1. Create a realistic budget and stick to it.
This means periodically checking your budget against your actual spending habits and adjusting your numbers and spending habits accordingly.
2. Don’t make impulse purchases.
When you see something you didn’t plan to buy and don’t really need, don’t buy it on the spot. Go home and think about it. You’re less likely to go back and buy it after you’ve had a chance to think about it.
3. Don’t buy something just because it’s on sale.
Buying a $500 item on sale for $400 is not a $100 savings if you didn’t need the item. It’s spending $400 unnecessarily. It also may not have been a real discount: some stores sell off items almost immediately to make people think they’re getting a good deal.
4. Get medical insurance.
Even a temporary solution with a large deductible can help in a medical emergency. Living without medical insurance is an invitation to financial ruin.
If you think you’ll just go to the emergency room if something serious happens, realize two things:
1) it doesn’t help you in case of chronic illnesses like cancer, and
2) although the emergency room can’t deny you treatment because of lack of insurance; they’ll certainly still expect you to pay the bills later.Only incur expenses if you can afford to pay them now.
5. Do not spend money based on future income.
Sometimes future income doesn’t materialize. In the meantime, you’ll be paying exorbitant interest rates, which can wipe out any savings you’ve made even when buying an item on sale! Try throwing all your credit cards in a drawer and committing to living without credit for a while.
6. Avoid large rent or house payments.
Only commit to what you can now afford, and increase your mortgage payments as your income increases. Consider refinancing or applying for a loan modification if your mortgage is weighing on your expenses.
7. Avoid co-signing or guaranteeing a loan to someone.
Your signature binds you as if you were the primary borrower. You can’t be sure the person will pay.
8. Avoid joint obligations with people who have questionable spending habits, even a spouse or significant other.
If you incur a joint debt or tax bill, you are probably responsible for everything if the other person defaults. In many cases, these liabilities are known to outlive the relationship.