Personal finance means different things to each of us but there are certain rules everyone should follow. Having guidelines and rules that you keep 100% of the time is key to excelling financially. Three of these rules include avoiding credit card debt, keeping a strict budget, and always have an emergency fund.
Credit card debt can cripple a person’s finances and destroy any other sound financial decisions you make. About half of all American carry a credit car balance and nearly every bankruptcy filed each year is the result of credit card debt. Missing just one payment can have devastating effects on your personal credit score. This in turn can allow other creditors to increase their interest rates and single-handedly ruin your life. Credit card debt should be avoided at ALL costs. If you cannot pay for it then you cannot afford it.
Budget, Budget, Budget
Every dollar you earn and every dollar you spend should be spent with intention. Never let your money tell you what to do. It is your money and you should determine where it goes. Too often we can spend hundreds and even thousands of dollars and not realize where that money went. That is certainly no way to financial wealth. Think of your personal finances as a corporation that keeps exacting records of where it spends and makes its money. When the balance sheet is out of whack, then no stone goes unturned until it can be reconciled. If you run your own finances this way, then you can create intentional wealth.
Yes, You NEED an Emergency Fund
Things happen in life that are beyond our control. An air conditioning unit needs replaced, a car needs repairs, and jobs get lost every single day. If you do not have an emergency fund then that money needs to be taken away from funds that you already have allocated in your budget. This can wreak havoc on your financial life and lead you on the fast track to bankruptcy. A good emergency fund should cover at least 3-6 months of your expenses. This is to ensure that when Murphy comes knocking on your door then you are prepared. The truth is that things that are our of your control will occur in your life but not having an emergency fund will be the reason it ruins your life.
While there is no guarantee that if you follow these three hard and fast rules that you will become the richest person in town. However, these three basic steps should be followed by anyone who wants a chance to live a financially independent. You are in control of your money so do not let your money control you.