The 7 Money Rules for Life: A Summary of Mary Hunt’s Rules

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Disclaimer:

Please do not assume that this is a substitute to the actual book entitled 7 Money Rules for Life. The author does a great job of explaining each rule with complete clarity. I recommend reading the book if you would like to learn each individual rule with more in depth context.

About the Author: Mary Hunt

Mary Hunt is the founder of the Debt-Proof Living organization consisting of an interactive website with thousands of loyal followers. She is the award-winning and bestselling author of 23 books. As a motivation speaker, Hunt travels to many conferences, colleges, universities and corporations addressing how to take control of one’s financial future. She currently resides in Orange County, Florida with her husband.

Where Did the 7 Rules Come From?

Hunt, being the debt-free advocate she is, was once in debt. She was a credit-card consumer who fell into the trap of debt. She accumulated over $100k worth of debt. In that time, she knew she had to make a change. She wrote the book 7 Money Rules for Life because she wanted to show others that it was possible to get out of debt. Through trial and error, she had created tons of rules and simplified them to only the seven most important.

With each rule that I list, I’m not following word-for-word from Hunt’s experience. I’m summarizing and reporting about the rules in an objective manner.

Rule Highlight:

No. Rule Description
1 Live Below Your Means Spend Less Than You Earn
2 Save, Save, Save Save for the Future
3 Give, Give, Give Don’t Be Susceptible to Greed
4 Foreshadow Expenses Anticipate Irregular Expenditures
5 Direct Your Money Tell Your Money Where to Go
6 Manage Credit Manage Creditors
7 Borrow Only What Can Be Paid Don’t Borrow Unless You Can Pay

Rule #1: Live Below Your Means

After learning about Hunt’s financial past from the introductory, the reader moves straight into rule #1: “Spend Less than you Earn”. Simply put, Hunt states that this is the single most important rule to get started toward a financially stable future. In this chapter, she highlights the fact of living paycheck to paycheck consumes 77% of the nation. If even the slightest extra expenditure occurred, the families would be in financial distraught.

After giving some line graphs and explaining how the income line should be higher than the spending line, she moves to the subject of wants vs needs. She states that the single most important aspect when trying to spend less money is finding contentment. Contentment is choosing to be happy with what items you already have. Rather than spending money on the latest technological devices, the family could be content with what items they already have.

A general rule of thumb, stop spending money and down-size your lifestyle for this rule to apply. The flow-chart represented in Figure 1 allows an individual to make a conscious decision on whether or not the item they want is a need vs a want. The only catch is, they must recite the flow-chart before they buy something and they must wait 24 hours before attempting to purchase it. Hunt describes many times where she convinced herself she needed an item until the 24-hour cool-off period occurred.

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Rule #2: Save, Save, Save

Paycheck-to-Paycheck Savings

With this rule, Hunt emphasizes how important it is to save for retirement and a financially stable future. She explains that it will change an individual’s attitude if they know they have money stashed away for the future. The first highlight to the rule is saving 10% of each paycheck. This is a crucial yet simple aspect of the rule to get started towards a financially stable future. If an individual lives paycheck-to-paycheck, they might struggle with the fact of saving 10%.

In reality, if one was to access their financial expenditures they would notice certain purchases they did not need. Referring back to rule one, before making a purchase one should always utilize the Pocket Quiz Flowchart in Figure 1. Hunt recommends utilizing it for purchases of $20 or more, but I’m going to recommend $5 or more. Each individual $5 purchase adds up overtime. Before one may know it, they could have already spent $50 – $100 on strictly minor purchases.

Emergency Fund

Hunt emphasizes how vital it is to ensure an emergency fund is available for use. Emergency funds should never be touched unless an event occurs such as hospital bills, car wrecks, job loss, etc. To analyze how much is needed for emergency fund, one must calculate their total month’s necessities and multiply by six. For example:

Groceries ($250) + House Payment ($700) + Car Payment ($80) + Car Insurance ($45) + Phone Bill ($60) + Internet ($60) + Electric Bill ($150) + Other Expenditures Necessary = $1,345 (+200)

Total = $1,545 * 6 = $9,270

Though the bills may very from location, make sure to add up all the expenditures from the month. After the process is completed, I personally would recommend adding at least an additional $200 to each month for some leg room. Once it’s multiplied by six, that’s how much should be an emergency fund. Six represents the amount of months the emergency account should be able to fund if a job loss was to occur.

How to Found an Emergceny Account

Hunt makes sure to answer any questions that may arise in someone’s head about savings. As a quick summary, she recommends taking out 10% of each paycheck for a savings account for retirement. For the emergency fund, she lists an assortment of ideas that may increase it overtime.

Some of Hunt’s Ideas:

  1. Utilizing the change in your pockets, put them in a jar.
  2. Eat at home instead of going out to eat and tip yourself. Put the tips in the jar.
  3. Sell items – add to the jar
  4. If an emergency happens, find a way to immediately replace the money in a short period of time.

Once the jar has collected enough money, deposit it into the emergency bank account. I have not listed all the items that Hunt recommends.To boost the savings, she does recommend adding $5 each day to it. The emergency fund is crucial in the short term so it’s vital to have money available in the account.

Rule #3: Give, Give, Give

In contrary to rule #2, this rule states that no individual should be susceptible to greed. Hunt states that an individual must give with not strings or exceptions attached to the money. Referring back to rule #1, contentment is a necessity for life. Contentment is being happy with the items you own. Greed is a nasty monster that can take over one’s mindset and attitude. Rather than thinking, “I’m happy with what I own”, greed states “I need more, more, and more!”.

How much do I give?

This really depends on the the income received and how much you think is enough for your means. It’s not about the quantity of the giving, it’s about the reason. You support a certain charity? Donate to them and ask for no tax returns. Hunt generated a system of 10-10-80.

  • 10% – Savings
  • 10% – Giving
  • 80% Income / Emergency Fund

She describes the 10-10-80 as the first three rules together in one formula.

Rule #4: Foreshadow Expenses

We all have irregular expenses that may occur from time to time throughout the year. This rule will bring financial freedom to life. Rather than worrying about changing the oil in a car or the next vacation, one will already have the money aside. Financial freedom not only brings stability but also a positive attitude.

Hunt recommends that for each irregular expense, one must set money aside each month. An individual may be thinking “I’m already setting out money for a savings, emergency fund, and for giving! How can I set money aside for irregular expenditures?!”. Referring back to rule #2, all the month’s expenditures together should completely be below the paycheck. If it’s not, then one is living above their means and they need to downsize. If it is, they should have some money left after savings and the emergency fund has been deducted. With the extra money, one can set it aside for potentially funding other savings accounts for irregular expenses.

The irregular expenses may not necessarily have to be bills. An individual could set up goals such as “New Computer” or “New Boat”. The possibilities are endless! Straight from the book, Hunt utilizes some common irregular expenditures:

Six Irregular Expenses That are Highly Predictable

Description Annual Monthly
Auto Maintence $700 $58
Vet $480 $40
Christmas $1000 $83
Property Taxes $2000 $166
Vacation $1500 $125
Gifts $600 $50
Total $6280

Rule #5: Direct Your Money!

As you may have noticed, all the rules correspond with each other. With this rule, Hunt explains how to budget correctly so that one is not over spending. This directly correlates with rule #1 and can be applied to anyone willing to make changes to their expenditures. First of all, one must determine their average monthly income.

Step 1: Income

How to Total Average Monthly Income:

  1. Weekly – Multiply weekly income by 4.333
  2. Biweekly – Multiply biweekly income by 2.167
  3. Semimonthly – Multiply semimonthly income by 2
  4. Quartely – Divide quarterly income by 3
  5. Annually – Divide annual income by 12

With each payment method above, one can determine how much they make each month.

Step 2: Fixed Expenses

I have already touched on the basis of monthly essential expenditures. These are payments that are regularly occurring each month. With this step, include all fixed bills including anything that’s not necessary. Some examples are: music lessons, mortgage, car payment, etc. The total for all the expenditures needs to be accurately calculated.

Step #3: Variable Expenses

Variable expenditures are the bills that fluctuate overtime. This can be anything from groceries to fuel cost. Each of the bills must be accurately calculated from past experiences. To ensure that there is no underestimating, I add $20 to every bill. If I have left over money after then ending of the month, I add it to the emergency fund.

Step #4: Non-essential Expenses

In an earlier step, Hunt states that one must calculate the total of fixed non-essential bills. This step states that even the fluctuating non-essential expenditures must be calculated. Hunt recommends that there still has to be fun in life. While I agree, I recommend disregarding this step until an individual has successfully filled their emergency fund up to six months worth of capacity.

Step #5: The GRAND Total

Once everything is calculated, it needs to be totaled. All the fixed and fluctuating expenditures need to be deducted from the overall income total. If it is a positive number, then great job! If its a negative number or barely positive, there needs to be a change.

Step #6: Change

If one received a barely positive or negative total, this step is crucial. There are various ways one can make a change with their financial situation. First of all, I recommend downloading an app that tracks every source of expense and income. With an app handy, one will be able to track all of their expenditures and notice any changes throughout the month. Some apps even compare months and calculate averages based on spending. If an individual does not have a smart phone, they could track their expenses by hand or excel database sheets.

This just repeats all the steps above but once everything is tracked, you will be able to see any growth or loss. Hunt recommends utilizing the envelope method. Directly from the book, Hunt states:

Envelopes. This is a simple method of managing cash– First, get some envelopes– write a category on each one and fund it with the amount allotted– Example: groceries: $250– as you buy groceries throughout the month, spend from this envelope only. Record the “What?” and “How much?” right on the envelope.

An individual may be wondering “Sure I can track and track, but when will I see growth if all I do is track the expenses I’m already paying?”. The simple answer: It is up to the individual to change the way they live and what they spend their money on to ensure they are not in the negatives. That is why this rule is titled “Direct Your Money!”.

Monthly Spending Plan – Example

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Rule #6: Manage Credit

Hunt emphasizes that credit is not the enemy. The perpetrator is the individual who subjects themselves to using credit cards and loans incorrectly. In the beginning of her financial life, Hunt had made the mistake of using credit card after credit card to accumulate over $100k worth of debt. This type of debt is toxic to a financial future and must be avoided.

There are three familiar terms that one must understand.

  1. Credit Report Agency (CRA): A company the gathers and collects all the information for an individual. Bank statement, credit usage, etc.
  2. Credit Report: This is the information displayed from the CRA that gathers all the information. It is associated with a social security number. This information can change on a monthly basis.
  3. Credit Score: This is the three digit score. It is a compilation of the credit report with the negative and positive aspects influencing it. While there are many different scores, the FICO is the most important.

The three main CRAs are Equifax, Experian, and TransUnion. Each agency is required to send an individual one credit report every twelve months for free. Hunt explains that to check a credit report and individual must go the Annual Credit Report website and request them. The user may choose to see all three CRA forms at once or spread them throughout the year. I recommend spreading them throughout the year to ensure that an individual is always updated with at least one of them.

Statistically, 70% of credit reports contain false information because they may contain wrong names or addresses. The name mix-up is most commonly associated with junior and seniors. Hunt explains that once the credit report has been downloaded or sent by mail that the individual must check every entry then report if something is false. By law, incorrect information can be removed from the credit report.

The FICO score is not free. The score is $15.95 each time an individual wants to check it. Hunt explains that there’s no need to view the FICO score but once a year since the score is just a measurement of the reports that the individual receives for free. If one doesn’t have incorrect or negative information, their FICO score will reflect a high number.

What Determines a Good FICO Score?

  • 620 = Minimum
  • 720 = Good
  • 760 = Great
  • 780 = Excellent

How is the Score Calculated?

Even though there’s secrets among the report agencies, it can be estimated that a couple of crucial points are involved. View the pie chart in figure 2 for more information.

What are the Advantages of a FICO Score?

View figure 3 for the chart of expense differences between high/low FICO scores.

Figure 2

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Figure 3

FICO Score Annual Percentage Rate 36-Month Auto Loan
720 – 850 4.261% $296
690 – 719 5.720% $303
660 – 689 7.769% $312
620 – 659 11.282% $329
590 – 619 16.338% $353
500-589 17.883%

Rule #7: Borrow Only What You Can Pay

As stated from the title, this rule states that an individual must only borrow what they can repay. Hunt goes into depth on this rule with student loans, home mortgage, and home equity loans. With this rule, I’m only going to be referring to home mortgage example from her.

Hunt uses the example of a home that is worth $250k. She states:

— if the purchase price of the home is $250,000, you should borrow no more than $200,000. This creates a comfortable margin that will you reasonable certainty that you can repay that loan

Conclusion

As the reader, you may have noticed that all the rules intertwine with each other. There is a not a single rule that does not apply to the other. Through trial and error, Mary Hunt configured these 7 Money Habits into a great book that I recommend for all to read. Being the first financial book I have ever read, I personally give it a 4 / 5.

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