8 rules for saving, borrowing and spending money

The best personal finance advice is tailored to your individual situation. That said, a few rules of thumb can remove the confusion that often surrounds financial decisions and help you build a solid financial foundation.

The following guidelines for saving, borrowing, spending, and protecting your money are drawn from nearly three decades of personal finance writing.


In an ideal world, you would start saving with your first paycheck and continue until you are ready to retire. You would also not be touching this money until retirement.

Even if you can’t save 15% of your pre-tax income for retirement, as Fidelity and other financial services companies recommend, anything you put aside can help secure a more comfortable future. Try to make the most of any corporate correspondence you get from a 401 (k) at work – it’s free money – and only borrow or cash in retirement funds as a last resort. .


You may have read that you need an emergency fund equal to three to six months of spending, but it can take years to save that much. It’s too long to put off other priorities, like saving for retirement.

A $ 500 emergency startup fund may be your first goal, and then you can build it. While saving, try creating other sources of emergency money, like a Roth IRA (you can withdraw your contributions anytime without taxes or penalties), space on your credit cards, or a line. credit against unused home equity.


Do you have children? Open a 529 Education Savings Plan and contribute at least the minimum, which is typically $ 15 to $ 25 per month. Saving for retirement comes first, but anything you can save will reduce the amount your child may need to borrow. Additionally, research shows that just saving for college increases the chances that a child from a low- and moderate-income family will attend college.


A college degree can earn more income, but lenders can afford to borrow much more than you can comfortably repay. If you’re borrowing for your own education, consider limiting your total debt to what you plan to do in your first year of school. If you’re a parent borrowing for a child’s education, aim for payments that don’t exceed 10% of your after-tax income and still allow you to save for retirement.

If your payments are more than 10% of your after-tax income, investigate income-based repayment plans that could lower your costs.


Credit cards are convenient and can protect you against fraud and disputes with merchants. But credit card interest tends to be high, so don’t hold onto credit card balances if you can avoid it. If you regularly pay off your balances in full, look for a rewards card with a signup bonus that earns you at least 1.5% of what you spend.


If you want to become a homeowner, the best time to buy your first home is when you’re financially ready and able to stay put for a few years. Go with a fixed mortgage rate for as long as you plan to stay in the house, and don’t make any additional principal payments until you’ve paid off all other debts and are on your way to retirement.


Buying a car now is not a good idea; Supply chain issues and other issues related to the pandemic have inflated the cost of new and used cars. In general, however, buying a used car can save you a ton of money over your driving life, just like driving your car for many years before replacing it.

Today, a well-maintained car can travel 200,000 miles without major problems, according to JD Power. This means that you can get around 13 years of service with your car if you drive it 15,000 miles per year. Ideally, you would pay cash for the cars. If you have to borrow, try to limit your loan term to a maximum of five years.


Use insurance to protect yourself against catastrophic expenses rather than smaller costs that you can easily pay out of pocket. If you have enough savings, consider increasing your policy deductibles to save money on premiums. However, be careful with health insurance policies with a high deductible.

Having a high deductible could cause you to postpone medical care, and it’s best to err on the side of health safety.

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