Video courtesy of "Cash Call with Jean Chatzky" airing Tuesdays and Thursdays at 8 pm ET/PT on RLTV.
En español | What are you worried about? For many of us, it's money: 7 out of 10 middle-class boomers fear they won't have enough cash to last through retirement, according to a Bankers Life and Casualty Company survey. As a financial journalist, I've seen the world of money grow more complex. We're now more responsible for our financial lives: Decisions about health care, parents, kids, and 401(k)s sit squarely on our shoulders. We desperately need simplicity — a way to answer our biggest money questions: about making it, saving it, spending it, and investing it. A means of examining our money decisions and being able to say: Yes. Or no. That simplicity is possible.
I've come up with a set of Money Rules that I follow religiously. Financial advisers, analysts, bankers, accountants, and smart people in non financial professions have their own rules. I've pulled nearly 100 of my favorites into my new book, Money Rules: The Simple Path to Lifelong Security. To start you off, here are five rules you should follow right now.
Rule 1: It's easy to buy things — it's hard to sell them
You can take two behavior-altering messages from this maxim. The first and more straightforward is that because it's so hard to sell things at a profit, be thoughtful when buying stuff you expect to sell someday. Take cars, for example. The average new vehicle depreciates about 45 percent in the first three years, according to Consumer Reports. If you plan on selling the car in a few years, buy one that holds its value. The second takeaway? The best buyers are skeptical ones, particularly with investments. "If you find it easier to buy and harder to sell, it's probably because you're investing with emotion instead of analysis," says Tim Maurer, coauthor of The Ultimate Financial Plan. "It's easy to fall in love with a story, and most companies have a compelling one. That makes the decision to buy easy — even when things are overvalued." As a result, you may find it hard to let go and sell. If you are the kind of investor who falls prey to your emotions, buy mutual funds, says Maurer. They have less of a story.
Rule 2: Pay your bills as they arrive
Several years ago I worked with polling firm RoperASW on a money-and-happiness survey. We found that people who instantly paid their bills were happier and had a better grip on their finances. They had about a third less credit card debt and were stashing away savings.
Here's why: Paying bills fast gives you room to maneuver. If you get — and deal with — a sky-high heating bill, you can immediately cut back on discretionary items and avoid running low on cash at the end of the month. It takes five minutes a day, says Alicia Rockmore, CEO of the organizational company Buttoned Up. "Sit down with the mail, look at it, get rid of the junk, look at your bills, get online (see Rule 5), and in two minutes pay those bills and be done. It's simpler, easier, and leads to fewer mistakes than doing bills all at once."
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