After I mention to people that I have a personal finance blog, often the next question (after commenting on how bad they are with money) is “so what are you all about?” They then go onto toss out a few names of other financial gurus and ask how I compare to them. Of course we all have similar core values; save money, invest early, don’t spend too much, but there are some differences in approaches and thinking between gurus. So, I thought I’d put forth my financial truths, the things that I live by and discuss on the blog. 

Of course at the core I still maintain the Cardinal Rules of Personal Finance. These rules are the basis of personal finance and I believe the guard-rails on the journey to financial freedom. You can read more about them here, but in summary they are:

1. Income = Expenses + Saving (i.e. don’t spend more than you make, and prioritize saving)
2. Master your money otherwise it’ll master you. 
3. Focus on achieving a little everyday. Financial success is a marathon, not a sprint. You won’t suddenly develop good habits or wake up to a fully stocked 401(k). 

So, now that we’ve got that covered, we can now dive into my financial truths. These are the attitude, rules, principles that I follow. Sure I’ve not arrived at total financial success, but I like to think I’m making progress (i.e. see Cardinal Rule #3). 

YOLO

Ah, the expression that young kids said a few years ago but not so much anymore; “You Only Live Once”, the rallying cry of people not worried about tomorrow but only today. You may often hear YOLO right before someone proceeds to make not the best decision, often around money, but not always. Saying ‘YOLO’ is often followed by buying something that’s not in the budget or that you’ll regret very soon after buying, or going out to eat/drink when you really should be staying in. 

Instead of looking at YOLO as being a negative, I try to approach YOLO as a positive attitude. Since I’m only going to live once, I definitely want to make the most of it, and I desire to be financially secure and be able to enjoy my money all throughout my life. One day I’d love to reach a point where I don’t have to work and be able to live off my savings (i.e. retirement). I also see the benefit of saving money now and having it grow over time. Along that same line, I do realize I’m only here once, and do want to enjoy my money – both now and later! 

Some now, some later 

Carrying on with the YOLO mentality, I realize that there’s only one life for me to live. With that in mind, my goal is to enjoy my money all throughout my life. To do that, I need to definitely enjoy it in the present. Whether it’s going on nice vacations (have you checked out my other site HelpMePickMyCard) or eating out with friends, or buying new clothes or toys to play with, I do enjoy my money now. However, I realize that by saving some money now, I’ll be able to watch it grow and have it grow for a long time. So, with my budget, I attempt to live/spend 75% of it, and then save/invest the other 25% of it. 

I believe that balance is the secret to a successful and happy life, a little now, a little later! 

Keep my money in fewer places rather than more

Being a young professional means that you’ll probably be busy and have lots on your plate. You’ll likely be busy working 40+ hours/week, have a social life, and lots of activities in between. Managing and staying on top of your money is not always easy, so I’ve found it’s wise to remove any obstacles to keeping an eye on things. One way to do so is to keep your money in fewer places, rather than more. Early on as a young professional, I had accounts all over the place. I’d open new accounts to take advantage of sign-up bonuses, or have 401(k) accounts in different places as I changed jobs. It became a lot to manage, and I realized that I should probably start consolidating the money. I rolled over my old 401(k) accounts into an IRA (individual retirement account), closed some old credit cards, and moved money out of old savings accounts. Keeping your money in fewer places means you’ll be more likely, and more easily be able to keep an eye on the money! 

Make your money work as hard as it can 

Let’s face it, we work hard to earn our money. We grind away at our jobs, whether that’s a 40+ hour full time job, or several part-time jobs, just to earn enough to survive. Hopefully we’re budgeting well and leaving some room for savings/investments. Whether that saving/investing be for retirement, an emergency fund, a specific goal (i.e. down payment on a house), you’ve worked hard to make that happen. You should expect your money to return that favor and work as hard as it can for you. Money put under a mattress won’t make you rich, in fact you’ll lose money thanks to inflation. Money kept in a regular savings account won’t grow that much either, as most banks pay pennies in interest. If you go through all this trouble to have money set aside to grow, make sure it’s growing as much as it can! Learn to get comfortable with investing some of your money, and seek out banks that pay higher interest rates (i.e. American Express or Ally are two common ones). Do some research and make sure your money is working hard for you! 

Be a risk mitigator (investing and insurance)  

There are often two different approaches when it comes to dealing with risk – either you’re risk averse, and void risk like the plague, or you’re risk seeking, and take on more risk, almost for the thrill of the chance. I’ve found that it’s wise to be somewhere in the middle, being a risk mitigator as I call it. You’re not going to get rich or be financially successful by avoiding risk all together, as the saying “nothing wagered nothing gained” goes. However, by taking on too much risk, you’re exposing yourself to more than you can tolerate, and could lose a lot of that money if things don’t work out in your favor.

The easiest way to mitigate risk is to diversify, i.e. put your eggs in different baskets. I personally keep some money in a high interest savings account, where I earn 10x more than keeping it in my normal bank. I then keep a fair amount of money invested in the stock market. All of my retirement right now is invested there, and I also keep some non-retirement money there as well. I keep most of my investing money in an index fund, and then keep a small amount of ‘mad money’ invested in individual stocks. Often times the boring investments are going to be the safest, and that’s what I’m after! 

Additionally, it’s important to have good insurance. No one likes paying for insurance until they need it, but when you need it, you’ll be thankful you did. In my life so far; I’ve gotten in car accidents (my fault), had a tree branch fall through our roof, had my car stolen and have required a variety of medical care. All of these would have been super expensive had it not been for having insurance (auto, home, medical). Now that BabyMoneyFinance is here I also have increased my life insurance policy. It sucks paying those monthly premiums, but I’ve certainly been glad to have coverage. Look at your own life and figure out the right amount of coverage for yourself. Getting a premium medical insurance plan may be too much if you are healthy and don’t go to the doctor very often. Getting full coverage on an old car that it close to dying probably doesn’t make sense either. Figure out the right mix of coverage for yourself! 

Keep an eye on it, but not too often, or never at all

It’s funny how your money can sometimes seem to have a mind of its own. Did you really plan to go out for dinner 3 times this week? Were those new AirPods a must have? Did you not mean to deposit money in one account vs. another? All sorts of things can go wrong, or not go according to plan. Therefore, it’s important to keep an eye on your money. Find a good budgeting solution that works for you. Set financial goals, work to achieve them, and measure your success against them. Keep tabs on your savings account and investments. Make this a regular habit, but don’t do it too often.

Although I may be in the minority here, I found myself early on checking on my finances a little too often. I would log in and check various accounts a little too often, almost daily. This ended up causing me more anxiety and more stress. My money balances didn’t change much at all day to day, so there really wasn’t a point in doing so. About a year ago, I adopted a new strategy, which I called my “Net Worth Tracking”. I committed to recording all my balances and doing a high level review of my finances once a month. Although I still find myself occasionally checking accounts, I’ve done a much better job at doing this less, and feel less anxiety and less stress with it! 

Give some of it back 

Although it may be a little counter-intuitive, I have consistently given money (even just a little) to charities on a fairly regular basis. Yes I watch my spending very closely, put my money in accounts where they’ll grow the fastest and set lofty financial goals for myself, I still leave room in the budget to give back. It’s been an incredible blessing to me personally, and of course a nice benefit for the charities I give to. I find that by giving, I reflect on how blessed I am in my own life, and then get joy by helping others. Whether it’s giving to your local church, animal shelter, NPR, relief organization, human rights causes or anything else, figure out what’s important to you and make financial (and/or time) contributions to them! 

Debt can be smart, but often it’s dumb

I grew up listening to Dave Ramsey on the radio. My Dad would often have it on in the car and I learned a lot from Dave about money. One thing that always struck me was how much he HATED debt. Like he really hated it, viewed it like the plague, something to always be avoided. I never fully agreed with all his views on debt, and have come to view some debt as being wise. Debt, when used responsibly and for worthy purposes can be a good investment in yourself. Going to college is expensive, but it can be a great leg up in the world, hopefully landing you a great job with a great salary. Buying a house with cash is pretty much impossible for 99% of us, but borrowing to buy a house that is appreciating in value can be a huge financial gain for you. 

I’ve come to view debt as a tool, one which can be used for helpful purposes, or not so helpful ones. Debt is a very powerful tool, and can greatly help or harm you. Getting into credit card debt, payday loan debt, expensive car debt can really be a burden on you and keep you from growing financially. Make smart decisions, do try to avoid debt whenever possible, and only take it on for worthwhile endeavors. 

Use credit cards for rewards, but do so responsibly 

Finally, this truth probably isn’t as important as the others, but it’s still something I’ve learned and hold dear. Credit Cards can be very powerful tools to earn incredible rewards. I personally using credit cards probably earn $900+ in rewards per year, and have taken many trips using the cash/points I’ve earned. There are lots of studies or financial gurus who will tell you that spending with a credit card often means you’ll spend x% more than you would have with cash, or that credit card usage is more likely to lead to credit card debt, which yes is a very bad thing. However, assuming you’re following my other financial truths and being responsible with your money, your debt and your investments, I think that credit cards can be a great tool to earn rewards! 

There you have it, my 9 financial truths that I live by, and the truths that guide me in my blog posts on this site. I don’t have all the answers figured out, I haven’t obtained full financial success in my own life, but it’s a journey and I believe I’m on the right path! 

What about you? Do you have additions to this list or things you would remove?