For personal finance there is supposed rules to achieving financials success in life. Some of these rules are hard coded and need to be followed. But some rules are outdated and some rules are made to be bent or broken. Some established financial rules can actually ruin your finances depending on certain life situations. Here are a few personal finance rules that under certain circumstances, you should consider breaking.
Avoid Using Credit Cards:
Popular good finance advisers recommend to not use credit cards or only use them sparingly. Yet using credit cards responsibly can help build your credit rating, provide you with a safety net in the case of an emergency and make you eligible for rewards such as cash back or travel miles. The key to using plastic is to pay of the balance every month in full. By paying off the entire balance off as soon as you receive your statement you avoid any and all interest. When used correctly a credit card can be an interest free 30 day loan when you need money the most.
Tax Refunds And Exemptions:
When you receive a tax refund it is because the government has been holding onto your money for a year and earning interest on your money before handing it back to you. Tax refunds are not a source of “windfall” money, it is money you worked hard for. If you work a 40 hour work week you have worked a total of 2,080 hours, and every hour you work you are paying taxes. When you receive your paycheck the government withholds some money. You should consider adjusting your withholding to avoid having too large of a refund and to increase your take home pay. The key is to avoid too little withheld and end up owing the government money at the end of the year. You should talk to a tax accountant to find the best amount of withholding. While you will not get a fat tax refund you will have more money in your pocket all year long, money you can leverage towards earning you interest instead of letting uncle Sam make money on your dime.
You Have a lot of Money In order to Invest:
This is not true at all. Some of the richest people in the world started off poor or middle class. They saved money and invested money. Some of these people did it little by little. You can begin investing with as little as $50 dollars per month. Also just because you might not have a huge income does not mean you do not deserve the assistance of a financial planner, everyone can use a little help with financial planing.
Save 10% of Your Income
This rule is as old as the hills and quite outdated for many people. 10% may not be enough for whatever goal you are trying to achieve such as retirement savings. You should decide what amount of money you need and then work backwards from there. If you were to slow to start saving for example you might need to save more than 10% to get to your goal, for example someone who didn’t start to plan for retirement until they hit their late 30s will for sure need to save more than 10% of their income towards retirement. It all comes down to what you are saving for, what the deadline is and how much you can afford to save.
Most so called financial rules are in place for good reasons, but everyone is different, You need to examine your finances and life situation and just use rules as general guidelines rather then absolutes written as stone, as this article has shown.