Cardinal Rules of Personal Finance

Personal finance is hard. It takes motivation, perseverance and a good head on your shoulders. Personal finance is tricky because there is just so much information out there, enough to fill several books on your bookshelf. Fortunately, I’ve boiled personal finance down into the following 3 ‘Cardinal Rules’. Give them a read and see if you can apply them to your own life!

1. Income = Expenses + Savings

The basic premise of this fundamental equation is that your expenses + your savings should not exceed your income. Depending on your pay schedule, you should be aware of you income (after taxes). Take that number and in-grain it into your mind. Focus on that income amount do not let your expenses and/or savings exceed that amount. Your income is your monthly ceiling.

2. Being the Master over your Money and not vice-versa

You must learn to be the master of your own money. You are in control, you earn it and you decide how it’s spent. Start to view yourself as the boss of your own life. You work hard and make the money come in. Don’t let your money fly out the window and it be month end and you have no idea where it went.

3. A Little Everyday

Incremental growth is the act of learning to value small acts that eventually add up. This is the mindset that keeps you focused on the big picture, and starting to realize how making incremental changes can really pay out in the long run. Cutting out on little purchases each day can make a big difference come months end.

  1. freemoneyminute says:

    Isn’t savings more in the net worth category. I would say that interest from savings would be income, but the savings itself would only fall under your total assets, not necessarily income. Maybe it should read Income = Expenses + New Savings?

  2. Financial Independence says:

    While your income needs to cover both expenses and savings, some could argue that by reducing their savings and increasing their expenses the equation would still balance (obviously this is not correct). Rebalancing to “Savings = Income – Expenses” makes the concept a bit clearer, but ultimately what it comes down to is “Income > Expenses”

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