Rule# 1

Posted on by Brian Lunsford

Live within your means.

Most people will tell you to steer clear of debt, and for the most part they are right. However, some debt is healthy and even essential for some of the basic needs you have.

I use to be die hard against having any debt at all. From 18 to 24 I stayed debt free. No car payment, no credit cards, no mortgage, not even medical bills. But what happened when it was time for me to buy a house as my family continued to grow? I struggled a great deal and was forced to get a credit card to establish a credit history.

There are some programs out there that will help you out when you have no credit history but these programs can be very stringent and particular on what you can and can’t buy and in my experience it is worth it to obtain a credit card and be responsible with it so that way you can establish a clean credit history and have more options to you as you start house shopping.

The idea behind being responsible with your credit card is to choose a bill to pay it with every month and then turn around and pay it off same as cash before you owe the credit card company any interest. This establishes clean credit history and you still live within your means.

Other steps to ensure you live within your means are as follows.

  • Do not spend more than you make
  • Establish a cash flow system for your finances (Make a list of all expenses against all income sources, this will allow you to see your personal free cash flow)
  • With your free cash flow, you should invest a certain percentage and save a certain percentage. (A local financial advisor can help you with this on a professional level)
  • Have an emergency plan in place if you or someone in your household loses their job, a good rule of thumb is to have about 3 months of your expenses put back for this.
  • Don’t try to keep up with the joneses. The Jonses are not as wealthy as they appear because they do not live within their means.