If you caught my post on Friday, you know that I’m a little disturbed at my lack of a financial ideology. It’s true: I don’t have any firm, overarching financial beliefs. No go-to money mantras.
On the one hand, this sucks. When I have tough financial decisions to make, I have no basic, deeply-held beliefs to fall back on. This is inconvenient, but, upon deeper reflection, maybe not all bad. Because on the other hand, I think my lack of a financial ideology might be a sign that I’m able to think analytically about my financial picture and make careful decisions on a case-by-case basis. So, I’ve decided that having no financial ideology might actually not be such a terrible thing.
At any rate, while I don’t have a financial ideology, what I do have are a few money “rules” that I stick to ruthlessly. As in, I’m very inflexible about these few practices. I consider them to be non-negotiable.
Again, they don’t form any type of cohesive belief basis, but they do play a huge role in guiding my financial decision making processes, so I thought I’d share them with my readers. Please, feel free to share your money rules in the comments below!
In no particular order, my money rules are:
1. Be well-insured
Having an emergency fund is important, but for most of us it’s almost impossible to save up enough money to cover a catastrophic medical emergency or your house burning down. Being well-insured is a key component of financial security, and one that’s not discussed very extensively in the personal finance world. Currently, I carry medical, dental, renter’s, car, long-term disability, and pet insurance. If I had children or a huge student loan bill I’d also have life insurance. Obviously, everyone’s situation is different, but if you’re under-insured you’re asking for trouble – take a long look at your life and ask yourself if everything you value is adequately covered. If not, get it covered, ASAP!
2. Keep track of your money
One of the reasons my debt and spending got so out of control a few years ago is because I was totally out-of-touch with my money. I stopped checking balances and keeping track of my spending – I just didn’t want to know. But not knowing where your money is going is seriously detrimental to your financial health – the less you know, the less you care, and the less you care the more trouble you’re likely to get yourself into. No matter high your balances are or how much you’ve wasted at Starbucks this past month, know your debt totals and where your money is being spent day-to-day. Knowing is the key to a healthier, happier financial future. So take a minute every day to log into all of your accounts – you’ll be happy you did.
3. Think very carefully before you borrow
I don’t think that it’s realistic for everyone to avoid all debt all the time. But I do think that before borrowing, the potential debtor should think very carefully about what she’s planning on going into debt for. Is the debt really necessary? How will I pay it back? What is the interest rate? Is there any way to avoid debt? Am I willing to take that option? These are just a few of the questions I ask myself before taking on new debt. Sometimes, even after the internal interrogation, I decide to proceed with taking on debt. But most of the time I don’t – I either forget about the thing I was going to buy entirely or I come up with an alternative that does not involve borrowing. I’m glad that this is a habit that I’m in now – because used to take on debt a lot more freely. And boy, oh, boy did I pay for it. Pun intended.
So what are your money rules? Do you agree or disagree with any of mine? Please, share!