10 Essential Finance Rules For Achieving Financial Success: A Comprehensive Guide

Everyone wants to achieve financial success and stability in their life, but not everyone knows how to get there. Managing finances can be a daunting task, but with the right tools and knowledge anyone can achieve their financial goals.

In this blog, we will discuss 10 essential finance rules that can help you achieve financial success and build wealth over the long term.

10 Essential Finance Rules:

Rule 1. Live Below Your Means

Living below your means is a fundamental rule of personal finance. It means spending less money than you earn and avoiding unnecessary expenses. Living below your means does not mean living a life of deprivation but rather making conscious choices to prioritize your spending and save for the things that matter most to you.

Income > Expenses

To live below your means, you can start by creating a budget that tracks your income and expenses. This will help you to identify areas where you can cut back on expenses, such as eating out, cable bills or subscriptions. By making these small changes you can save money for the things that matter most to youvacation which can be a down payment on a house, a dream vacation or retirement.

Rule 2. Save For Emergencies

Emergencies can happen at any point of time, having an emergency fund can help you deal any unexpected financial crisis without wiping your savings or derailing your long-term financial goals. An emergency fund should have enough money to cover 6-12 months of living expenses and should be kept in a separate savings account that is easily accessible.

Minimum Emergency Fund : 6 Months 

Ideal Emergency Fund : 12 Months 

To build an emergency fund, you can start setting aside a small amount of money each month which can be 10-15% of your income. Over time, your emergency fund will grow and you will have a peace of mind knowing that you can deal any unexpected financial loss such as a medical emergency or a job loss.

Rule 3. Pay Yourself First

Paying yourself first means, making savings a priority and treating it as important as your other bills. When you pay yourself first, you set aside a portion of your income for savings before paying your other bills and expenses.

Priority List

1. Savings

2. Other Bills and Expenses

To pay yourself first, you can set up automatic transfers from your checking account to your savings account each month. This will ensure that you are saving consistently, even if you forget to do it manually. By paying yourself first, you can build wealth over time and achieve your long-term financial goals.

Rule 4. Invest For The Long Term

Investing is an important part of building wealth over the long term. When you invest, you are putting your money to work for you and allowing it to grow over time. There are different types of investment options available such as stocks, bonds and real estate. It is important to choose investments that aligns with your goals and risk tolerance.

To invest for the long term, you can start by opening a retirement account such as NPS, EPF, PPF or APY and many more. These accounts offer tax advantages and can help you save for retirement over the long term. You can also consider investing in low-cost index funds which offers broad exposure to the stock market and can help you to achieve long-term growth.

Rule 5. Diversify Your Investments

Diversification is an important strategy for managing risk in investment portfolio. When you diversify your investments, you spread your money across different asset classes such as stocks, bonds and real estate and within each asset class you invest in different companies or properties.

Investment Portfolio

1. Stock

1.1 Company 1

1.2 Company 2

2. Bonds

2.1 Bond 1

2.2 Bond 2

3. Real Estate

By diversifying your investments, you can reduce your exposure to risk and increase your chances of achieving your long-term financial goals. For example, if one company in your portfolio experiences a drop the other companies in your portfolio can help you offset those losses.

Rule 6. Avoid Debt

Debt can be a major obstacle to achieve financial success. When you carry debt, you are paying interest and fees that eat away your income and make it harder to save and invest. Some debt such as home loans or education loans may be necessary, it is important to avoid high-interest rate debt whenever possible such as credit card debt.

To avoid debt, you can start by creating a budget that prioritizes your expenses and leaves room for saving and investing. You can also work to pay off any existing debt such as credit card balances as soon as possible. By avoiding debt, you can free up your money to put towards long-term financial goals and build wealth over time.

Priority List

1. High-interest rate debt payment

2. Savings

3. Investing

4. Other Bills and Expenses

Rule 7. Build Good Credit

Good credit is an essential for achieving financial success. Your credit score is used by lenders and financial institutions to determine your eligibility for loans, credit cards and other financial products. A good credit score can help you qualify for better interest rates and terms which can save your money over the long term.

A Score of 700 and above is generally considered good. (CIBIL) 

To build good credit, you can start by paying your bills on time and in full each month. You can also keep your credit card balances low and avoid opening too many new accounts at once. By building good credit, you can open up more opportunities for borrowing, financing and positioning yourself for long-term financial success.

Rule 8. Educate Yourself

Financial literacy is an essential for achieving financial success. By educating yourself on personal finances and investing, can help you make informed decisions about your money and avoid costly mistakes. There are many resources available for learning about personal finance which includes books, youtube channels, podcasts, online courses and my personal finance blogs (sum of all). 

To educate yourself on personal finance you can start by reading books such as "The Intelligent Investor" by Benjamin Graham, "I Will Teach You To Be Rich" by Ramit Sethi , "The Simple Path to Wealth" by JL Collins.

Rule 9. Plan For Retirement

Planning for retirement is an essential part of achieving long-term financial success. Retirement planning involves setting aside enough money to support your lifestyle in retirement and deciding how to invest money to achieve your goals.

To plan for retirement, you can start by calculating how much money you will need to support your lifestyle in retirement, and then creating a plan to save and invest that money over time. You can also consider working with a financial advisor to develop a retirement plan that aligns with your goals and risk tolerance.

Rule 10. Be Patient

Achieving financial success takes time and patience. Building wealth is a long-term process and it requires discipline, consistency and a willingness to learn from your mistakes. 

By staying committed to your financial goals and making smart choices with your money can help you to achieve financial success over the long term.

Conclusion:

Achieving financial success requires discipline, planning and a commitment to long-term goals. By following these 10 essential finance rules, you can build wealth over time, avoid costly mistakes and position yourself for long-term financial success. 

With these rules in mind, you can achieve financial success and build your life as you want.

So what’s your opinion on these 10 Finance Rules?

Let me know, I’d love to know what you think.

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Msn signing off!

Next Blog : April 17, 2023 At 10:00Am Indian Standard Time (IST).