When you’re trying to create a financial plan that works for you, you need to take a hard look at your principles. Principles are the foundation upon which your goals and strategies are built.

It’s easy to buy into false beliefs when you’re looking at your finances. Temptation is all around us. It’s simple to believe, for example, that once we finally buy a home, we’ll be happy. Or if we drive off the car dealership lot in a car that will turn everyone’s heads, we’ll have finally made it in life.

But by coming up with your own set of guiding principles, you’ll be less likely to fall for false beliefs. As the old saying goes, if you don’t stand for something, you’ll fall for anything.

To help you get started with defining your own principles, I’m going to share the 7 personal money management principles I live by. I’ve done with a lot of thinking about these over the years and they’ve served me well.

I encourage you to think through your own set of beliefs. If you don’t agree with my principles, that’s fine. This is just what works for me. Do some soul searching and find your own!

7 Personal Principles of Money Management to Live By

Principle # 1 – Money Is an Effect, Not a Cause

A good relationship with money doesn’t just happen. It’s the effect of one or many causes. It takes a lot of great decisions.

It’s those big decisions as well as the small ones that gives you a good relationship with money. It’s when you decide to open that 401k at work or make coffee cheaply at home instead making a daily stop at the coffee shop.

Principle # 2 – Increase Your Income by Increasing Your Value

In his book, The Education of Millionaires, author Michael Ellsberg wrote something that has stuck with me ever since I read it. “The key to making money, and therefore living a life of less stress, is to cause someone to joyfully give you money in exchange for something that they perceive to be of greater value than the money they gave you,” he wrote.

As an entrepreneur, this is a principle I live by. But it can also be used by employees too.

Jim Rohn has a classic, must-watch video that dives a bit deeper into this principle.


Principle # 3 – Money Flows to People Who Treat It Well and Away from People Who Don’t

Money tends to grow when it’s honored, understood, and respected.  By understanding the power money can have in your life and the importance of having it, you’ll be better off.

That’s not to say you should worship money because you shouldn’t. But it’s important to respect the role it has in our lives. Whether we like it or not, money matters. When you respect that and make your decisions based on that understanding, your finances will be easier to manage.

Principle # 4 – Money Expands Who You Already Are

Money can’t make a person happy – that has to come from inside. But if you’re already happy, money can make you happier and reduce stress if you use it wisely.

Let’s say you absolutely hate your job and that every single day you feel like it’s chipping away at your soul. Clearly, in this situation, you’re not going to be a happy person. Seeing your account balances grow won’t be enough to make you happy. Even if you retire with enough money, you aren’t going to suddenly be happy.

Fulfilling work, relationships, and good health — these are the things that make us happy.

Money can play a role in helping you grow these areas of your life. But by itself, money can’t give you these things.

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Principle # 5 – The Purpose of Personal Finance Is to Optimize for Happiness, Not Money

It’s not the money itself that gives you happiness – it’s the freedom that comes with having money. You’re doing it wrong if your goal is to gain the highest net worth.

You should save, invest, and get out of debt – not because of the extra zeros you’ll see in your bank account, but because of the freedom those zeros will give you.

Let’s look at your living situation, for instance. When it comes to making a big decision like where to live, you can focus on what living situation would make you happiest if you’ve been responsible with your money. If you haven’t, you’ll have to look at what your budget can afford and make the best of it. Wouldn’t you rather have choices? I know I would!

Principle # 6 – Wealth Consists Not of Having Great Possessions, But in Having Few Wants

This is a quote from the stoic philosopher Epictetus.

Finding your inner balance will help you build true wealth. To create inner balance, find happiness in the simpler things in life – your relationships, health, and finding a fulfilling job.

It’s when we don’t get those things that we look for quick hits of happiness by spending more money. We’re trying to fill the holes in our lives with material items at that point. That’s never a good solution.

Principle # 7 – Giving Is a Strategy In Our Best Self-Interest

My personal belief is that the more I give, the more I get back. Over time, I’ve seen it work – in my life and in the lives of those around me.

Giving doesn’t necessarily have to be money – it can be donating your time or being generous in spirit.

Even in the workplace this is a great principle to follow. Give more effort with your job and you’ll reap the benefits.

You always get back what you put into something!

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