Economic changes over the last 3 decades have been dramatic, especially in recent years. The housing market, unemployment rate, and increases in medical expenses (to name a few), have contributed to many financial hardships and difficulties. Headlines tout glimmers of hope as enough jobs are created one month, the stock market rallies one day, or home sales pick up briefly, but the positive trend is very slowly developing. We’re hopeful, but we know that things aren’t going to change overnight.

As a result, personal finance is a renewed (or new) focus for many people, and efforts to spend less, save more, and reduce debt are helping people to move toward financial control and stability. For many it’s a long hard road, but forming good financial habits along the way will produce life-long benefits. Let’s review some basics…

1. Living within our means: This is something we can’t do if we don’t have control over what we spend and how it compares to our income. Listing expenses in a budget or spending plan, adjusting the numbers as things change, and comparing the monthly total to our income is a revealing exercise. If we’re living beyond our means, then debt will become a way of life.
2. Know the story: When we manage our finances we have to capture all income, bills, assets and debt. Many people don’t know where they stand financially. This has got to be the first step in managing personal finances. Sometimes we just don’t want to know the bad news, but it won’t get fixed any other way. We need to review our financial state each month and make adjustment that will help us achieve our financial plans.
3. Face the music: We can’t look the other way and deceive ourselves into thinking that things will get better by themselves.  They won’t. We have to face up to the fact of where we are financially and get past it. Putting this off just delays the inevitable.
4. Commitment: Once we see where we are, we have to commit to getting things on track and to spending time updating, comparing, adjusting, and analyzing our financial data. If we treat managing our finances as an unwelcome chore, we’ll pay the price for quick and half-hearted efforts. This is an area of our lives that requires our time and attention every week.
5. Be frugal, be wise: Being frugal is not being cheap. In fact in the long run, it often pays to buy a more expensive product that will last than to buy a cheaper version that breaks easily or doesn’t really perform as advertised. Being a wise consumer can save a lot of money in the long run, and it only takes a little of our time to research quality and price.
6. The 24 hour wait (48 is better): Waiting 24 hours before making a major purchase is a proven way of reducing impulse buying. Studies show a significant reduction in purchases when people wait a day or two before making the decision. If you’re being pressured to decide or make a quick deposit on a purchase, that’s a good indicator that you should hold off and sleep on it.
7. Save for a rainy day: Having savings is the only way to keep the mishaps of life from disrupting a good financial plan. Many people establish saving and debt reduction plans only to have them ship-wrecked by a sudden financial need. Without a safety net of cash available, we’re forced to take on debt to get us out of a jam. A small reserve of cash is a much better solution.
8. Eliminate debt: The burden of debt drains us emotionally and physically in addition to affecting all of our financial decisions. It must be eliminated. Form a debt elimination plan, stick with it, and monitor your progress as you move toward financial independence.
9. Get rid of “stuff”: Stuff and clutter cloud our minds and our decision making. Stuff we bought and don’t use, stuff we bought and never needed, and stuff that we have with no idea where it came from. It all needs to go. As we go through stuff and get rid of it, we see how many things we buy that we really don’t need. This can be a great deterrent to buying more.
10. Credit cards: Handle with extreme caution. If you ask people why they use credit cards, you get a wide variety of answers. Some people don’t like carrying cash or cards are easier, some admit they can’t afford to buy things and credit allows them to buy them, and some actually get depressed when they spend cash but don’t feel guilty putting things on a credit card. However we use them, paying the full balance at the end the month is the only way to keep credit card debt from defeating our financial plans.

Applying these ten basic principles can develop into a sound foundation of personal finance habits that will keep us out of debt and protect our loved ones. The alternative is a cycle of debt that is like a huge weight on our shoulders that we can’t seem to unload. Credit card debt, car loans, equity loans, mortgages, and personal loans all take a heavy toll on us and our financial plans. But sticking to the basics can go a long way toward breaking the cycle, eliminating debt, and putting us on the path to financial independence.