At Rand, we know how easy it is to set financial rules for ourselves and how hard it is to follow them in practice. We believe in helping our users make the most of the money they have. We asked the team here at Rand for their top money rules that they use to be financially savvy.
Rule #1: Set financial goals.
The future does not happen by itself. Everyone needs to plan for their financial future. It is important to have money goals, but you also need smarter financial tools to help you achieve your financial goals faster. This is where Rand comes in.
Rule #2: Know your financial ‘habits’.
Where do you spend the most money a month? What could you do without? Track income, spending and debts across several months to gain a better understanding of how you spend money. Making changes to daily habits can make all the difference when it comes to how you spend.
Rule #3: Make a monthly budget.
Set achievable monthly targets around saving and spending. Break these down into weekly ‘goals’ to make your budget more realistic. Making changes to daily habits can make all the difference to your success, like planning meals and making your lunch in advance.
Rule #4: Know your expenses versus income.
Keep track daily of what you spend and prioritize your needs first (rent, food, utilities, transport, debt repayments, savings) versus nice to have (that take-away morning coffee, going out, subscriptions, eating out, new clothing etc.). Make sure you can ‘afford’ all your subscriptions. It all adds up fast!
Rule #5: Pay expenses first, on time.
Organize all your expenses to be paid out the same day you get paid, this way you know what you have after you have paid all your bills and set aside money for savings. Then you can budget how much you have to spend each week.
Rule #6: Use credit wisely (only for emergencies)
It is easy to get into debt and much harder to climb out of it. Your debt repayments should not exceed 20% of your net income each month as a rule. Plan and budget in advance for large purchases so you can pay for them using cash rather than credit. Credit cards should be for emergency use only, not for paying day-to-day expenses or managing other debts. Paying Peter to pay Paul gets you nowhere quickly!
Rule #7: Save money every month.
You should be aiming to save 10% net income a month. Break this down into weekly goals and automatically save money from your account into separate savings account each week. Prioritizing building wealth for the future is important to achieve your long term goals. By moving your savings to Rand’s Earn accounts, we can help your savings work harder.
Rule #8: Have a ‘Plan B’.
Build a ‘rainy day’ fund equal to 6 months' expenses in a savings account, earning income just in case. This way you are prepared should anything change in your financial situation, such as loss of income, unemployment, illness, etc. Better safe than sorry!
Rule #9: Pay off large debts as soon as you can.
The interest rates for student debt, car loans, personal loans, and/or credit cards are much higher than most savings rates. Even when you pay off the minimum payment each month, you are adding to the overall amount you owe, thanks to compound interest on the principle. There are many not-for-profit services that can help you consolidate your debts and help you come up with a debt repayment plan. Ask for help before you are underwater financially.
Rule #10: I want, never gets.
A good question to ask yourself when you are tempted to buy something on impulse is ‘how did I get by for so long without this?’ It is important to think long-term when deciding on what your priority is when using your money wisely rather than living for today.
At Rand, we have a vision of building a world where everyone has access to smart financial tools that improve their quality of life — regardless of income or knowledge. We want to help you grow your money 70x faster.