Tips for personal financial stability Published Nov. 20, 2009 By Lt. Col. Patrick Davis 1st Air and Space Test Squadron commander VANDENBERG AIR FORCE BASE, Calif. -- Everyone is aware of the national debate that's raging over health care these days. I'd like to submit that we should have a just as heated debate over the financial health of our nation and of our families. It seems to me that, in general, Americans (and Airmen) for many years now have lived beyond our means, not saving enough, and carrying too much personal debt. As members of the Air Force, most of us enjoy a stable job and a stable income, luxuries that, unfortunately, many civilians in America do not enjoy today. We should all take advantage of this opportunity to save for the future, rather than spending every dollar we make and living from paycheck to paycheck. We all have an obligation to provide for ourselves and our families for today and the future, and formulating and executing a sound personal financial strategy will go a long ways toward ensuring our families' financial stability. Just like writing down everything we eat is a great way to begin dieting, I think that writing down where every dollar goes each month is a great first step to financial stability and security. How can we expect to save when we don't even know where our money is going? Over the years, we have all heard many guidelines and rules of thumb regarding how to handle our money responsibly. Below are a few that have stuck with me, and I hope they will be useful to you, too. The No. 1 rule of saving is: Pay yourself first. This means to immediately set aside money every month for your savings, even before paying bills. A good target here is 10 percent of your gross income. This money should be earmarked for unexpected expenses, and experts usually recommend saving up three to six months of monthly expenses in this emergency account. Only after this fund is established should we begin paying off debt and investing in other areas. Automatic bill payment is a fantastic tool offered by nearly every bank nowadays. Use it for loan payments, credit card payments, utilities, cell phone bills, etc. What a great way to take care of those recurring bills automatically before we have the chance to spend the money somewhere else. We should all avoid living beyond our means by taking a good, hard look at our income and making responsible decisions on what to buy with our hard-earned money, without going into unnecessary debt. Speaking of debt, it isn't always a bad thing, but too much of it (especially at credit card interest rates) certainly is. A good rule of thumb is that a family's total monthly debt payments (home, auto, credit card, etc.) should not exceed 36 percent of gross monthly income. For example, if a family's total household gross income is $5,000 per month, their monthly debt payments should not exceed $1,800. For those of us looking to buy a home soon, a good rule of thumb is to never take out a mortgage for greater than two to three times your annual income. So, for that same family with a $5,000 monthly income ($60,000 annual), their total mortgage loan should not exceed $180,000. After housing costs, often the next largest expense we have is our cars. A great way to save money here is to either purchase a used car, or buy a new one and drive it for 10 years. Buying a new car every few years is a great way to waste a lot of money. In addition, financing a car for more than four years can easily lead to becoming "upside down" in a loan, so this is another pitfall to avoid. For those of us who have civilian spouses with employers offering matching programs for retirement savings such as 401K programs, we should absolutely take advantage of these programs to their fullest extent. This is free money! Another excellent savings technique is banking our raises and avoiding "lifestyle inflation." We can still enjoy some extra luxuries each time we receive a raise, but we should also take advantage of these opportunities to save some extra cash for the long run. I think that these few sound financial management techniques, when adhered to over the long term, can make a huge difference in how we live from day to day, as well as provide a great deal of much-needed financial stability for our families. Of course, the Air Force provides us many superb resources to assist us with financial management. I highly encourage anyone interested to contact your supervisor, commander or first sergeant for more information on where to go for these services.