7 Money Management Rules that Changed the Game for Me

If you’ve been following me and City Girl Savings for a while, then you may know that I’ve been in the personal finance game for a long time. I shared my money story that lead me to become the budget coach I am today. If you don’t know, I went to school for Finance. I got my B.S. degree in Finance from CSU – Northridge, almost 10 years ago (OMG). There were certain money management rules that changed the game for me along the way.

Today, I’m walking you through the 7 money management rules that made the biggest difference in my financial situation. I instill these rules in each and every one of my clients, and make it my mission to share what it really takes to get ahead financially. Before I dive in, if you want to hear me tell my money story that lead me to where I am today, watch the video below.

Now, let’s dive into the 7 money management rules that changed the game for me:

#1 – Track Your Spending

I have been following the notion of tracking spending since I got my first job at 16. I had a checkbook register that I managed. Every time I spent money or deposited money into my bank account, I would track it in my checkbook register.

I lost this habit when I left for college. I didn’t pick it back up again until I graduated and got my first job out of school. I no longer used a checkbook register, but tracked my spending (or what I should be spending) in the Notepad app on the computer. I would do this during the night shift at work, and look at it every night.

When I moved back home to Austin in 2013, I lost the habit. I was making good money (compared to my expenses) but I wasn’t tracking anything. I was diligently working to pay off debt, save, and fund what was to become City Girl Savings. I did good during those 3 years of not tracking, but I know I could’ve done a lot better. Shoulda, woulda, coulda.

I picked back up with tracking in 2016 and I haven’t stopped since. I created a tracker in excel that allowed me to see what my budgeted numbers were for every category, what I spent on a daily basis, and if I’d be under or over budget in any category.

I’ve been tracking for over 3 years now and it’s amazing to see how my income and spending has changed over that time. This system has been so effective for me that I even require my clients to follow it during our 3 months together in my 1-on-1 coaching program.

#2 – Pay Yourself First

You’ve probably heard this one – it’s spread all across the Instagram accounts of personal finance experts, but for good reason! The notion of “pay yourself first” basically means that the second you get paid, you put something into savings. I was following this rule without even realizing it.

My first job out of college, at age 21, was for a major banking institution. They offered 401k plans for their new employees, without any probationary period. I instantly signed up and allocated 5% of my income automatically be saved for retirement.

Nearly 10 years later, my 401k balance is almost six figures. THAT is the power of paying yourself first.

Granted, paying yourself first doesn’t just mean contributing to a retirement plan (though that certainly counts). It also means having a portion of your paycheck direct deposited into your savings account. It means that a portion of your income is always saved, the moment you get paid.

I would suggest you read The Richest Man in Babylon by George S. Clason. The notion of paying yourself first (10%, in fact) is one of the strategies followed by the character in the book who became the richest man in Babylon.

#3 – Expenses Should Never Exceed Income
Unfortunately, the rule of expenses should never exceed your income was one I learned the hard way. I got so wrapped up in acquiring material things (clothes, shoes, purses) that I spent way beyond my means. Since I didn’t have a savings, I was using credit to fund these purchases.

I learned that it can literally take minutes to go into debt – and years to get out of it. When your expenses exceed your income, you are putting yourself in a position to use your savings or incur debt. Both situations are a recipe for financial disaster.

Expenses don’t just mean bills – although, at minimum, your income should cover all of your bills and living expenses. For the sake of this rule, expenses can also mean discretionary or unnecessary spending. That’s where I got in way over my head.

I was spending so much money (that I didn’t have) on things I didn’t need. It literally took me years to get out of debt and now that I’m older, I realize it wasn’t worth it. I have clothes in my closet with the price tag still on it. I was so focused on acquiring things that I didn’t appreciate experiences. That has all changed now, thankfully.

#4 – There’s a Difference Between Wants and Needs

This rule piggybacks off of the previous one. When you are not able to differentiate your needs versus your wants, you end up spending more money than you should. You convince yourself that everything is a need, and therefore make it a point to purchase everything.

I wouldn’t say that I was unable to tell the difference between wants and needs. However, I wasn’t able to control my spending on the wants. I knew I didn’t really need it, but I wanted it. I let that desire take over and make purchases. Those purchases led me into debt.

Now, I only buy things I need. If there is something I want to buy, I save up for it. I never use credit for things I want (or need), I always save up the money to purchase the item. Now, I will purchase it on a credit card (with a zero balance), to get the reward points. I instantly pay it off with the cash that was saved up for the item.

#5 – It’s Not How Much You Earn that Counts

This was a very important rule for me to learn early on. It wasn’t about how much money I made, but what I actually did with it. The bank job I told you about right after college came with a very small salary. I could have made it work with my expenses, but since I wasn’t in a place where I could control my spending, I convinced myself that I just didn’t make enough.

Once I took control of my spending, I was able to see that my “small salary” would get me where I needed to go. It wouldn’t be overnight, but it would get me there.

I see the same in my clients, only from the opposite side. A majority of my clients make very good money, compared to their situation. In spite of making “very good” money, they still had debt and weren’t able to save. Once we got to the root of where their money was going and created an effective budget, the transition was incredible.

It’s not how much you earn that counts, but what you do with it. You could be making a very small salary but be living debt free and saving every month. You could be making a very large salary but be deep in debt and living paycheck to paycheck.

#6 – Invest as Early as Possible

I’d like to say that I was savvy enough at 21 to understand this rule, but I wasn’t! I just knew that I couldn’t pass up the match that was offered on my bank’s 401k plan. Regardless, the fact that I started investing as early as I did, and the way my 401k plan has grown to this day, I would say this rule is one of the most powerful money management rules.

There is absolutely no denying the power of compounding gains. It essentially means that your money earns money, and then earns money on top of the money that was earned. The way that your credit card balance accrues interest on top of the balance and the additional interest that was previously accrued, the same applies to your investments.

The only difference? One situation works in favor and the other one doesn’t. If you have credit card debt that is accruing interest, I would strongly suggest you pay that off before investing. The only exception being contributing to a 401k or IRA. You should do that, even if you are paying off credit card debt.

The reason I say that is because the average rate of return on stock-type investments is 8-10%. The average credit card interest rate is 15-25%. If you chose to invest rather than pay off your credit card, you would ultimately be losing money.

Assuming that you don’t have any credit card debt, start investing NOW! I’m not just talking about your 401k or IRA (though, you should be contributing). I’m talking about an investment account through a company like Betterment, Charles Schwab or Fidelity.

You don’t need a lot of money to invest. I personally invest $50 a month into 2 different accounts through Betterment. I love them. Here’s what my current return percentage is:

You will never find that kind of interest rate in a regular savings account. Granted, I am saving into a high yield savings account, but those only average about 2.25%. That’s nothing compared to 10%. That is why you should invest as early as possible, even if it’s a small amount.

#7 – Budget to Understand Your Situation

The last money management rule that changed the game for me is budgeting to understand my situation. I was good about this rule early on, let more money make me think I didn’t need it, only to come back to it.

Having a budget is a total game changer. A budget tells you exactly how much money should be coming in, how much money should be going out, and what’s left over. This allowed me to see what I could reasonably spend on myself, put towards debt, and save. Understanding that information is so POWERFUL!

When you know what you’re capable of achieving, it helps ensure you actually achieve it! Not knowing what your income is capable of doing for you keeps you in the dark. Keeps you from reaching your goals as soon as you can. Keeps you from tapping into your true potential.

We absolutely cannot have that! We as women must know exactly what we’re working with and what we’re doing with it. To be honest with you, that is exactly why I became a finance coach and why I create budget plans for people.

The minute I understood the power of a budget and what it did for my situation, I had to share it. I made it my life’s mission to spread the word. I am on a mission to teach as many women as possible that budgeting is the key to financial independence.

Schedule a free consultation with me and let’s talk about how budgeting can change the game for you.

Related: 5 Daily Habits for Financial Success 

I’m sharing these 7 money management rules with you because they made such a difference in my finances, and my life. Without these rules to follow, who knows where I’d be. Well, actually, I know where. I would be deep in debt, surround by things I don’t need, and complaining about how terrible my life is.

I don’t want that for you. Start making changes in your financial situation. Make the money management rules above your new financial guidelines. You will see a difference. Do you have any money management rules that have changed the game for you? Post a comment below to share them!

The CGS Team



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