The Most Powerful Personal Finance Rules

The Most Powerful Personal Finance Rules
Pic via Alan Falcon

Here are the top personal finance rules that could change your long term success and allow you to end up with a high net worth instead of being deeply in debt, living paycheck to paycheck, and always feeling financial pressure. These are more behavioral than mathematical in most cases. Self control, patience, and consistency are your top tools to be successful in your personal finances.

  1. You will need either a budget to ensure you spend less than you make or the self control to simple buy what you need within your means.
  2. Play great financial offense. Expand your income to increase your standard of living. You will be more successful if you do something you love because you will bring more energy to it. Look for a mission in life not just a career or a job. The worst thing you can do is just work for money, that is a low energy endeavor.
  3. Play great financial defense. You can’t out earn stupid spending as entertainers, sports stars, and the majority of lottery winners have shown. Spend money on things that are worth their cost. Buy things that create value for you in happiness, experience, or entertainment. Stay away from spending large amounts of money on things you will regret later.
  4. Buy a newer built house in a growing area with good schools, businesses, and attractions. Avoid old money pit houses or buying in a declining area. If you buy in the right place at the right time your house could double in value in a few years.
  5. Use a 15 year mortgage to buy your house not a 30 year mortgage. If you use a 15 year in 7 years you will be about halfway done, you will save a ton on interest, and will be working on the principle owed. After 7 years of a 30 year you are just getting started on getting it paid off.
  6. You can marry anyone you love so focus on looking for and dating people that will be financial asset in your life. Stay away from drama, people that are materialistic, princesses, and spoiled little boys in men’s bodies. If you want to be married choose someone that will bring added value into your life and wants to pursue the same goals in life.
  7. Do everything in your power to avoid divorce. It is a 50% drawdown in your net worth. The most important step is in who you choose to marry but once married your behavior and choices will play a huge part in whether your marriage ends in happily ever after or divorce court.
  8. If your company matches your 401K contribution get the full match so you can double your money tax free.
  9. DO NOT TAKE out money from your tax differed retirement account until you are retiring. The penalties and taxes will eat your capital up.
  10. Invest in companies you believe in. Don’t just be a customer be an investor.
  11. Buy cars that are 1 or 2 years old so someone else can take the initial depreciation from the cost of buying it straight form the dealer.
  12. Try to avoid car payments when possible. Maintain your car and keep it after it is paid off. Divert the car payment money to saving or investing.
  13. Only spend the money on college if it fits into your life and career goals. A four year college is not for everyone. College should be a step on a path to your goals not a goal itself.
  14. Only spend money you are planning to spend.
  15. Money in itself can’t make you happy but being broke can make you unhappy.
  16. Buy assets not just depreciating consumer goods.
  17. Creating cash flowing assets.
  18. Stay up to date on technology and trends.
  19. Create multiple income streams.
  20. Always have enough savings that you don’t have to put up with anyone’s BS.