The Money Manual’s 10 Money Rules To Live By
We get asked all of the time by our readers: “My personal finances are a mess, where do I start?” Even if your finances aren’t a mess and you just want to get to a better place money-wise, getting control of your personal finances involves some commonplace solutions, and it’s kind of like pushing a boulder up a hill. It absolutely can be done it just requires some consistency and a plan.
Consider this your plan of attack to get control of your money life, and then to start to build wealth.
Repeat after me: It can be done.
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You have to know exactly how much money you have and where it’s going. It’s shocking how many people don’t know how much money they have, or some bother to read through their bills every month to see what interest rates they might be paying on their debt, or what subscriptions they are paying for every month that they might not even realize they are paying for.
Make understanding where your money is going your first and top priority, and then sit down and make an honest effort to make a budget.
Don’t worry, we’ve broken down exactly how to make a budget for the very first-time so you can get started.
2. Pay Off Your Debt
Not all debt is created equal, but if you are dealing with high-interest debt (let’s define that as anything with an interest rate above 7%), then debt needs to be your next money priority. You’ll be on quicksand unless you get rid of it. For the most part, the kind of debt that falls into this category is credit card debt, personal loan debt, and some private student loans, so pay particular attention to those kinds of debt.
Here are four very different strategies for paying off debt from someone who paid off $81,000 of debt.
3. Start Investing — Even If You Are In Certain Kinds Of Debt
Now, we hinted at this above, but we don’t see all kinds of debt as the same. Mortgages and student loans, for instance, oftentimes have low-interest rates, and if you are paying those off it doesn’t make sense to put off investing.
We talked with two women who are winning the money game by investing while in low-interest debt. You are going to want to take note of their stories.
4. Start Investing — No Matter How Much Money You Have To Start With
Contrary to popular opinion you don’t need a ton of money to start investing. In actuality, you need just $5 to start at most online brokerages to buy a fractional share of a stock (a part of a stock). Now, you are probably thinking, $5 isn’t going to get me anywhere when it comes to building wealth. Well, that is correct. The point we want to drive home is to start investing with whatever money you have so you can start building the habit of adding to your investment account and start snowballing your investments.
Dive into our guide on how to start investing in stocks.
5. Diversify Your Investments
Once you start to invest, your next question is going to be what should I invest in? You don’t want to put all of your eggs into one basket, first and foremost, that’s never a winning strategy. Diversification is one of the most important lessons a first time investor can learn.
6. Feel Free To Invest In Crypto — Just Not With Every Dollar You Have
Cryptocurrency is the hot topic of the moment. We are certainly pro-crypto, just skeptical of using it as an investment vehicle given how volatile the asset is. A general recommendation for the novice investor is to make sure that no more than 5% of your portfolio is in crypto.
Once you’ve gotten your feet wet and are interested in buying crypto, make sure to check out our guide on how to buy crypto.
7. Take Advantage Of Dollar-Cost Averaging
What is dollar-cost averaging you ask? It is a simple technique that involves investing a fixed amount of money in the same fund or stock at regular intervals for the long haul. For instance, many beginner investors focus on investing in an ETF that tracks the S&P 500. If you were to invest $100 a month into that ETF, you would be dollar cost averaging. This is one of the most effective ways for beginner investors to build wealth over time. If you have a 401(k) you are already doing this, but more broadly speaking this strategy works.
8. Invest For The Long Run
Investors that ignore the ebbs and flows of the market after having invested in a sound diversified portfolio tend to win the investing game. This actually makes investing easier — you are investing for the long term and don’t need to constantly be moving your investments around.
9. Don’t Day Trade
Just don’t do it. Most beginner investors are not going to win investing this way. There are also plenty of tax implications that come with investing this way.
10. Make Extra Money Where You Can
So many people who have paid off large amounts of debt or are able to throw large amounts of money into their investment portfolios monthly have been able to do this by bringing in additional income when and where they can. Side hustle, ask for a raise, do what you have to do to bring additional income in to realize your financial goals.