The Ten Commandments of personal finance

By Len Penzo

For Len Penzo dot Com

Published: Tuesday, Sept. 10 2013 1:40 p.m. MDT

Charlton Heston as Moses in "The Ten Commandments."

Courtesy AMC

Enlarge photo»

Editor's note: This article originally appeared on the personal finance blog Len Penzo dot Com. It has been reprinted here with permission.

Maybe you heard about that infamous Kelton study from 2007 that found Americans could identify more ingredients in a Big Mac than the individual Ten Commandments.

It’s true, folks. Eighty percent of Americans knew there were two all-beef patties in a Big Mac — but just six in ten could identify “Thou shalt not kill” as one of the Ten Commandments. I know.

I’m sorry to say my anecdotal research verifies the Kelton study.

I know a Big Mac has two all-beef patties, special sauce, lettuce, cheese, pickles and onions — all on a sesame seed bun, no less — but I can only name eight of the Ten Commandments. (Don’t tell my third grade catechism teacher, Sister Nora.)

I wonder if Sister Nora would feel better if I told her I can name my Ten Personal Finance Commandments.

That’s right; in order to keep my life running as smoothly as possible, I faithfully follow these ten little nuggets of financial wisdom every day:

1. Spend less than you earn.

It’s the first personal finance commandment for a reason: Those that follow it are destined for financial freedom. It helps to be a frugality disciple. Remember, the word disciple is derived from its root word “discipline.” There is a lesson there for those who are willing to take it.

2. Behold the power of compound interest.

The greatest lesson you can ever bestow upon your children is the power of compound interest. True, the power is somewhat diminished in today’s upside-down financial environment of near-zero interest rates and lower investment returns, but working teenagers with the financial discipline to let their accrued savings grow over time still have a golden opportunity to set themselves up for life by making relatively smaller up-front contributions.

3. Always pay thyself first.

Your creditors are not more important than you. The truth is, it’s a lot harder trying to save money from what’s left over after you’ve paid all the bills — which is why you should contribute to your retirement nest egg and emergency savings fund before you sit down to pay your first creditor every month.

4. Faithfully track thy household income and expenses.

Trying to take control of your personal finances without knowing how much money you’re earning — and where it’s all going — is tantamount to trying to drive with a blindfold around your eyes. Eventually, both practices end in disaster.

5. Knoweth the difference between wants and needs.

Being able to distinguish between wants and needs is directly tied to your ability to accept personal responsibility. At the most basic level, all of us have but a handful of primary needs: food, water, clothing, shelter, healthcare, and (for most of us) transportation. Everything else, folks, is a want.

6. Keep thy budget holy.

Budgets aren’t for everybody — but they are essential for those who lack financial discipline. A budget is an important tool that helps control spending. It’s easy to make a budget — but they only work for those who agree to follow them.

7. Thou shalt avoid paying interest.

If you can’t afford to fully pay for something you want, then you must save for it — that includes a car. My only exceptions to this rule apply if you need a loan to buy a new home, start a new business or, in some cases, pay for higher education.

8. Keepeth thy spouse involved in the financial decision process.

It’s absolutely critical that married couples keep their communication lines open — especially when it comes to the household finances. Regularly assess and update your goals and progress, and be willing to compromise. Better yet, split up the financial duties; the Honeybee and I do. In fact, we work as a team and run our household like a business.

9. Blessed are those who knoweth a high income doesn’t beget financial freedom.

Financial freedom is a state of mind, as much as it is a state of being; so it can be achieved regardless of household income. Those who understand that have a much easier time keeping their personal finances under control than those who don’t.

10. Undertake thy chosen vocation for love, not money.

We achieve satisfaction at our vocation, whatever it may be, through a job well done; but for most people to be able to do this on a consistent basis, they have to love what they do. So do what you love and, if you’re patient, the money will eventually follow. I promise.

This is an updated version of an article originally published on April 3, 2009

Len Penzo is a personal finance blogger with a strong disdain for debt. His blog, Len Penzo dot com, has been featured as one of Kiplinger's Personal Finance Best Money Blogs in 2010 and 2012.

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