There are many money rules and tips that financial experts recommended in the past that many have lived by. Although some of these rules have worked well in the past, many aren’t as effective as they used to be. So, it’s time to ditch them and adopt new strategies that fit today’s money problems.
Here are some old-school money rules that, in this time and age can be bad for your financial well-being.
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Save 3 to 6 Months of Living Expenses in an Emergency Fund
Saving enough to cover three to six months of living expenses in case of unforeseen circumstances is an important goal. However, it may not be enough.
You have probably heard the scary stories of massive layoffs by companies these days, making it difficult to secure a new job. The process of securing a new job can take over six months.
Frankly speaking, the crappy job market and the uncertain economy mean for most folks, three to six months of expense savings is an excellent place to start but not a smart place to stop.
So, how many months of living expenses should you save? Eight to twelve months might be the smart place to stop. Check these books on Amazon to learn how to build an emergency fund.
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Don’t Use Credit Cards
Not using credit cards may help you track your spending easily or get out of debt. But it can also affect how lenders view your creditworthiness.
A report from CNBC has it that lenders are slashing or closing lines of credit for borrowers with high FICO scores because of inactivity. Plus, credit scores have also changed. According to Time, credit scores of 750 that lenders used to consider high are now sometimes at the bottom of very good because of more strict lending practices these days.
The smart thing is to practice using your credit card more often and pay off the bill in full. Also, remember that using credit cards has many other benefits. You just need to learn how to use it properly without abusing it. Here are books on Amazon on how to profit from credit cards.
Automate Expenses
When did you last cancel subscriptions you don’t use, shop for cheaper home insurance or auto? Or review your monthly expenses to identify charges or fees that you can remove.
The point is that you could be needlessly spending hundreds or thousands of dollars yearly when you put expenses on autopilot without knowing it. So, the new rule to adopt is to review your expenses quarterly to see where you are spending your money.
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During the review, put an E next to all your essential spending and a D to the discretionary ones. Then, examine those with a D to see if there are things you could remove.
People Also Read: Read These 5 Best Personal Finance Books by Black Authors
Constantly Monitor Your Portfolio Value
During a time of economic uncertainties, it’s normal to want to check to see how your investments are holding up. However the more frequently you check, the more you give room to counterproductive emotions.
For example, excitement can make you get overconfident and take unwise risks. On the other hand, fear of losses can make you pull funds out of investment and miss out on future returns.
The new approach is to keep in mind that short-term ups and downs are part of investment. With this in mind, you won’t be bothered about the short-term fall of your portfolio and you’ll also not be monitoring it daily.
Given all that has changed with the economy, many old money rules aren’t as effective as they used to be. The best way to stay on top of your finances is to improve your financial knowledge constantly. On Amazon, you’ll find many personal finance books that’ll help you learn new money rules.
People Also Read: 5 Reasons You Should Think Twice Before Using Your Credit Card
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