Money is a massive stressor for most people. Why? After all, personal finance has some pretty simple rules:
👉 Spend less than you make
👉 Save for a rainy day
👉 Buy low, sell high
Sounds easy, right?! But if it were, we’d all be sleeping soundly with well-padded bank accounts. Instead, most of us are crossing our fingers that the car holds out another year, the job we hate doesn’t fire us, and our credit cards magically stop charging interest.
Why? Because simple is not the same as easy.
So, let’s look at why we struggle to follow simple rules, and how to be more successful – other than hoping for a miraculous well of endless willpower!
Rule #1: Spend Less Than You Make
I don’t need to tell you that spending more than you earn is a financial death spiral. We all know it. Yet, even people making six figures still carry thousands in credit card debt.
Why? Because money isn’t math, it’s emotion.
💰 Impulse buying? Dopamine hit.
💳 Overpriced vacation? Have to keep up with the Joneses.
🛍️ Retail therapy? You totally “deserved” it after a rough week.
The world and your brain is designed to make you fail. Advertisers, influencers, your friends who “casually” go out for $500 dinners. Everyone’s in on the game of making you think your wants are actually needs and consumption fixes all problems.
How to Actually Spend Less Than You Make
✅ Know Your Numbers – You can’t fix what you don’t track. You can use an app to easily gather your spending data. The tricky part is developing a habit of actually looking at it. But like any other habit, it can be created. And once its a habit, it takes very little effort to maintain. People often report that the simple act of reviewing spending leads to better financial decisions. So that’s already a win! And if you choose to go further, like trying to budget, you will have the right foundation.
✅ Bring Instant Gratification to Long Term Goals – Our brains will always default to instant gratification. The trick is to have a long term goal so awesome that working towards feels gratifying in the moment. Want to change careers? Travel more? Retire early? Instead of seeing it as a sacrifice, reframe money spent working towards the goal as lavishly spending on yourself. You’re not saving, you’re buying freedom! By doing this, you can trick your brain into getting the same dopamine hit as filling your Amazon cart and hitting next day delivery.
✅ Redefine Success – If you think you need a huge house, fancy car, and all the latest gadgets to prove to the world you’re successful, you’re likely to get stuck in the financial death spiral. Instead of measuring success by what you own, measure it by how much freedom you have: freedom to choose work you enjoy, take time off, or say no to things that don’t serve you. Practice gratitude for what you already have, and focus on internal growth rather than external status symbols. The more confidence you build in your own values and choices, the less you’ll feel the need to keep up with someone else’s version of ‘making it.’
Personal experience:
My savings account and credit card bill were bi-polar until I found a goal that mattered more than mindless spending. Once I realized world travel was my dream and that it couldn’t wait until 70, saving toward that goal started to feel great. A long sabbatical or early retirement became my favorite item on which to “splurge.” The feeling of buying a new pair of shoes could no longer compete!
And while technology can be a curse, financial tracking apps are solidly in the blessing category. They make it ridiculously easy to track everything: income, expenses, savings, net worth. Some good ones are even free! Since my phone was already glued to my hand, checking my spending often easily became a habit. Having that information and awareness helped me make sure my spending was in line with my priorities.
But the biggest game-changer? Not inflating my lifestyle as I earned more. I stuck with my tiny, dishwasher-less home and my old, dinged-up Honda long after people expected me to ‘upgrade.’ Instead of a huge mortgage and car payment, I funneled about 50% of my income into savings for years. That was the rocket fuel that propelled me to my personalized version of success.
Rule #2: Save for a Rainy Day
“Have an emergency fund” is the brush-your-teeth of personal finance advice. And yet, 57% of Americans don’t even have $1,000 saved.
Why? Optimism bias makes us think bad things happen to other people. Present bias makes today’s spending feel more important than future security. Normalcy bias convinces us that life will always go on as-is.
We swear we will start saving next month, count on getting that raise, and see missing the T-Swift concert as the real emergency.
Emergencies are for Future You to deal with. But turns out, Future You is just Present You with more gray hairs and the same bad habits.
How to Actually Keep an Emergency Fund
✅ Define ‘Emergency’ – An emergency is losing all income, being at risk for losing your housing, or worse. Not a “crazy good sale.” Not “I accidentally overspent this month.” Not even a new hot water heater, car repair, or medical deductible – those should be planned expenses just happening at an unknown time.
✅ Separate That Cash – Keep your emergency fund in a different bank where it’s not tempting to dip into for “just this one thing.” Make it a little difficult to get to.
✅ Automate & Forget It – Treat your savings like a bill. Set up an automatic transfer until you get to 3-6 months of expenses. Once it gets there, take it out of your tracker app, don’t include it in your net worth. Treat it as if it doesn’t exist. Except for maybe an annual review of whether or not that is still a sufficient amount. Have expenses or circumstances changed that you might to need to fill that bucket some more? That’s the only thought you should give it.
Personal experience
My emergency fund was just a poorly managed checking account until I took the advice of defining what an emergency would be: suddenly losing my job, my ability to work, natural disaster. Thinking what life would look like was terrifying enough to finally take it seriously.
But I also knew myself. Fear fades, and old habits creep back in. So, I decided to outsmart my future self. I moved my emergency fund to a money market account at a completely separate bank, far from my daily spending temptations. If I wanted to access that money, it would take at least a week.
Rule #3: Buy Low, Sell High
The entire investing game boils down to this:
📉 Buy when prices are low.
📈 Sell when prices are high.
And yet, most people do the exact opposite. Why? Because we are panic-prone, emotion-filled, cognitively-biased creatures.
When the stock market drops, we sell in terror. When it soars, we FOMO-buy at the top.
The average investor underperforms the market by 3-5% annually. Not because they don’t know what to do, but because they can’t make themselves do it in the moment.
How to Actually Avoid Bad Investment Decisions
✅ Know Your Biases – Loss aversion, recency bias, overconfidence, our brains are wired to make terrible investing choices. Learn about these biases. Then, look at your history with money. Which one’s have you bitten you in the past, which are you most prone to? Past performance is often a predictor of the future!
✅ Have a Plan (and Stick to It) – Make an investment strategy when you’re calm and rational. Set up rules for buying, selling, and rebalancing, and only change them when reviewing your plan, according to a set scheduled. Not in a panic!
✅ Put Up Barriers – If you know you’re apt to freak out and sell when the market dips, make it harder to access your accounts. Longer wait times, extra approvals—whatever stops you from making knee-jerk decisions.
✅ Automate Everything – Scared to invest? Set up automatic contributions and dollar-cost average your way into the market without thinking about it. Auto-rebalance is also often an option. Make a sound decision once and implement it on repeat, rather than relying on yourself to make the right decision time and time again.
✅ Avoid BIG Mistakes – Small mistakes? You’ll recover, especially given a long enough time frame. But big ones? They can wreck you. Here’s a few tips to keep you from a lot of those big mistakes: Don’t get in deep on margin, don’t “gamble” with more than 5% of your net worth and be properly insured.
Personal experience:
The struggle is real, believe me! Despite knowing better, I’ve second-guessed investing because the market felt too hot. I’ve FOMO-bought at the peak, only to watch an investment crash. Basically, if there’s a classic investing mistake, I’ve probably made it.
But I’ve managed to avoid the really big, catastrophic ones. Most of my money is dollar-cost averaged into a boring, well-diversified portfolio. Years ago, I forced myself to write a Financial Strategy Statement. It was tedious, painful, and is far from not perfect. But it has helped keep me on track.
And I’ve built the muscle to not panic-sell every time the market dips. How? I actually watch the markets. I know, taboo advice. But I’ve seen too many people ignore their investments…until there’s a downturn big enough to trigger full-blown panic. By then, they have no tolerance for swings (no muscle) and make impulsive, costly mistakes.
Final Thought: Progress over Perfection
While all of these rules, tips and tricks are simple, they’re not easy. So, don’t try to do everything at once. Maybe today, you just set up a spending tracker. Or you open a high-yield savings account. Set-up that auto-invest into your IRA.
Because the real Golden Rule of personal finance? It’s not about being perfect, it’s about making slightly better decisions than the day before.
Can you commit to following that rule? Comment “I’m committed!” below. Pick one small thing and do it today.
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