My best financial tip

Money can’t buy happiness. That’s not my tip – that is just a prelude, and an obvious one at that. Because, although money might not buy happiness, the lack of money has been known to buy misery.  This is Financial Literacy Month, and it appears that Canadians need better financial literacy.  As do our American cousins.

This blog post is part of the Blog for Financial Literacy campaign, where each participant offers up their best financial tip.

My tip today might seem obvious. Indeed, it is obvious – and it has been spoken by wiser and more eloquent people than me. Yet most people – including myself (sigh) – totally ignore it. Not everyone who ignores it is miserable, of course. But most people who are miserable about money are miserable because they have ignored this one simple tip:

Don’t spend more money than you have.

How many people ignore this simple tip?

Everybody who carries a balance on their credit card. Everybody who has taken pout a loan. Everybody who has debt.

I know, I know. Sometimes you get a wallop in the wallet and you just need to borrow some money. And, yes, a mortgage is usually a good investment (if you don’t try to buy as much house as you can “afford” with a mortgage).

But debt should be an exception to the rule. It should not be a way of life. If you are already in debt, that is not the time to decide to buy a cottage or a motor boat. First pay down the debt, then save up for the splurge, then have fun.

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Yes, you will have to wait. Yes, you will have to defer some pleasure. Yes, some people will say that you have only one life to live, so buy things right away and get the most out of life.

Sorry, that’s a lie. Buy now, pay much more later might bring you some pleasure sooner. But if later on you are spending so much of your money feeding interest payments, that you can’t buy the fun things you want, you don’t gain a thing. You lose; you might even lose big time.

And I know that more than one savvy reader is thinking about the even bigger misery that debt creates. It is no secret that couples fight most about money.  And life sucks when you are fighting with your partner, your comrade-in-arms, your best friend.  And even more so when you have to go through a divorce.

You can accelerate your savings by adopting some frugal habits.  We have had some fun with frugal on this blog, but of course it’s about more than just fun.  It’s about avoiding misery, too.

Am I the only person so unrealistic as to recommend spending only what you make?  No.  Here are a few of the top personal finance bloggers and their thoughts on the subject:

Money can’t buy you happiness, but it sure can help you avoid falling into a pit of misery.  So earn more and spend less, and paint a great big smile on your face.

Indispensable Strategies for Budgeting in a Bad Economy

In a bad economy, many people find themselves in major financial trouble. That’s not just the case with those who lose their jobs. Even people who are gainfully employed can suffer major losses in a bad economy. As a result, everyone can benefit from following a few simple strategies in a bad economy. A handful of the most effective ones are outlined below.

  1. Shop Around for a Better Bank – Switching banks seems like a huge hassle, so many people stay put even when they’re paying exorbitant fees or not enjoying very competitive interest rates. Whether the switch is simple or difficult, it will pay off if it means spending less and getting more. High-yield online savings accounts are especially useful.
  2. Set Basic Goals – When it comes to personal finances, there’s always room for improvement. With that in mind, it’s smart to constantly set new goals. That’s just as true for people who are on shaky financial footing as it is for those who are in better shape. From setting aside money for an emergency fund to paying off a mountain of debt, there are always ways to make things better. Saving up for a major expense like a new house or car is another example.
  3. Pay Less for Essentials – One solid piece of advice during a bad economy is to avoid unnecessary expenses. What about the essentials? For example, car insurance is one thing that every drive must have. As easy as it is to compare vehicle insurance online, there’s no excuse for not shopping around from time to time. Shaving even a tiny amount off of a monthly premium can result in huge savings over the long run.
  4. Opt Out of Junk Mail – Junk mail can be absolutely insidious when it comes to trying to be fiscally responsible. From credit card offers to catalogs filled with the latest gadgets, the opportunities for making major mistakes are rife. Fortunately, there are ways to cut back on junk mail. Opt-out services are available. The Consumer Credit Reporting Industry, for example, maintains a website that allows people to opt out of many types of junk mail. The same process should be used to cut back on tempting marketing emails as well.
  5. Be Diligent about Paying Off Debt – People who already have debt when a bad economy develops should make paying it off a top priority. At least 20 percent of a person’s income should be used for this purpose. Expenses can be cut elsewhere to make this possible.
  6. Save Consistently – After old debt has been paid off, at least 20 percent of a person’s income should be socked away in a savings account. Once again, the best thing to do is to put it into one of the many high-yield savings accounts that are available online.
  7. Monitor Credit Carefully – Every adult in the U.S. is entitled to one free credit report from each credit-reporting agency per year, and everyone should take advantage of it. A single mistake can have very expensive consequences, so it’s important to catch errors as early as possible. It’s even possible to sign up for credit alerts that make it especially easy to nip issues in the bud.

By implementing these simple strategies, anyone can emerge unscathed from a bad economy.

Guest poster Pete Schilling is a writer for who specializes in personal finance and insurance topics.