Analysis of “The 11 Principles” by Money Crashers

Posted by Ben

March 12, 2008

1 Million Dollars MoneyCrashers.com has ~~an article~~ a list about a few principles regarding money and we would like to address them. Over all, its a great list. Feel free to comment!

1. Always spend less than you make.
Naturally, this is in first place as it keeps the saver moving in the right direction, regardless of how fast or slow. By setting up a budget and keeping to it, your options down the road are far more substantial and lucrative. Lets face it, if you even want to stand a chance of reaching your financial goals, spending more than you make will never get you there, so stop it!

2. Do not believe in money myths.
Research, research, research. Take everything with a grain of salt and don’t believe anything until you have read or heard from either the source or someone equally reputable. There are a great deal of myths out there dealing with money and of course if a deal sounds too good to be true, you can bet that’s the case.

3. Get out of debt and stay out of debt.
This is most important in the early stages of getting on the right track with your finances. Always keep this in mind when contemplating purchases. The best thing to consider, I feel, is to explore the long term effects:
     a) Is there an interest rate? If so, for how long?
     b) Will this put me into debt or overdraw my account?
     c) Can I live without this item for two weeks or is it an impulse buy?

4. Save money for the unexpected
Murphy’s Law states that if something can go wrong, then it will. Life pops up sometimes and really gives it to us and we have a responsibility to be prepared. There’s no reason not to prioritize an emergency fund. You will be glad you did and you will then have ample time to rebound from it successfully. Remember, it is probably better to make payments on a debt and keep a couple thousand in the bank, than it is to withdrawl the money to pay down the debt.

5. Pay for education with cash.
We could probably write a whole other site on student loans, or at least a few posts. Student loans are normally taken when a student is excited and has a ”fake money” approach to borrowing because payments are deferred and its one of those “out-of-site-out-of mind” type things. Well, those loan companies are going to come looking for all that money about 6 months after you graduate. One of the worst things for your credit is to default on these loans. Be diligent about it and take any extra disbursements and give what you can right back. You will actually save yourself quite a bit of money in the long run and have a huge leg up on your net worth.

6. Find creative ways to boost your income.
Another quote I like is “What you do on Saturdays is what puts you ahead of the competition.” Is there anything you can think of that you do really well? Write about it! Even the tiny trickle you can get from Adsense will pay for it and you will learn a great deal? What about eBay? Is there anything you can sell? You might even buy certain things and resell them for a profit. There are about 40 trillion sites out there dedicated to this very topic. The idea is that we are all given time but it comes down to what we devote our time into. Preferably, it turns out to be lucrative.

7. Invest for the long-term and keep it simple.
Automatic investing will be your best friend for this. Find out what monies you might be able to live without and get it deposited into something. Even if your parking it at first, as long as you eventually get that money working for you, you will be far, far better off than if you hadn’t. The important thing to remember is to NOT touch it. No matter what. Even if its in the stock market and the value drops: Don’t be emotional about it, have faith. Remember that for long-term investing, a drop in price is actually good: Its on sale! We also recommend heavy research in stocks unless its an index or ETF. Google Finance is a great free tool. Consider reading an early post on the subject titled, “When the Market Falls, Don’t Panic.”

8. Educate yourself about real estate, cars, and financial products.
A little redundant since we already talked about doing tons of research, but this also refers to investing in yourself some. With knowledge. Being an informed user of real estate, cars and other financial products can only benefit you.

9. Avoid scams and financial predators.
Your bank has not lost your account information. There is absolutely no one in Nigeria that needs your help moving millions. Any email that inquires for you to log in right away is trying to spoof your identity and walk off with all your hard earned money. Be wary of links that don’t match when you hover over them. Its very easy to have a link say one thing and go somewhere else and pull the images from the real site. When you suspect something, close the email or browser and go to the actual sites: if its for real they will put a message on the main page of the site. But for the most part, be skeptical and educate yourself. Getting your identity stolen is an awful violation that you need not be a part of.

10. Give, Give, and Give more.
I would say that this applies when you have some extra money and are aggressively maintaining assets that have no place to go. When would this happen? Well keep in mind that there are those that are not as fortunate and it feels good to give. Just be sure that you won’t be hurt financially by it, in the sense that it can cause debt or missed payments. Giving when appropriate will also be your friend during tax time.

11. You and your spouse are a team!
One of the leading causes of divorce is due to money. You have to be united to be successful; not just in money but in most things. It can strain a relationship where you are working hard toward a goal and your significant other removes all your progress with what seems like carelessness. Communication is key here.

Any thoughts on this? $

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