5 ultimate rules of money management

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If you think that understanding personal finance is way above your head, you’re wrong. All it takes to get started on the right path is the willingness to do a little reading – you don’t even need to be particularly good at math.

To help you get started, we’ll take a look at the most important things to understand about money if you want to live a comfortable and prosperous life.

1. Control your instincts

The sooner you learn the fine art of delaying gratification, the sooner you’ll find it easy to keep your finances in order. Although you can effortlessly purchase an item on credit the minute you want it, it’s better to wait until you’ve actually saved up the money. Do you really want to pay interest on a pair of jeans or a restaurant meal?

2. Know where your money goes

Once you’ve gone through a few personal finance books, you’ll realize how important it is to make sure your expenses aren’t exceeding your income. The best way to do this is by budgeting. Soon you’ll realize that making small, manageable changes in your everyday expenses can have just as big of an impact on your financial situation as getting a raise.

3. Build an emergency fund

One of personal finance’s oft-repeated mantras is “pay yourself first”. No matter how much you owe in loans or credit card debt and no matter how low your salary may seem, it’s wise to find some amount – any amount – of money in your budget to save in an emergency fund every month.

Having money in savings to use for emergencies can really keep you out of trouble financially and help you sleep better at night. Also, if you get into the habit of saving money and treating it as a non-negotiable monthly “expense”, pretty soon you’ll have more than just emergency money saved up: you’ll have retirement money, vacation money and even money for a home down payment.

4. Start retirement planning

Whatever your age now, start planning for retirement NOW.  The sooner you start saving, the less principal you’ll have to invest to end up with the amount you need to retire, and the sooner you’ll be able to call working an “option” rather than a “necessity”.

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5. Take control of your own financial future

If you don’t learn to manage your own money, other people will find ways to (mis)manage it for you. Some of these people may be ill-intentioned, like unscrupulous commission-based insurance agents. Others may be well-meaning, but may not know what they’re doing. Instead of relying on others for advice, take charge and read a few basic books on personal finance.

Remember, you don’t need any fancy degrees or special background to become an expert at managing your finances. If you use these eight financial rules for your life, you can be as personally prosperous as the guy with the hard-won MBA.

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