Jeffrey Strain wrote an insightful article giving 10 easy guidelines to follow. The 10 commandments, if strictly followed, you will get better financially in no time. Here they are:

1. Take Actions
Every result is the consequence of our previous actions. One of the action strongly recommended there is to print out this list and paste it somewhere which can remind you everyday. Taking care of your personal finance is the first priority.

2. Pay off All credit Card Debt
Some says that you are not a free man until you are debt free. I don’t really agree with that because only bad debt make you poor. Wise use of good debt actually make those rich people richer nowadays. Anyway, credit card debt is certainly a bad one although there are some exceptions. I once read that the owner of one of the top three electronic chain stores in Malaysia started his business expansion with advanced cash from his 8 credit cards.

3. Understand the difference between wants and needs
Jeffrey says,

There is nothing inherently wrong with small
luxuries, and you should be able to enjoy many of the nonessential
things you have. But it is important to realize that wants are not
needs. If you master this skill, your finances will be in much better

It is all about the control of impulse spending. I have a client whose passive income is so high that he can definitely spend without really thinking of whether it is a want or need. I think it actually make sense to create a substantially higher income which is more than enough to sustain your lifestyle. But before you reach that level, you better control the unhealthy spending habit.

4. Live on Less Than You Earn

I think that this guideline is somehow related to No.3. Isn’t that budgeting is the first step to differentiate wants vs needs? Concentrating on building passive income is a more practical and enjoyable measure if compared to restrain one’s spending. But if you are in the both extreme, like one of my senior, who makes over RM300,000 a year but spend only RM50,000, you will gain financial freedom faster and easier than others.

5. Pay Yourself First

Jeffrey suggested that we pay ourself a minimum of 10% of our take-home pay. Pay yourself first is easier said than done. Take a look at the strategies recommended.

6. Set Financial Goals
Set short term, medium term and long term financial goals. This includes retirement, home purchase, children education etc. Everyone knows that without clear goals, we are going nowhere. However, I think that it actually brings us somewhere even though we might not set a goal.  But just don’t sit still. The chair you are sitting on doesn’t have lifetime warranty.

7. Educate yourself and be responsible for your decisions
Financial educations is what you lack. If we are equipped with proper financial knowledge, it helps to make wise decisions. You are responsible for your decisions. Look at your situation now! Just refer back to your financial decision a few years back — which took you here now. Look ahead and make your decision, wisely.

8. Save and Invest
I would say that save and invest is a good habit. If you can add in “create” prior to save and invest, your money train will definitely move faster.

9. Protect your finance
Wealth protection is the foundation. Without it, you are wasting your time doing all the rest. Any dreadful disaster is enough to sweep away all your hard earn money. Insure you assets, insure you life, insure your earning capabilities, insure your family… insure everything!

10. Donate
Warren Buffett may have donated the largest sum in history. But I wonder if he did it since the beginning? If he didn’t do it earlier, he would have donated a lot more recently. It is because the money he donated in the early days could have been used to invest and get compounded for years!

Just some of my thoughts. What do you think of these 10 commandments?

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Personal finance author and trainer

    2 replies to "10 Commandments of Personal Finance"

    • kclau

      I think patience and discipline is a compulsory quality for person to success in life, not merely in financial planning. It would be a quality required before one can follow the 10 commandment. Don’t you think?

    • Relax

      I think you should add patience and discipline into the list.

      What if a person who did all 10 points above, but do not have the patience and discipline (fear and greed based) in investing?

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