Thanks to Free Money Finance for the reference to the 10 Commandments of personal finance.
1. Thou shalt create a savings plan
2. Thou shalt not spend more than you make
3. Thou shalt not try to keep up with the joneses
4. Thou shalt limit the amount of debt on credit cards
5. Thou shalt pay monthly bills on time
6. Thou shalt avoid get-rich-quick schemes
7. Thou shalt protect thyself against risk
8. Thou shalt teach your children to handle money wisely
9. Thou shalt plan for retirement
10. Thou shalt legally protect thyself and thy family
Read the original source for more information, but I just wanted to add some of my own thoughts on them.
1. Thou shalt create a savings plan
The site recommends 20% of your income, but I think that’s too much. It’s great if you can afford it, and you should certainly do it, but if you can’t, then 10% is fine.
Another option is to put aside 10% into a savings plan, PLUS 10% into an emergency fund. When the emergency fund equals 6 months of your lifestyle expenses, then stop putting that 10% into the emergency fund and put it into your savings, thus increasing it to 20%.
2. Thou shalt not spend more than you make
This is common sense, but is the reason why most people have trouble with debts. It’s a simple matter of sitting down with your budget and working out what your expenses are. Every dollar, every cent, everything. And then detract this amount from your weekly/fortnightly/monthly income.
If the resulting figure is a minus amount (eg. -$246), then your expenses exceed your income. This is not sustainable.
You’ll need to make some hard decisions about what you can stop spending money on in order to reduce your expenses. You can find more information about this in my article How to be your own financial manager.
3. Thou shalt not try to keep up with the joneses
This is just silly for so many reasons. What if they have more money than you? You’ll never reach their level. Why do you have to keep up with them? Because you’re insecure about your status, whether in your neighbourhood or social group or work. This is an internal issue you’ll need to deal with, and spending money doesn’t help resolve it. If your only reason to get it is because ‘someone else has it’, then you shouldn’t be getting it. Especially if you can’t afford it.
4. Thou shalt limit the amount of debt on credit cards
Quite often banks will give out credit cards with a credit limit that they would like you to have, based on your income and your ability to repay it. This is a dangerous thing to accept.
If you don’t know how much credit you need, then you don’t need a credit card. Don’t do it!
Try to get a credit card for only as much as you think you’ll need. Anything more than a few thousand dollars and you should be thinking about a loan instead. The interest rates on repayments will be much cheaper.
Think about a Debit Card instead. This is like a credit card, but the money you use is your own savings account. You can’t spend more than what you’ve saved, and you don’t pay any interest. Much smarter!
5. Thou shalt pay monthly bills on time
Every time you’re late with a bill, it affects your credit rating. Also, by being late, it means your next payment is DOUBLE what your missed payment was, in order to catch up. If you weren’t able to afford the first missed payment, how can you afford the second doubled payment?
And that’s not to mention late fees. So just pay your bills on time. It’s easier in the long run. Sacrifice something unimportant, like not drinking at Starbucks for a week, in order to get the money for the bill.
6. Thou shalt avoid get-rich-quick schemes
Listen to the advice – “If it sounds too good to be true, it probably is.” It’s true. If it sounds too good to be true then you’re either being deceived or it’s illegal.
7. Thou shalt protect thyself against risk
I have nothing to add to this one. 🙂
8. Thou shalt teach your children to handle money wisely
Children are a reflection of their parents in many ways, and if you want them to have a wise attitude towards money, you have to give them something wise to reflect. You owe it to your children to be the best that you can be.
9. Thou shalt plan for retirement
Work out how much you’ll need when you retire. Every year, for another 30 years. Maybe even longer. You will need to start doing today whatever you need to do to have this money available to you when you’re no longer working.
Save as much as you can, put money aside into retirement plans, invest in property or other growth-oriented investments. These are all effective means of planning for your retirement. You need to start doing it now, to maximise your results by the time you retire.
10. Thou shalt legally protect thyself and thy family
Just do it. They’ll thank you for it when you’re no longer around but you’ve set up safeguards for them when you’re gone.
Thanks for reading! Please add your own thoughts below.
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