Ramit Sethi, best-selling author of “I Will Teach You to Be Rich” and more importantly BFF of VFS (and secretly my personal idol) has 10 money rules he follows.

Let’s go over 5 rules this month, and 5 more next month.

They make a lot of sense, and you may want to adopt or adapt them.

1. Have one year of emergency funds in cash

Before COVID, most advisors recommended keeping 3-6 months in cash.

Since COVID, many mention 1 year as a safer goal.

Amassing that much money doesn’t happen overnight, but it sounds like a good idea given our recent collective experience. It also will vary depending on how many dependents you have.

If you’re a business owner with an entire team you’re responsible for, along with countless bills to pay, you will need cash reserves in your business account as well.

An informal survey of practice owners suggested that they like to keep 3 to 12 months of fixed expenses in a separate, dedicated “rainy day” fund.

Obviously, the right number depends on multiple factors.

At the very least, take time to think about what amount makes sense for you, personally and professionally.

2. Save 10%, invest 20% of gross annual income

In a perfect world, this is what would happen to all of us.

These percentages are based on the mantra “pay yourself first.”

Savings of 10% off every paycheck can be earmarked for various purposes: building an emergency fund (see point #1), saving for a big purchase (a wedding, a car, a house, see point #3),

Saving 20% of every paycheck for investment and retirement purposes is a fantastic goal. The next step is to learn to invest wisely.

Keep in mind that these percentages are goals. If you are starting your financial journey, pick lower numbers, then increase them as your income goes up.

3. Pay cash for large expenses

This point is somewhat controversial.

For some “consumer” purchases (Ramit mentions an engagement ring, a dream trip or a wedding), it is definitely wiser to pay cash than use plastic or a loan.

Paying 22% interest on the trip of a lifetime or on a wedding will make those memories bittersweet…

Although some well-intentioned authors recommend buying a house with cash, it is likely impossible for 99% of the population.

Ramit suggests a much more achievable goal: putting 20% down. This amount is often recommended because it will prevent you from paying PMI (Private Mortgage Insurance).

4. Never question spending money on books, appetizers, or donating to a friend’s charity fundraiser

This is classic Ramit.

Self-education through books, truly enjoying a meal at a nice restaurant, and being generous are the small luxuries that make life more enjoyable.

Another classic Ramit rule (not part of this top 10) is to be stingy on things that don’t matter to you, and splurge on the things you love.

Your non-guilty pleasure may be gardening, traveling, vinyl records, rare stamps or photography.

5. Business class on flights over 4 hours

Now we’re truly talking about the finer things in life…

Remember, personal finance is personal.

So if you have short legs and a healthy back, and you don’t mind being treated like a cachectic sardine, continue to fly coach.

If you have long legs, a bad back, the right budget, and the desire to pay more for a flight and enjoy a seat that is 50% wider, then go ahead and follow Ramit’s advice.

Please take a few minutes to think about these 5 money rules.

Can you adopt them as is? Could you adapt them to your own life?

Next month, we will cover Ramit’s next 5 money rules. 

Phil Zeltzman, DVM, DACVS, CVJ, Fear Free Certified