The 3 rules of sound personal money management

Weathering the storm

Rule number 2: Manage your money like a company – First Part

Day 541. Money is an energy. It’s used to fuel the world. A lot of people say money is the root of evil and therefore encourage others to live in poverty or at least with a minimum money. I believe that money can be a blessing and a curse. It all depends on how you manage your money. It’s true that money can make people go crazy and commit crime. It’s although true that money can save people’s lives, can cure disease and can positively contribute to the well-being of people. As for many things, charity begins at home and it’s crucial to know the basis management rules of money. Personal money should obey the same rules as an entreprise money.

You are your own company, let’s call it yourself, inc. Yourself, inc. has an accountant: you! And if there are one guy in a company that knows how to handle the company’s money, it’s the accountant. He can be, or has to be, the bad-ass who ensures money is well treated. A financially sound company can weather any storm and will resist any crisis. Same for an individual. However, to handle your personal finance well, it has to obey the following 3 simple principles:

  1. Pay everything cash, except for case number 2
  2. Use credit only if the asset you acquire allows you to make money
  3. Put aside a share of your monthly revenue to weather storms or to treat you (in cash)

Of course, this is not what a majority of people will tell you. I will however show you why these three simple, though not easy to apply, principles will be at the start of sound money management.

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