No matter what your age or income, there are two basic rules that everyone needs to know. Those rules are firstly, only buy what you can afford, and secondly, pay your bills before spending on anything else.

Rule Number One

Although this sounds like a simple rule, it is seldom followed – only buy what you can afford. Spending more than you can actually afford is often due to incorrect budgeting. Some suggest that you should always have at least six months of living expenses in the bank for safety in case you lose your job. This is a good rule, but what constitutes living expenses?

Your living expenses are the bare necessities that you cannot do without, such as food, your mortgage or rent, electricity and water, car payments and fuel and so on. You will notice that there’s no room in there for that great jacket you saw last week, even if it is on sale, and no need to cater for expensive holidays either. The term necessity also assumes that if the worst happens and you do lose your job, you will immediately eliminate the extra niceties that you can no longer afford.

Losing your job may mean having to do without the ‘optional extras’ like mobile internet services, call forwarding or redial on your land line. Television cable services are another area where considerable savings can be made by choosing a cheaper package. Check your contract carefully first, as sometimes you will be forced to pay penalties for cancelling or changing the contract.

Emergencies such as ill health, your car breaking down or roof leaking have to be catered for as well. These are the things that you need to keep your life safe. You need a car to get you to job interview. The boiler keeps your home warm, and your health is the most important of all. If you are ill, your ability to work is diminished.  Emergency funds should never be wasted on things that you want but don’t need.

Money Management Rule Two

Now that you have learned to only buy what you can afford, the second rule is ‘pay your bills.’ You are legally obliged to pay your bills. Although it is not handled the same way as shoplifting, not paying your utility bills is quite simply a form of theft – you have taken and used the electricity supplied to you without paying for it.

We are bombarded daily with images of material things, and actively encouraged to ‘live up the Joneses’ and buy the latest and greatest. Unfortunately, doing so does not make us the greatest. If walking into a store to buy another ‘thing’ makes you feel better, you probably need more than just a lesson in money management.

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