If you want to avoid the biggest financial pitfalls in life and build a foundation of stability on which you can build over the years, so that you end up in a comfortable position when you’re older, there are a few financial rules you should always remember…
#1 Most People Don’t Have Your Best Interest at Heart
When it comes to money, oh say 90 percent of the people you interact with have absolutely no interest in ensuring that you are financially sound. Sure, it might be important to you, and they might be making all of the right noises, but really all the average person cares about is their own wealth!
You need to remember this when you’re being talking into a deal that sounds too good to be true by your financial adviser, or you’re thinking about getting married without a prenup.
Sure, it might be a cynical way to think about things, but it’s also a smart one, and you can take solace in the fact that the people who you care about most probably do have your best financial interests at heart, it’s just everyone else you need to be careful about!
#2 You Can’t Predict the Future
When you’re working out what to do with your money, you need to remember that there is no such thing as a sure thing, and you certainly need to remember that you cannot predict the future.
You might be absolutely sure that the product you’re considering investing in is going to take off like wildfire, but everyone who bought into the internet bubble and lost everything and the people who invested in AOL, for example, all thought that too.
When you know that you can’t predict the future, you’re more likely to be a little bit more cautious before you invest. You’ll take the time to research the potential risks and rewards and never put more cash at risk than you can really afford to. This will help you to avoid many of the pitfalls that come with personal financial management.
#3 Insurance Isn’t Optional
A lot of people opt to save some money in the now by forgoing insurance policies for various things, but many of them live to regret it.
The things are, insurance, when it comes to the important things like health, pets, home, and life, is an asset.
It will ensure that you can keep your financial house in order when the worst happens, and there is no reason not to have it if you can afford it, especially because there are high-risk insurance policies now available for health, and you can almost always find good deals by comparing what’s available online.
Get insured and not only do you get peace of mind you get to not have to sell your home because you got sick or put your pet to sleep because you can’t afford the bills!
#4 Emergency Funds are Non-Negotiable
With a caveat that if you’re just making ends meet you may not be able to right now (although you might want to see if you can anyway), saving for an emergency fund that represents between 6 and 12 months worth of your salary is so important. It gives you breathing space, should you become unemployed, to find a new position without having to sell your stuff to pay the bills or go bankrupt in the extreme!
#5 Debt is the Main Cause of Financial Strife
Nine times out of ten, people who find themselves in financial trouble do so because they’ve gotten themselves into debt.
Of course, there are always people who get into trouble by spending wildly, and there are always going to be people who struggle to make ends meet, and that’s what gets them, but most of the time its loans, credit cards and other forms of finance that you have to worry about.
So, if you want to be financially sound, you need to start making a real effort to pay off your debts and to use debt sparingly, if at all, in the future.
#6 High-Interest Debts Demand the Most Attention
If you are currently in debt and trying to pay it off, one rule that you should really pay attention to is the one that says you should always put the most effort into paying off the debts that accrue the most interest.
I mean, it sounds obvious, but so many people spread out the cash they have available for dealing with debts amongst all of their debts evenly, only to never get anywhere.
If you want to get anywhere ladder your debts, starting with the most expensive to service at the top, working down to the lowest interest one and, although you’ll need to make the minimum payments on all of your debts, focus all of your efforts on those debts at the top of the ladder.
#7 You Should Talk About Your Money
Handling your money, particularly if you’re saving, investing and paying off debt, can be difficult, which is why you should always, at least when you’re about to make a big decision, or you’re struggling to handle things, talk to someone. If you let your own emotions and opinions take over, then it could end in disaster.
Although this might seem to fly in the face of the first rule I’ve given you, the rule that states most people don’t have your financial interests at heart, it is possible to find those rare trusted people and as long as you keep the power and make the ultimate decisions, talking to them could be good for you enabling you to work out what it is you really want.
If you bear these simple rules in mind whenever you’re doing anything financial, although, like investments, there is no guarantee that they will pay off for you, but they will nudge the odds considerably in your favor, and that could be all that it takes to help you on your way to greater financial security. Forget them at your peril!