Three Financial Rules of Thumb

Kerry from Squawkfox was doing an article and asked me for three quick financial rules of thumb to live by (well, I think she asked me rules of thumb that I live by, but those are useless given my financial situation, so I decided to give her a better answer). Remember that everyone should have their way of dealing with their financial situation, but it’s always good to start with a couple of simple rules and then figure out what works for you.

What were these nuggets of Financial Wisdom that I passed on?

• Spend less than you make, sounds simple but for some reason, lots of folks NEVER figure that out. Even Dickens knew this one as he wrote:
  

  Annual income twenty pounds, annual expenditure nineteen six, result happiness.
  Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.
  Charles Dickens, David Copperfield, 1849

• Never confuse spending less with saving money. You cannot add by subtracting financially. Don’t get me wrong spending less for something is a goal, but you aren’t saving money, you are spending it, you are just spending less of it. Save by not spending in the first place.
• Lifestyle creep is dangerous, and never an excuse to build up debt. You don’t “deserve” those nice things necessarily, never go into debt for something you want, and figure out the difference between what you WANT and what you NEED (and stick to that).

I have written these things before (note the links to the earlier posts about those exact topics), but sometimes it is worth chewing your cud in the name of financial literacy.