5 Rules of Money: How to Make It, Save It, & Be Smarter About It

Added: Mar 8, 2024

Early Life and Financial Lessons

Tiffany grew up in a family where money discussions were open and transparent. Her father, an immigrant from Nigeria, instilled in her the importance of managing money wisely. She recalls weekly family meetings where they discussed chores, homework, and the family's financial state. This upbringing laid the foundation for Tiffany's financial literacy and confidence in managing money.

Transition to Adulthood

After graduating from college, Tiffany initially followed her parents' advice and was diligent about saving and budgeting. She worked as a preschool teacher and supplemented her income with side hustles like babysitting and tutoring. However, her financial journey took a turn when she decided to invest with a friend who turned out to be a scammer. She ended up with significant credit card debt and faced financial challenges when she lost her job during the recession.

Facing Financial Challenges

Tiffany found herself in a difficult situation with $50,000 in student loan debt, a mortgage, and credit card debt. She had to confront the reality of her financial struggles and make tough decisions to overcome them. Despite feeling devastated and overwhelmed, she sought advice from her sister and began to strategize a plan to address her debts.

Overcoming Financial Setbacks

With the support of her family and her determination to turn her financial situation around, Tiffany started to chip away at her debts. She took on various jobs, continued to budget and save diligently, and slowly paid off her debts. She learned valuable lessons about resilience, resourcefulness, and the importance of financial literacy during this challenging period.

Educating Others About Money Management

Through her experiences, Tiffany realized the power of financial education and empowerment. She recognized the need to educate others about money management and help them build a strong financial foundation. This realization led her to become the "Budgetnista" and share her knowledge and expertise with millions of people through her books, podcasts, and workshops.

Taking Control of Your Finances

Tiffany outlines five key categories to master in order to take control of your finances: budgeting, saving, debt management, credit, and investing. She starts with budgeting, reframing it as a way to say yes to what's important rather than a restriction. She advises creating a money list to track expenses and income, categorizing expenses into bills, usage-based expenses, and discretionary spending.

Identifying Spending Patterns

Tiffany encourages individuals to identify where most of their money is going, whether it's towards bills, usage-based expenses, or discretionary spending. This helps determine if the issue is not making enough money or spending too much. She highlights the impact of social media and online shopping on overspending, emphasizing the need for automation to safeguard against impulsive purchases.

Automating Your Finances

Tiffany recommends setting up two checking accounts for spending and bills, with direct deposit splitting income between them. She advises opting out of a debit card for the bills account to prevent overspending. Additionally, she suggests having two savings accounts at a different bank to earn higher interest rates. By automating bill payments and savings contributions, individuals can stay on track with their financial goals.

Debt Management and Credit

Tiffany stresses the importance of managing debt effectively, whether through consolidation or repayment strategies. She advises checking credit reports regularly and disputing any errors to maintain a good credit score. By understanding the impact of debt and credit on financial health, individuals can make informed decisions to improve their financial situation.

When dealing with debt, Tiffany suggests creating a debt list to understand who is owed, how much, when it's due, the interest rate, and the status of each debt. She introduces three methods for paying off debt: the snowball method (paying off the lowest balance first), the avalanche method (tackling the debt with the highest interest rate first), and the tsunami method (prioritizing debts based on emotional impact).

Tiffany advises tackling high-interest debt first and negotiating with creditors to lower interest rates or payment plans. By creating a debt list and prioritizing repayment, individuals can gradually reduce debt and improve their financial situation. Additionally, she highlights the importance of avoiding unnecessary debt and making informed decisions when borrowing money.

Budgeting

Tiffany stresses the significance of creating a budget to track expenses and prioritize spending. She recommends categorizing expenses into needs, wants, and savings, and using tools like the 50/30/20 rule to allocate income accordingly. By setting clear financial goals and automating bill payments, individuals can establish a solid foundation for financial stability.

Saving

Even if there isn't much money to save initially, Tiffany encourages opening a savings account as a placeholder for future savings. By starting small and gradually increasing savings, individuals can work towards their financial goals.

While savings are essential for emergencies and future financial goals, Tiffany cautions against hoarding excessive amounts of money. She compares savings to a safety belt, emphasizing the need for a balance between saving and investing. By putting excess savings to work through investments or other income-generating opportunities, individuals can maximize their financial growth and security.

Paying Yourself First

Tiffany's approach to paying yourself first involves asking four questions before spending money: Do I need it? Do I love it? Do I like it? Do I want it? By focusing on needs and loves, individuals can ensure that their money is spent meaningfully and avoid oversaving, as there is a cap on how much should be saved for emergencies.

Dreamscaping

Dreamscaping involves envisioning the life one wants to live in the future, considering various aspects like living arrangements, travel, and personal goals. By finding a guide, creating a flexible plan, and engaging with a supportive community, individuals can work towards realizing their dreams and aligning their actions with their desired lifestyle.

Increasing Income

To increase income, Tiffany suggests evaluating current job roles and seeking opportunities for advancement or higher pay. She emphasizes the importance of showcasing one's value to employers by highlighting contributions that generate revenue or savings for the company. By creating a "go me" file to track achievements and skills, individuals can effectively negotiate for salary corrections or promotions.

Side Hustles

For additional income, Tiffany recommends exploring side hustles aligned with existing skills or certifications. By leveraging expertise and minimizing investment risks, individuals can pursue profitable side ventures. She advises calculating potential returns and focusing on direct return on investment to ensure financial viability. Whether tutoring, babysitting, or offering specialized services, side hustles can supplement income and support financial goals.

Personal Reflection

Tiffany shares a personal story of loss and resilience, underscoring the importance of prioritizing meaningful connections and experiences over material wealth. She emphasizes the value of love, relationships, and purpose in shaping a fulfilling life. Through her own journey of grief and self-discovery, she highlights the transformative power of perspective and gratitude in navigating life's challenges.