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To ensure proper management of your money … Here are the most important financial rules

You will not be able to make a fortune through investing if you cannot save money and do not manage your money well in the first place; So saving money is always more important than investing.

In a report published by the American “Fortune” website, the financial expert Ben Carlson pointed out the rules that must be followed to ensure the proper management of your money.

Avoid credit card debt

The first rule of personal finance is not to keep credit card debts, and since credit card borrowing rates are significantly high, paying off these debts will negatively affect your income, in which case you will not be prepared to invest your money if your debts accumulate.

Income is not the same as savings

There is a big difference between making a lot of money and getting rich, which means that your net worth exceeds the amount of money you make. In other words, high wages will not automatically make you rich, and low income does not mean that you will be poor; The most important thing is the amount of your regular income that you save, not the amount that you spend.

Saving is more important than investment

The best investment decision you can make is to set a high savings rate because it will give you an enormous margin of financial security, and while you cannot control the level of interest rates, the performance of the stock market, or the timing of recessions and market crashes, you can control your savings rate.

The only way forward is to live below your potential while saving a portion of your income for the future (Getty Images)

Live at your lowest potential

When living within or above your potential, you may end up spending your entire salary every month without building real wealth, and perhaps the only way forward is to live below your potential while saving a portion of your income for the future.

Determine your expenses

You have to understand your spending habits if you want to ensure that your money is managed well. The goal of this strategy is to spend money on necessities in exchange for cutting back on luxuries, and if you save money first, you don’t have to worry about the budget, you spend all that remains on Priorities.

“Automate” everything

Automating as much of your financial transactions as possible is the best way to save more money, avoid late payment of fees, and make your life easier. The goal is to make big decisions in advance so that you do not have to waste much time and effort in managing your money.

Huge expenses

The most important outlay in terms of preserving your money is the huge outlay: like housing and transportation, and the overspending can be massive on these two because they constitute fixed costs, and bring in more additional expenses than most people realize.

Create emergency savings

When establishing your monthly budget, you should take into account irregular and unpredictable expenses, such as car repairs and health problems, and you can plan to defray these windfall expenses by setting aside a small amount of money each month to better prepare yourself.

Housing and transportation costs are fixed expenses that may be associated with additional costs (Getty Images)

Save more amounts every year

The secret to saving more money over time is to increase your savings rate every time you get a bonus, so that you never notice that you earned more money in the first place.

Determine your financial situation

Each person should have an approximate value of their real net worth, which means adding together the value of assets and subtracting any debts. This method will enable you to make general expectations about savings rates, market returns, and investment portfolio growth; Accordingly, future goals can be set.

Taxes matter

Take advantage of the largest number of tax credits possible, and stay aware of your personal tax status. The biggest savings in this category include utilizing as many deferred tax means on savings as possible, and keeping trading as low as possible while investing in taxable accounts to avoid paying higher taxes on short-term capital gains.

Earn more money

Saving and cutting back is an excellent way to achieve financial goals, but it will remain an incomplete strategy if you do not try to make more money. Many people think there is nothing they can do to get a better job, be promoted, or earn a higher wage. But that is nonsense, and you must learn to improve your skills and negotiate a higher salary over time.

Financial independence

Your goal should not be to reach a certain age in order to be able to have a happy life, but rather to reach a point where you never need to worry about money again.Financial independence allows you to make decisions about how to spend your time on your own terms.

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