9 Essential Rules of Personal Finance That You Should Follow (2024)

Managing, budgeting and saving money is certainly no easy task – discover the essential rules of personal finance that will make your life easier and your money last longer

9 Essential Rules of Personal Finance That You Should Follow (1)

Personal finance is to do with the way you handle your money and involves all aspects of financial decision making. Learning practical financial skills is key to leading a healthy lifestyle, one that brings security and removes the stress of worrying about money.

Improving your understanding across the different areas of personal finance including, budgeting, debt management, saving, and in some cases investing, will help you to prosper in your day-to-day life and help to add clarity to any big or small financial decision.

When seeking financial freedom, your personal finance plays a vital role to ensure every aspect of your income is handled well, you’re not overspending, and can afford to make payments without running out of money before payday.

Learn how to improve your finance skills by following these important rules:

#1 Don’t Spend More Than You Make

When your bank balance is looking healthy after payday, it’s easy to overspend and not be as careful. However, there are several issues at play that result in people relying on borrowing money, racking up debt and living way beyond their means. Some reasons include:

Following in your parent’s footsteps– you learn a lot from your parents, including picking up on how they spend their income. If your parents are carefree spenders, then you’ll likely to also follow this notion.

Lack of a budget– the importance of a budget can be widely underestimated but having a plan on how you should distribute your income and earnings is vital to stay in control of your spending and avoid cash flow problems down the line but more on budgeting later.

Fail to prepare, prepare to fail– Sure, living for today is a great mantra to follow but not when it comes to making financial decisions, especially if they’re costly. Preparation is key to ensuring you don’t go overboard and run out of money and ensure you’re covered for what tomorrow may bring.

The issue with spending more than you earn is the nasty side effects you can encounter. If you find that you’re funding your lifestyle by living in debt, it can easily spiral out of control leaving you with more repayments to make and no end in sight.

If you’re tempted to make a purchase that you’re not sure if you can truly afford, check out our blog post on someQuestions to Ask Yourself Before Taking on New Debt.

#2 Get Out of the Debt Spiral & Stay Out

According to the Money Advice Service, 8.3 million people in the UK are over-indebted, made worse by the coronavirus pandemic.

If you’re struggling to get out of debt, there are some free services – such asStep Change– that can help you to budget your money, apply for a debt relief order (where applicable), and suggest changes that will get you back on track to achieving financial wellbeing.

Here are two different approaches people have taken to reduce their debt.

The Snowball Method

This involves making the minimum payment on all your debts, then paying off the smallest debt first, one at a time. This method encourages motivation as you’ll conquer your repayments a lot faster.

The Avalanche Method

This again involves making the minimum payments on all your debts but then paying off more on the debt with the highest interest rate. So, if you had £1,000 on a credit card with an interest rate of 29% or a car loan of £15,000 at an interest rate of 3% then you would pay the credit card off first.

For more information on getting out of debt, check out our blog post on8 Secrets to Dealing with Debt on a Tight Budgetwhere you’ll find some practical steps to take back control of your finances.

Once you’re out of the cycle of debt, it’s a lot easier to never get back into that position again – after all, experiencing the financial freedom of a life without debt is totally worth making more than just the minimum payments on all your debts.

#3 Creating an Emergency Fund is a Must!

In 2020, the money advice service revealed that 22% of UK adults had less than £100 in savings, which can make them vulnerable to the effects of significant changes in their income, such as job loss or unexpected costs.

This is where an emergency fund comes into play, to prevent any problems when your finances are impacted. You should have 3-4 times your monthly salary in savings to cover any large costs or changes to your income.

To get started, we’ve put together a useful blog post with simple steps to help youbuild a successful emergency fund.

#4 Get Your Budget in Order

Creating a spending plan for your money ensures that you’ll always be able to afford the essentials you need and the things that are important to you. A budget will help to prevent the accumulation of debt, find areas that you can save money and give you back control.

Here are some simple steps that will help you to start (or improve) your budget:

  1. Take note of your income and all your outgoings – this can include your rent, utilities, food, childcare, gym memberships, and travel expenses.
  2. Calculate the difference and see exactly how much you have remaining to spend
  3. Determine how much of this you want to set aside for luxuries such as dining out, holidays and clothes and how much you can realistically afford to save.
  4. Make it a habit to review your budget two weeks to make any changes or improvements necessary.

Discover how to create a successfulbudget if you’re on Universal Creditwith our helpful tips and advice.

#5 The 70:20:10 Budgeting Rule

Following on from creating a budget, the 70:20:10 budgeting rule is a simple principle that you can follow to help you figure out how much of your income you can realistically spend, save, and use for debt repayments regardless of the amount you earn or levels of debt. Here’s how it works:

Start by dividing your take-home pay and divide it by 70%, 20% and 10%:

70%is for all your monthly expenses – including all your bills, food, travel expenses.

20%of your income should go towards your savings unless you have pressing debts to repay. These should come first if the below 10% doesn’t cover all your repayments.

10%goes towards tackling any debt repayments you may have by starting with the highest priority.

Of course, this rule is open to adjustment so if you’re looking to pay off more debts or save more, then you will need to change the categories accordingly, so it rounds up to 100%. However, it’s important to remember when it comes to budgeting, the key is to find a solution which works for you and helps you to achieve financial wellbeing.

#6 Always Do Your Research Before Making a Purchase

If you’re looking to make a purchase, of any kind. Remember to browse the internet to see if you can find it cheaper elsewhere.

According to research fromThink with Google, 53% of shoppers say they shop around before making a purchase to ensure they’re making the best possible choice but there are still ways you can up your research game ensuring you save the most money.

One way to do this is by adding a coupon finder, such as Honey, to your browser extension to help find you discounts, coupons, promo codes and deals when shopping online, and automatically applying them to your basket.

Another way to save money, especially if you’re shopping on a new website, is to sign up to their newsletter. Some companies offer 10% of your first purchase. If you’re a student or key worker for the NHS, a wide range of businesses offer a 10% to 25% discount on your shopping.

Additionally, Suits Me account holders can save money simply by using their Suits Me debit card with our cashback retail partners. Learn more about our exclusivecashback reward programmeto see where you can start saving!

#7 Separate Your Emotions from Your Finances

Do you find that you’re spending money to increase your happiness when you feel like you need a pick-me-up? You’re not alone.

Of course, treating yourself to a little treat once in a while isn’t such a terrible thing, but when you’re spending money compulsively to fill a hole then it can lead to some serious financial problems, worsened by the consumerist society we live in.

The first step to tackling this issue is to spot the signs by becoming self-aware of your spending habits when you’re most likely to make an unnecessary purchase, and how you’re feeling.

#8 Maintain or Work on Fixing Your Credit Score

Your credit score shows lenders how likely you are to pay back any money you borrow. Your credit score also determines which interest rates you’ll qualify for. The better your credit score, the more likely it is that you’ll be accepted for credit and at the best rates.

Having a good credit score is vital if you’re looking to apply for a credit card, get a new car on finance, or need a mortgage to buy a house. It does take time to build your credit score and make any improvements so it’s worth getting started early to plan for any future financial goals you may want to achieve.

To learn more about how to improve your credit record, we’ve put together a helpful blog post exploring some of thereasons your score might be low and some simple ideas on how to improve it.

#9 Stick to a Meal Plan to Maximise Savings

One of the best ways to prevent unnecessary spending is to cut back on food expenses, something with sounds like a chore, but once you’ve found a routine that works for you, you’ll be able to cut back on unnecessary spending, and unnecessary food waste.

In the UK alone, the average Brit spends £451 on roughly 34 takeaways a year, a figure which is increasing year after year according to a survey conducted byKMPG accountants.

A meal plan can be a handy tool that allows you to know exactly what ingredients you will need for the week to avoid pointless purchases and prevent you from ordering that pizza when you just don’t have any cooking inspiration.

Are you feeling hungry? Before you head to the shop check out our blog post on5 Ways to Save Money on Foodto reduce the size of your grocery bill.

Can a Prepaid Card Help Improve Your Personal Finance?

A prepaid card works in a similar way to a debit card, except there is no overdraft or lending facility attached – removing the option to slip into debt and needing to pay fees and charges for borrowing the money.

Here at Suits Me, we offer much more than just a basicprepaid debit card. Our accounts are personal accounts which work similarly to a traditional bank account. You’ll gain access toan online accountand ourmobile app, where you’ll be able to manage your money on the go, 24/7.

We offer a whole variety of banking-like features including:

  • The ability to set upstanding ordersand managedirect debits,
  • Send money within the UK via atransfer, international transfers are available via a partner in the Suits Me app,
  • Gain access to our exclusivecashback reward programmewhere you’ll automatically get a percentage of your money back when you use your Suits Medebit cardwith our retail partners.

Opening a Suits Me account takes 3 minutes and you’ll gain access to your online account immediately so you can start managing your money. We don’t ask for proof of address or run a credit check. We accept 99.8% of all applicants – so if you’re looking for a suitable alternative solution apply today!

Open Your Account Today

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9 Essential Rules of Personal Finance That You Should Follow (2024)


What is the 10 rule in personal finance? ›

The 10% rule is a savings tip that suggests you set aside 10% of your gross monthly income for retirement or emergencies. If you still need to start a savings account, this is a great way to build up your savings. You should create a monthly budget before starting your savings journey.

What is the #1 rule of personal finance? ›

#1 Don't Spend More Than You Make

When your bank balance is looking healthy after payday, it's easy to overspend and not be as careful. However, there are several issues at play that result in people relying on borrowing money, racking up debt and living way beyond their means.

What is the 70/20/10 rule money? ›

The 70-20-10 budget formula divides your after-tax income into three buckets: 70% for living expenses, 20% for savings and debt, and 10% for additional savings and donations. By allocating your available income into these three distinct categories, you can better manage your money on a daily basis.

What is the 75 15 10 rule? ›

In his free webinar last week, Market Briefs CEO Jaspreet Singh alerted me to a variation: the popular 75-15-10 rule. Singh called it leading your money. This iteration calls for you to put 75% of after-tax income to daily expenses, 15% to investing and 10% to savings.

What is the 70 10 10 10 rule? ›

What is the 70/10/10/10 budget rule? The 70/10/10/10 budget rule says you should use 70% of your income for expenses and divide the remaining 30% into emergency savings, long-term savings, and giving.

What is the 30 30 20 10 rule? ›

According to the 30:30:30:10 rule, you must devote 30% of your income to housing (EMI'S, rent, maintenance, etc.), the next 30% to needs (grocery, utility, etc.), another 30% to your future goals, and spend rest 10% on your “wants.”

What is the 80% rule personal finance? ›

The 80/20 budget is a simpler version of it. Using the 80/20 budgeting method, 80% of your income goes toward monthly expenses and spending, while the other 20% goes toward savings and investments.

What are the 5 basics of personal finance? ›

There's plenty to learn about personal financial topics, but breaking them down can help simplify things. To start expanding your financial literacy, consider these five areas: budgeting, building and improving credit, saving, borrowing and repaying debt, and investing.

What is the 40 30 20 10 rule? ›

The most common way to use the 40-30-20-10 rule is to assign 40% of your income — after taxes — to necessities such as food and housing, 30% to discretionary spending, 20% to savings or paying off debt and 10% to charitable giving or meeting financial goals.

What's better than 50/30/20? ›

Alternatives to the 50/30/20 budget method

For example, like the 50/30/20 rule, the 70/20/10 rule also divides your after-tax income into three categories but differently: 70% for monthly spending (including necessities), 20% for savings and for 10% donations and debt repayment above the minimums.

What's better than a 50/30/20 budget? ›

“Where the 50/30/20 rule and the envelope system get complicated, the 80/20 plan gets simple. Instead of having to categorize every single expense into what is essential and what is not, you simply take 20% of your paycheck and deposit it directly into your savings account.

What is the 40 rule money? ›

40% of income should go towards necessities (such as rent/mortgage, utilities, and groceries) 30% should go towards discretionary spending (such as dining out, entertainment, and shopping) - Hubble Money App is just for this. 20% should go towards savings or paying off debt.

What is the 50 rule in accounting? ›

The 50% rule in accounting is a guideline businesses use to classify expenses. If an expense is more than half the cost of replacing an asset, it's a capital expenditure. This rule is important for companies to record expenses an keep proper financial records.

What is Rule 72 in accounting? ›

The Rule of 72 is a calculation that estimates the number of years it takes to double your money at a specified rate of return. If, for example, your account earns 4 percent, divide 72 by 4 to get the number of years it will take for your money to double.

What is the 20 10 rule tell you about debt? ›

The 20/10 rule follows the logic that no more than 20% of your annual net income should be spent on consumer debt and no more than 10% of your monthly net income should be used to pay debt repayments.

What is the 10 10 20 rule in finance? ›

It says your total debt shouldn't equal more than 20% of your annual income, and that your monthly debt payments shouldn't be more than 10% of your monthly income. While the 20/10 rule can be a useful way to make conscious decisions about borrowing, it's not necessarily a useful approach to debt for everyone.

What is the 10/20/30 rule in finance? ›

30% should go towards discretionary spending (such as dining out, entertainment, and shopping) - Hubble Money App is just for this. 20% should go towards savings or paying off debt. 10% should go towards charitable giving or other financial goals.

What is the 40 30 20 10 rule for savings? ›

The most common way to use the 40-30-20-10 rule is to assign 40% of your income — after taxes — to necessities such as food and housing, 30% to discretionary spending, 20% to savings or paying off debt and 10% to charitable giving or meeting financial goals.

What is the 10 5 3 rule in finance? ›

According to this rule, stocks can potentially return 10% annually, bonds 5%, and cash 3%. While these figures are not guarantees, they serve as a guideline for investors to forecast potential returns and adjust their portfolio accordingly.


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