Do you need to change your car, do you want to treat yourself with some purchases or want to invest in a real estate project? Here is what this rule particularly followed by all entrepreneurs consists of.
Some particularly useful rules for managing your budget in life should be taught at school. This is what many investors who have had to learn from their own experiences believe. Because when we want to buy real estate, change cars or treat ourselves by spending a certain amount of money, we are not always well supported or advised. Have you put enough aside to acquire this property or should you borrow by taking out a loan from your bank? And then, we must above all look at whether the amount we want to spend is reasonable based on our income.
On his Tiktok account, Racem Flazi, entrepreneur and CEO of Legal Place, recalls what the “10% rule” consists of, which in his eyes is essential before any purchase or investment. Concretely, if you want to buy a good that costs more than 10% of the total amount you have in your account, this means that it is better to do without it. “For example, I want to buy a Porsche that costs 50,000 euros, but I don’t have 500,000 euros in my bank account, so I don’t buy it.” recommends Racem Flazi, who believes that if you buy it anyway, it means that you are living beyond your means. To another extent, if you earn 3000 euros per month, according to the 10% rule, you should not spend more than 300 euros on a single purchase or investment. This may seem like a small amount, but following this rule can help you maintain a healthy financial balance and avoid getting into excessive debt.
In addition, many French people take “too much credit to consume”, which can sometimes lead to money problems. It is therefore appropriate to think about your real desires and needs, depending on your living environment. “As soon as people earn a little money, they will immediately build up credit to buy a luxury car, a luxury watch, very expensive clothing brands (Gucci, Hermès, etc.), but if you traveling in economy class and you dress in Hermès, there is a problem“, notes the investor. “In reality, you know deep down that you’re not supposed to own these items, and the worst part is that often, it’s just to show off social status that you do it.”.
In practical terms, this simple rule can help you make more informed financial decisions and avoid common pitfalls. Thus, by applying the 10% rule, you can evaluate whether a purchase or investment corresponds to your current financial means. This requires you to carefully consider your financial priorities and avoid impulse purchases or risky investments. By following the 10% rule, you can also better plan your long-term finances. You can save more money each month and invest in longer-term financial goals, such as buying a home, building an emergency fund, or preparing for retirement.