Nathan Bell wrote a great article in the Sydney Morning Herald about what he perceived as the seven golden rules for financial success. This article inspired me to think about the decisions we make for our finances- some big, some apparently small- and which are the most important. Here are my thoughts on the seven key decisions for personal finance success, inspired by Nathan Bell’s List.
Decision One: Minimising Risk
As Bell would put it, never go back to square one. Deciding that, no matter what, you’ll never expose yourself to the point of financial annihilation is probably the most important financial rule you can live by. That doesn’t mean money in the mattress, simply that you have protected yourself in the event of a worst-case-scenario.
Decision Two: Save Sustainably
You might long for a Mercedes, but the key to all success is acknowledging your current situation, accepting those things you can’t change about it and deciding to change the things you can, at a sustainable rate. Saving 20% of your income might seem impressive but, without some serious budgeting, it’s a short term strategy.
Decision Three: Learn As Much As You Can
My great-grandmother died with a reasonable amount of equity, and lived the last couple of decades in semi-darkness because she refused to turn a lightbulb on. She would have loved this new world, where personal finance learning is available to everyone, and perhaps she would have done things very differently. Deciding to be a life-long learner, and adapt your financial opinions according to what you know, is a great tool in your financial wellbeing.
Decision Four: Quality, Not Quantity
Whether you’re investing in shares, your first home or a new microwave, learning to invest your money in quality items is something most people learn when their fifth pair of Cotton On shoes break within a fortnight. No decision, or lesson, is more important. Cost is about life cycle and usability, not the upfront capital.
Decision Five: Reinvest
Bell discusses this in terms of the share market, but it has wider implications for our personal finance. At some point, it’s important to decide whether extra money that comes your way will fall into your monthly budget, or fall into your savings or investment account. Deciding to use your extra money as a savings method allows compound interest to do it’s thing, and your savings to star looking very healthy.
Decision Six: Down Debt
Yes, some debt is helpful. Mostly, however, it’s a bane. Avoid it as much as humanely possible, pay it off as quickly as you can and be smart about what uses you put your debt to, and whether the overall value justifies the interest. If you have a credit card debt, commit to getting rid of it.
Decision Seven: See The Whole Picture
Personal finance is incredibly important. Without money, we’re stressed, stretched and often unhappy. But it is, at the end of the day, solely a tool with which we navigate the world. How much it can contribute to your happiness is about the uses it is put to, and what concessions you have to make in order to gain that money. Choose for it to be an important factor in your life, not the only factor.