9 Money Rules I Follow for a Stress-free Life (Do you know what #5 mean?)
How much money we have and how we choose to use our money dictate many of our day-to-day decisions; where we live, what we eat, how we entertain ourselves.
Money plays a role-at least in part- in nearly every decision we make.
If you have high levels of stress in your life, there’s a good chance your finances are a contributing factor to that stress.
Here are 9 money rules I follow to live with less money-related stress.
#1- Prioritizing flexible work over the top salary
It’s less important to maximize how much you make per paycheck than it is to maximize the number of paychecks you collect in your life.
Taking a stressful job that provides little flexibility in your schedule is a fast track to burning out.
When I was in grad school, I thought I wanted to work in investment banking. What I wanted was to make as much money as possible, as quickly as possible because my financial situation was a mess.
Luckily, I ended up going a different route, working in public policy for a non-profit organization.
It paid substantially less than investment banking, but it allowed me to have a life and make a good living. Over the years, my flexibility has increased as I build more trust within the organization. Today I work from home full-time.
Even though my paychecks have been smaller than if I worked in investment banking, I’m going to end up collecting more of them over my life. Many investment bankers don’t last long, the hours are too brutal, and the work conditions are too poor in many cases.
A job paying $70,000 with flexibility can be a better choice than a job paying $100,000 that has you chained to a desk 10+ hours a day.
#2- Treat new money like it doesn’t exist.
Few things are as stressful as living paycheck to paycheck.
Here’s what it feels like when you work 40+ hours per week and have nothing to show for it at the end of the month.
Living paycheck to paycheck is not something you can fix overnight without a sudden pay raise or making dramatic changes to your lifestyle.
A slower, more chill way to save more money over time is to treat new money like it does not exist.
Meaning when you get a bonus or a pay raise or some other financial windfall use that money to pay down debt, save or invest.
Over the years, you’re savings rate and wealth will begin to grow-slowly at first, but eventually, it begins to snowball.
#3-Pay yourself first
Treating new money like it doesn’t exist sounds good on paper, but never underestimate how easy it is to have your pay raises absorbed into your general spending.
Here’s the solution; pay yourself first and automate the process.
Got a raise that increases your take-home pay by $50 per paycheck?
Great! All you need to do is call your bank and increase your automatic withdrawal from your checking to a saving/investing account by $50 every payday.
You will not miss what was never there.
#4-Become a rational investor
If you’re a paying subscriber to my newsletter, you’ve been getting a new chapter of my book each week, with the working title “The Rational Investor.”
Here’s the action item for the book:
Buy a handful of globally-diversified, low-cost index funds and hold onto them for 20+ years.
Investing can be stressful, but it really doesn’t have to be. Your portfolio and your mental health would be better off if you automate your investments, buy a few index funds and then get on with your life without following the day-to-day drama of the stock market.
#5- Avoid FOMO, YOLO, and lifestyle inflation
Some like to say life is short.
The reality is that if you make the wrong choices, life is long. Someone recently told me they bought a black mustang, despite not having very much saved up. The justification for this healthy, young man to splurge so big was that “they may not even be alive when they’re 60,” so what do I care about saving money now?
To which I thought to myself, “but what if you are alive when you are 60?” Isn’t that the stage of your life that you don’t want to get up and go to work if you don’t have to?
Some say, “live life like there’s no tomorrow.”
I’ve taken a different philosophy.
“live life, like you want to have more control over your time 10-years from now.”
#6- Make extra money doing something you care about
Writing is not my full-time job.
One day it might be, but right now, it’s a side hustle. It’s something I used to do for free because I love doing it. Today, I make money doing it.
There are few sweeter feelings than getting paid for something you would do for free.
If you make enough of it, you’ll be able to increase your savings rate so long as you follow rules 2 & 3.
If you keep at it long enough, you may end up at my definition of financial freedom, which is when the money you earn from investments and work you love is greater than your living expenses.
Here is a shameless plug for my book where I discuss the steps to achieve that definition of financial freedom in great detail.
#7- Spend more money on what you value most
In rule 2, I discussed treating new money like it doesn’t exist.
Obviously, I don’t expect anyone reading this to save 100% of their pay raises for the rest of their life. On paper, that sounds awesome, but it’s not going to happen in reality.
Once you hit a certain level of financial security and wealth, there’s nothing wrong, at all, with a bit of lifestyle inflation, so long as two conditions are met.
It’s not excessive.
You spend the money on things that make you happy.
#8- Stop thinking short-term
When I was in debt and living paycheck to paycheck, I was by definition thinking exclusively in the short term. When your biggest challenge is coming up with rent money, it is hard to think past the end of the month.
Here’s the beautiful thing about personal finance and why I love writing about this stuff; as your finances improve, that provides you more ability to think longer and longer-term.
If I may indulge in another plug, long-time readers may notice how I price the cost for the premium subscription to this newsletter.
I give readers two options.
$50 per year works out to be $4.16 per month, a much better deal. I do this for two reasons.
I’m confident if you read my work for a year, you will be willing to continue paying for it in year 2, so I am willing to cut the price by 58% for anyone willing to commit to a year.
It incentivizes long-term thinking.
If $50 for a year feels more painful than $10 per month, you are stuck in short-term thinking.
#9- Give back to causes that make the world a better place
My biggest regret from the short-term thinking I suffered from when I was younger was that it prevented me from giving back to charity.
Even when I was struggling, there were many people struggling in ways I could not imagine, and I did nothing to make their lives easier by giving to the right charities.
Recently, I made the decision to give $1 for every 10 free subscribers and 2% of the revenue from paid subscribers to a charity that helps alleviate medical debt for others.
Few things have made me feel happier and more accomplished than writing that first check knowing it would help alleviate over $700 in medical debt for someone in need.
Even if you’re finances aren’t where you want them to be, give back. If not with your money, then with your time.
Don’t have a lot of time?
Then give blood. It’s the easiest way you can help save a life with no cost and less than an hour of your time.
CONTRIBUTED BY Ben Le Fort
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