5 Financial Rules that are Meant to be Broken

When handling finances, most of us follow a set of rules. Do an online search on financial tips and you’ll be bombarded with opinion-filled posts from “financial experts” who claim that by following what they say, you’ll be able to boost your nest egg or earn more money. In reality, however, breaking some of these popular rules is the best thing to do. Let’s take a closer look at these financial guidelines:

Rule #1: Set aside 20% of your monthly income as savings.

Similar to the 50-30-20 rule (50% for necessities, 30% for whatever you want to buy, and 20% for savings), this tip won’t really help if your income to start with is barely enough to cover your expenses. This is especially true if you’re a minimum wage earner. When you get your paycheck, you’ll want to first settle your monthly bills and other financial obligations. Whatever’s left is your savings. Even if the amount isn’t 20% of your income, it’s better than having zero savings at all.

Now this technique works when you’re just starting out, but as you become more financially stable, you’ll need to change your tactics and break this rule again. Once you’re financially secure, put away more than 20% as savings. After a few years, don’t be surprised if you now have a small fortune in the bank.

Rule #2: Don’t use credit cards.

Many money experts claim that in order to avoid credit card debts, you’ll have to let go of your credit card. But what if you’re transitioning from an old job to a new one, and your first salary is still three weeks away? You do have money saved up, but you realize it won’t be enough to cover the groceries and monthly bills. You can ask for a loan from a relative or a friend, but this can get tricky if you get behind payments (and potentially ruin relationships). But if you have a credit card, you won’t lose sleep thinking about where to get money until your first paycheck.

Once you get your paycheck, pay off the card in full, and put it away until you’re in a tight spot again. Don’t get a card with a limit that you couldn’t pay off with one paycheck. By using the card as a source of emergency funds, paying it if off before the due date, and sticking to a limit you can afford, interest rates won’t pile up and keep you trapped.

Rule #3: Want to get rich? Then cut down your expenses.

Trimming down your expenses IS one way to properly manage your finances, but it’s not THE key to wealth. If you take a closer look at rich people, you don’t really see most of them stacking coupons or buying only the necessities, right? It’s good to have wise spending habits and all, but many wealthy people who earned their way up focus more on how to increase income. In short, they’re always on the lookout for opportunities to make more money. Besides, you can’t really live on budget meals and hand-me downs forever. You’ll want to occasionally reward yourself with a brand-new outfit or spend the next holiday on the beach, working on your tan and trying out an exotic dish.

So Instead of sticking to just a single source of income, work on how you can increase your cash flow. Get a second job, offer your skills or services for a fee, or put your money in investments such as bonds, stocks, and mutual funds.

Rule # 4: Don’t rent, buy.

This rule may seem logical, but the best option depends on your lifestyle and needs. Will you be living in that house or using that car for more than three years? If not, then why would you choose an option that involves a long-term commitment? Renting a home is the ideal choice if you see yourself living in the city for a few years before travelling to another state or moving to another country. The same goes with the car. Want to get the latest Ford Mustang when you’ve just bought a Toyota Camry two years ago? No problem. Just get a car lease. You’ll be able to switch models more often on lease than if you bought a car. This is definitely more manageable than buying because payments are cheaper and getting a loan for a lease is easier.

Rule #5: Do what you love and the money will follow.

This is probably the most common tip you’ll hear from life experts, some of your friends and loved ones. But what makes this rule worth breaking is that it’s often misinterpreted. If this is 100% true, then why don’t we all just stick to things we love so we could all get rich? The truth is that not all hobbies can be turned into successful, money-making ventures. This doesn’t mean that you should abandon your dreams and live a life without meaning. After all, you’ll need passion to keep you going.

Break this rule and develop a profitable skill that you’ll enjoy doing for years. Or better yet, learn to love what you do. Once you’ve learned how to appreciate your work, your perspective changes. Seeing your difficult boss or that annoying officemate every single day won’t seem like torture anymore. Dedicating yourself to your work won’t be as hard as it was, making you more productive and proactive in the workplace. Because you’re now enjoying your work, earning money isn’t really that difficult anymore.

Whenever you come across rules on money management, think about your financial situation first, and figure out if those rules apply to you. If not, break them. Instead of blindly following a set of rules, do what makes more sense to you. Know what rules to break and when to break them, and you’ll have an easier time managing your money.