The longer money has been around, the harder it seems it is to understand it. Spiralling debt is now one of the biggest problems for several households in Europe and North America. It is fair to ask, then: where is the proper financial advice and why is it so hard for households to stay out of debt?





One personal example will never be quite like the other, but there are always a couple of maxims anyone can follow, or at least, try to live by. Understanding how money works and why it exists is something everyone should strive for.





Frugality is a tough term to describe but can always be considered a starting point. Some define it as trying to live with as little as possible and making as many cuts as they can, while others define it just as spending a little part of your income. Obviously, if you have an income of 5000€ per month, then frugality shouldn’t be hard to come by. Personally, I would describe frugality as spending just what is in fact needed. By needed, I am including some of your needs, as long as you don’t fall into what is called luxury. Usually, luxury is not quality, it is paying a monetary price for something you could get for less. I would say the golden rule here is to assess what you want and need for life; in order to live more frugally you don’t necessarily have to follow rigidly the examples of others or live like a caveman. In short, the best rule to apply here, is that when you make any sort of transaction, you give yourself two seconds to think: why do I need this and how will it benefit me? Sounds simple, but you’d be amazed at the effects this can have on your expenses.





The golden rule for every expense you have is: living below your means. Input should be greater than output; and although this should be a simple rule to follow for most people, many enter debt without necessity. Borrowing money should only be considered in times of actual necessity. Many said debt is the worst type of poverty because it’s true. Debt is not money you got before time, it is money you are wasting to banks and that is keeping you from really balancing your finances. With this in mind, having a new TV is not a necessity. You’ll end up enjoying it less because you have to work for a longer time in order to pay the interest on your debt. This applies to a certain extent to mortgage. People tend to ignore differences when the values are very high; we create a mental barrier where we consider that if it will have to be done, then it doesn’t matter if the loan is bigger; however, a little math can go a long way. Always look for the best rates, and if there’s a month where you can make bigger payments to get rid of the loan, do them.





Savings is another rule many people tend to not follow. Now, we are all aware that with all the expenses we have monthly it might be hard to put even more money away from us. But most use that as an easy excuse not to start saving, be it for retirement, or just an to account you opened for that purpose. I am an advocate that you should never oversave, when you have the means to live abundantly and you are not enjoying life because of too many savings and little enjoyment, but it is the opposite that rings true to most cases. There are little excuses not to put even if just a small percentage of your income to savings. Consider it an expense, just like everything else. The difference is that the money will still be yours, and can accrue in value due to gained interest.





Last, but not least, your biggest net worth is not what you own, it's you. Studies have shown that spending money on experiences and education are far better options than spending money on clothes you do not really need, or a bigger house that just takes longer to clean. Any money spent on your well being is money not wasted.



