16I’m always in awe of people who have all the toys. These people have the latest iPod, the newest big screen TV, and that Wii thing. These people really love their stuff, and freely talk about stuff-gathering with me at work. It’s kinda funny how these same people also have lines of credit, maxed-out credit cards, and no money left after pay day.
I must be weird. I don’t have lines of credit, maxed-out credit cards, and most of my paycheck goes directly into savings. I do have nice things though. I purchased new furniture this year, I participate in an expensive sport, and I have a stunning diamond ring.
So why am I worth six-figures while others shuffle debt?
Do I have a lucrative job? Nope. I make an average salary for my age group, according to the November 2007 issue of MoneySense Magazine.
Did I win the lottery or inherit buckets of money? Nope. I’ve never played the lottery, and my family is alive and well. Although I have been promised a pretty set of china tea cups from my grandmother.
Did I play the stock market and strike it rich on a flashy investment? Nope. I’ve invested small portions of money slowly over time. I invest in index funds and ETFs. I’m pretty boring about investing, actually.
Do I own a house, condo, or other real estate? Nope. I am a renter and have been renting for well over a decade.
So, how did I get to be worth six-figures and still afford some nice stuff? It’s pretty simple really, here’s how:
1. Rent:
I am a proud renter. I don’t pay condo fees, mortgage interest, or maintenance. I save the money that would otherwise go towards mortgage interest and invest it. My rent is 1K a month. In the past six years real estate has gone bonkers in terms of pricing. Renting has been the better dealio after running my the Rent Vs. Own numbers in my city of residence. With so many people up to their eyeballs in mortgage debt, I feel pretty good with having growing (and diversified) investments.
2. Live below your means:
Everyone always says to live below your means…but I don’t think people really get it. Living below your means requires one to spend far less than what they earn.
3. Track the moolah:
I figure if you’re going to live below your means, you’ve really got to know what your means entail. You’ve got to track the money flow. I use Quicken, and I track every penny. Yes, EVERY PENNY.
4. Don’t buy it today:
Most people have a hard time delaying gratification. They want the latest and greatest “thing” now, today, pronto! By delaying gratification and not buying the hot new toy today, I save lots of money by buying used or discounted items tomorrow. It’s amazing how prices of gadgets and stuff drop after a few months on the market.
5. Buy used:
I tend to buy lots of used stuff. My dining room furniture was purchased used from craigslist.com. I’ve also purchased used sporting equipment from kijiji.ca. My sister also bought baby goods and maternity clothing used from these sites. Buying used saves A LOT of moolah! Do yourself a huge financial favour by browsing Buy and Sell lists before hitting the shops.
6. Don’t buy crap:
The best way to avoid debt is to stop buying crap. Most of the stuff out there is crap. Crap doesn’t hold it’s value. Crap takes up space. Crap is stuff you use a few times and put it aside in favor of the next crappy purchase. Crap is bought to perhaps help feel emotionally better one day, fill a short-term desire, or as an unplanned splurge. Crap costs you money. Avoid crap.
7. Move the moolah:
This is really simple. Every time I get paid, I move a portion of my moolah to a savings or investment account. I move my moolah every pay, without fail. Some people call this “automatic savings”. I just call it common sense. I figure, why I am working so many hours if I have nothing to show for it at the end of the week! Moving my moolah every pay is the significant reason why I am finally sound.
8. Get rich (and skinny) by brown bagging lunch:
I bring my lunch to work everyday. I figure the average lunch costs about $10. Doing the math, $10 X 5 day = $50 bucks. Doing more math, this is $200 bucks a month! The yearly total is: $2,400 for just lunch! OUCH. Besides, eating out can be pretty unhealthy. I find that bringing my lunch everyday not only saves me big bucks, but I can control the healthfulness of the food I eat. So yes, I get rich and skinny at the same time.
9. Make dinner at home:
This is really a continuation of item #8. I tend to plan my dinners weekly every Sunday and prepare LOTS of leftovers. I then use the leftovers for my weekly dinners and some lunches. I save HUGE money, lots of time, and stay skinny!
10. Bike to work:
I don’t own a car. I haven’t owned a car in over 12 years. Biking to work everyday makes me wealthy and skinny at the same time. It’s kinda funny how all the free and inexpensive forms of transportation can make you slim and rich. If you live in a city with good transportation it’s pretty easy to ditch your car and take transit, or better yet, ride your bike!
I have a feeling I will be adding to this list over time. I have many tricks for saving money and keeping healthy. What are your tips?
fox
Pings:
- Carnival of Debt Reduction #125 - Super Bowl XLII Edition — Broke Grad Student February 4th, 2008
- Carnival of Debt Reduction » The Super Bowl XLII edition of the Carnival is up February 4th, 2008
- Debt Reduction - Carnival of Debt Reduction #125 February 4th, 2008
- Financially Fit or Financially Fat? « If I Were Debt Free… February 5th, 2008
- Readyforaction » squawkfox - great advice April 25th, 2008
Comments:
Renting is a big one! The situation where I live makes it much better to rent as well. You miss out on the intangible feeling of owning your own home but then, for me, it’s much less stress having a portfolio of liquid assets rather than a giant mortgage liability.
Entertainment saving tips: rent DVDs instead of going out to a movie; use an antenna (if possible where you live) instead of cable–we get crystal clear digital channels from the U.S. (some of them HD) and all the major Canadian networks (albeit very blurry analogue quality); use the public library instead of buying books (if possible where you live); if you do go out for dinner, try not to order alcohol… or order less…
Lean and toned, not skinny!
I’d like to add:
*contribute to RRSPs.
*take advantage of any company matching programs that your place of employment may have
*grow your own veggies/herbs/fruit — whatever your space allows for, and shop farmer’s markets for produce, not only do you get fresher, local produce and support the local farming industry, it’s cheaper than anywhere else.
*drink tap water. the amount that people spend on bottled water, juices, sodas, coffees and other beverages is ridiculous. bottled water costs more than gasoline and nearly everywhere in Canada has more than adequate tap water.
*if your bank is not giving you free banking, fire them. there are plenty of institutions who will give you free banking *and* high interest. 10 dollars a month in fees may be the average, but it’s certainly not acceptable.
Great post. I really like the advice on buying crap.
Thank you for your kind words Sue. I think I need to write a full post just on crap. I feel there’s more to say on the subject.
I have zero debt, 1,000,000 in equity. Never inherited a penny, smoked for 15 years drank 1500 dollars a month ate out every breakfast, lunch and dinner. I earned 5K a month on average.
How did I do it? I’m 29 years old. Heheh.. Maybe I should write a book.
Debt doesn’t really have a lot to do with net worth. On meager then average earnings, I was worth six figures even with five figures of debt taken into account. My debt is down to four figures and close to extinction.
The secret: start disciplined automatic investing YOUNG (I started at 22) and go all in on equities.
EMILY. Early money is like yeast: it makes the dough rise.
So while I was stupid with debt, it didn’t stop me from prospering anyway. LOL Even doing things half right works.
(I’ve gotten smart about debt, simple living, avoiding crap in recent years. Which just accelerates my net worth growth and wealthbuilding.)
Hi kentuckyliz: Congrats to getting your debt close to extinction.
I haven’t heard of “EMILY” before, but it makes PERFECT sense. It’s so true about investing and saving when young.
Why is youth always wasted on the young?
I agree with all you said especially the crap buying! I will argue your number 1.
” I don’t pay condo fees, mortgage interest, or maintenance” - You are not directly paying those bills but you actually are paying someone else’s condo fees, mortgage insurance, and interest through your rent payment. Not only that you are paying a bit more most likely to get the landlord a positive cashflow on your unit.
I own a rental and believe me that my renter pays all the bills associated with it and then some.
I absolutely love #7. It seems simple but I don’t think a lot of people do this habitually. I basically do the exact same thing…”Move the Moolah”!
Your list is very good. We live on a relatively small income, and are debt-free. Most people I know earn a lot more, and live lavishly on credit. Each side thinks the other is weird. People might think, because we live simply and frugally, that we are poor, but they would be wrong!
Here are my tips:
- Buy high-quality items and maintain them well, so that they last as long as possible
- Learn Do-It-Yourself skills; you save a lot, and the government can’t tax the work you do for yourself (as it would when you hire a service, such as painting).
- Barter labor or materials with others, instead of buying
- Drink tap water most of the time. Flavored water is a ‘want’, not a need.
I really like your item, “Don’t buy Crap”. Probably because I hate crap, too. I noticed that our little house seems much larger, now that I have decluttered it. Even used crap can become a problem! Less really is more, in every way.
We live in an inexpensive yet beautiful rural area, where it is generally cheaper to own a house than to rent. It’s our choice to live here. Our property includes over 100 acres of woodland with a creek running through it, and a modest house which will be about 900 sq. ft. when the renovation is complete. For us, living in a natural area is priceless; we would not trade it for a mansion. There is no public transportation here, so we drive well-maintained old cars (one is 1989!). Property taxes and living costs are relatively low here. Our heating cost is less than $50/year, (gas/oil for the chainsaw, cutting our own wood).
Chickadee: You make an excellent point about buying high quality items which last when maintained. I too do this. Shelling out a bit more up front for a NEEDED item really pays dividends when it lasts for years. Ohh, and bottled or flavored water is also crap, for sure. I only drink tap. Tap water is also far better for the environment considering all the production and recycling needed for plastic bottles. Where you live sounds like a dream scape. You lucky birdie you. I too live in a wooded area off the beaten path. I used to be a city dweller, but have given it all up for rural living. You sound like a kindred spirit.