New Rules of Finance

The concept of finances has existed since the beginning of time. In Mesopotamian days people would trade goods for other goods and services, which would quickly morph into a form of currency. Some rules have existed since the beginning of time about finance. Budget, save for retirement, spend less than you earn to build up your wealth.

Other financial advice holds up less than adequately in the 21st century. With a new financial culture and the everchanging way of the younger generation viewing finances, the rules of the trade have changed. A common rule preached throughout the late 20th century was to save six month’s worth of living expenses for emergencies. That includes rent, utilities, and any fixed necessary expenses. While saving for emergencies is incredibly important, it’s not necessarily doable for Millenials in today’s market. Most individuals have trouble saving 1,000 dollars for emergencies, much less 6 months’ worth of expenses. There are now new and other ways of looking at finances and saving money.

Another old rule is that buying an old home is better than throwing away money on rent. While that may be applied in the 1920s when buying a house was equivalent to now buying a smart refrigerator, the same can not apply now. Since the 2008 housing crisis, buying a home has become an increasingly difficult process. Instead of that old rule, make your new rule of thumb is to examine your expenses, and don’t rule out renting. Often in today’s market, renting is the safest option, especially for Millenials and Generation Z.

Another old rule had to do with investing. Previously it was recommended that you do not invest in any stocks until you pay off your debts. The thought process that investing in stocks with the risk of not paying out debts was greater than reward. With the current options for not only paying off debts but investing, the opposite may be true. As a new rule of thumb, focus on paying off your high interest and regular debt payments, while investing in a low-stakes stock. The ability to grow your portfolio can help in the long run instead of hurting.

While trends come and go, the importance of finances do not. Don’t be afraid of new lines of thinking, and more relevant options for your financial journey.

This post was originally published on Etienne Kiss-Borlase’s Finance Blog. For more info about Etienne, please visit his homepage.

New Rules of Finance

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