If tomorrow you were out of a job, could you continue to pay for rent, utitlities, food and other necessary expenses until you secured another position?

The only problem with The Micawber Principle is that it doesn’t allow for savings. Sixpence is not much to save over a year’s time. The guideline is to have 3 months of expenses saved to tide you over in case of financial emergency, such as loss of a job. This 3-month figure is separate from your retirement savings.

The only way to save successfully is to have a surplus after you have paid all expenses. If you find you never have anything left over to save, then the next entry in this series is for you. It’s time to make a budget.

“Annual income twenty pounds, annual expenditure nineteen pounds, nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds, nought, and six, result misery.”

The Micawber Principle teaches what we all think we already know, that we should live within our means and failing to do so is the beginning of financial difficulty. It seems fairly obvious but until you do the numbers, you might not realize in what areas you are, in fact, living beyond your means – something that will eventually snowball into real debt struggles.

Start by making a budget. List all expenses that are unavoidable and necessary such as rent or mortgage payments, utilities, car payments, fuel, food and other household expenses regularly incurred. Compare your monthly expenses to your income, if you still think you look like you are in pretty good shape, then make the list that really counts.

Track all your expenditures daily, not the big items from your budget but the little expenditures you don’t think about. Cups of coffee, eating lunch out, birthday gifts, movies, impulse buying… you’d be surprised how these little items add up. Now look at how many times you pulled out a credit card to pay for one of these expenses, probably because you didn’t have the cash available and count in the interest.

Chances are, you will find that without realizing it, your expenditures regularly exceed your income. By putting this purchase on one card and the next on another, you spread the debt around and so it doesn’t appear to be growing very much. But over time you are keeping yourself in debt, even if you manage to juggle the money around to meet all the minimum payments.

If you are vacillating on whether or not to buy that Toyota hybrid vehicle, this might give you incentive to do it sooner rather than later.

The deadline to receive the full tax credit for the purchase of a Toyota hybrid is October 1,2006. Taxpayers will only be entitled to a 50% credit for vehicles purchased after October 1.

And the credit goes down from there. If you wait until April 2007, you will only be allowed 25% of the credit.

September is the one year anniversary for yearly free credit reports for consumers. Phased in across the country, all areas were eligible by September of 2005.

All consumers are entitled to a free copy of their credit report once every 12 months form each of the three national credit reporting agencies – Equifax, TransUnion and Experian.

To obtain your free credit reports, you can order them online at www.annualcreditreport.com, call toll free at 1-877-322-8228 or obtain an Annual Credit Report Request Form at www.ftc.gov. Once completed, mail the request form to Annual Credit Report Service, P O Box 105281, Atlanta, GA 30348-5281.

Knowing what is on your credit report is the first and most important step to taking control of your personal finances. Be sure to take advantage of this opportunity to get the information you need to repair your credit rating and to discover and correct mistakes that your credit report may contain.