6 Personal Finance Rules to Live By
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Being fiscally responsible means you live by sound money principles that allow you to build a stable future for yourself and your family. An understanding of these basic financial tenants is the first step in achieving financial success.
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1. Build an emergency fund.
Think of an emergency fund as a security blanket for your finances. You should save up three to six months of your total expenses in an emergency fund to be able to deal with an unforeseen circumstance like job loss, illness, natural disaster or home issue.
2. Protect your family with life insurance.
Life insurance is one of the most important gifts you can give to your loved ones. If you are the breadwinner of your family, your insurance coverage should be five to six times your salary to leave them secure and protected if something happens to you.
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3. Negotiate.
Whenever it is an option, you should always negotiate. No matter if you’re buying a new car, landing a new job, purchasing a house or even setting up a new cable account you should always negotiate to ensure that you get the lowest price possible. Don’t feel embarrassed or shy about asking for a deal, perk or discount — your bank account will thank you in the long run. Remember, it never hurts to ask.
4. Start early to save for retirement.
When you are in your 20s and 30s, retirement seems like a long time away, but it will sneak up on you before you know it. Start saving for retirement as soon as you enter the workforce and look into 401k plans that your employer might offer as a way to start.
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5. Don’t buy a house unless you can afford it.
Homeownership is a big part of the traditional American dream, but it also is a huge financial burden. Don’t purchase a house unless you have saved, budgeted and are secure in your finances. Make sure you can afford at least a 20 percent down payment and be aware of hidden costs including home repairs, insurance, closing costs and furniture.
6. Save 10 percent of your income.
Savings are a huge part of being a financially responsible person. You should try to save 10 percent of your monthly income and an additional amount for retirement. It is key to live within your means, only buy what you actually need, and save for bigger-ticket purchases. Always try to pay down high-interest credit card debt first because it will drain your bank account in the long term.
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