3 Super Easy Personal Finance Rules To Live And Die By

In yesterday’s Juice, we detailed the three investing tenets we live and die by. Today, we complete the second leg of the money equation and look at the three personal finance tenets we live and die by. 

Personal finance is broad. And it can include investing. However, for our purposes, we tend to keep it separate and define it as everything to do with your money outside of investing. So spending, saving, debt, cost of living and even areas such as banking and insurance. 

In this installment, we focus on the core areas of personal finance, which tend to revolve around higher level ideas of spending and saving. As the weeks and months go by, we’ll get into more specific, sub-level spaces. 

As with our investing tenets, you’ll find each personal finance tenet is different, but not disparate. They tie together under one unifying theme, which we’ll discuss at the end of this email in today’s bottom line. 

#1 – Match Saving To Spending

One way to ease the feeling of guilt some people feel over spending on things they don’t need – or need, but don’t like paying for – is to aim to match savings to spending on at least some purchases. 

For example, you don’t need to go on vacation. But there are obvious lifestyle benefits attached to getting away. Even if your employer provides paid vacation, you’re still more than likely paying for the trip. 

As you book each element of travel, consider diverting a percentage of each expenditure to a savings account. 

You dropped $1,000 on flights, send 20% (or $200) to savings. 

This beats the hell out of what a lot of people do. Put the big purchase on a credit card and tell themselves they’ll pay the balance in full when the bill comes. 

It doesn’t always go down that way, as partially evidenced by the $4 trillion in debt carried by the millennial generation alone. 

You can match saving to spending when you go out to eat dinner or buy yourself new clothes.

Of course, apps and even some banks will round up all of your purchases and send that money to savings. Some banks – Wells Fargo in particular – will send $1 to your savings account each time you use your debit card. 

Sounds like small potatoes, but this little bit of savings – taken together – can add up fast.  

#2 – Don’t Go Crazy On Housing And Cars

They say you can comfortably spend 30% of your income on housing. But do you have to hit that limit? 

Let’s say you make $10,000 a month. Can you commit less than $3,000 a month to housing? Not only can you save the difference, but you might rest easier knowing that your housing payment doesn’t generate as much pressure on your earnings each month as it otherwise could. 

Same goes for your ride. 

In one of our most popular Juices of 2023 – Having A Midlife Crisis Must Be Super Expensive – we looked at the cost of sports cars and luxury vehicles. If you go this route, you could be looking at a monthly payment close to $1,000 and, in some cases, well over $1,000 or even $2,000. This beats the heck out of the already lofty average new car payment of $725 a month. What if you aim to go lower than $725? Or maybe ride your used car – with no payment – into the ground? 

Now we’re talking about a real way to build wealth and having access to cash in case you need it. Beats the crap out of running such a tight ship each month just so you can cover your necessities. 

#3 – Don’t Sweat The Small Stuff

There’s lots of stigma around spending in the world of personal finance. We don’t like it. 

Extremes rarely work. Most people are going to spend money on things they don’t need. 

And, we’re sorry, but the math on that $5 a day latte adds up to a rounding error for people making decent or better money. While $1,800 a year isn’t necessarily chump change, it’s a spit in the bucket relative to the aforementioned savings you can see by paying close attention to what you spend on your big ticket items. 

Enjoy life. If you’re lucky enough to do so, spend freely, but within reason. Isolate two or three things you like doing – hobbies, even guilty pleasures – and do them regularly. Maybe even create savings accounts you divert some money to each week or month specifically for these discretionary purposes. 

By not restricting ourselves, many of us actually wind up saving more money amid spending rather than deprivation. 

The Bottom Line: So the unifying theme here is moderation. 

Moderate as much of your spending as you can by matching it with some savings. 

Moderate how much you spend on big ticket items that can get prohibitively expensive. Such as housing and transportation. 

Moderate your spending, but – unless you really get off on it – don’t hold yourself to an unrealistic standard of no discretionary spending at all. 

Taken together, this approach to personal finance makes for a well-rounded life and a well-rounded budget that remains within your control.

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