10 Money Rules for Your Repertoire

I am down to earth, at least I like to think I am but when it comes to my lifestyle and my hard earned money, I am fast learning to be a world class Diva all the way to the bank with my peep toe heels and pink nail polish for good measure. I am anal about finding ways of growing wealth, no matter how small, to ensure my little girl will get a much better start when she grows up, than I did.

Over the years, I found myself being complacent and just getting by. I have talent, I know I do and I am a very hard worker. But as years went by, I did not have a clear purpose or focus so I squandered opportunities to plan better and get ahead. I thought I understood money, I knew I was ambitious and determined to succeed but I did not know which direction to head to help me get to where I wanted to go. All I knew was that I desired success. I didn’t even have a clear idea what that meant.

That was me in my twenties. Now that I am in my thirties and not quite where I had planned to be at this point in my life, I have to contend myself with the comforting thought that I now have a much better sense of the direction I am headed and where I want to be. While the path I am on right now requires me to give up splurges and diva worthy accommodations, I am constantly reminded of the value in exercising constraint in my spending and being smart with my money.

I recently watched a documentary where football athletes who had earned millions talk about how they found themselves bankrupt. If you know the tale of the ant and the grasshopper, then they were the grasshopper. They had the false assumption that the sugar factory will stay open, they didn’t apply much common sense which would have helped them reason it out that theirs was a risky engagement that could end at any time. So they got excited when they saw the first check and showed little respect for their dollars and just a few short years later, there they were, talking about days gone, sounding so painfully pathetic.

I looked at these men and realized I did know people like them. People who had taken their eyes off the ball and who had made some mistakes along the way but didn’t know how to find their way back, people who had stopped planning and gotten stuck at simply surviving with no clear purpose or direction. In that brief moment, I felt fear. A deep rooted fear of being one of these people a few years from today. I imagined my little girl one day asking me why I had not saved or why I had not made better choices … that is just not something I am willing to experience.

So while I agree with Tim Ferris, Author of The 4-Hour Workweek: Escape 9-5, Live Anywhere, and Join the New Rich, that mini retirements are necessary, and that all work and no play will certainly numb the creativity of my inner diva, I also believe that we should do all we can today to right our financial course in a balanced way so a few years from now we will not look back wistfully and call these ‘the good old days’ because we will be living better days.

10 Money Rules for your Repertoire

  • Rule#1 Live within your budget: You have to know exactly where your money is going. Do not leave your spending to chance. Budget everything.
  • Rule#2 – Save the max for your Retirement: If your employer offers a retirement savings plan such as a 401k, don’t over think it, just sign up as soon as you get a chance to. For 401k You can contribute up to $17500 (or $23000 if you are 50 or older) of pretax dollars in 2014. While that might be a hefty sum to chop out of your paycheck, you can start at minimum with the match percentage your employer offers. If they match up to 6% of your contribution then make sure you start with that otherwise you will be leaving money on the table. Increase your contribution each year until you meet the max. If you are self employed, there are options for you as well such as SEP or SIMPLE IRA
  • Rule#3 – Pay off all your debt: Work with your creditors and come up with a plan to pay off your debt. Do not acquire any new debt if you can help it. This should be a goal you shoot for.
  • Rule#4 – Build a nest egg of at least 10% of your earnings: That is the number you should shoot for. You can do more but that should be the starting number so do what you can to hit this number. Constantly review your budget and look for ways to cut back your expenses or increase your income so you can save 10% each year.
  • Rule#5 – Invest your savings and target a return above inflation: Don’t let your savings sit doing nothing for you. Put your money to work BUT only invest in what you understand and if you don’t fully understand an investment opportunity, find a  trusted expert to help you. You have worked hard to save your money, you want to grow it but do not be reckless with your choices. Inflation currently is at around 1.5% so look for investments that will return more than that. Do your research, whether it is on bonds, stocks, mutual funds, index funds, peer to peer lending, real estate … the list goes on. Take the time to understand where you want to put your money then take action.
  • Rule#6 – Do not ignore the coins in your house: You have to respect money whether it is a penny or a $100 bill. So when you see that penny floating around the house, pick it up.
  • Rule#7 – Make room for your splurge. Give yourself an Allowance: Often times we say ‘pay yourself first’ but what we mean is that ‘put money aside for your savings’. This rule requires that you truly pay yourself with an allowance. You have worked really hard to earn this money, even harder to try to keep some of it for your rainy days and your retirement, you need to budget some  of it so you can enjoy your life today as well. You don’t want to put off living for today in your plan. It is unhealthy to do so. Whether your allowance is $25 a month or $500 a month, make room for it and use it to do something for yourself. It is okay to accumulate your allowance for bigger treats, it is up to you. Whatever you do though, do not dip into your nest egg for a treat. There is no splurge so amazing that you cannot do without it.
  • Rule#8 – Save for education with a 529 Plan: If you plan to further your education or if you have kids, this is a smart way to plan for their education. Create one and start contributing. You can learn more about 529 Plans here.
  • Rule#9 – Budget Giving: The more you give, the more you receive. Allow room in your budget to give to those less fortunate than yourself. You will be amazed how you get blessed with more not less.
  • Rule#10 – Check your progress at least monthly: Do not let a month go by that you did not take stock of where you are and the progress you are making.

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