A recent survey showed that 60% of us don’t keep a budget. Close to
20% hasn’t a clue where their money goes each month, yet 43% do spend
more each year than they earn. Almost a third pay no attention to
interest rates on their credit cards, even while carrying an average
debt of $15,000 per household.
How can this head-in-the-sand approach to managing money end in
anything other than disaster? Look at our economy over the last two or
three years and the answer is obvious: it doesn’t. You can’t ignore the
basic laws of economics. You can’t spend more than your take in without
paying the consequences.
For over thirty years I have followed a very simple plan to financial
stability. It allowed me to treat my family to Christmas in Hawaii
several times, maintain a timeshare condo in Florida for 20 years, have a
vacation home in the mountains of Arizona, live in a nice home with a
pool and spa, and stop working when I was 52.
I didn’t hit the lottery. In fact, I wouldn’t buy a lottery ticket
under any circumstances. I didn’t hit it big in the stock market. In
fact, I am extremely conservative in my investments and suffered no
major lifestyle changes during the last several recessions.
What I did is so simple, so easy to implement and so effective that
anyone in virtually any financial situation can do what I did. It
doesn’t matter if you are single, have a family, take care of your
elderly parents, or live in a yurt in Mongolia. It doesn’t even matter
what your income is. So, what is the one key?
Live beneath your means. That means spend
less than you make. Ignore the siren call of instant gratification.
Realize that credit costs you. Understand that risky investments are
called that for a reason. Don’t be greedy. Remember the Turtle won the
race.
As I’ve noted, we didn’t spend the last 30 years in a tent in the
wilderness, living off road kill and fish. Our lifestyle was
comfortable. We were not (and still are not) minimalists, though I like
that approach to living. My wife and I agreed very early that we would
do three things without fail: spend at least 30% less than we made, save
and invest that 30%, and never carry credit card debt. We lived beneath our means.
Living this way means turning your back on the consumer society that
fills our every waking moment. TV is not a medium for entertaining you.
It is a delivery system for making you feel unsatisfied. Magazines and
newspapers contain more ads than editorial content. Every sense of
yours is under assault to buy more, spend more, charge more, and risk
more. To not do so is almost unpatriotic.
I am not going into detail on how you live beneath your means.
Common sense will get you most of the way there. Thousands of books and
web sites can educate you on the basics of budgeting and smart
investing. There is really a very simple path to financial independence
and anyone can follow it. Maybe not at the 30% level we managed, but if
you spend less than you make and are committed, it will work.
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