Avoid these 10 financial sins if you want to prosper

THERE are many positive actions you can take to improve your financial position — such as furthering your education, investing, using insurance to protect yourself from shocks, and planning for retirement. In this column, I focus instead on actions that, in my view, are likely to set you back financially and you should avoid. They range from the mundane to the philosophical.

- MARTIN HESSE

1 Don't spend more than you earn

We all commit this mortal sin occasionally. But if it's every month, then you're either surviving on debt, which will only increase (at a compounded rate) over time, or depleting your savings. You may know part of Charles Dickens's famous passage on this matter, but here it is in all its glory:

"My other piece of advice, Copperfield," said Mr Micawber, "you know. Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery. The blossom is blighted, the leaf is withered, the god of day goes down upon the dreary scene, and, in short, you are forever floored. As I am!"

2 Never use credit to buy consumables

If you are using your credit card to buy groceries and not paying the full balance on your credit card each month, it means you are paying as much as 21.5% interest on what you have spent on milk, bread, and tea (among other items). That makes no financial sense and you will probably end up in a debt spiral. Clothing accounts are equally nonsensical. Credit should be used very sparingly and only for large items you cannot afford to buy in cash.

3 Don't lend to (or borrow from) a friend

Countless friendships have been ruined and money lost over the centuries because the borrowers have overestimated the patience and goodwill of their friends in wanting their loans repaid. A good friend may be generous and forgiving of your faults ... until it comes to hard cash. If money can break up close-knit families fighting over a will, it can destroy friendships with consummate ease.