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What is the golden rule of money management?

Golden Rule #1: Save more, spend less One of his most famous pieces of advice on managing your money is “Don't save what is left after spending, spend what is left after saving." In other words, save before you spend - pay yourself first.

gibraltarbsn.com - The 3 Golden Rules Of Good Financial Management| Gibraltar BSN
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There is no shortage of advice on how to manage your finances. From online articles, newspapers and magazines, to radio and television programmes, social media, podcasts and videos, there are tons of resources available that provide guidance on financial management, along with new digital tools that can help. Even your family, friends and relatives are all eager to dispense their wisdom on this topic. But while the tips and ideas are all useful, ultimately there are three we consider the golden rules of good financial management - the core basics which everyone should get right to ensure their finances stay healthy and secure at all times.

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Golden Rule #1: Save more, spend less

Warren Buffett, one of the world’s top investors, lives a very modest, frugal lifestyle despite his immense wealth. One of his most famous pieces of advice on managing your money is “Don't save what is left after spending, spend what is left after saving." In other words, save before you spend - pay yourself first. When your monthly salary comes in, the first thing you should do is transfer a portion of it into another savings account, even before you pay your bills. And when it comes to spending, don’t spend more than you earn. Always look for ways to reduce your expenses. What will greatly help is to work out a monthly budget, as well as understanding your needs and wants.

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Golden Rule #2: Invest

While saving money is a great habit to get into, it’s only good enough for short-term goals. For the long-term, saving money alone isn’t going to cut it, and that’s because of inflation which causes the value of your savings to fall over time. And you don’t want that to happen, especially during your retirement! So once you have accumulated enough savings, invest the money to grow it further. And don’t wait too long, because investments need enough time to grow. The earlier you start, the more your potential gains. There are various investment plans and vehicles out there such as unit trusts, bonds, equities, company shares, mutual funds, exchange-traded funds (ETFs), gold and property. There’s also the Private Retirement Scheme (PRS) and the EPF’s Members Investment Scheme (MIS), which you can read more about here. You can also consider investment-linked plans such as Gibraltar BSN’s GoProtect and GoProtect Platinum. These plans offer insurance protection while helping you save and invest at the same time (more on insurance in Rule #3 below).

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It’s important to note that all investments come with risks. So before you commit to any type of investment, always make sure you thoroughly understand what you are investing in, and decide on how much risk you can tolerate.

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Golden Rule #3: Always plan for the unexpected

Life doesn’t always follow a script, which is why it’s so important to be ready when it throws you curveballs.

For your finances, there are two things you need to do:

Start building an emergency fund, if you haven’t already.

Protect the wealth you’re working so hard to build against any uncertainties with a comprehensive insurance plan. An emergency fund is a pool of cash that you save and set aside strictly for last minute urgent expenses such as car and home repairs, travel for family emergencies helping out family members, or living expenses after a temporary job loss or pay cut. However, when it comes to unpredictable life events such as unexpected death, or an accident or critical illness that leaves you disabled and unable to work, the sudden increase in medical expenses and/or loss of income will cause your savings and emergency fund to get depleted very quickly and leave you or your loved ones financially crippled. This is why having an insurance plan is crucial to shield your finances against these major uncertainties. If you don’t have an insurance plan yet, now is the best time to start! Take a look at some of our popular plans here, and if you’d like us to contact you, simply fill up the form at the bottom of the page and one of our Gibraltar BSN agents will be in touch.

gibraltarbsn.com - The 3 Golden Rules Of Good Financial Management| Gibraltar BSN
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