With all the economic bad news all around us I thought I’d share some financial commandments Magda and I have developed and try very hard to stick to. They have helped us get through many tough times.

1. Thou shall not spend more than you make

I know, common sense right? Well, it seems this is not so. We have developed a habit of using cash for almost all of our transactions. Credit cards are debit cards to us; no money in the bank, no using the credit card.

2. Save, and then save some more

We don’t always have money left over to save. But when we do, we save mercilessly. Some say saving 10% is a good goal to have, but we try to pack away 50% or more of our money whenever we can. Living on 50% of your income can be difficult, so we don’t always do it. But it builds a lot of confidence in that if one of us is out of work, we can still get by without dipping into our savings.

3. Always have a parachute

Add up 6-12 months of minimum living expenses. Save that much money and put it in a liquid investment vehicle. We use a high-interest savings account that we can get access to in 24 hours. 6 month GICs are also a good idea and can sometimes pay a bit more.

4. Patch those leaks

There are so many little expenses in life that really can add up. We try to limit our expenses whenever possible. We try to buy-to-replace, and avoid buying just for the sake of having something new. We also bargain hunt (although we could do more) and look for second hand sources. This is also about looking for alternatives. For example the big guys charge about $6 for a movie rental, but the little corner-store near us has movies for $1.77. Much less selection of course, but for 1/3 the price we’re fine with that.

5. Look for more income

Reducing expenses is probably the easiest way to get your finances under control. But why not look to increase your income as well? Monetizing hobbies, partnering your skills with your friends’, and developing multiple streams of residual income (example: how I makes $2000 a year without doing very much) are some ways to expand your income. I’m always looking for my next $20/month ultra-low-effort idea. You can also take the raise or the new job approach, which can involve new learning, expanding responsibility, and more networking.

6. Cook your own food

Prepared and processed foods are more expensive than ingredients. For example we spent $80 recently on a bread-maker which has already paid for itself in reduced bread costs. Quality food is extremely important to us, so we spend more on better ingredients rather than spending more for convenience. We still order Chinese food once in a while, but the majority of our food is made from scratch.

Those are the big ones we try very hard to always follow. We are not perfect. We don’t follow all of these all the time (except for #1 – that one is really important). Developing good financial habits takes a long time, so we try to take the long-view and work incrementally.

What kind of financial commandments do you try very hard to follow?