Financial Literacy - Smart borrowing
debt
10 do's and don'ts for borrowing money

The world is full of don'ts. Don't run with scissors, don't wear seersucker after Labor Day -- and please, do not feed the bears.

Some rules are designed to preserve social order by imposing stigmas on unseasonal attire while others are necessary to avoid potential stabbing or mauling catastrophes. All attempt to avert crises that may arise as unintended consequences of our actions.

As often as the rules of style, camping and crafting are broken, so too are financial rules transgressed. The penalties for doing so vary in severity between the ramifications for wearing summer white at Halloween and fleeing from a grizzly bear demanding snacks.

But breaking these rules for borrowing can leave you hemorrhaging money, and that doesn't ever look good.

Rules to live by
Follow these guidelines to keep more of your money where it belongs -- in your wallet.
10 borrowing do's and don'ts
  1. Do save money while repaying debt
  2. Do find the best interest rate
  3. Do read the fine print
  4. Do pay on time -- every time
  5. Do remember that borrowed money is not free
  6. Don't borrow frivolously
  7. Don't fall victim to bad loan products
  8. Don't borrow money without telling your spouse
  9. Don't carry credit card balances
  10. Don't borrow more than you can afford

1. Do save money while repaying debt

Theories abound on whether borrowers should repay debt while saving or forgo saving to pay off debt faster.

Depending on the depth of the hole you've dug, it can take years to get out of debt. So some savings must be established and maintained to establish a healthy bottom line.

At minimum, put in place an emergency fund to prevent further borrowing in case of a rainy day. Most experts recommend stashing enough cash to cover between three and six months worth of expenses. Some say you can get away with less, but no one ever went wrong saving too much money.

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It's a balancing act for sure, but one that can be accomplished by a little math and strict adherence to the overriding personal finance dictum that you must live below your means.

"There isn't any magic to this. Everyone has a certain amount of income, and the only way to save money or pay off your debts is to spend less than your income," says Adele Brady Bolson, CPA and member of the AICPA's CPA National Financial Literacy Commission.

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