To prosper, create a financial rulebook

Many of the mistakes we make with our money stem from not having guidelines and sticking to them.

In recent columns, I’ve given advice to college graduates and young adults on investing early for retirement and making the most of their earnings as they start working. Now I want to address something equally vital to avoiding financial crashes and clashes.

You want to prosper? Create a financial rulebook. And, if I may, here are five financial rules to get you started as you begin your career.

I will not lend money. You would think requests to borrow may come only from family, but you will be spending a lot of your time with another group of folks — your co-workers. And you may get so close that an officemate will ask you for a loan. I don’t care if it’s $5 for lunch because she left her wallet at home or $500 for an unexpected car repair. Don’t do it. Ever.

If asked, you can just say: “I have a rule. I don’t lend people money. But I’ll give it to you if I have it.” (And then only if it’s a very small amount.)

Family and friends can act really funky when the time comes to repay a loan. A $5 loan is forgotten by the recipient. But you remember. You feel funny or petty asking for it. So you don’t. But you become resentful. Then you may clash and the relationship becomes strained or broken.

I will not co-sign. It’s not likely that, starting out in your career, you’ll be asked to co-sign on a loan. But you will save yourself a lot of grief by never doing it. Co-signing with your spouse is the only exception.

As you strengthen your financial situation, you’ll gain the credit rating to be a co-signer. So friends or family members may come to you to help them establish credit or get a car or apartment. Don’t do it. Not for your child, cousin or co-worker.

Please understand what co-signing means. You are not the backup if the primary borrower fails to pay. Upon signing for the loan, you become equally responsible for repaying it, even if the person dies. And the loan will show up on your credit report. Let’s say the primary borrower pays the loan but is often late. Those late payments negatively impact your credit history. The loan can also reduce your ability to borrow.

By the way, a survey by the credit bureau Experian found that many young adults would ask their parents to co-sign. And 77 percent said their parents would probably do it. As the survey showed, many millennials are responsible borrowers. But don’t put your parents or anyone else in a position to pay if you can’t.

I will not carry a balance on my credit card. You might have heard that you need to accumulate debt on your credit card to build up a good credit history. That’s just not true.

You only need to pay off your charges on time. You boost your credit rating by reducing the amount you owe.

I will live below my means. The fastest way to crash financially is to spend every dollar you make. Now is the time to learn how to live on less, even as your income increases, which typically results in an increase in your wants.

Hopefully, you’ll see your income bump up over time. As that happens, don’t incorporate all of that added money into your budget. Decide on a percentage that you will automatically save from every raise.

I will give regularly. Fifty percent of millennials don’t donate any money to a charity, according to a survey by BBB Wise Giving Alliance.

I know. You may not be making a lot of money, so you don’t see how you can afford to give. But you should. Participate in your workplace giving campaign or choose a charity to support. Or tithe, if that’s what you believe. If you wait to give after paying all your bills, giving gets forgotten. So make it a priority.

My life wouldn’t be what it is if I hadn’t been taken in by my grandmother, won a scholarship to college and been helped by so many people. So my personal money maxim has always been — even when I wasn’t earning much — to whom much is given, much is required.

Every day we live by various rules. Yet when it comes to our financial lives, we often don’t develop personal guiding principles to help deal with the financial issues that come up. As you start out in the real world, develop rules to dictate how to use your dollars.