8 Money Rules To Live By

Despite the world changing and opening up new wealth, there are still some great money rules that will stand the test of time!

Invest 10% of your income

For every dollar that you earn, you want to ensure that at least 10c is going towards building your wealth. You need to treat money like they are employees in your business.

Give it a specific role to perform with concrete objectives. After a while, you will have more money coming in to support your bigger vision and need to allocate additional goals to that money.

But unlike employees, money can and should be working for you 24/7.

Pay yourself first

This is one of the most consistent pieces of advice you will hear. Most people will pay their bills and living expenses first then if there is enough left over they will pay themselves.

By paying yourself first you are ensuring that you’re taking a step away from living pay check to pay check. It’s also a great strategy for the mind as it positions you as a priority.

Allocate no more than 30% of your pre-tax income on accommodation

The figure of 30% is what is used to determine levels of mortgage stress. Once you go over that 30% figure, you are vulnerable to market fluctuations and said to be under mortgage stress. 

But from a psychological point of view, it can also be damaging. As humans we crave two competing ideals. Routine and novelty.

Whilst accommodation provides us with the routine and security, paying too much of our income towards it will prevent novelty. This will lead to feeling blah and ultimately impact your happiness.

The formula is simple enough. If your household income is $100,000 per year, the maximum you can spend on accommodation is $30,000. Or about $577 per week.


If you finance a car, ensure repayments are no ore than 10% of your gross annual income

For similar reason as the accommodation formula. I’m not going to go into the details now about the most effective way to buy a car because there are plenty of arguments. This is simple. Cap your repayments to 10% of your income.

If you earn $100,000 per year, then your maximum repayments for the year will be $10,000 or $192 per week. But in all seriousness, people will rarely need a car that costs more then $30,000.

Few wealthy people are driving a Tesla or BMW, that’s reserved for the middle class who want to look rich. They go for the reliable vehicle that gets them from point A to point B for the minimal amount.

At the end of the day, you are buying a depreciating asset that will cost you money along the way.

You have 3 options to improve your financial situation

If you are ever in a budget rut or feeling financially trapped, then you have three options.

              Earn more

              Spend less


It’s as simple as that. Don’t overthink anymore than how you can execute on one of those three options.

The rule of 72.

Divide 72 by the annual rate of return to determine how long it will take to double your investment.

Example – $100 invested at 10% would take 7.2 years (72/10) for it to turn into $200. Whilst not really a money rule or overly useful, it is a pretty cool formula you can pull out form time to time.

Quickly calculate your annual income.

Double your hourly rate and add 3 zeros.

 If you earn $25 per hour and work 38 hours per week you earn approx. $50,000 per year.

$25 x 38 = $950

$950 x 52 = $49,400

Is it better to buy or to rent?

The price-to-rent ratio is a useful rule of thumb for making this decision. Find two similar places, one for sale and one for rent. Divide the sale price of the one by the annual rent for the other. The result is the P/R ratio.

Say you find a $400,000 house for sale in a nice neighbourhood, and a similar home for rent on the next block for $1600 per month, which is $19,200 per year.

Dividing $400,000 by $19,200, you get a P/R ratio of 20.8. If the P/R ratio is low, it’s better to buy. If the price-to-rent ratio is over 15, it’s probably better to rent.

Simply head to your chosen property website and select your suburb in question. Divide the average property price in that suburb by the average rental price in that suburb.

Be sure to keep things like for like. Don’t compare the purchase price on a 3 bedroom apartment to a purchase of a 3 bedroom house.

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