8 Financial Rules of Thumb You Need to Know

Do You Know the Rules of Personal Finance?

personal 10You may be familiar with a few of the important financial rules of thumb for your own personal life but it’s important to really understand the impact they can have overall. Making a commitment to do better with your money means knowing all of the different ways to secure your financial situation -- present and future -- and being dedicated to incorporate them into your life.

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A Matter of Savings

personal 9Savings has been an area financial experts have been harping on a lot recently. After research showed that many Americans live without a savings plan or an emergency backup, there was more emphasis being placed on putting money away for safe keeping. A rule of thumb for savings has long been to save at least 10% of your total income. For each paycheck you receive, you should automatically 10% or more into savings that you won't touch until you retire.


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Start Saving Early

personal 4A rule of thumb for the younger generation is to start saving early. This links to future retirement plans which too few young people think about when just starting out. But the earlier you start saving, the longer period of time you have to save. This translates into a much more secure financial future at the age of retirement than if one had started saving when they were older.

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Retirement Savings

personal 5This also brings up another rule of thumb. Concerning retirement, if your employer offers a match on a 401(k) or other retirement savings options, you certainly should enroll and contribute to the account. You are essentially getting free money towards your future. Roll over funds when you transfer to a new job so you can continue building up your future financial life.

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Automation Rules for Money

personalAdvances in technology in the last decade has made it easier to automate your finances. Automating your finances through online banking can certainly yield a payoff. Starting with your savings plan, you can have your percentage taken directly from your payroll check and transferred automatically to your bank account. The money you plan to save will never be physically touched by you, providing a guarantee it will go into a savings account. If you leave the money in the account, automation can go a long way to bulking up your savings fund.

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Automatic Payment Systems

personal 7Banks and many creditors allow you to enroll in automatic payment systems. The money is directly withdrawn from your bank account by the creditor or paid out by your bank. This method for bill paying can help you avoid extra money paid out in late fees and penalties. It can also help you avoid forgetting bill payments that could harm your credit score.

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Be Cautious

personal 8There are some cautionary rules you also need to keep in mind. In order to protect the money you have now and the money you will make in the future, you need to take your finances seriously. Never agree to co-sign on a credit card or a loan for someone else. Only a few missed payments or a total loan default can ruin your own financial status for years to come.

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Don't Live Off of Your Credit Cards

personal 6You should also never live off of your credit cards. If times are hard and cash is tight, do not rely on credit as an extension of your income. You are only setting yourself for a world of trouble for many years down the line. Financial hardships mean you need to cut back on overall spending and tighten the purse strings to figure out how to live on the cash you do have. Adding credit card bills to the mix will only create a dismal financial future. Even during a financial hardship, you have to also remember not to touch the cash you saved when it comes to your retirement funds. Emergency funds should be established for these hardships and can be used as a cushion. All other savings accounts should be left alone.

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