Some of us hate ’em. Some of us love ’em. Some of us couldn’t care less and just do as we’re told so we don’t ruffle feathers or get into trouble.
Because us humans are a complex, unpredictable and unruly bunch, we really can’t live without rules. OK, it’s more like…we shouldn’t live without them or our society was descend into chaos.
While it’s easier to follow societal regulations, many of us have a hard time of following our own. That is, if we have them in the first place.
Case in point: I’ve been thinking about, making, saving and investing my own money for decades now, but never once have I thought about having a set of personal ‘rules’ around the stuff.
That is, until I read Ringgit Oh Ringgit’s 10 Money Rules post.
Sure, I have an Investment Policy Statement, but as its name implies, it’s a set of rules that applies only to the cash I choose to invest.
What about the rest? Am I doomed to financial chaos if I don’t have a set of rules to abide by? I doubt it and I’m probably being a little too dramatic for my own good, but I do think that having this ‘code’ in place will help alleviate my on-going mental struggles with money.
Here we go: My 10 money rules, the FI edition.
Money Rule #1: Save at least 50% of your income whenever possible.
This hasn’t always been true for me, but as I got more serious about my FI journey, I realized that I had a big decision to make: Keep spending mindlessly (which I did for a couple of years) or keep most of what I make for a financially-secure future.
I chose the latter.
I’m not going to lie — there were times where I felt deprived and bitter about not having as much to spend on going out with friends and going on holidays, but hey, I’d made my own bed and it was time I made things right for my future self.
Seeing the progress that I’ve made over the last 5 years and now, being on more solid footing financially, I’m glad that I did.
Moving forward, this is a rule I will always live by to the best of my ability, no matter what my situation.
Money Rule #2: Invest 50% of what you save.
While keeping most of what I make is great, just having it sit in a savings account ain’t gonna make it grow.
And given that a big part of my FI goal is to own more income-generating assets, I make it a point to invest half of everything I save for capital appreciation, interest or dividends and just as importantly, to beat inflation’s butt.
The remaining cash serves as a cushion that gets funneled into my savings as well as emergency and sinking funds for rainy days and specific expenses.
Money Rule #3: Pay cash for big-ticket expenses.
I can attribute this rule to my being 100% debt-averse.
Is this good or bad? Meh, who knows? What I do know is that the thought of owing someone lots of moolah makes me break out in a cold sweat, so I avoid it whenever possible.
Obviously, everything has a trade-off and this aversion has meant putting off milestones like buying my own home and a new car (which I finally did last year), but it’s also meant being debt-free and speeding up my progress to FI, so no regrets there.
Money Rule #4: Invest in yourself.
While investing my money in tools that make me more money has been great, I wouldn’t have made much progress in my career and as a human being without also investing in myself.
To date, I’ve taken courses in a wide-range of areas, from fitness, meditation, copywriting and digital marketing to self-authoring in a bid to take a holistic approach to skill development as well as getting to know myself better.
Were they worth it? Having emerged on the other side a more aware, multi-skilled and well-rounded human who’s also been able to contribute more in a professional setting, I’d say the answer is a hearty “yes”.
My next ‘self’ investment now that I’m on a sabbatical and have more time to focus on my personal life? I’m seriously considering therapy to work out some mental and emotional kinks I’ve accumulated over the years.
Money Rule #5: Always question following the crowd.
“You should get into crypto NOW.”
“This stock is so hot right now you need to go all in with it.”
“Why save when you can spend on things that make you happy right now?”
When everyone’s doing something because it’s ‘trendy’ or ‘hot’, you’d better get all your facts in order and then walk in the opposite direction if it doesn’t make sense or sit right with you.
Sure, a lucky bet can have you riding a rollercoaster to unimaginable riches, but it can also take away everything you’ve worked so hard for in the blink of an eye.
And as for the ‘stuff’ you accumulate from retail therapy: They’re not going to make you any happier than you already are….at least not beyond the initial euphoric high of buying it. How do I know this? Been there, done that a little too often. It’s just not worth wasting your money on.
So the next time find yourself wanting to jump in when you see lots of people doing something, question it and proceed with caution.
Money Rule #6: Money is important, but it’s not everything.
When you’re so caught up with reaching FI, in can be easy to forget that there’s a whole, big, beautiful world out there that has nothing to do with numbers on a spreadsheet.
Sure, money makes many things possible, but spending all my time trying to earn more, save more and invest more also means less time actually living with my family, friends and community.
So get out there and do things. Life’s too short not to.
This is what I tell myself when I catch myself spending too much time obsessing over my FI progress.
Money Rule #7: Nurture the right partnerships.
I’ve seen how this one can go wrong with my own eyes and ears:
- Spouses who drive their partner to the brink of bankruptcy before taking off with someone younger.
- Business partners who drive each other apart (and their business down the drain) because of inherent incompatibilities that either one refuses to acknowledge.
- Smart, ambitious dreamers who hold themselves back and stay small because their toxic friends keep dragging them down.
Having survived an abusive relationship myself, I can tell you that the kind of people you invite into your life can have a profound influence on your success and well-being, so choose wisely.
Money Rule #8: Buy quality and use it until you can’t.
I don’t buy a lot of things (not anymore, anyway), but when I do, I prefer to spend more on quality.
Like my Macbook Air that lasted me 10 years. Or my favourite pair of Birkenstocks that are six-years- old and going on seven. And my Radley London leather bag that I bought over 12 years ago that I’m still using today.
Don’t get me wrong — I’m no product snob and am not into super high-end luxury brands — they just wouldn’t have a place in my life, but I have tried buying the cheapest (shoes, bags, clothes, etc), and always ended up having to buy multiple replacements because they didn’t last very long.
For me, it just makes more sense to go for the best quality stuff I can afford so I can spend less time (and possibly money) shopping around for my everyday essentials.
Money Rule #9: Always be tracking your money.
Tracking every ringgit I earned and spent was the first thing I did when I decided to re-kindle my goal to reach FI.
Without this habit which I’m now 4 years into, I’d still have no idea where my money was coming from besides the obvious being work, and where it’s going (*shiver*).
I’d also be 100% clueless about how much money I actually need to survive in a year (info that’s very handy now that I’m unemployed and living off my cash cushion and investment income) as well as how much I can realistically set aside in my handful of sinking funds for upcoming expenses given what I’m bringing in now.
Money Rule #10: Earn and then keep enough to buy back your freedom.
I’m thankful for every job (the good and bad) I’ve ever had throughout my 20-year career, but the thought of spending another 15-20 years of my life in a cubicle terrifies me.
I plan to keep working even after I reach financial independence, but moving forward, I want my contributions to the world to be on my own terms, which is why I worked my butt off juggling full-time and freelance jobs for as long as I could to earn as much as I could.
Now that I have enough of my financial life taken care of and a critical investment mass going that earns me enough passive income to live on, I’m ready to give phase two of my Freedom Plan my all.
I can’t think of a better way to go about this one and only life I have.
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THE MILLIONAIRE NEXT DOOR by Thomas J. Stanley and William D. Danko
This is the very first book I ever read about money, and one that opened my eyes to what it really means to be wealthy and how the true rich (ie people who have a lot of money and are smart with it) make, manage and use the green stuff. You can get your copy here.
YOUR MONEY OR YOUR LIFE by Vicki Robin
I consider this mandatory reading for everyone, no matter where you are on your financial journey. If you’ve got questions about how to develop good habits around tricky subjects like debt, earning, spending and your relationship with money, this book’s got the answers. You can get your copy here.
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