10 Commandments of Personal Finance

By Jeffrey Strain
Special to TheStreet.com

For some people, getting personal finances in order is more grueling than wandering the desert for 40 years.

But it doesn't take a miracle. If you are looking for some basic guidelines, just follow these 10 commandments:

1. Thou Shalt Take Action

Reading about how to improve your personal finances is a start, but it has absolutely no meaning if you don't take the action of putting what you learn into motion. Before you can get anywhere with your personal finances, you need to begin -- right now. If you are reading this article, you know that you should be taking steps to get your personal finances in order.

Print out this list and place it where you will see it every day, so that you are reminded that personal finance is a priority in your life and that you will take some action each and every day to try to improve your lot. If you aren't sure where to begin, start with getting your banking accounts in order.

2. Thou Shalt Pay Off All Credit Card Debt

Credit card debt is, in most cases, the No. 1 enemy to your personal finances. It can have a huge negative effect if your credit card bills are not paid off in full every single month.

Sit down and work out a plan to pay off any credit card debt that you currently have, using the snowball method that best fits your personality. Make this a top priority.

3. Thou Shalt Understand the Difference Between Wants and Needs

To keep your personal finances in perspective, you need to understand the difference between wants and needs. There is nothing inherently wrong with small luxuries, and you should be able to enjoy many of the nonessential things you have. But it is important to realize that wants are not needs. If you master this skill, your finances will be in much better shape.

Take some time to critically look at your true needs vs. your wants. If you are having trouble distinguishing these, set up a plan to eliminate impulse spending.

4. Thou Shalt Live on Less Than You Earn

There are no two ways around this one. If you want to keep your personal finances in order, you need to live on less money than you make. That means either purchasing items and services that are less than you currently make, or figuring out a way to increase your salary so that you can spend more, but still less than you make. Either of these is perfectly fine.

Track your spending to see if it is more or less than you are earning each month, and create a budget so that you can continue to track it in the future. If you are spending more than you make, you need to decide whether to curb unnecessary costs or figure out how to increase your income. Most people can balance their budget without changing their current lifestyle.

5. Thou Shalt Pay Yourself First

Before you pay any of your other bills, you should pay yourself a minimum of 10% of your take-home pay. This money is not part of your monthly spending budget.

Go to your bank and set it up so that your paycheck is automatically deposited, if possible. Then set it up so that an automatic payment is immediately taken from your paycheck into a specified account that is not used for your monthly expenses.

6. Thou Shalt Set Financial Goals

In order to reach your financial goals, you need to know what those goals are. Nobody can determine these goals except for you. You need to take the time to figure out exactly what your financial goals are so that you can take the needed steps to reach them.

If you don't know specifically what you financial goals are for this year, next year and 10 years from now, take the steps needed to create them.

7. Thou Shalt Educate Yourself and Be Responsible for Your Decisions

While it may be more convenient to hand over all your money matters to somebody else, you will not do this. Part of being financially responsible is having the final say in all decisions about your money. That does not mean that you can't seek out advice and get opinions on your finances, but in the end your money is your responsibility, and you are the only one who is going to truly look after your own interests.

If you have designated someone else to take care of your finances, begin to take back control. No matter what, spend an hour or two each week reading articles on personal finance subjects or visiting Web communities where you can ask questions.

8. Thou Shalt Save and Invest

Take the money that you pay yourself first and either save or invest it to make it grow and work for you in the future.

If you are carrying credit card debt, invest in it first. But also make sure to take full advantage of the saving and investing opportunities that are available. If your company matches 401(k) contributions, contribute up to the match and try to maximize your Roth IRA contribution. Make sure you have an emergency fund.

9. Thou Shalt Protect Your Finances

You will take the necessary steps, usually through insurance, to make sure that your assets are protected in case of a disaster.

Take the time to make sure that all your assets are properly insured, and re-evaluate this every few years or whenever a major life change occurs, such as marriage or a new addition to the family. Also be sure to compare insurance rates on a regular basis, since this is a competitive business.

10. Thou Shalt Donate to Worthy Causes and Those Less Fortunate

No matter how desperate your finances may appear, if you are reading this article there are a lot of people that are far worse off than you are in the world. It's important to nurture a sense of giving and to be thankful for the small things that you do have. That means donating to worthy causes on a regular basis.

Find a few causes that you believe in, and give to them generously. Don't assume that money is the only way that you can give. Volunteering time and skills are also appreciated by most charitable organizations. You can research organizations at Web sites such as Charity Watch. If you don't know where to begin, three that you may want to consider are Kiva, Modest Needs and Doctors Without Borders.