3 Money Rules Worth Following in Your Everyday Life, According to Kate Kaden
Every financial guru has their own set of money rules that they swear by, but building wealth doesn’t require a long list of complicated strategies.
In a recent YouTube video, YouTuber Kate Kaden, who discusses frugal living, budgeting and saving money tips, shared three simple money rules that she learned from the book "The Simple Path to Wealth" by JL Collins.
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According to Kaden, if you do nothing else but these three things, you should be in good shape. Here’s what she said.
Spend Less Than You Earn
In other words, live below your means.
“If you’re trying to save up some money, reach some financial goals, you’ve got to spend less than you earn,” Kaden said. “You’ve got to know how much money is coming in and plan where every dollar is going.”
According to Kaden, if you spend more than you earn, you’re in debt. If you spend the same amount that you earn, you have no wiggle room, which can also put you in debt if there’s an emergency or a sudden change in your income.
“Spend less than you earn so that you’ve got room to do something with this money,” Kaden said. If your basic bills are more than you earn, “you either got to make more or you got to spend less."
Kaden recommends writing out a budget with categories that make sense for you. Kaden has household expenses with all her essentials, savings, lifestyle or fun, and giving.
Invest the Surplus
Once you spend less than you earn, she recommends investing the surplus.
“Investing does not have to be complicated. It’s very simple, and people make it more complicated,” Kaden said.
The key is putting that surplus to work for you. According to the U.S. Securities and Exchange Commission’s (SEC’s) Investor.gov, regularly investing a set amount or percentage of your income can help build wealth over time through compound growth. For those with a workplace retirement plan, the agency also recommends contributing enough to receive the full employer match.
And surplus doesn’t mean every extra dollar. The Financial Industry Regulatory Authority (FINRA) recommends having emergency savings and paying down high-interest debt before investing.
Avoid and Pay Off Debt
“Avoiding debt is going to be a huge deal for you,” Kaden said. After paying off her credit card debt, she now focuses on paying off her mortgage before retirement.
“I don’t want a mortgage payment anymore. I am planning to pay it off in half the time,” she added.
There are several methods you can try to pay down credit card debt, including the snowball and avalanche methods. Financial expert Dave Ramsey recommends the debt snowball method, where you pay off your debts in order from the smallest balance to the largest. Under the debt avalanche strategy, you pay off debts from the highest interest rate to the lowest.
“Double that minimum payment. Whatever you can do,” she said. “Get rid of that debt so that you can use that money toward either investing more or saving toward something that is important to you.”
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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