Traditional budgets are for the birds. The word alone (budget) often harbors fear, laziness and confusion. Nobody should be afraid to order an appetizer at a special dinner or invest in a gym membership. Of course you need a spending plan, but we’ve found that it’s never one size fits all. The key to building financial health is to give yourself rules but make them work for you – mA rule you can live by.
Ramit did it. He put together his 10 money rules to help him create the life he wants to live. Take them and adapt them to your lifestyle, values, and priorities. Then create your own list that is organized but not handicapped.
Ramit’s 10 Money Rules
1. Always have a year of emergency money, cash
22 million jobs were lost during the Covid-19 pandemic in 2020. Careers ended in the blink of an eye. Many people were not prepared for such an event. While grim, tThis is a very valuable lesson. When times are good, work hard and fast to hold onto a year of emergency funds. That one action alone will alleviate much of the anxiety you experience when thinking about money. Learn more about set up an emergency fund here.
If this seems extreme to you, adjust it. Make your # 1 rule: Always have six months of emergency money ready. Remember, these are YOUR rules to live by, not his.
2. Save 10% and invest 20% of the gross annual income
When you start saving, the emergency fund is the starting point. Once that’s set up, you can switch to a high yield savings account. For Ramit, this is a personal commitment to his future. His advice is to automatically send a portion of every paycheck to this account without seeing it.
Not ready to invest this amount of money? That’s OK. Perhaps your money rule could be: Invest 5% and save 10% of your gross annual income. Or don’t invest anything now.
3. Pay cash for large expenses (engagement ring, dream trip, wedding) and at least 20% discount on a house
Let’s put it this way … drop the plastic. In order to build good financial health, it is important to Ramit not to have large debts when interest is incurred. Maybe people get caught in the credit card trap thinking they can just cash it out. But then something comes up, maybe a trip to the emergency room, and that plan goes out the window. One of Ramit’s keys to saving money is to only spend what you have when you have it.
4. Never ask if you want to spend money on books, appetizers, health, or donations to a friend’s fundraiser
Since Ramit is constantly educating himself through reading books, he has set up ‘Ramit’s Book Buying Rule’ which enables him to buy any book he finds interesting. That’s his thing. You may have something that matters so much to you if you are not depriving yourself of something that you love. Maybe you choose a few things that make you happy and fill you; then form your rule around this.
Do you love gardening? Your # 4 rule could be this: Never question money on gardening supplies, flowers, sunscreen, and manicures.
5. Business Class on flights over 4 hours
A luxury, sure, but for Ramit, who travels a lot, this is important to keep him motivated (and comfortable). This may also be non-negotiable for you or even not even close to your money rules list. For Ramit, he gives in every now and then when it comes to comfort.
6. Buy the best and keep it for as long as possible
Sometimes it’s expensive to buy cheaply and spending a little (or much) more on quality ends up saving you money. Ramit likes to buy high-end electronics because they last longer, clothes because they don’t tear or tear easily, and cameras for their reliability. Some of these items can be passed on to generations. Couldn’t be a bad rule to adopt as your own.
7. No limit on spending on health or education
Health and education are really rewards that are always passed on. If you take an online course that will make learning data visualization easier for you, you now have a new skill to sell as a data consultant.
Those few extra sessions with your trainer at the gym will make you feel good about yourself – you will become energized, motivated, and maybe even inspired to think more creatively about a project or specific client.
The no-limit part of this rule might scare you, so maybe a cap of $ 100 / month for fitness classes and $ 10,000 / year for education – whatever makes sense to you.
8. Earn enough to only work with people you respect and like
Ramit refuses to wake up in the morning and doesn’t look forward to his day and future interactions. Friendliness, respect and trust are of the utmost importance to him when it comes to people he hires and with whom he works. This could be one of those aha moments for you too. If you are feeling miserable because you are scared of going to work every day because your boss is a bozo, you can implement a rule like this.
9. Prioritize the time outside the table
Money rules are more than just figuring out how to put money in the bank. It’s also about creating the life you want to live. Your money rules may want to ensure that once everything is going smoothly according to your plan, you are prioritizing family, loved ones, and your health.
10. Marry the right person
Believe it or not, money is a big part of a relationship. People grew up with different monetary values and can see it very differently. To avoid future conflicts, Ramit has pledged to adhere to Cassandra’s own money rules.
Did you notice that Ramit’s rules are more about saying yes than saying no? It’s not about taking small luxuries. Your money rules are also about investing in yourself – especially if that investment can help you make even more money. There are no limits to the earning potential. However, there is a limit to how much you can cut.
Remember, these are your rules, tailored to your particular interests, skills, and lifestyle. And it’s okay to fall off the cart and make mistakes. But always remember that the real mistake is not to do anything. Anyone can make smart financial decisions with a solid, personalized plan that works for them.
Learn more from Ramit in this YouTube video about money rules.
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