Feeling Sure About Money Choices

How to Be Confident in Your Money Choices

In the real world, most people don’t have an accountant or financial advisor to help them make daily money decisions. We either outsource that responsibility to another member of our household or figure it out ourselves. There’s so much noise around money topics that it’s easy to feel overwhelmed. The risky and reckless approach is to just wing it and hope it all works out. But smart and diligent people can confidently manage their money as long as they remember some foundational principles. Here’s my list of money rules to keep in mind.

Don’t lose money

The first rule of managing your own money is to not lose it. That may sound simple and even silly, but a lot can go wrong in unexpected ways. Of course, there’s always a small risk you’ll lose your job, get sick, or encounter an emergency—those are mostly out of your control. What I’m talking about is investing in things you don’t understand, going in debt for a good or service you don’t have a proven need for, or even leaving money around in an account that doesn’t earn interest. If you start by not losing money, you’ll be in good shape.

Choose stability

While it’s all the rage to invest in the next exciting, high-flying investment opportunity, most ordinary people who aren’t money nerds would be better off focusing on stability. Look for the easy wins in long-term investments that have a track record of success. For me, I like to keep most of my extra cash in a solid bank and stake my long-term financial future on index funds, which tend to follow the market. I’m far from an expert, so most of my confidence comes from knowing that I’m not making decisions that will blow up my life.

Know what you’re paying for

I’ve been delighted to find that knowing exactly what you’re buying or what you’re getting with an investment quickly becomes its own kind of superpower. Most people are surprisingly happy to make a big purchase and just hope for the best. But as Warren Buffet has shown, you don’t have to be the smartest person in the room to understand the simple mechanics of a business. Just follow the money. When you make a purchase, make sure you’re getting real value for what you spend and try to understand as much as you can about it.

Easy to enjoy

After a long day of work, my wife and I try to keep our evenings as low-key and peaceful as possible while we spend time with our kids. We don’t really want someone calling or texting us, or any reason for us to check our email. Applying that same principle to your money, you should avoid any financial arrangement that seems destined to require lots of attention. Buying complicated insurance, taking on a mortgage that’s hard to understand, or investing your money in something that needs constant monitoring—it’s likely going to add stress to your life.

Never in a hurry

I find that pushing back against the urgency in your life is a good habit in general, but especially so in the area of your finances. Don’t let people apply high-pressure sales tactics to you, or try to convince you to invest in something that’s so good that by tomorrow it will be gone. Most good opportunities don’t require you to make decisions at the spur of the moment. And the truth is, you don’t have to nail these decisions every time to be doing great financially. If you can just avoid the big mistakes and stay consistent, you’ll likely be in great shape.

Don’t over-complicate

There are only a handful of money decisions that most people need to worry about, but there are at least a hundred ways to make your life more complicated than it needs to be. For example, you probably need to know how to pay your taxes, how to pay your bills, and how to budget your money. But you don’t really need a complicated budget system to do that well, even though they might be fun to tinker with. On top of that, there are probably only a couple of investments you need to learn about—maybe your 401(k) or an IRA for retirement.

Become an expert

I spend nearly all my time reading and writing, so there’s not much margin in my life to become an expert in many other fields. However, I do try to learn a little bit about everything since I find it interesting and stimulating. When it comes to managing my own family’s finances, though, I prioritize reading and listening to a few podcasts each year to stay up to date and be reminded of the basics. In real life, you don’t have to know everything to stay out of trouble with your money; you just need to know more than most people are willing to learn, and then you’ll have the knowledge to take advantage of the obvious good opportunities that come along.

Trade time for money

One of the simplest ways to make money in life is to trade your time and effort for it. The common ways to do this are through working a job or side hustle and learning to do more of your own chores. For example, I mow my own lawn and do my own snow plowing because I find I can earn more per hour than I make in my regular job. Whenever your time is worth less than the cost of hiring for the equivalent work, it’s a good idea to do it yourself and pocket the difference.

Raise your margins

If you’re reading this blog post right now, you’re probably the kind of person who likes to plan ahead. I can think of few areas of life where a bit of planning pays off better than in the area of finances. Raising your margins is a simple way of saying that you give yourself a larger buffer of money between what you earn and what you spend, and between when you expect to pay a bill and the deadline for when it’s actually due. By taking any extra money, no matter how small, and putting it in a savings account or investing it, you are building up wealth for a rainy day.

Keep looking ahead

Some people have a knack for coming up with big dreams and novel ideas, but then letting them vanish into thin air, never to be seen again. That is a sad waste of potential, might I add. When it comes to money, the main thing is to have the discipline to make a few good decisions and stick with them. That may sound boring, but in many areas of life, the best way to win is to keep looking ahead and keep the most important things in view. In the case of finances, it’s about roughly spending what you earn and avoiding big mistakes.