Back to Blog Home

5 Financial Rules That Are Meant to Be Broken

carefulcents profile picture
Carrie SmithGuest Blogger
June 03, 2016 · 1.5k Views

Rules are often meant to be followed and are put in place for the safety and ease of everyone. But sometimes you have to evaluate the rule and see if it applies to you. As you set out on your own path, you’ll discover that some rules are meant to be broken, especially financial ones.

Personal finance is not a one-size-fits-all type of thing. You have to find what makes you successful, experiment and create your own rules along the way. Here are five money rules that are meant to be broken.


1. Going on a financial crash diet

Reaching a specific financial goal, whether it’s paying off debt or saving to purchase a new car, is not necessarily the end goal. There are quite a few years between joining the workforce and reaching retirement. However, we usually treat these goals with short-term solutions. Instead of creating long-term savings habits, or paying off debt in a manner that will allow us to have more control, we simply “starve” ourselves for a period of months or years in order to obtain our goal.

This mindset is like going on a crash diet and does nothing to create smart savings and spending habits for your future. The way you approach financial goals has to be sustainable, otherwise you could have a “relapse” once lifestyle inflation starts creeping back in. Reading all the debt payoff stories is great, but do so with a grain of salt. Work towards thinking in terms of years and years instead of the short-term gains.

2. Cutting spending to save money

There are many spending temptations that are considered non-essentials, like buying a latte or eating out. But that doesn’t mean you should cut out all non-essential spending for good. It’s all about moderation and keeping things in perspective. Don’t cut out all the extras in your budget and become a hermit, that’s no way to enjoy the money you work hard to earn.

Reducing your spending will only get you so far. Instead, focus on earning more money and using your time to increase your bottom line. Spend your money wisely and strive to have a good balance between cutting spending and earning more.

3. Purchasing a home instead of renting

The American Dream is still firmly planted in the idea that purchasing a home is the next natural step towards being successful. However, this is no longer the case. After purchasing my first home at the age of 23, I quickly realized that the responsibility and added financial strain didn’t give me the ability to travel or have a social life, like I wanted.

Buying a home didn’t make sense for the life I was creating and instead held me back from the things that really mattered. After two years of owning my home I decided to sell it and have been a happy renter ever since. If you’re not sure where you want to settle down yet, or if you enjoy traveling a lot, being a homeowner isn’t the best choice for you.

Don’t get sucked into purchasing a home just because everyone else is, or you feel like it’s the next step as an adult. Make sure it fits into your lifestyle and that you can easily afford the additional responsibility.

4. Creating a budget

A budget is an important part of managing your money, but be open to different styles and ideas that may work better for your spending personality. If you’re having trouble sticking to a budget, which can seem restrictive, try referring it to as a “spending plan”. Set your goal every month to spend a certain amount of money and enjoy the freedom that comes with it.

Don’t limit your spending but instead give yourself a goal to work towards that allows you to spend up to a certain amount. The results will be the same but you’ll have more fun creating a “spending plan” than trying to stick to a budget. Instead of telling people “it’s not in my budget” you can start saying that it’s “not in my monthly spending plan”. This already helps you sound more in control of your finances.

5. Carrying a debt balance to build credit

It’s a myth that in order to build good credit you must carry a balance on your credit card. Using your credit cards every month, and paying off the entire balance, will still establish a good history of credit. Using credit cards and applying for various loans, like a car loan or mortgage, will help you build up your credit, but there are other factors that affect your overall credit history.

The biggest factors that affect this include payment history, which has 35% of the impact, and total amounts owed, which has 30% of the impact. So instead of carrying a balance in order to build credit, focus on making your payments on time every month and decreasing the total amount owed so you can increase your credit score.

Have you broken any of these financial rules? What are some other ones we can add to the list?


carefulcents profile picture
Hi, I'm Carrie Smith! I'm a financial writer and small business expert who helps freelancers build client-based businesses through meaningful relationships. I have a background in small business accounting and taxes and recently won an award for Best Entrepreneurship Blog for my site,

Related Posts