STATE OF DEB T California has the highest household debt per
capita, with about $74,000 outstanding per person—mostly in
mortgages. New Jersey, Nevada, and Arizona are close behind.
ing our money decisions and being
able to say: Yes. Or no. That simplicity
is possible.
I’ve come up with a set of Money
Rules that I follow religiously.
Financial advisers, analysts, bankers,
accountants, and smart people in non-
financial professions have their own
rules. I’ve pulled nearly 100 of my
favorites into my new book, Money
Rules: The Simple Path to Lifelong
Security. To start you off, here are five
rules you should follow right now.
It’s easy to buy
things—it’s hard to
sell them, especially
at a profit
You can take two
behavior-altering
messages from this
maxim. The first and more straight-
forward is that because it’s so hard
to sell things at a profit, be thought-
ful when buying stuff you expect to
sell someday. Take cars, for example.
The average new vehicle depreci-
ates about 45 percent in the first
three years, according to Consumer
Reports. If you plan on selling the car
in a few years, buy one that holds its
value. The second takeaway? The
best buyers are skeptical ones, par-
ticularly with investments. “If you
find it easier to buy and harder to sell,
it’s probably because you’re investing
with emotion instead of analysis,”
says Tim Maurer, coauthor of The
Ultimate Financial Plan. “It’s easy
to fall in love with a story, and most
companies have a compelling one.
That makes the decision to buy easy—
even when things are overvalued.” As
a result, you may find it hard to let go
and sell. If you are the kind of inves-
tor who falls prey to your emotions,
buy mutual funds, says Maurer. They
have less of a story.
Pay your bills
as they arrive
Several years ago I
worked with poll-
ing firm RoperASW
on a money-and-
happiness survey.
We found that people who instantly
paid their bills were happier and had
a better grip on their finances. They
had about a third less credit card debt
and were stashing away savings.
Here’s why: Paying bills fast gives
you room to maneuver. If you get—
and deal with—a sky-high heating
bill, you can immediately cut back on
discretionary items and avoid run-
ning low on cash at the end of the
month. It takes five minutes a day,
says Alicia Rockmore, CEO of the
organizational company Buttoned
Up. “Sit down with the mail, look at it,
get rid of the junk, look at your bills,
get online (see Rule 5), and in two
Back of the Envelope
TOP: ILLUSTRATION BY SAM RHODES; HOUSEHOLD-DEB T SOURCE: “FEDERAL RESERVE BANK OF NE W YORK QUAR TERLY REPOR T ON HOUSEHOLD DEBT
AND CREDI T,” NOVEMBER 2011. BOT TOM: ILLUSTRATION BY S TEVE SANFORD, PHO TOGRAPHED BY TED MORRISON; DENOMINATION-EFFEC T SOURCE:
“THE DENOMINATION EFFECT” BY PRIYA RAGHUBIR AND JOYDEEP SRIVASTAVA, JOURNAL OF CONSUMER RESEARCH, DECEMBER 2009
