Until very recently I wasn’t even aware that I had Money Rules. Late last year I took part in an advanced course on Neuro-Linguistic Programming, securing my NLP Master Practitioner qualification. As part of the course, the group took part in an exercise on modelling. Modelling is essentially the process of recreating excellence by understanding the beliefs, strategies and thought processes that a person employs to be masterful at a particular skill – and then modelling them, so you can be too.
Within the last few days of training, we paired off with another participant that had a skill we wanted to learn. My modelling partner was a fashion designer and artist and was amazing at all things creativity – which I desperately wanted to learn. Fortunately, I offered a skill she wanted to learn, which was (surprise, surprise) personal financial management.
As a result of going through the process of teaching someone else how I “did” effective personal financial management, it became so much clearer to me how I was able to do it so well. She picked up on a number of “acorns” of wisdom and creatively put it into a storytelling performance piece (even the topic of money couldn’t stifle her creative spirit!). I may have to try to convince her to share the story with us here on the blog, it was awesome.
The concept of these acorns developed into my Money Rules after hearing an IGTV video by Ramit Sethi, sharing his own Money Rules. But really, whether you call them acorns, Money Rules or Financial Commandments, it’s essentially outlining and formalising your personal philosophy of money.
Make your own rules
I am going to share with you my money rules here today. Before I do though, I want you to know these are my money rules. I am not here to tell you that you need to adopt any or all of them (although, please feel free to). I DO, however, encourage you to create and document your own money rules. Start by considering the following three things:
- How you manage your income and expenses;
- The lifestyle you want to have; and,
- What kind of relationship do you want to have with money?
Consider how you live your life now and what you want for yourself in the future. It’s ok if some of your rules seem hard, or you’re not currently living by them strictly. They are there to guide you and keep you on your path – a compass, rather than the map, as it were.
My Money Rules
Here are my ten Money Rules:
Let’s break them down.
Always keep a budget, but don’t be a slave to it
I know that many people are afraid of budgets, but I love them. And my love of spreadsheets is only part of the reason. The real reason I love them is that knowing the numbers gives us a clear picture of where we are now and how we can get to where we want to be. I’ve added the last part about not being a slave to your budget because I don’t want to obsessively be looking and fretting over my budget, it’s there as a tool to create freedom – not as a punishment.
Have an emergency fund of 6 – 12 months of expenses
I like to have a minimum of six months and a maximum of 12 months in cash for emergencies. You may have less or more and that’s totally fine, it’s a personal choice based on many things. I like to have the money there not only for security but also for opportunities. I’ll also add that we hold it in our offset account, so I don’t consider there to be a large opportunity cost in having that amount “uninvested”.
Never go into debt for consumer goods, cars or holidays
Just don’t. Debt is great for some investments, where the cost of borrowing is outweighed by the return you make. Clothes, shoes, cars and holidays should be paid in cash – and by all means, use your credit card to transact, but pay it off before the interest-free period.
Buy quality over quantity
Every time I break this rule, I regret it. Recently we renovated our laundry and I tried to justify buying cheap tiles because “we didn’t spend much time in there” or “it’s such a small space”. But the cheap tiles were brittle and had very little glaze on them, which meant that they chipped easier and made the tiler’s job ten times harder. It also meant it took him twice as long and therefore increased the price of labour. In the long run, you always end up paying more by choosing low quality.
Invest. Especially in yourself
If you’re not investing in your future by way of shares, property, savings, artwork, bonds, or some other financial instrument then at the VERY LEAST invest in yourself. Whether that is going to university, taking a creative class, doing personal development work or anything else that will increase your ability to earn income in the future. Don’t pinch pennies at the expense of your future potential.
Consider your present and future self in every transaction and financial decision
YOLO right? Well, sort of. Life is a constant balancing act between what we want now and what our future self wants and needs. My philosophy is that regardless of whether my inner child is screaming “But I want it NOW!” I still have to think about how that will impact my opportunities in the future. I am the first to admit that this is NOT as easy as it sounds.
Not only to change the world but to bring abundance into my life. See my previous post on Charity & Abundance
Spend in line with your values
I never feel bad about spending on things that align with my highest values. In fact, I consciously budget to be able to spend on what is important to me. Not only that, but it also helps me when making decisions about the life I’m creating and the things I spend money on, in conjunction with the point above about balancing present and future self.
Structure, not control
I am very much a recovering control freak. Recovering because a while ago I realised that trying to control everything in my life was neither working nor making me happy. But creating a structure to manage my spending and financial decisions gives me a boundary to work within, while also allowing flexibility and means I never feel restricted or trapped.
Remember that money will not bring you happiness, so keep doing ‘the work’
Financial security is important for both health and happiness. However, beyond a certain level of wealth and income, our happiness pretty much flatlines. I choose to pursue more wealth and help women create more in their own lives because wealth does bring choices and freedom. But I recognise that having more money in the bank isn’t going to mean I won’t have bad days. In order to be the master of my own emotions and find inner peace, I need to continue to do self-development work.
All of these money rules have been developed over my 20+ years in financial services and a lifetime of getting to know myself. And who knows, as I learn more about myself and as my life changes, my money rules might too. So, if you don’t have the ‘perfect’ set of money rules yet, don’t worry. You definitely don’t need to set them in stone, just put a few ideas on paper to start with. I would love to know what you think of my rules – was there anything surprising in there? Do you resonate with one or two of them? Let me know!