The Only Financial Rule You Will Ever Need

February 5, 2010

Calling something the only financial rule you will ever need sounds a bit grandiose but it gets your attention. Plus, it’s kind of true. Everyone had their own unique financial situation so everyone needs their own game plan but there is one rule that should be kept in mind at all times. Don’t buy something if you can’t afford it.

This sounds elementary, but those who learn to adhere to this rule from day one never enter into debt. Of course, there are special circumstances but generally this is true. If you never spend money that you don’t have then you will not be likely to find yourself in trouble financially. This advice is perhaps more relevant now than ever.

The Beauty Of Only Spending Money You Have

If you start off with the clear rule of only spending money that you have then it will be hard for you to get into debt. This is not to say that you cannot have credit cards. It just means that you only put as much on your credit cards as you can pay off each month. If you cannot afford to pay it off then you put off any additional purchases until a month when you can. Or you could just forget those potential purchases entirely.

But some say that’s the beauty of credit cards. You can buy things you cannot afford and not worry about paying for them until later. What about not buying them and never having to worry about paying them off? Wouldn’t that be better than having more possessions or other luxuries that you don’t really need?

What About Necessities?

You’re not going to be able to pay everything off in a month. Cars and houses are two excellent examples of this. But these are necessary expenses and you can still be smart about them.

Choose a house and a car with monthly payments that you can easily afford. Do not make choices that will have you cutting it close each month because these will not be your only expenses in life. You want plenty of leeway for all those other pressing bills that come in regularly or unexpectedly. Make sure that you can pay all your bills off every month and make sure that you can do it with plenty of breathing room.

Does Anyone Really Do This?

This question is a popular rationalization. Many say that no one really pays off their credit cards every month. Even if this were true, the poor financial planning of the rest of the world is no excuse for you to do it too. Even if this is how everyone else does it, don’t you want to be better off financially than those who continue to amass ever greater amounts of debt each month?

There are many people who don’t buy anything they cannot afford. They are the ones who are not hit as hard when recessions hit. They already know that spending more than you make can land you in precarious financial situations and have made the choice to not end up in one of their own. If you want to be free from the debt that so many people carry then you have to do things differently.

If you are starting out then this is the only financial rule you will ever need. Don’t spend money that you don’t have. Adhere to this rule and prepare for a life full of financial smooth sailing.