10 Commandments of Personal Finance
For some people, getting personal finances in order is more grueling than wandering the desert for 40 years. But it doesn’t take a miracle. If you are looking for some basic guidelines, just follow these 10 commandments:
1. Thou Shalt Take Action
Reading about how to improve your personal finances is a start, but it has absolutely no meaning if you don’t take the action of putting what you learn into motion. Before you can get anywhere with your personal finances, you need to begin — right now. If you are reading this article, you know that you should be taking steps to get your personal finances in order.
Print out this list and place it where you will see it every day, so that you are reminded that personal finance is a priority in your life and that you will take some action each and every day to try to improve your lot. If you aren’t sure where to begin, start with getting your banking accounts in order.
2. Thou Shalt Pay Off All Credit Card Debt
Credit card debt is, in most cases, the No. 1 enemy to your personal finances. It can have a huge negative effect if your credit card bills are not paid off in full every single month.
Sit down and work out a plan to pay off any credit card debt that you currently have, using the snowball method that best fits your personality. Make this a top priority.
3. Thou Shalt Understand the Difference Between Wants and Needs
To keep your personal finances in perspective, you need to understand the difference between wants and needs. There is nothing inherently wrong with small luxuries, and you should be able to enjoy many of the nonessential things you have. But it is important to realize that wants are not needs. If you master this skill, your finances will be in much better shape.
Take some time to critically look at your true needs vs. your wants. If you are having trouble distinguishing these, set up a plan to eliminate impulse spending.
4. Thou Shalt Live on Less Than You Earn
There are no two ways around this one. If you want to keep your personal finances in order, you need to live on less money than you make. That means either purchasing items and services that are less than you currently make, or figuring out a way to increase your salary so that you can spend more, but still less than you make. Either of these is perfectly fine.
Track your spending to see if it is more or less than you are earning each month, and create a budget so that you can continue to track it in the future. If you are spending more than you make, you need to decide whether to curb unnecessary costs or figure out how to increase your income. Most people can balance their budget without changing their current lifestyle.
5. Thou Shalt Pay Yourself First
Before you pay any of your other bills, you should pay yourself a minimum of 10% of your take-home pay. This money is not part of your monthly spending budget.
Go to your bank and set it up so that your paycheck is automatically deposited, if possible. Then set it up so that an automatic payment is immediately taken from your paycheck into a specified account that is not used for your monthly expenses.
6. Thou Shalt Set Financial Goals
In order to reach your financial goals, you need to know what those goals are. Nobody can determine these goals except for you. You need to take the time to figure out exactly what your financial goals are so that you can take the needed steps to reach them.
If you don’t know specifically what you financial goals are for this year, next year and 10 years from now, take the steps needed to create them.
7. Thou Shalt Educate Yourself and Be Responsible for Your Decisions
While it may be more convenient to hand over all your money matters to somebody else, you will not do this. Part of being financially responsible is having the final say in all decisions about your money. That does not mean that you can’t seek out advice and get opinions on your finances, but in the end your money is your responsibility, and you are the only one who is going to truly look after your own interests.
If you have designated someone else to take care of your finances, begin to take back control. No matter what, spend an hour or two each week reading articles on personal finance subjects or visiting Web communities where you can ask questions.
8. Thou Shalt Save and Invest
Take the money that you pay yourself first and either save or invest it to make it grow and work for you in the future.
If you are carrying credit card debt, invest in it first. But also make sure to take full advantage of the saving and investing opportunities that are available. If your company matches 401(k) contributions, contribute up to the match and try to maximize your Roth IRA contribution. Make sure you have an emergency fund.
9. Thou Shalt Protect Your Finances
You will take the necessary steps, usually through insurance, to make sure that your assets are protected in case of a disaster.
Take the time to make sure that all your assets are properly insured, and re-evaluate this every few years or whenever a major life change occurs, such as marriage or a new addition to the family. Also be sure to compare insurance rates on a regular basis, since this is a competitive business.
10. Thou Shalt Donate to Worthy Causes and Those Less Fortunate
No matter how desperate your finances may appear, if you are reading this article there are a lot of people that are far worse off than you are in the world. It’s important to nurture a sense of giving and to be thankful for the small things that you do have. That means donating to worthy causes on a regular basis.
Find a few causes that you believe in, and give to them generously. Don’t assume that money is the only way that you can give. Volunteering time and skills are also appreciated by most charitable organizations. You can research organizations at Web sites such as Charity Watch . If you don’t know where to begin, three that you may want to consider are Heifer Int’l , Leukemia Society or Meals on Wheels .
(Article provided by WMI)
Until next time, J.
Have a fabulous, magical and safe holiday!
"Take control of your destiny or someone else will"
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December 23 2008 05:28 pm | Wealth Strategies
December 24th, 2008 at 9:04 am
Great Advice, Janet. Especially as we approach the new year with new resolutions. Wishing you and your family a very happy holiday season!
Bob and Rosemary
Bob Clarkes last blog post..When One of Your Team Members Quit
December 25th, 2008 at 7:29 am
verry good advice
i wish you happy…
December 25th, 2008 at 12:53 pm
Hi Janet,
Yes, these are all excellent tips. You really have to know your plan and keep things like this top of mind to ensure you take action. It’s pretty easy once you get in the habit! It took me awhile but I think I’m there!
Hope your holiday is wonderful–
Maueens last blog post..Recession Proof Industries- What is the best?
January 3rd, 2009 at 12:21 am
Great tips! I like the number 10, it’s better to give to those people who are more than worthy to receive anything from us. Little things can be a big thing!
Bhings last blog post..New Year’s Resolution
January 3rd, 2009 at 12:23 am
Great advice. It feels good not to be in unmanageable debt.
Karens last blog post..I Won a $100 Sears Gift Certificate
January 3rd, 2009 at 5:30 am
Some good pointers there…Expect the last, I dont believe in giving to charity.
LadyGraces last blog post..Front Cover
January 3rd, 2009 at 9:06 am
What an excellent post! If you don’t mind, I’ll echo the highlights on one of my blogs ( http://mba-geek.com ) and recommend to my readers to come read the details here.
Owens last blog post..Xmas fun: Win yourself a Twitter Mug
January 3rd, 2009 at 9:45 am
The one aspect of that we don’t follow is paying ourselves first. There’s no use in having a savings account earning a couple of percent when we have credit cards charging us more than a couple of percent.
We’re working hard to pay off our credit cards and have a good amount of available credit. If an emergency arises, we have that credit available and are in no worse position than we were to begin with.
Pay off debt first, then save. That’s the way we do it.
corrins last blog post..Atkins - not just meat, eggs, and cheese anymore!
January 3rd, 2009 at 10:36 am
this is a great list, but i have to echo what corrin said. we focus on paying off our credit cards right now rather than putting that money in savings because the interest rates we’re charged are much higher than the ones we earn.
cadys last blog post..A Cropping we will Go
January 3rd, 2009 at 11:46 am
Great principals to live by. Number 10 is my driving force behind what I do with home business.I have some lofty goals..
Maureens last blog post..Jonathan Budd’s MLM Mastermind System
January 3rd, 2009 at 1:00 pm
This advice was suggested to me years ago and I am passing it on in the hope it may help!
Apply for a Line of Credit at your bank and use that money to pay off your credit card.
Put your credit card in a large bucket of water and put it in your freezer (tie a string around the card and anchor it with a rock so it’s in the very center of the bucket where it’s difficult to get to!!!).
Once your credit card is paid off, AND you’ve repaid your line of credit (at a MUCH lower interest rate) thaw your credit card and use it for essentials only - and pay the balance off every month.
If you need money in an emergency, use your LOC, NOT your credit card. The LOC interest rate is MUCH, MUCH lower than a credit card.
Heather in Beautiful BCs last blog post..Haiku Eve
January 3rd, 2009 at 1:48 pm
Thanks all of you for stopping by and commenting! I have really enjoyed reading your thoughts and other alternatives and ideas. Have a fabulous and prosperous New Year!
January 3rd, 2009 at 1:53 pm
Great advice. Now, if only we weren’t in a recession… I’m currently working on getting my credit card bills in order. We’re signing up for a consolidation service. The hardest part for me is not being able to give to others as much as I’m used to. I like to donate to charities - to my church, to the ASPCA, and to other charities that I come across during the year - but lately things have been tight and I haven’t been able to do that as much. Hopefully we’ll get things in order soon, though.
Sadies last blog post..I’m Starting 2009 Off At…
January 3rd, 2009 at 5:06 pm
As always excellent advice here for starting the New Year off right!
Barbaras last blog post..Something New To Ring In The New Year !
January 3rd, 2009 at 5:19 pm
Happy New Year! Budget/financial health is as important as physical health!
Christina thecoffeeladys last blog post..New Years on the Homestead
January 3rd, 2009 at 6:37 pm
And maybe add:
Thou shalt cross thy fingers until the circulation stops that the new President knows what he’s doing and the Congress will back him up! LOL!
Great commandants! And Heather, the freeze your credit cards into ice blocks is perfect
Diane Scotts last blog post..January 6th Reminder Marketing Tools You Need With Residual Income
January 4th, 2009 at 1:43 am
Very original, I like that!!!
January 4th, 2009 at 3:12 pm
All this stuff makes my head spin! My husband takes care of it all, and I trust him so I never think about it.
Julies last blog post..Happy Birthday To Me
January 4th, 2009 at 6:21 pm
Julie,
You’re fortunate to have someone who handles the financial aspect of things for you. Not to sound morbid, but have you thought about what you would do if something were to happen to your husband? Mine died at the age of 39…. Statistically more than 50% of the women over 50 are single (either unmarried, divorced or widowed). You might want to consider slowly educating yourself on financial matters, even just enough so your “head doesn’t spin”. Good luck and happy new year!
J.
January 4th, 2009 at 11:30 pm
Great tips, I agree with most of them.
We’re unable to pay ourselves for anything at the moment.
Credit cards are awful, we haven’t had any in years.
valmgs last blog post..Back to reality
January 5th, 2009 at 2:29 am
This is one of the best lists for finances that I’ve read in a long time. I’m bookmarking it to re-read and put into action.
Connies last blog post..Curse of the Bone Pirates Book Review
January 5th, 2009 at 2:29 pm
Excellent article Janet. Even though I watch my finances quite well, I have picked up some things to think about within this article.
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