Everyday we all face having to make decisions around money.  Should I pay off my debt, should I buy a house, should I invest in the stock market, property, whatever, the list goes on.  To make the kind of life-changing wealth we want, we need to start by narrowing down on our options so we can focus on what’s really important.

I’m going to share with you today my 9 money rules I have around money to help me reach my money goals.  These are personal to me and my life and I’m sharing them with you to give you some ideas for your own money rules to help you reach your goals.

So, we work with clients to help them build their passive income so they can retire early, have extra income, whatever their drive is.  For me, it’s spending more time with my kids.  Now, to have a passive income of say $100,000 you need about $2,000,000 in assets outside of your family home.  I have 3 kids who I would like to put through private school so I feel I need a little more than this.  At the moment I’m all about reducing my debt and saving money to put into passive income so I can achieve my goal.  Now you understand my goal, let me share with you my “rules” that I’m using to help get me there.

1. Have an emergency fund of cash.

You will often find people like myself saying that it should be 3 – 6 months worth of salary or income that you need to have in an emergency.  I would say this is the minimum amount, what you have in there really depends on your own opinions.  For me personally, having never taken maternity leave because I’m self-employed and I couldn’t afford to do so, the magic number is 12 months so that’s what I’m saving towards.  For you it might be less, your commitment might be less, you may be able to go home to your parents if something goes wrong, but bottom line, I would say have at least 3 – 6 months worth of cash in an emergency fund.

2.  Save at least 10% of your income and invest at least 5%

Wow, that seems like a lot when you’re feeling the pinch after a year of interest rate rises.  But hear me out.  Warren Buffet once said “do not save what is left after spending, spend what is left after saving” and it’s absolutely true.  If you want to save and invest to improve your passive income goals, you need to actually put it into your budget and treat it like an expense.  So, start with these numbers and as your income goes up, increase them.

To give you an idea of how this would work out, if you were to save $900 per month which is 10% on a $100,000 income, you would have over $2,000,000 in savings in 30 years.  Yes this is for the long haul but the longer you take to start, the older you will be when you get there so the sooner you start the better.

When it comes to investing, it’s your pill of choice but, you want to be able to add to it frequently so you need to bear this in mind when you set it up.  Also think about the tax point of view at the other end, how easy is it going to be to calculate the capital gains tax on the investment because each time you put in a deposit, that’s another purchase of an asset, so potentially a minimum of 12 purchases a year. That’s quite a complication for your accountant.

3.  Be able to pay in full for big expenses

So think wedding, honeymoon, car…I would love to be able to add house to that list, but at a current median house price of $779,719 I think those days are long gone (unless you are very lucky and start saving early). I think the bigger point here is, having a no debt policy in your household.  Now, I’m not a saint, I have debt, I have both a credit card and a mortgage, both of which I pay more into than I need to to reduce them down quicker.

Different people have different opinions when it comes to debt, and handled correctly it it can be very useful.  This where the concept of good and bad debt comes in.  So debt which you can take a tax deduction for would be considered “good” debt, so this would be a loan you’ve taken out to buy an investment property or shares as you can deduct the interest against the income you earn from them.  “Bad” debt would things like your mortgage, credit card, or that personal loan you took out to buy solar panels.  These types of debt you can’t take a tax deduction for so they just sit there, requiring you to pay interest.

I think the overall point here is, looking ahead and saving for the things you want rather than turning immediately to debt to buy them. 

4.  Don’t scimp on the little pleasures.

Now, please don’t misunderstand me, I’m not advocating going out and spending everything you have on the little things, but understand, you are saving, you are investing, allow yourself some small pleasures.  Go out with friends, enjoy a meal out with them, if there’s a book you would like to read, buy it, if there’s a movie you want to see, watch it.  Allow yourself some pleasure money in there as well.

Think about every diet you’ve ever been on, they’re so restrictive, don’t eat carbs, don’t eat sugar, don’t eat, don’t eat, don’t eat.  What is it that you want to do almost immediately after starting?  That’s right, eat some yummy home baked bread, a slice of cake, a glass of wine, a beer…if you allow yourself a little of something you enjoy, you will find sticking to the other rules easier, so enjoy a meal out, a movie, or a book and don’t feel guilty about it.

5.  Find a luxury you enjoy and enjoy it, without feeling guilty.

You might be wondering why I advocate this particular one and it’s really simple, a bit like the last “rule” it’s a permissive one allowing you to do something you enjoy. 

Many years ago now I worked for BHP Iron Ore.  Company fatigue management policy stated that whenever we had to fly somewhere over 3 hours it was business class.  Being in Perth that meant that unless we were flying from home from Adelaide, everywhere was more than 3 hours.  I was sent to Rio to help them out with something and had the privilege of flying business class the entire way.  Now I was flying a lot at that particular time between Australia and Europe and would always fly economy as I couldn’t justify the additional cost to fly business.  Well that Rio trip well and truly opened my eyes.  So now my rule is: whenever I can, I fly business class provided the flight is more than 3 hours.  It’s a little bit of luxury I get to enjoy – you choose something for you.

6.  Buy the best and keep it for as long as possible

Now, what is the best?  Well that’s totally up to you, but for me it’s things like makeup, clothes, my car.  I bought a BMW 320i when I qualified as a Chartered Accountant as a present to myself for all my hard work (and trust me, doing your CA is seriously hard work), I kept that car until it blew up on the side of the road and even then I would have kept it for longer but for the fact I by that stage had kids and dogs and it no longer was fit for purpose.  I like to have nice clothes, so that means I buy them less often, buy classic styles and I try not to get too caught up in the latest trends.

For my phone, the very one I’m recording this video on, it’s the 11 Pro, I bought the biggest I could afford at the time and I’ll keep it until it no longer works (I kept my 4 and switched it for the 11 only because I couldn’t open the apps anymore and the button stopped working).  The point is, don’t allow yourself to be caught up in having the newest shiniest brightest object in the room, you save money in the long run by investing in quality and holding onto it for life.

7.  Work where you will be happy

For many of us the 38 hour working week is a bit of a dream, but even if it wasn’t, we spend far too much time at work to be miserable, so I always like to make sure that where I work, makes me happy.  Now, I’m not saying you need to throw away a career to go and find your inner bliss, because I get it, we all need to pay our bills.  No, what I’m saying is that I’ve learnt the hard way, you need to be happy at work.  The people around you need to make you laugh, the work you do needs to bring you some joy.

I remember when I was about 1 or two years out of university being given the opportunity to work for one of the Big 4 accounting firms.  I was excited, being able to say I worked there was huge and if I’m honest I had these grandiose visions of one day making partner and conquering the world.  But, they had a reputation for working their teams long hours so in my second interview, when I was given the time to talk to an existing team member I asked the question.  The reply?  As long as you meet your chargeables and get the work done there’s no reason to work the long hours.  That was enough for me and I accepted the job.  I loved working there for about the first year, but after that reality set it.  Between staff meetings, internal training, internal coaching sessions, studying for CA and the leave it took with it, meeting the 85% chargeable time quota within a normal working day had become nearly impossible, so the late nights and early mornings started to creep in.  Ultimately my misery began to be reflected and I left for greener pastures.

Now, many years later I have finally learned the lesson and I don’t allow myself to work with teams or clients who are not going to share the same vibe as I do and make the workplace enjoyable.

Which leads us quite nicely into number

8. Understand your priorities and stick to it.

So as you may or may not know, I have 3 children with my eldest just about to turn 6.  So they’re young.  When I’m at home, I need to be present for them, they miss me and I miss them.  Up until I had children I never really understood work-life balance.  I thought I did, but I had no idea.  I thought that by merely closing the door on work at 5pm and being at home, I had balance.  I didn’t really because I carried on thinking about it and would usually end up doing some kind of work at strange hours or over a weekend.  When you have children your whole perspective changes and you start to really understand your priorities.  That is not to say that you may not understand your priorities unless you have children, you may well do, only that I didn’t.

Now when I find balance, it has to be proper balance other wise I am too tired, too stressed and to unhappy to appreciate the little small things my children do which brings them joy.

Which brings me to my last one, number

9. Keep the right people in your life.

This is much easier said than done and experience really does come with age.  I married my husband much later in life and for me, that meant that I felt like I had made enough bad choices to recognise a good one when it came along.  We compliment and support one another and when you have 3 children trying to play you off against each other that really helps A LOT.  As a business owner and Mum I have found I need to have the right kind of support around me.  Some friends come and go, others stay, but they all give you experience as you go.  So there we have my 9 money rules.  I like to think they are more about giving me permission to do things than they are about denying myself anything.  I’ve shared them with you because I like to think you can use them as a base to start to create your own money rules which reflect your own life and your own goals.

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