10 Commandments of Financial Common Sense

1. Thou Shall Invest in Your Own Earning Power: The world keeps changing, and so should you. Your current job will not last forever, so you’d best begin planning for the next one now. An investment in yourself pays powerful dividends.
2. Thou Shall Live at a Profit: If you spend more than you make, you’re sending Old Man Trouble an engraved invitation to your house, and he’ll be arriving any day now. Unless you have a wining lottery ticket or a rich uncle, spending more than you earn is a time-tested way to make yourself 1. Happy for a little while, 2. Miserable for a long while, and 3. Poor forever. One way to ensure that you live at a profit is to have a written budget that you stick to. If you’re married, be sure to include your spouse in the budgeting process.
3. Thou Shall Have Insurance: Life, health, auto, home, and disability. And, thou shall be a wise purchaser of insurance. Some policies are ridiculously overpriced. Usually, these policies are "pre-approved" and have advertisements that appear continuously on late-night television. These ads may feature highly believable stars from of old-time TV; don’t believe them. If an insurance policy sounds too good to be true, it is. A fool and his premium payments are soon parted.
4. Thou shall not borrow money to buy things that immediately go down in value: a list of such items includes, but is not limited to, clothes, jewelry, meals, vacations, boats, electronic equipment, and cars. If you absolutely need transportation but have no money, borrow only enough to buy a reliable (but not necessarily stylish) used car. If you have large balances on your credit cards that you can’t comfortably pay off each month, cut the cards up and stop spending . . . NOW!
5. Thou shall understand the power of compound interest: When money is invested wisely and allowed to compound over time, amazing things happen. Thou shall understand those amazing things.
6. Thou shall own assets that are likely to appreciate, starting with your home: A home is a great investment for a variety of reasons, and a sensible home mortgage is a sound way to pay for this asset. But beware: don’t max out the loan, and don’t sign up for the longest possible term (30 years is too long to pay for anything, including your house).
7. Thou shall face and overcome thy addictions: Of course, the primary reason to overcome the chains of addiction is to free oneself from the physical, emotional, and spiritual bonds that shorten life and rob life of its joy. But it's also worth noting that addictions make you poor, not only in spirit, but also in the pocketbook.
8. Thou shall manage risk and diversify investments: Having too many eggs in any one investment (even if that investment is your own small business) is a formula for financial disappointment.
9. Thou shall not fall for pie-in-the-sky get rich schemes: In other words, thou shall be satisfied to accumulate wealth slowly by investing in solid assets that meet one’s investment objectives. And speaking of investment objectives . . .
10. Thou shall have simple, clearly stated investment objectives: If you know where you want to go, you’re likely to get there. But if you have no idea where you’re going, then you’re probably going nowhere, and you’re probably going there fast.

Written by Criswell Freeman, Psy. D.