How did you learn to manage money?

[skull]

Common sense
My parents: I had an allowance as a kid. They were also good role models in that they didn't spend money they didn't have on shit they didn't need. My mom used coupons when she could.

Same here I had to get a paper route at 10 so I could buy stuff like video games, got an under the table job with our butcher for $4/hr at 14. Followed after them and saved a lot of it had 10 grand at 16 but got into drugs and blew it all. Quit all that been back to saving for about 8 years now. No debt except the house just like my parents. Even then the house has as much equity as it does a balance on the mortgage since I bought a dirt cheap fixer upper. Can't beat a mortgage payment including taxes and insurance thats lower than a lot of peoples car note.

 

[BurnItDwn]

As far as knowing what investments to choose,, It's more or less learning what the options are, and the differences between them and choosing which is best for my goals.
As far as making sure my income exceeds my spending ... you have to live below your means. if you make 100k, then live in a 150k house and keep your car for 10+ years, you will save money.
If you make only 50K, then get roomate(s) and live in a less expensive apartment, buy used car, keep it for 10+ years, and you can save money
if you make 250k, buy a 375k house, keep your "toy collection" small, and put the money in investments.

Knowing which investments to choose takes a lot of learning/education to make informed decisions. However, leaning how to balance a checkbook and how to manage income vs expenses should not be particularly difficult...

It's more about discipline than anything else, and discipline is very difficult!!!!

 

[tynopik]

fatwallet finance forum

also listening to horror stories from callers to people like Dave Ramsey and Larry Burkett

 

[skull]

Trail and error here and a tight wad wife that helped to calm down my penchant for spending.

My problem is that I'm at the point now where I'm debt free but the house, have a stable income, have emergency savings, and the bare minimum retirement (401k to ensure the match for me and a annually maxed out Roth for the wife) but I don't have a lot of guidance on where to put my savings next.

I curious to how others have handled this situation? I've considered consulting a professional but I work with financial professionals everyday and more than half of them are morons. In full disclosure, I mostly work with commissioned sales people so maybe the "financial professional" label is a little loose here.

Check out the bogleheads forum they should have some good advise on taxable accounts. I'm going for real estate and other business adventures. All my income already comes from being self-employed, I don't make a whole lot but have a flexible schedule which makes it nice for other hands on investments.

 

[Sean Kyle]

Make a tight schedule of spendings and stick to it! Do not even touch the money that is for savings. This is the only way...

 

[TwiceOver]

Went to all cash. Set a budget, took out a huge wad of cash every month. If I didn't have cash with me dedicated to what I wanted to do, well tough shit.

It works for me, probably not for everyone.

 

[Sho'Nuff]

I learned from my Aunt (who was a bookeeper) and my dad (aka - the cheapest man alive). My aunt taught me the concept of compound interest when I was 16. I was convinced it was voodoo at the time, but after taking my first economics class in college I learned it was not. As a result, I started investing at the ripe old age of 19. My first job was as a house painter working for my dad. He said he would pay me minimum wage if I didn;t save anything, but he would pay me $10/hour (at the time ~$30% more than minimum wage) if I saved/invested the extra money. I did the latter and put the extra money in a couple of mutual funds. As I watched that money grow, I took that lesson to heart and have applied that same investment strategy to all of my income. I.e., whatever my income was, I immediately took 30% of it and put it into investments). Knowing that I would be tempted to access that money or not invest, I made the investments automatic and I put the money into accounts that were not as easy to access as a bank. Specifically, I arranged automatic transfers from my bank account to occur 1 day after I got paid, and automatic investment of that money to be made 1 day after the automatic transfer cleared.

From the time I was 19 to the time I was 28 I did not make a large amount of money. I was a government employee at the time and I started out making a whoppin 28k/year, and at age 28 my income had increased to about $62,000/year. Still, I stuck to my investment strategy and lived off of 70% of what I earned - saving or investing the rest. At age 29 I graduated from law school and started making a lot more money (close to $200,000/year). Rather than increase my standard of living by a huge margin, I increased it a little bit and took the opportunity to save/invest even more of my income. From age 28 to age 33 I saved/invested about 60% of my income - which was easy to do considering the huge raise I received and my wife and I had no kids. At that point I also engaged a financial advisor, because the amount of money I had invested had started to become quite large - to the point that I was concerned that I could make a mistake that would cost me dearly.

Note - from age 27 onwards, I always contributed the maximum amount of money that I could to a 401k or the government equivalent (TSP).

At age 37, the amount of money I had in non-retirement investments crossed the $1M mark.

At age 39, and at the advice of my financial advisor, I made my first withdrawal from my investment accounts (ever). I took out about $40,000 from my accounts to buy a new to me boat and a new to me truck. According to my financial advisor, I am the only client he has ever had to encourage to spend money.

Note - throughout this whole journey I have always endeavored to avoid debt like the plague. I have only ever had one source of large ongoing debt, and that is the mortgage on my house. From time to time I have taken out loans on cars or other items as well, but I only do so when I feel that the interest rate is low enough that my money is better spent in the market. Even so, my mortgage is slated to end in 14 years. At that time I will be age 54, at which time I will retire and go do something else (probably become a pyrotechnician and/or demolitions expert).

The key to saving is discipline and not touching your money unless you ABSOLUTELY need to. If you can leave money in the market for a long time compounding at 7% interest - you will eventually get rich.

Good luck.

 

[Miramonti]

I believe if you want to manage money well, you need a fear of not having any at all.

People that are spontaneous purchasers are freakin dangerous and often extremely short-sited with money imo. If purchasing is an emotional thing for people, managing one's money is going to be extremely difficult.

 

[RearAdmiral]

fatwallet finance forum

also listening to horror stories from callers to people like Dave Ramsey and Larry Burkett

Some of the horror stories are truly horrifying. I think I would have a heart attack if I were in the shoes of some folks.

 

[Cappuccino]

i dont manage the money manage me i have to much money i somtimes use notes to wipe my mouth when i finish eating my cavier

 

[Mai72]

1) Invest in yourself. As Henry Ford had stated many years ago you want to invest in YOU! We live in a great era. There are podcast, YT videos, blogs and books that will give you knowledge and ideas on how to manage, save, produce more and invest. Learn new skills that are highly marketable and bring in a high income. Invest, invest and invest some more. In my case, 5-10% of my yearly income is invested in books, seminars, courses, etc.

2) Set a monthly limit on what to spend and save the rest. For me, that's $3k a month. I can easily live on $3k and what ever is left over goes into a sacred account that I can't touch. You want to keep putting money in this sacred account. For instance, say I make $5k for the month. I use the $3k and put the $2k away. Do that for a full year and it's $24k.

3) But... here is the thing. You want to keep increasing your income. You can do that via reselling online. eBay, Etsy, Shopify, Craigslist and Amazon make it very easy to produce excellent side income. I'm in an eBay group and our 2017 challenge is to net $20,170 for the year. I'm up to about $800 for the month of Feb. Not bad for someone who just joined. I've sold on eBay before. I just was never a dedicated seller. If you're not happy with your income find side hustles to increase it for the year. Put the money away.

4) Save to invest. When you have enough you want to take the money out of the savings account. Unless you like an ROI of 0.005% get it out. For me, that's going to be $100k. I'm actually getting to that mark and I'm getting excited. Again, you want to save to invest, not save to save.

5) Invest. Now, this is where I'm going to differ with most people here. I know everyone here likes stocks and I do too. But, for me real estate is key. I'm not talking about flipping homes. I'm not even talking about renting one home to one tenant. I like multi family apartments. I first learned about multi family apartments thru Grant Cardone and Bigger Pockets Podcast. Grant has made a fortune via multi family apartments. His portfolio is worth a staggering $500m. It's like any investment. You need to know the market and you need to do your research. When done correctly, the results are incredible. Imagine owning a 12 door complex. Those 12 doors paying you every month $800 in rent. That's $9,600 a month. In a year that's over $115k. Of course, that's with a full occupancy. Even at 85% fill rate you're still going to come out on top. Just keep in mind that you'll have to worry about maintenance, insurance, hiring a manager, etc. In the end it's still worth it and can be an excellent source of passive income. It's a great tool to build wealth and many people have gotten wealthy via real estate. Plus, the tax benefits are incredible. Rentals aren't going anywhere since people are always going to need a place to live. And, baby boomers are retiring in droves. Many are going to be selling their homes and moving into apartments.

6) Have some type of retirement setup. Roth IRA, government pension or a 401k are the three that many people have. You should have at least one and stick to it. Have money taken out automatically via every paycheck. You should never have to use it until you decide to hang it up and retire.

7) Diversify. Stocks and other investments are important. I like Warren Buffets plan of putting money into safe stocks. Electric companies, McDonalds, Coca Cola, and the Railroad companies aren't going anywhere. Those are good long term (30 plus years) stock options. You could also gamble and do some investing in a startup. Who knows. You might pick the next Face Book or Apple.

8) Use personal finance tracking software like YNAB. That's what I'm currently using and I love it. Like Dave Ramsey has stated "you need to be deliberate if you want to change anything in your life." I'm always looking at my bank account. At least once a day. I'm tracking everything so I know where my money is going and what I'm spending on a daily basis. Everyday! I have an account titled "My Online Business" That's where my online funds go to so I have money when I'm ready to invest in my eBay, Amazon and Shopify store.

9) It's all in your mind. IMO, that's the biggest for most people, because most people believe in shortages rather than abundance. There is more than enough money to go around for everybody. Think about this. I could hand you $100m and it would be a non-event. Everybody on this forum could be given $100m and it wouldn't be a big deal. If you wanted to be a millionaire in 5 years you could pull it off. The issue is a) how badly do you want it? b) do you believe that you can achieve it. Mindset is key.

This is pretty much my game plan. I started a bit late. Both my parents were chronic spenders. They made a fortune in their lifetime and blew it all. I didn't want to do the same which lead me to research how I can save and invest. Look at the stats. Something like 77% of Americans have hardly anything saved for retirement. Hell, many don't even have $1k saved in their bank accounts. That's sad and scary.

 

[ImpulsE69]

I've always been cheap. We weren't poor but not rich either. I was raised by my grandparents, so they had old school mentality. Like I mentioned in another thread, I started working when I was 12, so I learned early to manage money. A teacher in junior high taught us about finances, checking, stock markets. At the time, I didn't care, but it became very useful.

The one thing I am not good at though is investing. I am very risk adverse. Now that I have a nice savings and 401k/roths I have begun dabbling in it, but I honestly do not have the time or want to learn every aspect and that is what is tough when you tell people to invest. You have to be really driven (or not have a full time job) to dive that deep into things. Sure there are 'easier/stabler' ways, but they are not surefire either.

I've even looked into reality, but again, I see/hear too many horror stories to give it too serious a thought. The laws work against renters.

 

[Mai72]

I've always been cheap. We weren't poor but not rich either. I was raised by my grandparents, so they had old school mentality. Like I mentioned in another thread, I started working when I was 12, so I learned early to manage money. A teacher in junior high taught us about finances, checking, stock markets. At the time, I didn't care, but it became very useful.

The one thing I am not good at though is investing. I am very risk adverse. Now that I have a nice savings and 401k/roths I have begun dabbling in it, but I honestly do not have the time or want to learn every aspect and that is what is tough when you tell people to invest. You have to be really driven (or not have a full time job) to dive that deep into things. Sure there are 'easier/stabler' ways, but they are not surefire either.

I've even looked into reality, but again, I see/hear too many horror stories to give it too serious a thought. The laws work against renters.

With real estate and renting it can be dicey.

Throwing out renters can be tricky. Especially if a mom has babies. Then, what if they destroy the apartment. It's going to be very difficult to get a settlement when the client doesn't have two pennies to rub together. IMO, that's why research is key. Pick an area that's close to a shopping center. University and hospital are also ideal. Make sure many of your tenants are hard working. I know Grant Cardone favors the South because he hates the snow. Snow and ice = Lawsuits. Many of his multi family apartments are in very nice areas. He looks for high end stores like Whole Foods and Starbucks. He even looks for an area with a high gay population. Gay people normally take care of their things and they usually have good paying jobs. Again, it takes research. Nothing is ever easy.

 

[Exterous]

At age 39, and at the advice of my financial advisor, I made my first withdrawal from my investment accounts (ever). I took out about $40,000 from my accounts to buy a new to me boat and a new to me truck. According to my financial advisor, I am the only client he has ever had to encourage to spend money.

I find that a bit odd for the truck. Assuming you have a good credit score you would have been better off leaving the money in and getting a low interest rate car loan in 88% of the rolling 5 year returns for the S&P since 1926. Hopefully it was a very recent truck purchase as the market has been particularly strong over the last 7 years

The one thing I am not good at though is investing. I am very risk adverse. Now that I have a nice savings and 401k/roths I have begun dabbling in it, but I honestly do not have the time or want to learn every aspect and that is what is tough when you tell people to invest. You have to be really driven (or not have a full time job) to dive that deep into things. Sure there are 'easier/stabler' ways, but they are not surefire either.

You might want to look at some of the 'Lazy' portfolios or Target Date funds. They'll give you an, historically, very good portfolio that will likely beat an actively managed fund\portfolio for a fraction of the cost. And they do this with a minimum of fuss. Are there ways that have historical evidence to suggest they would do better in the future? Yes but you'll get most of the way there with these options without a deep dive.

Still there really isn't a 'surefire' method to saving - they all have risk. Even 'safe' money markets had serious liquidity concerns during the latest financial crisis and many were frozen, some for extended periods of time. People have been screwed out of pension payments even after the PBGC stepped in. Nothing is completely safe.

 

[Svnla]

I've always been cheap. We weren't poor but not rich either. I was raised by my grandparents, so they had old school mentality. Like I mentioned in another thread, I started working when I was 12, so I learned early to manage money. A teacher in junior high taught us about finances, checking, stock markets. At the time, I didn't care, but it became very useful.

The one thing I am not good at though is investing. I am very risk adverse. Now that I have a nice savings and 401k/roths I have begun dabbling in it, but I honestly do not have the time or want to learn every aspect and that is what is tough when you tell people to invest. You have to be really driven (or not have a full time job) to dive that deep into things. Sure there are 'easier/stabler' ways, but they are not surefire either.

I've even looked into reality, but again, I see/hear too many horror stories to give it too serious a thought. The laws work against renters.

If you really risk adverse, better put your money in FDIC-insured accounts (not paying much) than investing in stocks and bonds because you would pull your money out the second the market goes south and then you would be in a deep hole to climb out of.

If you have some money that you can afford to lose (after you make sure that you have no credit card/high interest debt, have 6 months emergency account), then put 90% in a cheap index stock fund and 10% in a cheap index bond fund. Warren Buffet said so.

 

[ImpulsE69]

If you really risk adverse, better put your money in FDIC-insured accounts (not paying much) than investing in stocks and bonds because you would pull your money out the second the market goes south and then you would be in a deep hole to climb out of.

If you have some money that you can afford to lose (after you make sure that you have no credit card/high interest debt, have 6 months emergency account), then put 90% in a cheap index stock fund and 10% in a cheap index bond fund. Warren Buffet said so.

I've already thrown some money into VIG, which is doing well for now, and a few other stocks that have long histories of stability and dividends, but yes, I keep an eye on them. I actually do know enough though that if the market falls, I wouldn't just pull out at a loss and that would be the time to buy (assuming said companies don't go under). I still keep the majority of my cash liquid, but I do want to shift to something beyond .04%

 

[RockinZ28]

Just natural for me I think. That and I'd never be able to deal with the stress of living paycheck to paycheck. Seriously how can people do it???

Need to be less conservative and invest more though.

Did something abnormal this year tho, as wife and I are both driving 2017 vehicles.

 

[Kaido]

Any book, etc. advice would be great.

I've had an odd relationship with money - I grew up with penny pincher parents who did well for themselves through sound financial decisions, but they were always too busy to teach us anything (and, ok, indians are a little proprietary with information). Ever since i've been on my own I've rebelled against that penny pinching and have been too much of the opposite. A few actually positive changes means more financial responsibility and higher stakes, so we need to drill down on our finances.

I don't know where to start -sure, spend less save more but there's a whole world of terms I don't understand, and I don't know what I don't know. Retirement in particular scares me. I'm about 30 years away but it seems like many of my 30something peers are way ahead of me, and it's about time to catch up.

Any books, courses, website recommendations would be great. I'll start using mint, anything else?

I learned mostly by trial & error. I made plenty of financial mistakes growing up, which I think helped to motivate me to figure things out, despite having an honest struggle with math. Learned a bit from my parents. Learned a lot from motivating experiences; I worked 3 jobs at one point and it really pushed me to figure out how to manage my finances & pursue an education that would allow me to raise a family & live reasonably comfortably. Eventually, it mentally clicks that you're going to be working for the next 40 years & then you're going to have to survive into retirement, so you start working on things with a larger perspective. I've mentioned my personal financial system in other posts, and I'm always refining it, but just making up some rule numbers here:

Rule number one: You can buy whatever you can responsibly afford. If you can afford a Ferrari without going into financial hardship, more power to you. If you can't afford a bus pass, then you're walking. It all boils down to "spend less than you make." Related (funny) video: Don't buy stuff you cannot afford.

Rule number two: The definition of wealth I've adopted is: "how many long you can survive without a job?" If your overall expenses are $2,000 a month and you have $4,000 in savings, then you are 2-months rich. Some people call this F-you money that they store in case they get fed up with their job or boss & want to bail without a backup plan. If your income disappears today & you have no ETA on a replacement source of income (i.e. new job), how long can you continue to pay your bills, feed yourself & your family, etc.?

Rule number three: There are three acceptable forms of self-chosen debt: an education (to secure a job that will financially benefit you in the future), a reasonable car (i.e. reliable), and a reasonable house. Obviously things like unintended medical bills do not fall under this category. I don't use credit cards to buy things to pay them off over time (they only get used if I intend to pay them off the same month). This has meant going without some stuff & having to wait, but it also means not getting stuck in needless debt.

Rule number four: Keep a cash safety net. Mine is pretty basic: I always keep a spare $20 in my wallet, just in case the card machine is down or a place only takes cash (both are rare, but it happens sometimes). I keep $60 in my car for emergency gas fill-ups, same deal, just in case the card machine goes down or your card number gets stolen & locked or whatever. $1,000 in a small lockbox along with personal documents (passport, birth certificate, social security card, etc.). I grew up in Florida & we'd have to evacuate pretty quickly from bad weather sometimes; separate from a 72-hour kit, having your important docs & some cash for a hotel or whatever can be a lifesaver in a pinch. Also recommend a $2,000 buffer in your checking account, that way you don't have to worry about overdrafts or odd bills killing your checking account or whatever, and $1,000 in savings for emergency withdrawls or transfers into checking. It's a few grand total to have to save up for & "not use", but it can really save your hide in a pinch.

Rule number five: Don't drink from the fire hose. I use my local bank for bills (auto-pay, for the most part). I have an allowance card for "mad money", which is basically a reloadable debit card that auto-transfers a set amount every week (his & hers; right now I like American Express Serve cards). I use SmartyPig for saving up for more expensive things over time. I work for a living & have to budget for the things I need & the things I want, and I like the convenience of creating a hands-off safety net through automation. I also have a small credit card with something like a $1,000 limit for gas & for emergencies (ex. get a flat tire & need a new $400 tire same-day). I only carry two cards on me - my allowance card & my gas/emergencies credit card (plus a spare $20 bill in case I need cash).

Some people struggle with having access to cash & needing to spend it all, and need to impose self-limiting systems to ensure that they stay out of trouble; for me, it's not about that, it's simply about creating a goof-proof system. I never have to think about my finances outside of a minute or two daily scan (ex. to make sure my card hasn't been stolen, which has happened!) because everything is compartmentalized. You don't have to be rich to do it either, just make an effort to save up & create a cash safety net for yourself, and then make a system that works for you. I don't like using my bank card in public or online because the number has been stolen a few times (through random guessing or card skimmers on ATM's or whatever, I don't know), so I only use my Serve card or emergency credit card in public (which also have better fraud response systems available).

Rule number six: Having a work ethic paves the way for financial success. If you're lazy, well, it's generally hard to make money if you're not willing to work for it, barring rich parents or the death of a rich relative or winning the lottery or whatever. But working isn't the only part of the equation. Work smarter, not (necessarily) harder is also important. Figuring out what you really want to do for your life's vocation is a great thing to dig into. Taking advantage of existing systems for education & financial growth are good too. Dave Ramsey has some great books. Look up FI/ER on Reddit. Google "credit card churning". If your company offers 401k matching, take advantage of it. Set financial goals for retirement & for a standard of living. Get an education. Basically be willing to learn, be willing to work, and be willing to plan. People hate thinking even more than they hate working, but if you're willing to make a realistic plan & then go after it, then it's really not too hard to be successful at it. But basically, the money is out there if you're willing to work for it. They keep printing it all the time. Companies need help to fulfill there vision, so jobs are available. It's doable if you develop a strong work ethic.

Anyway, everyone has a different system (or none at all!). There are a million approaches. There's a lot of stuff you simply don't have to do if you make bank & don't live an extravagant lifestyle. There are a lot of things you can benefit from if you're willing to dig in. Like if you want to have kids & want to save up for them to go to college, you can set up a CHET 529 plan. There are wise ways to use credit effectively. There are good investments to make. It's not so much that there's one magic system, as much as defining what you personally want to work for you. I like having my finances automated so that I don't have to spend much time on them. I like having a little protected safety net of cash-on-hand & a checking account buffer, and only a couple of limited cards to spend money on so I never risk draining my account. I like having goals to work towards, like SmartyPig projects & 401k stuff, that I can contribute slowly to over time to build up, so that I get the financial benefits from later & don't have to shell out a huge amount of money unplanned for something.

I would recommend that you start a gDocs file or an email thread to yourself that you update as you think of ideas you like (and don't like) about your finances...how you want to spend your retirement (working, or on a boat somewhere? or watching TV at home as the social security checks come in?), how you want to live on a day to day basis, what's important to you (trips? food? toys? a big savings nestegg?), and so on. Everyone has a different set of personal desires, so you kind of have to tailor the system to what you want.

 

[Kaido]

Any books, courses, website recommendations would be great. I'll start using mint, anything else?

Worldview is a very important part of finances imo. This is kind of a dumb book, but it has a lot of really excellent points:

https://www.amazon.com/Secrets-Millionaire-Mind-Mastering-Wealth/dp/0060763280

In psychology, they use this term called "self-talk" to figure out how you feel about things based on the things you say. Your self-talk can be severely limiting if it's not something you've ever consciously thought about, and can be detrimental in a lot of ways if you're doing damage you don't even realize you're doing. For example, my wife was raised to "save, save, save". Not to save with a goal in mind, but just a lot of emotional punches like "we don't have the money for this". So for starters, that mentality is kind of crippling because then you're always living in feel-bad land about money, regardless of income. Instead of asking, "how can I afford this?" it's a strong negative emotion of "we can't afford this". It partly creates a victim mentality & partly stops you from taking any action to resolve it. Especially if you're young, what's stopping you from hopping on Craigslist to find a dogsitter job or mowing someone's lawn? But if you self-talk your way out of taking action to resolve the problem, then it's never going to get fixed.

The author of the book above makes some good points about saying how he can predict your financial future in just a few minutes of asking you questions because it becomes really obvious what underlying systems you're using to manage your ideas about money. iirc, he talked about how his dad would do real estate projects & be generous when things were going well, and then spend to zero and then have to pick up a new construction project, and how he inherited that "spend to zero" habit without even realizing it. I can't remember if it was this book or another one that talked about financial blueprints & how when you get married, you have to make a new blueprint together because you both come from different financial backgrounds & points of view, and a lot of marriages fail with financial problems listed as the main reason why. So figuring out how you look at money, the little catchphrases you say (or think), and if you're in a relationship, how the other person views finances is important because then you can take where you're at & decide where you want to be and then work towards that. This is another good book btw:

https://www.amazon.com/Rich-Dad-Poor-Teach-Middle/dp/1612680011/

The key takeaway from that book for me was the true defintions of income, assets, expenses, and liabilities. One of the big points he hits on is that your house is not your biggest asset; it is your biggest liability. He has very simple, very basic definitions for those things. For example, an asset is something that makes you money. A house is something that may make you money at some point in the future should you decide to sell it (or may cost you money, in a bad market), but on a day-to-day basis, it's costing you a mortgage, property tax, insurance, utilities, maintenance, your time & effort, upgrades & modifications, all sorts of things. The bottom line is that it's a liability because it's costing you money on an ongoing basis.

Looking at finances through that lens really changes how you view things. What assets do you have, i.e., what things do you have making you money right now? What is costing you money, i.e, what are your liabilities? You mentioned Mint; do you know historically what you spend money on? Things like your food bill can vary from $400 a month to $1,200 a month if you cook at home, buy in bulk, eat out a lot, etc. And even caring about that depends on your situation...if you have a good job & don't live extravagantly, then you may not even need to track your food budget if you always keep it well under what you make every month. So the system you choose to adopt kind of depends on a mix of your goals, your income, and your expenses. Where do you want to be a year from now, five years from now? You're not stuck with how things are right now; you can work to make finances easy for yourself.

 

[Kaido]

One thing to keep in mind is that, just because someone appears to be ahead of you that doesn't mean they actually are. Fancy cars, houses and toys can all be bought with debt or by forgoing savings. People who appear well off are living paycheck to paycheck more often than you might realize

Mentioned this in another thread, but I have a buddy who makes well over $100k a year & lives paycheck to paycheck. Dude brings home over $8,000 a month & can't go out to lunch with us because he can't pay his bills. He's not stuck in a bad situation, either...not paying alimony or child support or student loans or crazy medical bills or anything, just doesn't manage his money & constantly runs out. Panic mode all the time with his finances. I can understand struggling if you're making minimum wage & really can't keep up, or struggling if you've got a huge student loan payment & your wife ran off with your kids and now you have to support them and you were in the hospital forever and own a truckload of cash to the doctors & hospital, but...c'mon. Talk about first-world problems. If you make that kind of money, hire yourself a financial advisor to help you get on top of things.

I still remember a kid in my high school class who bought a brand-new car for like $500 a month. We all thought he was nuts. I think minimum wage was like $6 an hour at the time. I recall stifling a laugh when he told us he had to ask his mom for gas money on a regular basis because he literally didn't have gas money to get around

 

[Red Squirrel]

Yeah that's kinda sad to be making that kind of coin and be struggling. I bring in around 3-4k per month and feel I'm fairly well off. Things are tighter than I'd like them to be though, but I also have to remember I'm paying more on my mortgage than I actually have to and do have some luxeries per month such as a cleaning lady that I could do without if I had to.

Kinda reminds me of how a lot of those stories of people striking it rich due to lotto, investment etc and a few years later they're going bankrupt lol. I feel zero sympathy for those people. They should have given me a fraction of their winnings and I would have been better off than they were.

 

[Mai72]

Kaido-

Rule Number #3 is a bit off. You neglected to mention going into debt to purchase real estate which would in most cases be good debt. Grant Cardone talks about this quite frequently. He has a $500m real estate portfolio, and he uses debt frequently to purchase multi-family apartments. For instance, he might take a $400k loan at 3% interest. Normally, when he's renting to tenants he's getting a 12% ROI during the first year. Why wouldn't you take a loan at 3% when the possibility to get 12% is quite high? The beautiful thing is, the ROI just keeps going up after that. As his tenants pay down the loan, the ROI increases. He has gotten 24-30% ROI in the 9-10 year mark. When the complex is paid in full he either sells it or keeps it and uses it as continued passive income. Plus, the tax benefits and the leverage you get is phenomenal.

As for a college loan being acceptable debt I'm on the fence. Our college debt crisis paints a dire picture for many graduates. And, it depends on the degree. Graduating college with a degree in Art @ $100k in student loans is just stupid.

 

[Kaido]

Kaido-

Rule Number #3 is a bit off. You neglected to mention going into debt to purchase real estate which would in most cases be good debt. Grant Cardone talks about this quite frequently. He has a $500m real estate portfolio, and he uses debt frequently to purchase multi-family apartments. For instance, he might take a $400k loan at 3% interest. Normally, when he's renting to tenants he's getting a 12% ROI during the first year. Why wouldn't you take a loan at 3% when the possibility to get 12% is quite high? The beautiful thing is, the ROI just keeps going up after that. As his tenants pay down the loan, the ROI increases. He has gotten 24-30% ROI in the 9-10 year mark. When the complex is paid in full he either sells it or keeps it and uses it as continued passive income. Plus, the tax benefits and the leverage you get is phenomenal.

As for a college loan being acceptable debt I'm on the fence. Our college debt crisis paints a dire picture for many graduates. And, it depends on the degree. Graduating college with a degree in Art @ $100k in student loans is just stupid.

I would lump that under #6 because that's an additional thing you can do to grow your personal funds above & beyond a standard 9 to 5 job...if you have the buying power available, you can buy real estate, get a second house to rent to tenants, rent out storage units, etc. Of course, not everyone has the ability to put down $500 million in real estate, or even be able to secure an additional $400k loan on top of their house, so that one is a little more difficult for the average bear. And not everyone wants to have to deal with tenants, either (not that all real estate purchases require that).

Yes, I agree about being careful about a college loan. I wrote the generic "education" word in there because you can to go college, trade school, vocation school, etc. And there are plenty of options alternative to that as well...do OTJ training, become an entrepreneur, join the military, etc. In addition to that, you want to secure a job that will financially benefit you in the future. They will let you pay to learn anything you want in college, but that doesn't mean there's a job at the end of the tunnel waiting for you, or even a good-paying job for that matter, so it's easy to get stuck "following your dream" & then end up getting burned at the end by not really doing some research into what you plan on doing for the rest of your life. I have a couple friends who went to dental school, which is horrifically expensive (the average amount owned after school is well over $200k), but is also pretty secure because it's a very solid job to have for the rest of their life, so it's not a bad investment of their time or money.

 

[zinfamous]

the school of TridenT

 

[zinfamous]

Read Mr Money Moustache, if only because it gives you something to shoot towards and some ideas. It paints the picture of being financially free, where your income from your investments is enough to meet your daily expenses, allowing you to do whatever you want.

How to get there? Reduce your expenses and focus on paying off your debt. Debt is a lot more expensive than you realize, and it is a horrible feeling being trapped in it. It is a great feeling when you get free. I am not free, yet, but I have no credit card debt and my car will be paid off soon.

I guess when you have a more long term view of your finances, that also encourages you to make better decisions. I find it easier to put off purchases like new computer hardware, knowing that it sets me back quite a bit. I'm much more cautious about buying anything now, because I try to put as much as I can into paying back my debt. And it does work.

I like Mr Money Mustache. Dude is hardcore but you can learn a lot of behavior adjustments that really put you on the path to savings and growing money through simple compound interest. You may not want to depend on spoon-fulls of olive oil as part of your daily caloric intake, like MMM, but his advice is a solid foundation of fixing disastrous budget issues and learning to shave bad, money-wasting habits out of your life in order to create several hundred dollars-worth of "Free" money every month. It is a great start.

Also, jlcollinsnh, The Mad Fientist, and Go Go Curry Cracker are solid FIRE bloggers.