Wednesday, January 20, 2010

7 Debtly Sins

Thou shalt not eat what one cannot swallow. Do not get things that you can't afford. It can be either a daily $5 dollar mocha fix or once in 10 years splurge on an unaffordable luxury car.

Thou shalt not stray away from disciplined path. It is necessary to be financially disciplined. Being disciplined is not just paying bills on time. Staying on disciplined path requires you to stick onto your financial plan unless a better financial deal emerges. For example, you researched and settled on a car model that you can afford. Being disciplined is not adding that $3,000 fancy sound system later during the purchase. Same goes for setting up the budget for a night out on town and sticking to it (even when you are drunk).

Thou shalt not keep up with the Joneses. Keeping up the appearances with the Jones, Garcia, or Chens is a recipe for financial disaster. They may have higher income than you or are more financially irresponsible than you. If your neighbor gets a Beemer, do you really need to get one?

Thou shalt not procrastinate. Procrastination is not just putting up paying the bills tomorrow or forgetting to cancel subscriptions to unread magazines. Majority of the big expenses can be avoided by being proactive today. For example, you know that you need to change oil in your car. However, procrastinating a $30 oil change might lead to an engine failure with expensive proposition of replacing the entire engine for a few thousand dollars. Same goes to "I will call tomorrow to get lower interest rate on my credit card". Isn't it better to earn money (by saving) today than tomorrow?

Thou shalt not give in to instant gratification. Wanting everything now is gluttony. For example, you can buy a bottle of soda in a vending machine for $1.50 or get 12 packs for the same price in a supermarket.

Thou shalt not count eggs before they hatch. Never justify future earnings to pay present extravagance by credit. Excuses such as I can afford it with my next paycheck or when I get promotion or with a new job are delusional. Interest always increases your real cost. Buying a $10 widget now may cost you $20 with the interest. Thus, before buying, think if you are willing to pay $20 for that widget? Factor in the interest when you factor in the future earnings.

Thou shalt not waste. One of the common examples of wastage is wasting perishable food items.However, more unnoticeable waste is buying items and not using them to their fullest potential. For instance, you buy an expensive DSLR camera. After initial burst of enthusiasm, you end up exclusively using your old point and shoot camera due to convenience. This is a bigger waste and it is often overlooked by many of us.

No comments:

Post a Comment