Why You Need to Learn the Rules of Personal Finance

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Have you ever gathered around a brand new board game with some friends and family? Maybe you take the instructions out of the box and start going through them to learn the rules of the game. Or maybe someone has played before and starts explaining the rules to the rest of the group. The more complicated the game, the more difficult this can be.

I’ve definitely encountered this many times, both as the brand new person and also the experienced player. Think about how you feel during the first round of a brand new game. Do you have any confidence that you’re making the right moves? I sure don’t. I second guess myself and look for assistance from others. I’m just along for the ride, trying to learn along the way.

What about for a game you’ve played dozens of times? It’s likely you’re confident in your decisions and you feel much better about your chances of winning. You have a strategy in mind, and continue refining it over time. It goes without saying that games are much easier when you’ve played before and know the rules. In this same way, the “game” of personal finance is much easier when you put some time into learning and practicing. By knowing the rules, you increase your chances of excelling.

Money Isn’t Going Away

The reality is that money isn’t going away, and will always play a role in your life. In high school I used to tell myself that I didn’t care about making a huge salary or being rich. Looking back, I think I was right on track for realizing that money wasn’t going to buy me happiness and that I needed to seek contentment in other ways. On the other hand, it quickly dawned on me that the more I was able to learn about using money as a tool, the more I would be able to thrive in life. This wouldn’t just benefit myself, it would mean more stability for my family, more opportunities to give to others, and most likely less stress. This pursuit of more freedom and flexibility is why we’re pursuing financial independence.

You can either learn about money and gain control over your finances, or you can go through life uninformed and have your money control you. If you go through life refusing to learn the rules of personal finance, you’re restricting yourself. You’ll be living a life with less options, and less protection against unforeseen circumstances. For example, if your job starts going downhill, you won’t be able to better your circumstances unless you’ve built up some cushion to where you can make a change. With no emergency fund, you’ll be stuck. For me, living a wealthy life is through having freedom and gaining the ability to not have to worry about money.

The Rules of Personal Finance

Personal finance is never black or white, it all depends on your individual situation. However, there are some universal rules that most experts agree on, for example:

• Spend less than you earn
• Avoid and eliminate high-interest debt
• Invest early and often
• Reduce and eliminate unnecessary expenses
• Spend on areas that bring you value
• Get the employer match for your 401k
• Utilize travel rewards

The more familiar you are with these rules of personal finance, the better off you’ll be. When you learn how to cut your expenses, increase your income, how to invest, and the various tax advantages available you’re no longer just along for the ride. When you’ve learned the rules, you can refine your strategy and maximize your chances of succeeding.

Figure Out Where You’re At

The first step towards winning with money is to figure out where you’re at. How much savings have you built up? How much debt do you have? What are the minimum payments and interest rates for those debts? Spend some time taking stock in what your financial situation is, and then use that to begin making a plan for how to improve. Personal finance is a skill, and takes some time and effort to learn about. However, this is time well spent, and when you put the time in you’ll be winning with money in no time.

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