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Live well below your means. It's like living below your means on steroids. When the average consumer gets smacked around by life, they think life is so unfair, which it is. But, for the few who have lived a frugal existence... kicked up a notch. Well, when life kicks them around, its like a blip, a speed bump, it's just a minor inconvenience.
I don't completely agree w/ this - if you work your tail off and become hostage to saving, you really miss out on life - and find that you're a retiree with a lot of money, but no experiences. I found that although I "paid myself first" and "lived beneath my means" that I traveled, skied in a variety of countries, took up sports, and enjoyed watching pro sports in person.
I see saving like dieting - if you starve yourself, you're more likely to binge. If you give yourself a treat once-in-awhile, you're more likely to maintain a healthy weight.
One of the best decisions I made was, maxing out my 401K when I started working. when I was 23.
Even today - I have the same philosophy of maxing out my 401k. Although my Income has doubled in last 7 years and 2 jobs.
- Paid off all the cars.
- Paid off all the credit cards
- No Student loans
Bought an expensive house and decided to build equity. As of now, after paying the mortgage - 401 - putting 1200 into savings and paying all the bills I pretty much break even. But the thing is I am putting almost $3000 each month into savings (401 + savings + employer match).
Next thing, which I have planned in next 5 years:
- Pay off the house.
The idea is that 80% of the savings you can achieve comes from sacrificing 20% of the items in your budget (exact numbers are debatable but you get the idea.)
I don't strive for a perfectly lean budget.. I just cut the big ticket things that don't bring much pleasure or raise my standard of living substantially and call it a day.
-I don't trust credit card companies at all. Over limit fees, late fees. Some cards are very predatory. I.e. a card with a $500 limit and $39 annual fee or something.
Obscene interest rates on many of them (25-30%??). I think a few years ago (maybe 5 years ago), the credit card companies were required to print on your statement how long it would take you to pay off your debt if you just payed the "minimum" payment. Like 20 or 30 years in some cases, lol. Just obscene. I think they try to rip you off from day one.
You don't get ahead of the game paying interest. Then when you think about what you bought with a credit card. In many cases, you don't even need it. So, why go through the hassle of paying for it for 10 or 15 years, lol?
True, there are many cards with rewards and things. But they seem very predatory as an industry.
When I flew to Chicago a few weeks ago, they were passing out US Airways credit card applications during the flight! Perfect. Multiply 250 seats times, how many flights a day? How many flights a year. The CC companies look no different than the casino industry. Give out a few rewards (comps), but the house wins in the end and makes the money.
Marry someone hard working and frugal, who sees life as a financial partnership - at least for the purposes of this thread; there are other things, too.
A spendthrift or lazy partner will destroy your plans.
I don't completely agree w/ this - if you work your tail off and become hostage to saving, you really miss out on life - and find that you're a retiree with a lot of money, but no experiences. I found that although I "paid myself first" and "lived beneath my means" that I traveled, skied in a variety of countries, took up sports, and enjoyed watching pro sports in person.
I see saving like dieting - if you starve yourself, you're more likely to binge. If you give yourself a treat once-in-awhile, you're more likely to maintain a healthy weight.
This can be true. However, if you really save a huge portion of your income (say 70%), starting in your 20s, you can be financially independent within 7-10 years, by your early or mid 30s. Then you have the option of upgrading your lifestyle and continuing to work or walking away from the rat race entirely....or maybe working, but doing something entirely different that might pay less. It also depends on how much you earn. If you are earning 100K and saving 70% of your income, that is a different experience than earning 50K and saving 70%.
I believe if you work hard, you need to reward yourself periodically instead of saving every penny. If not, you'll find yourself with a huge nest egg but nothing to show for it during the years of working - no pleasures in life and maybe angry for it.
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