The Golden Rules of Personal Finance

Introduction

I was going to call this blog series ‘There’s nothing new under the sun’ to reflect the fact that no matter what stage we’re at and how long finance and the economy has been around, really, it doesn’t change.

But I figured that was a bit obscure and would do absolutely nothing for the YouTube algorithm for the podcast and video, so instead it’s the golden rules of personal finance. These are the things which are universal, no matter what life-stage you’re in. Hopefully they will be helpful.

Cashflow is Everything

This is the number one golden rule for a reason. At literally every stage of life, cashflow management is your number one tool to ensure financial success. Think about it: when you’re getting started and trying to put together a starter emergency fund – you need to spend less than you earn in order to put some money aside.

Same when you’re clearing debt. When you’re building wealth, paying yourself first means you’re prioritising your cashflow towards your own purposes, not someone else’s. So you’re overpaying mortgages, or maximising pension and ISA contributions.

Then, in retirement, managing cashflow is a way to ensure that you always have the money you need. By not overspending in the early years of retirement, you’ll give yourself options in later life over things like long-term care, and making significant gifts to family – things like that.

A positive cashflow simply means spending less than you earn, and as I’ve said before, there are two sides to that statement. Either you can spend less, or you can earn more, or both. Spending less is about planning your expenditure, rather than just letting it happen to you.

Yes, it means setting and sticking to a budget, especially in the early days of getting a handle on your finances. It means choosing whether to defer an impulse purchase in favour of a potentially better financial decision. It means saying no to pressure from friends to go away for a big weekend, if doing so would be a detriment to your finances.

Earning more is about negotiating a pay-rise – not easy in the current climate I’m sure. It’s about pursuing promotion. It’s about starting a side-hustle to earn some money in the evenings and weekends. It’s about starting your own full-time business, maybe, so you’re in control of your own future that way.

And it’s about owning assets which can provide positive cashflow, perhaps like a rental property. Cashflow is absolutely everything. It’s what your entire financial security is built upon, so take it seriously.