Money. The topic that is often taboo yet gives us sleepless nights. It affects us on so many levels yet we still struggle to understand it, manage it and embrace it to fully benefit from it.

Managing your finances can sometimes seem like a cumbersome and overwhelming task however once you get a grip of a few simple steps, you will realise it is not all that bad.

There are a few simple money rules to live by to grow your wealth and understand your finances. Sadly, they don’t teach you at school and often, they don’t teach you at home. That is why we have decided to put them together for you instead.

1. Plan for financial freedom

Having a money goal in mind is an excellent motivator for people to attain financial freedom. Make this target the centre of your savings and spending strategy.

Fix a savings percentage to set money aside each month from your income, and progress towards your goal. Make sure you set aside at least 10% of your income towards your savings. Make it untouchable and unquestionable. Each year raise this savings percentage, gradually reaching a 50% savings mark and achieve financial independence faster. The saving percentage is the total sum of the money kept across various accounts divided by your income. Tip: If you feel you don’t have enough to set aside on savings, then you should probably review and cut down on your spendings.

2. Set funds for emergency

You have set an amount for savings. Begin the distribution of these savings first by allocating money for emergencies, followed by your other investment requirements.

Put the emergency fund in a high-yield savings account that allows you to earn interest more than a regular saving or checking account. Let the emergency savings make some money for you, while it’s kept in your bank account.

The pandemic has shown the need to build up a higher savings reserve for an emergency – a minimum of six months’ worth of payments to deal with the temporary financial crunch.

3. Avoid getting into debt

Taking a debt to fulfil desires beyond your means can put you into a vicious cycle of instalment payments that cover the high interest. Rethink and reassess your need before signing up for a loan instalment commitment.

Make purchases only when you have an adequate provision of cash to pay for it. Check out our shopping guide to help you with that. And if taking debt is a must, decide to take a mortgage to only purchase an appreciating asset. For instance, a home loan is useful when the instalment amount is less than or similar to the cost of renting. In this case, it is a sensible choice to invest in an appreciating asset, compared to a loan taken for an expensive car purchase that does not appreciate.

4. Plan cash purchases wisely

You have set a strategy about putting your income for long term savings and investments, emergencies, and remaining for other lifestyle expenses. However, having a deliberate control over your spending is also vital to attain financial freedom. Small cuts on some unnecessary expenditures each month is useful to fill a giant piggy bank of savings.

5. Make an investment strategy

Besides an emergency fund account, you need a long-term strategy for investments to build your wealth. Your assets let you grow your money through interest or dividend, which is extra income.

You can use it to reinvest, allowing your invested money to grow your portfolio for years. Some investments provide value appreciation of the asset, also a crucial element of building wealth.

It is most important to diversify your investment portfolio. There are investment apps like Sarwa that allow purchasing fractional shares so that you can start immediately even with a small budget. Be clear about your investment goals, risk tolerance, or financial circumstances to make suitable investments. Don’t speculate in get-rich-quick schemes.

6. Improve your money mindset

Our financial situation is always closely tied to our relationship with money and whether you believe it or not, it is something you can work on and change. It can be related to how you were raised, what cultural background you come to, to your religion or to who had the biggest impact on you and what you were told about money from a young age. Whatever it is though, it can be worked on to improve your financial literacy and attitude towards money and wealth.

Simply, invest in yourself and your knowledge and skills to increase your earning power.

Managing your money is an act of balance. This includes identifying between needs against unnecessary expenses, having adequate provisions for savings and investments. Setting the money rules right from the start, incorporating them into your regular part of your life is essential for achieving your money goals.

What rules do you apply around your money to ensure they make you happy?

 

By the way, we recently launched in the UAE with our brand new app. It allows you to connect all your bank accounts and view and manage your money all in one place. Download our app now to check it out.