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Sumptus Censum Ne Superet!

"Sumptus censum ne superet" (Anon)

The Latin scholars among you will recognise this phrase as perhaps the most important advice in the entire field of personal finance. As for non-scholars, you'll have to scroll to the end of this article for a translation!

Now that the election is done and dusted (remarkably, just two out of nine adults – 22% - voted for the winning party), I'm worried about the UK's immediate financial future. Personally, I've been feeling for a while that there are some tough times to come, as one or more of the following problems crop up:

• redundancies and job insecurity rise;
• 'easy credit' turns into 'hard debt' and our £1,081 billion chicken comes home to roost;
• consumer spending starts to fall and retailers and manufacturers suffer declining sales;
• millions more homeowners experience 'payment shock' when their attractive fixed- or discounted-rate deal ends and their monthly repayments go through the roof (pun intended!); and
• the weakening housing market leads to house-price falls, reduced equity, a big rise in mortgage arrears and more house repossessions.

Of course, I could be accused of being a financial Cassandra, but I'm just speculating about what might happen in a worst-case scenario – I'm genuinely not trying to predict the future! But similar setbacks have happened in the past, as I explained in Lessons From The Last Housing Crash.

But the great thing is that "sumptus censum ne superet" works in every possible financial situation: good times and bad, booms and busts, growth and downturns, expansions and recessions, surges and slumps.

Indeed, I would argue that this phrase is the absolute cornerstone of good financial planning. Sensible individuals, companies and governments live by it, whereas over-spenders, bankrupts and failed businesses suffered because they ignored it. Mr Micawber from Charles Dickens' David Copperfield expressed the underlying principle very elegantly and, more recently, it was the subject of The Money Secret by Rob Parsons, which I reviewed here.

So, how can one rule give everyone financial success? The answer lies in its simplicity: live by this tenet, plus invest just a tenth (10%) of your income for your working life, and you'll be wealthy one day.

Okay, the wait is over. Here's the translation of the above title: "Let not your spending exceed your income" or, as we say on one of our most popular discussion boards, Live Below Your Means!

Hence, please take the time to maximise your income and cut your expenses, and then use the spare cash to save and invest to build a stronger financial future for you and your family. It really is as easy as that!

More: Three Steps To Becoming A Super Saver | A Dozen Ways To Make £500.