Commandments of Personal Finance

December 4, 2008 at 7:08 am (Improving Financial Health) (, , , , )

Hello all readers from MSN! Welcome, and thanks for visiting!

I’ve been talking to my boyfriend about my budget journey, my research, what I’ve been doing, and how i’ve done so far. I’m also trying to convince him to get in on the game, as he needs it as much as I do, though he doesn’t have the debt I do. I realized in talking with him last night that there’s several things that every PF blogger out there seems to recommend or follow, and I’m going to save you all a bunch of effort and tell you what they are! Drum roll please…

Track your spending habits

Compile the past 3-4 months bank statements, and start figuring out where you spend your money. This will tell you what expenses you have, and where you spend money, and also where you probably need to rein in your spending (I’ll give you a hint, eating out is probably high on the list).

Make a budget

Determine what expenses you absolutely HAVE to pay (rent, utilities, car insurance, food). Figure out what you don’t have to pay, but may be able to cut, or may need to cut in the future (cable, entertainment such as books, movies, going out to eat, sports or theater tickets, etc). Figure out what yearly expenses you may have that may not occur every month, such as car tab renewals, car maintenance, yearly subscriptions, etc) so you can budget some per month to save up for the big expenses. If you know about them in advance, it won’t wreck your budget when they happen. Don’t worry if it seems overwhelming. Do it, live it, and see how you do. I guarantee you’ll make adjustments and then tweak as necessary. Many people seem to have an internal competition to see how well they can beat their budget from month to month. And remember to not worry if it doesn’t always work. Over time it will!

Start an emergency savings plan

It seems to be a $1,000 for those last minute unexpected bills. Your car is towed; you had to go to the emergency room; your car broke down and needs a repair; a death in the family – plane tickets last minute.

Open an online ING orange savings account

With a $25 bonus, and a high APY rate of return (between 3-4%), it’s a great way to save. Plus, since it takes a few days to take money out, you’ll be less likely to relie on it as a safety net and spend it.

Take stock of your debt

Figure out what debts you owe and make a plan to pay them off. Don’t just pay the minimum – pay as much as you can while balancing saving up an emergency fund. There are 2 school of thoughts on paying them off. Either pay off the smallest ones first to feel like you’re making headway, or pay off the largest percentage rates first to reduce what you owe faster (I like this last one best).

Talk to the credit card companies and see if they will reduce your interest rates (they may or may not until you start aggressively paying them off). Consider moving debt onto lower or no-interest credit cards (be aware that transfer fees may affect your decision to do this, or not).

Snowball debt payments

In your budget you’ll have regular monthly interest payments due to your existing creditors. As you pay them down, these will get smaller. Rather than reduce what you pay, keep paying the SAME amount. The debt will reduce even more!

Increase your income

Get a second job. Work overtime. Do online surveys for cash payments (they add up over time). Have a garage sale, or more than one! Put all additional income and all found income (gifts, tax returns, etc), straight into debt payments.

Build up a 3-6 month budget reserve

What happens if you lose your job or become injured? After saving up an emergency fund, and starting the debt repayment (if you have any), start thinking about saving up 3 to 6 months of your budget for life’s “what if” situations. Not everyone can do this; if it doesn’t seem possible, save up a larger emergency fund, or pay off your debt first.

Become frugal

Eat out less. Cook at home more and make meals for work, rather than eating out. Buy bulk. Clip coupons. Shop at thrift stores rather than the department store. Do without, or make do with what you have.

Stop spending

Do you have credit cards? Stop using them. Put them away and pay them off. Live off your income (“spend less than you earn”) only, and don’t incur additional debt. This should probably be the number one item on the list.




  1. Jerry Cheung said,

    I llike your list of straight forward advice. I still use my credit cards for the convenience of ‘swiping’ and not carrying cash. I find that if I carry a lot of cash, I end up spending it without thinking. Credit cards also lets me manage and track what I’ve spent online so I can look over them later on. My take on it is to pay off your credit card bills every month.

    Best of luck with your goals!

  2. niaknowles said,

    This may not mean anything, but I just want to say how proud I am of you, the steps you’re taking. You’re in my prayers- I’m routing for you! 🙂

  3. Brian Light said,

    You blog is interesting but I was wondering about the ING Savings account. Why is it so cool?! It is 3 to 4% per year and where I live (the country where I live I mean) bank gives 8% minimum per year. Does APY Rate of return mean how much you will receive per year?

    Brian Light

  4. Catherine said,

    Great advice. Like Jerry, i carry cards in lieu of cash. Quicken is a big help with getting finances in order and keeping it that way, including calculation of net worth.

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