I was doing some financial planning with a young couple several years ago when Sam Walton was still alive.  The husband said to me "Tom, I have determined that for every million dollars Sam Walton has, I have $11.  I said to him "Don't get caught up in the world's concept of money.  If you and Sam were in church together and you put $100 in the collection plate while Sam put in $1,000,000.00, everyone would know about Sam's gift but not yours even though yours was 9 times as much based on your comparison".  The widow, praised by Jesus, is an illustration of how Jesus looks on giving (Mark 12:41-44 NIV).

Below are eighteen principles for your use.  Not using these principles will put your hard earned money in the pockets of your creditors and will rob you of thousands if not millions of dollars.

18 Financial Principles

Working the principles depends on momentum.  Starting is the toughest part, like pushing a car that is out of gas.  Tough to get it going, but once you get it going it doesn't take as much effort.  It still takes effort, just not as much.

1. Pay yourself a minimum of 10% of your gross income.  Start a savings account for emergencies and then build for your future.  If you don't pay yourself first you will give everyone else your money and you will end up with nothing.

2. Analyze your previous twelve months spending.  This will be difficult to do if you don't have a checking account.  If you have a checking account and write a lot of checks to cash you probably won't be able to put it together.  An alternative approach is to write down daily where you spend your money for three months.  It is important to record your spending by category, as this accounting will be a basis for your budget in the next step.

3. A budget is an operating plan.  It is not written in concrete and needs to be flexible.  Flexibility will allow you to handle a forgotten birthday present for your mother by pulling money from an under spent item.  Example: You need $20 for the gift - you spent $10 less for groceries and $10 less for gas than you had budgeted - you can pull the $20 from these two items.  The purpose of the budget is to plan how you are going to spend your money, which enables you to stay focused.  Focus is important so that you control your money rather than letting it control you. 

4. Plan for recurring expenses.  When you know you're going to get a bill, plan for it.  Things like car insurance, car repairs, vacation, taxes, etc. are recurring expenses.  If you know your car insurance is $200 every 6 months and you get paid every two weeks, budget and set aside $15.38 every payday.  Put it in your savings account earmarked for your car insurance.  When it comes due you can simply transfer it from savings to checking and write a check.  You can do this for all recurring expenses. 

5.  Debt reduction. 

List all of your debts.

Eliminate the smallest debt as quickly as possible.  Sell something if you can.

Celebrate paying off this little debt by spending the monthly payment on yourself.

The next month, add the payment of the debt you paid off to the next smallest bill.

When it is paid off, celebrate by again spending a monthly payment on yourself.

Continue this strategy until all debts are paid off.  This strategy snowballs debt payoff.

Celebrate with one payment.

Do all you can to not incur new debt.

Follow principles 6 & 7. 

6. Never eliminate a payment from your budget.  When a debt is paid off, continue living without that money - only now you save or invest it for yourself. 

7. Become your own banker.  This is a result of principle #6.  As funds build you can loan yourself money for new purchases.  Set up a payment plan to pay yourself back with interest.  Be serious about this principle.  Be aware you will be the nicest banker you ever dealt with.  You won't dun yourself for past due payments nor will you repossess anything from yourself.  If you take advantage of yourself you will lose. 

8. Buy interest free as much as possible. 

Layaway is the most flexible and least costly strategy.  You may have to wait for the item you want but you will pay no interest.  You can always change your mind and get most of your money back or exchange items.

Barter - exchange labor for items or trade item for item.  Use cooperatives available in the community.

Save money in a savings account for a specific item. 

Once you sign a contract or use a credit card the item is yours along with the depreciation, contractual payments, etc.

Your only hope for getting any of your money back is to sell it. 

9. Use community tools. 

Credit Union - $25 to open a savings account.  You can deposit checks and take withdrawals without paying substantial check cashing fees.

Library reference desk will help you research things like car values.

Rebates on purchases from retail places like Best Buy, Circuit City, etc.

Local newspapers-coupons, garage sales, grocery ads, etc.

10.  Plan purchases.  This will help you to purchase what you can actually afford.

Research cost of purchases and ownership.

Set that amount aside now before the purchase to see if you can live without it.  Do this for a minimum of 3 months and preferably 6 months.

Adjust the amount you are setting aside if necessary. 

The money you set aside can be used for a down payment, etc. 

11. Get the best price. 

Seasonal - buy a winter coat when the spring clothing is put out for sale.  You can do this on layaway as well.

Realize that everything goes on sale eventually and recurs.  If you can't do it now, it will go on sale again.

Going to the manufacturer's location, if possible, can save shipping costs and many times give you a better price.

Buy from surplus outlets.

Auctions, Flea markets, garage sales.

Buying cars from individuals.  A $50 investment to a local mechanic will tell you if the car is good. 

12. Tax wise investing.  An Ira, a 401k, a 403b are all good investment plans and will reduce income taxes.  Also invest the taxes you save, as you will have to pay taxes when you take the money out.  If you invest the tax savings you will be paying taxes with taxes and not your personal $'s. 

13. Transportation costs.

Repair is less costly than replacement.  You can put a rebuilt engine in a car for the equivalent of a few months of car payments.

Use higher deductibles on insurance.  Find out the best deductible price break.  Put the savings in the bank for use in case of an accident to pay the deductible.  Once you give your hard earned money to the insurance company it is theirs forever.

If you want health insurance you can purchase a major medical policy with a $10,000 deductible for about one-fourth the cost of a $1,000 deductible.  Again, put your savings in the bank and use it if you need it for doctor visits, etc.  Again, once you give it to the insurance company it is theirs forever. 

14. Pay off loans early the easy way.  Let's say you have a car payment of $200.  $175 of it is interest and $25 goes toward the principle.  If you add $25 to your payment and pay $225 you will eliminate a $200 payment with that extra $25. 

15. Offset inflation by increasing your savings/investments by the percentage of the previous year's inflation rate. 

16. Don't spend any change.  Put it in a jar.  You will be surprised how much you will save in a month.  Use it for savings, debt retirement, or investments. 

17. Sell, trade, or barter any item you are not using. 

18. When buying a car or any other product you are financing, never answer the question "How much of a payment can you afford?"  I can guarantee you will end up with a payment higher than necessary if you answer this question.  Your response should be "You tell me your best offer and I'll decide if I want it or not."  Make the best deal you can and then you can determine the payment.  Arrange your financing with a bank first, if possible - cash talks.  Car dealerships get kick backs on the interest you pay.