The Three Money Rules and How to Follow Them.

There are a lot of great ideas when it comes to money. There are ideas on saving, investing, spending, and pretty much anything else that you can do with money has an expert telling you what you should do. It’s impossible to listen to all of them since after a while they all start to contradict each other. So what are you supposed to do? I’ve learned a lot of things in life the hard way and this is one of them that was much easier to have someone explain it to me. There are really only three rules to money. At least if you want to have more if it in the long run. Everything else falls into one of these categories. And if you do them right you’ll build up your own stash.


  1. Spend less than you earn.

The Rule

This is probably the most well-known rule when it comes to saving money for the future. If you spend less than you earn you have money left over for the fun stuff. Or to save, or to give to charity, or whatever else you want to use it for. This is also what most of the money advice focuses on. This is where you look at what you spend and cut things out that you don’t need. For example, do you really need cable TV? Or do you really need to eat out? The less you spend the more you have left over.

The Problem

If you spend more than you earn you have to cover the rest with credit cards, pull it from savings, borrow it from friends, or worst of all a pay day loan. You can’t do that forever. If you try then you’ll find that you have to keep borrowing money. First to cover your expenses then to cover the payment to pay back the money you borrowed.

How to Follow It

In general look at what you spend, look at what you make and make sure you spend less. That sounds lovely, but how do you do that? That could be an entire post itself. I’ll write that soon. First, though, add up all the money you bring in. This includes your job and any other money you have coming in. Then add up everything you spend. You might have to track this over a few weeks. And remember everything counts. If you’re spending more than you’re making then it’s time to look at what you’re spending and figure out what you can cut. If all you’re spending money on is food and shelter and there is nothing left to cut then that gets us to rule number 2.


  1. Make more than you spend.

The Rule

This sounds a lot like rule number 1. The difference here is that we’re focusing on what you make instead of what you spend. If you know you have certain expenses then it’s time to make sure that you make enough money to cover those expenses. If there is something special that you want to spend money on then find a way to make enough extra money to cover it.

The problem

Similar to the first problem, if you don’t make more than you spend then you’ll have to borrow more and more money to cover your bills. This will dig you deeper into a hole. With all the extra debt it will be harder to get the good stuff later on in life.

How to Follow the Rule

So what do we do about it? After following rule one and cutting out the extra stuff that you don’t need you can also look at the money you are making and find ways to make more. This could mean getting a new job or a second job, getting more hours at work, or even starting your own side business to help make more money. I’ll talk more about ways to make more money soon, too.


  1. Put the difference to work.

The Rule

If you have more money coming in than going out then you have the surplus that you need to get out of debt and even be rich. That’s what this rule does. Follow this rule to take that difference and put it to work to make you more money or to make your own financial situation stronger.

The Problem

Most of the time when people have extra money the money goes to buying more toys. Luxuries, like cable TV subscriptions, get expensive. They also become addictive. When money is spent on things like this it’s gone forever. You’re in no better position than before you had the money. Maybe even worse if you spent more than just the extra money you had.

How to Follow the Rule

This is where there is the most contradictory advice. That’s because everyone’s situation is different. This is also probably where most of the posts on this site will focus. The best place to start if you’re just starting out is to put some in a savings account then put the rest towards debt. Once you have a good base then you can start looking at options that will make you even more money like investing. Investing can be riskier and definitely more volatile, so I recommend starting with a savings account first.


  1. Effort

Several people I’ve talked to like to add that there is really another rule. They all call it different things, but they all come down to effort. Anybody can make money. Anybody can save money. Anybody can be rich. It just takes effort. Sometimes it takes a lot of work. Obviously if your parents were rich it probably won’t take a lot of work. Most of us don’t have rich parents. So we have to work for it. That’s rule number 4. Do the work. Don’t give up just because it can be hard and don’t accept excuses. It really is possible to retire rich.


Did I miss anything? Are there any other fundamental rules that you know of? Let us know, and let us know what you’ve found that helps you make these rules work for you.