Rule #1: Think about the short and long term aspectsWhile it’s important to consider the overall picture, you likely won’t be able to predict exactly how you’re going to pay everything off in the long run. As a result, take it day by day. Meaning: make sure you are able to pay all of your debts as they are due. This ensures that your bills are paid, on time and that you will be set for the present and, if you’re in good shape for the present, you’re automatically in better shape for the long run. If you obtain a sudden cash flow, paying more than what you immediately owe is a bonus for the long term.
Rule #2: Given the choice, favor cash over further debtThis sounds like common sense but, with limited funds, students are often forced to choose between paying with what they've got or going into further debt. While paying with what you’ve got might leave you breaking even, it’s always preferable to do this over taking on more debt to seemingly have a surplus. Really, you’ll just be spending money you don’t have time and time again. Obviously, this isn't a good long term solution as it will just continue to pile on more debt for the future.
Rule #3: Never sacrifice your credit scoreAlways pay your bills when they are due, even if you can only afford a minimum payment. Do this no matter what it takes! If you don’t, your credit score will decline, leaving you will a whole onslaught of issues. Keep this in mind: if your credit score declines, your minimum payments and interest rates can raise, making it even harder to stay on top of your payments. Not to mention that it will also make future borrowing for important "adult" things, like cars and houses, much more difficult, if not impossible. In other words, you’ll end up owing more money for borrowing the same amount. That simply isn't logical! Remember, your credit score follows you through life and takes a very long time to turn around!
Rule #4: Always stay diligentThere’s nothing wrong with being anal retentive about your bills and payments, if you need to be. If you find yourself forgetting to make payments, set up automatic payment methods or, at the very least, pay your bills within the week of receiving them to ensure that you won’t forget about them or put them on the back burner.
Rule #5: Extra income isn't a surplus when you have debts to payIf you happen to gain access to extra funds, remember that it’s not time to go shopping or splurge on yourself! When you borrowed, you technically started out with a negative balance since none of the money is actually yours. Which means any additional funds that come in should go to paying off your debts, so that you’re that much closer to financial freedom.
What rules do you follow to maintain financial freedom?
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