First posted over four years ago, I continue to believe these approaches to financial health work. I have made one or two edits, like CD rates, to the original post but otherwise it is how I wrote it.
Up front I'm telling you I am not an investment guru. I'm not pushing the next hot thing. I'm just an average guy who has managed to stay afloat by adhering to a few basic rules of financial sanity. How many are you following?
- Don't Chase Returns That are Well Above Average. If most CDs are paying .9%, you can assume that one paying 5% has some problems. If a broker or friend says you can make a 15% return on your money, turn and walk away quickly. If it is too good to be true, it usually is. Greed kills.
- Use On Line Bill Pay. There is no reason to write a check, put on a stamp, and hope the Post Office delivers it on time. Virtually every bank allows you to pay your bills, on-line, for free. It is more secure than the mail. Often you can upload the data right into your budgeting software.
- Get a Free Credit Report. Go to annualcreditreport.com for a free report at least once a year. Don't be confused by sites that promise a free report, but require you to purchase some other service. The one linked above is absolutely free. Look over your report for mistakes or problems. Contact the credit bureau immediately to fix anything that is wrong. The rate you pay for your credit card, auto loan and mortgage are directly affected by these reports. Know what they say.
- Use A Budget. If you do nothing else, keep track of what you spend so you aren't surprised at the end of the month with more days left than money. There is no other way to keep yourself safely afloat. Otherwise you are leaving your financial well-being to chance.
- Live Beneath Your Means. Spend less than you bring in. How do you know? Use a budget. Your goal is to spend 10-20% less than your income or investments generate. Why? That is the only way to build up a sufficient emergency fund and give you enough wiggle room to adjust to unexpected expenses or inflation. I wrote a post about this subject with more details. If interested, click here.