Getting Started (rule #2)

The first rule was aimed at getting you started on the road to having some money to invest. The second rule is aimed at keeping you on track.

(2) You should never carry credit card debt

It's OK to have a credit card, and to use it. Credit cards are very handy things to have, and you should have at least one. But you should always pay the full balance on the card each month. If you do this, then you will never be charged any fees or interest.

If you treat your credit card like this, then you aren't really going into debt, you are just paying your bills on a monthly basis. If your credit card charges an annual or monthly fee anyway, then you should cancel that card and get one with no fees.

Interest and fees seem like little things at first, but they add up over time. Think of them as little vampires sucking away at your money. Just like a little savings can add up to a lot of money over time, these recurring fees add up. And these fees are coming right out of your disposable income.

Disposable income is the money you have left over after you have paid for your necessities, like food and rent. This is the money that is available to you to spend on things that you enjoy, like music and movies. Savings also have to come from your disposable income. So anything else that is coming from your disposable income is an evil that should be eradicated. If it's not fun, and it's not helping you save then why tolerate it?

While we are on the topic of fees and interest, it is also a good idea to get a no fee checking account, for the same reason. Most banks will give you some way to avoid fees, either by maintaining a minimum balance in the account, or by setting up an automatic deposit into a saving account.

One other type of scam to avoid is the so called "free credit report" service. These services may be free to start with, but they all convert to a service that charges a monthly fee. If this happens to you, cancel the service immediately.