3 Uncommon Rules of Money

If you pay attention to personal finance gurus, you’re familiar with some of the common tips: let your money work for you instead of just working for money; compound interest is among the universes’ most powerful forces;  live below your means. Here are 3 I would add:

1) Everything is cheap until you multiply it by 12. Netflix is cheap at 7.99/month, but when you multiply by twelve, it becomes $96 a year.  Going out for pizza is cheap at $40 for your family, but if you do it once a month, it becomes $480/year. If you make $48,000 a year, that means you spent 1% of your income going out for pizza!  A quick way for anyone to improve their finances is to make a quick scan of their latest credit card statement and cancel at least one recurring expense.

2) If something costs more than $100,000, not everyone should buy it.  Our country got in big trouble when we told everyone that they needed to buy a house, even if it cost $100,000+. Now we are telling our youth that they should buy something else that often costs more than $100,000: college.  I don’t care what it is, if something costs $100,000 not everyone should buy it.

3) Put your savings in Siberia. Siberia is a metaphor for a place that is hard to reach.  When you keep your savings in an account linked to your checking account, you are just a click or ATM visit away from raiding your savings, often on a short-term impulse purchase. Make it hard and annoying to reach your savings. An example of Siberia would be a Fidelity account that is unlinked to your checking account, so you have to wait days to get your money. Two positive shifts will occur in your head: you will force yourself to live within your budget because a trip to Siberia is too painful and annoying; you will increasingly appreciate the value of Siberia as your savings skyrocket.

What do you think? What are some of your favorite personal finance tips?