • Identify and cut unnecessary expenses.
    • Align spending with important financial goals.
  14. Schedule Weekly Budget Check-Ins With Your Partner:

    • Regular communication is crucial for successful shared budgeting.
  15. Wait at Least 30 Days to Make Any Major Purchase:

    • Avoid impulsive purchases by implementing a 30-day waiting period.
  16. Don't Let Other People Spend Your Money:

    • Resist peer pressure and stick to your budgetary limits.
  17. Save for Annual Expenses All Year Long:

    • Plan and save for yearly bills to avoid financial surprises.
  18. Keep Up With Routine Home Maintenance:

    • Regular maintenance prevents major expenses and preserves property value.
  19. Negotiate Interest Rates Regularly:

    • Negotiate lower interest rates on credit cards and loans by maintaining a good credit score.
  20. Pay Attention to Interest Rates:

    • Stay informed about national interest rates to make informed financial decisions.
  21. Negotiate Bills Annually:

    • Review and negotiate bills such as cable, internet, and insurance annually.
  22. Meal Plan Regularly:

    • Plan meals to control grocery spending and avoid waste.
  23. Also Meal Prep:

    • Prepare meals in advance to save time and money.
  24. Find the Best Grocery Store for Your Needs:

    • Stick to a preferred grocery store for consistent pricing.
    • Utilize resources for meal planning based on store preferences.
  25. Only Go to the Grocery Store Once a Week:

    • Limit grocery store visits to control spending.
  26. Shelf-Cook Once a Month:

    • Practice shelf-cooking to use existing pantry items and save money.
  27. Determine How Many Times You'll Eat Out:

    • Set limits on dining out to manage expenses.
  28. Pay Your Bills on Time:

    • Timely bill payments prevent late fees and maintain a good credit score.
  29. Cut Out Your Bad Habits:

    • Eliminate costly and unhealthy habits to save money and improve well-being.
  30. Spend No More Than 30% on Your Housing:

    • Allocate a reasonable portion of income to housing expenses.
  31. Avoid Long-Term Auto Loans:

    • Shorter auto loans are advisable to avoid issues with depreciation.
  32. Take Care of Your Car:

    • Regular maintenance reduces the risk of expensive repairs.
  33. Check Your Bank Account and Credit Cards Regularly:

    • Regularly monitor accounts to detect and address potential fraud.
  34. Figure Out How to Earn More:

    • Explore ways to increase income, such as negotiating a raise or starting a side hustle.
  35. Review Your Long-Term Goals Regularly:

    • Periodically reassess long-term goals and adjust financial plans accordingly.
  36. Conduct a Financial Review Every Year:

    • Review accounts, insurance coverage, and financial goals annually.
  37. Know Your Net Worth:

    • Calculate net worth by subtracting liabilities from assets.
  38. Understand How Credit Scores Work:

    • Learn about factors influencing credit scores and monitor them regularly.
  39. Understand How Your Taxes Work:

    • Stay informed about tax laws, deductions, and potential savings.
  40. Set a Daily Reminder of Your Financial and Life Goals:

    • Maintain focus on financial and life goals with daily affirmations.

In conclusion, these 40 personal finance rules cover a wide range of topics, providing a comprehensive guide to managing money effectively and achieving financial success.

40 Personal Finance Rules to Live By | Guide to Money (2024)
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