17 Money Rules Everyone Should Know

21 Nov 2022

Hello traders,

All the below are based on my preferences, I don't give any financial recommendations and I have nothing to sell you with this article.
I'm sharing content because I see a lot of traders being/becoming broke and I don't want you to be one of them.

1. Pay yourself first

As soon as you get paid, put money into savings.
Automating this is even better.

2. Keep a 6 months emergency fund

If you have multiple streams of income, you can go as low as 3 months.
If starting out on your own, you could need as much as 12 months.

3. Budget using the 50/30/20 rule

• 50% for needs
  
• 30% for wants
  
• 20% towards saving/retiring
  

4. Divide your bonus into thirds

• 1/3 for fun
  
• 1/3 for retirement
  
• 1/3 for debt paydown
  

5. Put a large percentage of your raised into your savings

This helps avoid lifestyle inflation and moves up your retirement date.

6. Avoid high-interest debt

If you have it, use the snowball or avalanche method to pay it off

7. US only: Always take an employer 401K match

Many employers match a percentage of your paycheck.
This money gets an immediate 100% return.
Turning this down is the same thing as turning down ra raise.

8. Your home payment

Mortage + interest + insurance should cost less than 25% of your monthly income

9. When buying a car, use the 20/4/10 rule

• 20% down
  
• 4 years loan
  
• < 10% of your monthly income
  

10. Save at least 15% of your monthly income for retirement

11. The stock market has a long-term average return of 10%

So, when the CPI inflation of your country is 10%, you're actually at breakeven in term of buying power

12. The rule of 72

Example: The stock market returns 10%, so 72/10 = 7.2 years to double your money

13. The 4% rule

This rule says you can safely withdraw 4% of your starting investment balance each year (adjust for inflation in subsequent years) and not run out of money.

14. The wealth ratio

Take what your spend divided by your income
If it's below 10%, you're "wealthy" because you can live off 10% of your income

15. Have at least 5 times your gross salary in term life insurance

16. Before spending money

Wait 24 hours and ask: do I still want it? If you do, go and buy it.
This will save you from a lot of impulse purchases

17. Value time over money and experience over things


I'll keep bringing a few articles like this every week because it helps me clarifying my thoughts AND giving back to the community makes me feel good about myself somehow :)

Thank you for reading
Dave