the golden rule

The Golden Rule of Finance

Too many people spend money they haven’t earned, to buy things they don’t need, to impress people they don’t even like.

Will Rogers

The Golden Rule of Finance is one that makes a tremendous amount of sense to many, but only a few truly know how to apply it. The above mentioned quote by Will Rogers hits the nail right on the head as it is a great explanation why people cannot live up to the Golden Rule. Here is how it goes:

Never spend more than you make.

Now I wonder how many of you went “duhhh” as soon as you read that. And though the Golden Rule of Finance is nothing but logic, most people do not know how to spend less than they earn.
In fact, there is a lot of people that spend their money even before they’ve received it. Spending more than you earn usually is a result of complete ignorance as to where your money is going.

Why the Golden Rule of Finance is not applied

A very common trap that people find themselves in is called Credit Cards. Now, credit cards aren’t necessarily a bad thing; they can actually be quite useful, as long as one knows how to resist the temptation. Credit cards should be used in situations where for example, a hotel booking is to be secured, but they shouldn’t be used to pay for such luxuries (remember – you can choose the option to pay upon arrival when it comes to hotel bookings).

Another common trap is impulsive spending. Us humans are controlled by our emotions, therefore our decision-making is based upon our emotions as well. We should identify these emotions and what affects them. Generally, we are influenced by external factors. These factors can be our closest friends, ads, celebrities, sales and discounts or people (on social media) you don’t even know. Give yourself several days to think about a purchase to be sure you are not acting upon your emotions.

Lastly, automated subscriptions and memberships are another way to make sure money is flowing out of your pocket, usually without you even noticing. Oftentimes we are still paying for subscriptions, though we stopped using their services. Guess what? You’ll still have to account for these fairly unnecessary payments. Determine the subscriptions and memberships that are completely useless and cancel them immediately.

How to comply to the Golden Rule of Finance

There are a few effective ways that you can use in order to implement the Golden Rule of Finance. The first and maybe most obvious one would be budgeting.

Using a budget helps you to restrict your totally unnecessary expenses. When creating a budget, you can either choose to make a very detailed one or a simpler version. Just make sure that it includes a portion for saving and/or investing.

A second way to help you implement the Rule is to track your expenses. Tracking your expenses will increase your awareness immensely. Simply jot down every single purchase you are making as soon as you made them. This is most effective when one carries a little notebook with them. Using the Notes app on your phone might be an alternative.


To know where your money is going, you should track and review your expenses regularly. Both monthly expenses as well as discretionary expenses. Reviewing your spending is the best way to identify which expenses were a total waste of money. Soon I will publish more posts that will elaborate on how to control your spending, including specific strategies that you can apply in your own life, so stay tuned!

Lots of love,