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Personal finance is just that, personal. Not everybody does things the same way, nor should they. Every family and individual has a different situation, so what’s good for one isn’t necessarily good for another. We’ve all heard most of the mantras of personal finance so I won’t repeat them here, but I will list the personal finance principles we live by and why.

• Live below your means. This is probably the most important principle we follow. I’m firmly convinced that you cannot get ahead financially if you spend more money than you bring in. We’re currently living on  about 70% of our gross income, a number I’d like to make even smaller. Spending less money than we bring in allows us to save for things like paying off debt and investing.
• Pay yourself first. We have automated college savings, Irregular Expense savings, and 401(k) contributions, most of which leave our bank account on the first of the month. The money we set aside in our Savings & Debt account isn’t automated but that’s so we can move extra when it’s available. No matter what though, I make this savings transfer. We look to save money rather than spend it.
• Track every penny. We’ve been using Microsoft Money for 12 years. I always know how much comes in, how much goes out, and where it goes. This allows us to focus our cost-cutting efforts on the areas we’ll get the most benefit. I also shows us where we stand financially today, as well as how we’ll look in the future. I can’t imagine not having such tight control over our finances.
• Use credit wisely. Early in my adult life this was definitely not one of my financial principals. Now it certainly is. We use a rewards credit card for nearly all of our purchases and pay it off every billing cycle. Doing this earns us about $30/month on spending we were doing anyway. While we still carry an auto loan, I don’t believe that this is a wise use of credit anymore. This will be the next debt we pay off, and is the last of our consumer debt.
• Drive used cars. Between my wife and we’ve purchased or leased 6 new cars. In each case their value plummeted the second we drove them off the lot. In one instance we wound up trading one in about 8 months after getting it, taking over a $5000 loss. I currently drive a late model used car that is completely paid for. It has every amenity I want, and cost about 1/3 of the price of the car when new. If modern cars are well maintained, they will last for a very long time.
• Shop around. We rarely buy something the moment we see it. Instead, we give ourselves a cooling off period to see if we still want the item. Many times we don’t. For any purchase over about $100, I go crazy with research. There are more choices than most people can handle for nearly everything, so it’s difficult to be sure you’re getting the best item for you. I read opinions from current users of the products as well as professional reviews and when I settle on a choice, I shop around for the best deal. My wife does all the grocery shopping and uses tricks such as coupons, sales, and The Grocery Game to maximize the amount of food we get for our money. She nearly always saves 30-40% off the regular price on our weekly grocery bill.
• Time is your most important asset. There’s never enough time in the day. I’d like to spend much more time with my kids, or doing the things I want to do. Instead, I have to work. I trade my time for some of my company’s money. I try to do things in the most efficient way possible, a way that will one day let me stop trading my time for money and let me live of the fruits of my labor. The time I invest in personal finance will pay large dividends down the road when I can retire years before my peers.

We do other things - such as take lunch to work - as part of personal finance, but I won’t go into all our boring details. The items I listed above are the major principals that direct our financial lives. In following them, we’re building a very strong financial foundation that I hope will set our family up for generations.