Simple Money Rules – From the moment you walk out the door, you become a target for people trying to sell you something and take your money. Learn and apply these simple rules to protect yourself and your money
Make no mistake, if you don’t take great care of your money and make an effort to protect it, it will eventually slip through your fingers. But don’t worry, we’ve prepared 10 stupid, yet simple money rules you can apply to safeguard your assets!
However, if you can manage to implement these 10 simple money rules we’ve prepared for you, you’re going to be ahead of most people in terms of wealth management.
If you prefer enjoying a video rather than reading, you can watch the video version on YouTube. Now, let’s jump right in!
Here are 10 stupid, but simple money rules to follow in 2023:
1
Sit on enough cash, but pay attention to inflation
There was a time when most currencies were backed by gold or other precious metals and proudly held their store of value pedigree.
But those times are over. In fact, it is a very bad idea to keep all of your money in cash because of a sneaky but dangerous thing called inflation. Most people don’t really understand how inflation works, so we’ll use the “explain it to me like I’m five” rule.
So, in simple terms, “inflation” means that the prices of goods and services tend to go up over time. In other words, as prices go up, your money is worth less.
Inflation is an important thing to think about when it comes to your personal finances because it affects how much it costs to live, how much your assets are worth, and how well your investments do.
For example, let’s say you have $10,000 in a savings account that pays 1% interest per year. If the rate of inflation is 3%, your savings will be worth 2% less each year.
This means that you will actually lose money because the interest rate you earn is less than the rate of inflation. So, keeping money in a savings account when inflation is high is like scamming yourself.
This simple money rule is especially relevant today because inflation has become one of the main reasons people are losing money.
The price of living is going up at alarming speeds and is showing no signs of slowing down anytime soon.
And let’s not even talk about the fact that to get “a high-interest rate of 1%,” you usually have to lock your money away for a long time. So, when deciding how much cash to keep and how much to invest, it is important to keep an eye on inflation.
You need to find the right balance, which can be hard if you don’t know much about money.
However, it’s important to remember that life doesn’t go in a straight line, so you might need some cash on hand to cover unexpected costs and emergencies, or even to buy something big without going into debt.
2
Figure out your risk tolerance
This simple money rule is highly important, as it will shape your entire approach to financial strategy.
In the world of finance, “risk tolerance” means a person’s willingness to lose money in the hopes of making more money.
It is important to understand this idea because it can have a big effect on how you invest your money and your overall financial health. Several things can help you figure out how much risk you are willing to take.
First and foremost are your investment goals. You should ask yourself what you want to achieve with your investments.
Are you looking for long-term growth, or would you rather keep your money safe? Knowing what you want to achieve with your investments will help you decide how much risk you can take.
Your investment horizon is another thing to think about.
This is about how long you want to keep your investments. If you have more time to invest, you may be able to take on more risk because you have more time to ride out any short-term losses.
On the other hand, if you only have a short time frame for your investments, you may need to be more cautious.
Another important aspect to think about is your current financial situation.
How much are you in debt? Do you have a fund for emergencies? These things can change how much risk you are willing to take.
Last but not least, you should think about how you feel about risk. How do you feel about the idea that you might lose? You could make more money if you take on more risk, but do you want to do that or would you rather play it safe?
What you’ll find is that your risk tolerance can be higher or lower depending on your age. Remember that high-risk moves are for people who are young or have a lot of money.
We’ll conclude this rule with a powerful statement: Only fools and gamblers approach investments with a “YOLO” attitude.
3
You are paid what you ask, not what you are worth
If you think your boss will give you a raise out of kindness, you should think again. Capitalism doesn’t work like this and meritocracy is just a trendy word.
It’s easy to think that our pay should match the value of the work we do, but unfortunately, this is not always the case.
That’s because the value we bring to an organization as a whole is subjective and hard to measure. But here’s what you can do about it:
This simple money rule teaches us that when it comes to salary negotiations, people who are confident and assertive are often able to get more money. Even if they don’t necessarily bring more value to the company than someone who is less assertive.
This is why it’s important to learn how to negotiate well. It’s the shortest way to get paid fairly for the work you do.
But it’s important to remember that “you get paid what you ask for, not what you’re worth” is not a license to ask for more money than you’re worth.
In the end, your pay should reflect how valuable you are to the company, so it’s important to do your research and make a well-thought-out request during salary negotiations.
Considering that negotiation is an essential skill that EVERYONE should possess, we’ve covered the 15 Rules of Negotiation in a previous post. We highly recommend you read it, as it will significantly improve your relationships, both professional and personal.
4
You don’t need to be a millionaire to live a millionaire lifestyle
Some people call it “fake it until you make it“, while others call it being smart. In any case, here are some ways you can live like a millionaire without spending like one.
For example, a Lambo costs hundreds of thousands of dollars, and the costs quickly add up when you factor in gas, maintenance, and environmental taxes.
Unless you have unlimited money, this kind of buy is more likely to hurt you than help you.
We fully understand. We also like expensive toys. A lot, actually.
So, according to this simple money rule, renting a supercar or yacht instead of buying one is a better idea when you want to have some fun.
It’s safer, won’t put a strain on your finances, and lets you live like a millionaire.
If “fake it until you make it” is of special importance to you, we’ve got a great article published where we approach the best strategies to act like billionaires, even though you’re not one yet. You can read it here.
5
Earn international, spend in your local currency
This simple money rule is especially important for freelancers and those of you living in growing economies.
Earning money in a foreign currency and spending it in your own currency can be a smart financial move for a few reasons.
First of all, if you make money in a currency that is stronger than your own, you may be able to buy more with it.
For example, if you earn in US dollars but live in a country where the local currency is weaker, you may find that your earnings go further when converted to your national currency.
This can help you save money, invest in assets, or even live in a better place.
Second, foreign currency helps you avoid economic problems in your home country. If your country’s currency has high inflation or other economic problems, it can make your savings and earnings worth a lot less.
Earning money in a foreign currency can also help you diversify your income and keep you stable when the economy isn’t doing well.
If the economy in your country goes down, it may be hard for you to find work or keep making money. Having money in a foreign currency can give you an extra safety net and help you get through rough times.
If you use this to your advantage, you will definitely get the most money out of it.
Just make sure you respect the law.
6
Pay yourself first
This is not true in business, but in your personal life, it should be a golden rule.
The simple money rule of “paying yourself first” is based on the fact that you need to put your own financial well-being first if you want to be financially stable and successful in the long run.
When you pay yourself first, you save or invest a portion of your income before you pay any other bills or expenses.
Financial experts often suggest this method as a way to build wealth and become financially independent.
By making saving or investing a non-negotiable priority, you are more likely to put money away regularly and resist the urge to spend it on things that aren’t as important.
Just make sure you budget properly.
7
Use credit to your advantage
To use credit to your advantage, you need to know its benefits and risks and use it in a responsible way.
By applying this simple money rule, smart people use credit in a number of ways:
- Building their credit
- Getting rewards
- Paying for big purchases with their assets
It’s important to build credit if you want to get loans and other financial products. You can also get cash back, points, or miles from credit cards with reward programs.
You can use credit cards in a smart way to get the most rewards, but you should pay off your balances in full to avoid paying interest.
Smart people also use credit to buy big things like a car or house, but they are careful about it. They look into different options, compare interest rates, and talk about terms.
Only use credit for necessary purchases and keep your credit utilization ratio low when possible.
8
Budget literally everything
This simple money rule can help you reach your financial goals in a number of ways.
- It gives you a clear picture of your income and expenses. This helps you decide how to spend your money and keeps you from spending too much.
- It helps you save money by showing you where you can cut costs.
- Keeps you out of debt by making sure you have enough money to pay all your bills and debts.
- Less stress and anxiety. Budgets give you control over your money and help you plan for the future.
It all depends on how well you can keep to your rules.
9
Spend less than you earn
It’s a good idea to spend less than you earn. It lets you save money and build wealth over time.
When you spend less than you earn, you have extra money. Use it to pay off debt, invest, or save for the future.
This can help you reach financial goals like buying a house, starting a business, or retiring comfortably.
Also, living within your means and not using credit to get by will significantly reduce your stress.
This is a true, time-tested simple money rule that will allow you to become financially stable and build wealth over time.
10
Do tax avoidance, not cash evasion
Tax avoidance is a legal way to lower your tax bill without evading taxes, which is against the law. This translates into:
- Lowering the amount of taxes owed to the government by using legal tax strategies
- Taking advantage of tax deductions and credits
- Investing in tax-deferred retirement accounts
- Setting up business transactions in a way that is tax-efficient.
Even though it’s legal, people disagree about how it should be done.
Some say it’s not fair to society and adds to inequality, while others say it’s a good way to save money.
In our opinion, tax avoidance is a strong and simple money rule that will help you in the long run.
In the end, it is up to each person to decide if they want to avoid paying taxes or not. However, it is important to be aware of the legal and moral issues of tax avoidance.
Make sure you get advice from a qualified tax professional when making decisions about taxes.
Final thoughts
We hope you enjoyed reading this article as much as we enjoyed writing it. The world is going through difficult times and it’s become more important than ever to pay attention to your well-being.
We’ve made it our mission at Alux to educate 1 Billion people and we’re determined to succeed in our endeavor.
And the best way to succeed is by using the Alux App. The Alux App has everything you need to not only improve but reinvent yourself into the person you’ve always dreamt of being.
Try it out for 10 minutes/day and see your life transform
See you next time Aluxers!
