As the year comes to an end, once again people (including myself) have resolutions to make next year better than this year. The two most popular resolutions involve physical fitness and fiscal fitness. Most of us have goals to lose weight and to lower our debt (increase savings, etc.). Usually, the physical fitness aspect of our resolution means to eat less and exercise more. The course of action is simple. The key is to get started or as that famous slogan from that popular athletic apparel company says, “Just Do It”.
For our personal finance, it is a bit more different. It should not be as complicated. As I progressed through investments, real estates investments, eliminating credit debt, increasing cash flow, etc., I have (along with my wife) have practiced to the best of my ability these principles. As the samurai warrior or spartan soldier have a code of ethics (or Bushido code), it is effective to have principles that we should apply to our personal finances. Here are some:
Never listen to financial advice from someone making less than you. This may seem cruel. But, would you go to seek medical advice from a plumber? (or vice versa) Even though they may be the nicest and best plumber in the world, it would make sense to seek medical advice or treatment from a medical professional (e.g. a doctor). Why would you hinder yourself by seeking financial advice from broke folks? You do not have to avoid them. You can still (and should) do other activities such as golfing or watching movies with these folks.
Do not borrow money from anyone especially relatives. Beside purchasing a house (which it is possible to save for), you should not take out loans or use credit. Now, it is especially to remember this principle when borrowing from relatives. Unless you want to change or hurt that relationship, you should not loan nor borrow money from your dear relatives. Remember: The borrower is enslaved to the lender. Money is important but it is like fire. It can warm a house or burn a house. When borrowed or loaned to relatives, it will burn that relationship.
Use cash. Before I try to play in the credit game, I would look for lower rates (or even zero percent rates). The best rate in the long-term (or any term for that matter) is cash. Using cash has an emotional “zing” to it. You will hesitate before making any purchases. That hesitancy is known as the “voice of reason”. That is what we need in our personal finances.