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Old 12-16-2009, 07:43 PM   #21
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His might be extreme, but your "die tomorrow" is extreme as well and generally kills any incentive to save for the future. There is a happy medium. You just need to find yours.
yeah i know just a little devils advocate. but seriously i am living my happy medium, i do save and dont spend foolishly. but waiting till i'm 68 or when i can "retire" to enjoy myself seems nuts to me. hell the world is ending in 2012 anyway
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Old 12-16-2009, 07:55 PM   #22
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I think this is a great post for people to really get a grasp on what they are spending. The spreadsheet idea is something I have been preaching to people for a while to try to understand where their own cash flows and how to change bad habits.

Once you get this mastered and have a firm understanding of how to manage your finances, you can elevate yourself to understanding investing beyond this into other markets. For instance, I personally, will never pay my house off early for a multitude of reasons. If you look at the amortization table of payments, the payments that you are cutting off tend to be payments that are heavily weighted in principle and not interest. My loan is also at 4.75%, so it is unbelievably cheap. I make my payment and invest the rest in a self managed account, which is mainly emerging and foreign markets like Australia and Brazil. I make a much better return on my investment, but I have spent a lot of time understanding these markets. Plus my money is still liquid.

This is a solid plan that would get you to a point to where you could be financially independent and stop the ridiculous spending habits that most have. I spend more than I probably should, but I make sound investments that yield sustainable returns. I have a fixed amount each month that has to be invested and the rest I can spend on cars/my garage. Sometimes I have a fair amount and sometimes I have none. It is the age old “pay yourself first”.
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Old 12-16-2009, 08:01 PM   #23
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while i agree that there is some very sound advice here (and some of which i follow myself) i am wondering where you live. since i live in the state with the worst taxes in the country, i can assure you that your write-up can not apply here. when a sub $300k property comes with yearly taxes of about $10k/yr it just doesn't compute. btw, $300k doesn't get you much of a home here....
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Old 12-16-2009, 08:24 PM   #24
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yeah i know just a little devils advocate. but seriously i am living my happy medium, i do save and dont spend foolishly. but waiting till i'm 68 or when i can "retire" to enjoy myself seems nuts to me. hell the world is ending in 2012 anyway
My wife and I have definitely enjoyed ourselves. We bought a 10 year old Miata with 80K miles in '99 instead of a new one. We played cards instead of going to the movies. I never have understood where it was written that you needed a new $35K BWM with custom rims to be happy.


Two real life examples of people I know:

Mother-in-law: 60 years old, divorced twice, bankrupted both husbands, miserable, broke and alone. She had a civil service job making double/triple what I made when I first got married. Didn't save a dime and always spent like crazy (enjoying life). Her dad bought her a house, her dad bought her a car. In the past she always bought whatever she wanted - now she can't even buy what she needs.

Friends: Guy makes 2X what I make, wife makes 80% of what I make. They are so far in debt they cannot see a way out. How can your family make $100K a year more than mine and still be broke?


Me - OK income, nice house, nice truck, nice Miata, two 50cc minibikes, good investments, completely debt free, happy.

Him - FANTASTIC income, nice house, nice truck, nice Miata, two 4-wheelers, no investments, completely swamped in debt, miserable. Yeah, he is enjoying life!


The comparison between his family and mine, where he went wrong and where I went right should be taught in school to little kids. I can walk around in his house and see what happened. It is crystal clear. Stacks of Blu-Ray DVDs, newest I-Phone, two widescreen TVs, sodded yard, the best clothes, the best toys, the best beer/liquor. They are really nice people and I am trying to help them out of their mess. They will eventually make it but it will take them years of hard work. If you had asked them 5 years ago they would have told you they were happy but I doubt they would now. A little sacrifice over the past 10 years and I bet they would have $1,000,000 right now - easy.
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Old 12-16-2009, 08:36 PM   #25
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while i agree that there is some very sound advice here (and some of which i follow myself) i am wondering where you live. since i live in the state with the worst taxes in the country, i can assure you that your write-up can not apply here. when a sub $300k property comes with yearly taxes of about $10k/yr it just doesn't compute. btw, $300k doesn't get you much of a home here....
Yes, the cost of living in NJ is more than SC but you guys make a shitload more than we do too. If not, no one could afford those $800K houses or the crappy taxes you pay. Personally, I'd get out of that hell hole if I were you but that is just me. My company is based in NJ and I cannot believe all those guys live up there.

It is all what you make of it. We got married for $50 by the Justice of the Peace, no diamond ring, no honeymoon, no catered food, no guests. We bought a 900 ft2 house with 1 bathroom. Just like it would have been 50 years ago. Look at how people used to live before everyone was so busy trying to keep up the the Jones' all the time. Everyone was much happier and there was no debt.
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Old 12-16-2009, 08:50 PM   #26
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One more thing before I wind it up for the night. Again, just trying to help out some of the younger guys here. I have bought quite a few things over the past couple of years and I am indeed enjoying myself. It is all in the way you go about it though (remember that I am debt free and everything I buy I actually own - I've earned the right to buy myself some stuff here and there). Yesterday a friend came over to jam a bit on the guitar (I suck but I was trying). He brought over his expensive *** amp, $500 foot pedal, and $600 Fender Strat. I was playing my used Chinese Strat and cheap amp ($200 total). I couldn't tell the difference between the two. He drove up in him 2 year old (bought it new) Toyota Camry ($25K?) and parked behind my Geo Metro ($1.5K). They both get us to work just fine. The day after tomorrow I am going to do some target practice with another friend. We will be shooting my Ruger 10/22 I bought for $200 at a pawn shop. There will be guys next to us shooting $1500 1911s and $2K AR15s. I'm buying ammo for $15 per 500 and they are buying ammo for $200 per 500. Chances are they are paying 15% interest on that ammo to Visa. Something to think about...
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Old 12-16-2009, 08:50 PM   #27
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while i agree that there is some very sound advice here (and some of which i follow myself) i am wondering where you live. since i live in the state with the worst taxes in the country, i can assure you that your write-up can not apply here. when a sub $300k property comes with yearly taxes of about $10k/yr it just doesn't compute. btw, $300k doesn't get you much of a home here....
I agree, and disagree here. My house was 425k and my taxes are about $7400 a year. My total mortgage payment is roughly $2700 including taxes and insurance (30 yr fixed at 6%). Yes it is expensive, in fact before buying the house here I almost bought one in Tampa for the same price with twice the square footage and a couple grand less in taxes. However, my salary would have been much lower and the potential to move up the corporate ladder was almost non-existant. Although NJ costs a ton, it also provides you with many opportunities that other states may never see.

As for the spreadsheet idea, I started one back in September with the same idea as the OP. I put different categories for eating out, groceries, "monthly nut", gifts, etc. I originally budgeted we could cover the basic payments in $4k, much more was going out. I've become much more aware of where it's all going and we've cut back substantially. However since then we've had some big unpredictable expenses which have wiped out all the savings we captured from starting the sheet (don't worry we still have a good amount in the bank). It completely feels like an uphill battle.

Another thing I've learned is to find good CD's and park your money there. If you have you're spare 10k tied up in a CD it'll be harder to get at it and those urges will disappear before the money is available.
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Old 12-16-2009, 09:28 PM   #28
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when a sub $300k property comes with yearly taxes of about $10k/yr it just doesn't compute. btw, $300k doesn't get you much of a home here....

pwnt. I was reading about Jeresy. A 300k house here would be 1. shitty and 2. cost you $3000 in taxes

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Another thing I've learned is to find good CD's and park your money there. If you have you're spare 10k tied up in a CD it'll be harder to get at it and those urges will disappear before the money is available.
Is it even making any money? it was cool when my savings account was making 6%, now it's like .0002% sigh
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Old 12-17-2009, 12:44 AM   #29
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3-4% is a rockin' short term CD now. Those aren't liquid enough for me as they have penalties for taking out early and the ones that are risk free have too low of interest rates.
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Old 12-17-2009, 01:01 AM   #30
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It's amazing to me how much pay and cost of living changes from region to region. A decent house around here (2000-2500sq ft) is typically in the $200k-$250k range, and average income is maybe $35k. Travel just 300 miles and it could jump to $400k and a $55k income. Crazy.
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Old 12-17-2009, 09:06 AM   #31
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3-4% is a rockin' short term CD now. Those aren't liquid enough for me as they have penalties for taking out early and the ones that are risk free have too low of interest rates.
If massive inflation hits us again I think we will be seeing 30 year bonds at 18% like the early 80's <G>.
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Old 12-17-2009, 09:26 AM   #32
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It's amazing to me how much pay and cost of living changes from region to region. A decent house around here (2000-2500sq ft) is typically in the $200k-$250k range, and average income is maybe $35k. Travel just 300 miles and it could jump to $400k and a $55k income. Crazy.
Eh, that's nothing, how about about travel across the street from me and a townhome could easily be $700K, behind me a few blocks you could easily find a 700sq. ft. apt with 15 occupants making a sum total of 15K a year...
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Old 12-17-2009, 09:27 AM   #33
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If massive inflation hits us again I think we will be seeing 30 year bonds at 18% like the early 80's <G>.
Massive inflation won't be hitting us anytime soon.

As far as CD's not being liquid enough, that was the point of my post, it'll keep you from spending with this big urges.
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Old 12-17-2009, 09:39 AM   #34
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I was talking to a buddy the other day about diversified financial approaches to life. I think ultimately we both agreed that a viable approach would be to spend the first ten years out of college focusing on amassing cash/wealth. That means living as you have (or even less so). The goal is to have at least $750k earning 10-15% by the point you're ready to change (upgrade) your lifestyle. That should provide an individual (and SO) the means to do what you wanted in the context of a comfortable lifestyle.

To your point Robert, I think it's easy to get suckered into the "I gotta have" only find it's more a "I think I wanted" and finding out ultimately the fantasy never as good as the reality.
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Old 12-17-2009, 09:50 AM   #35
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We got married for $50 by the Justice of the Peace, no diamond ring, no honeymoon, no catered food, no guests. We bought a 900 ft2 house with 1 bathroom.
I realllly need to marry someone who is okay with that lol.
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Old 12-17-2009, 09:57 AM   #36
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Eh, that's nothing, how about about travel across the street from me and a townhome could easily be $700K, behind me a few blocks you could easily find a 700sq. ft. apt with 15 occupants making a sum total of 15K a year...
Well yeah, it's that way everywhere, but I meant on average. I live in a home that would probably only sell for 120k in a neighborhood of houses built in the 60's and 70's, average income probably 30k, but you can go about 8-10 miles to the west and you reach fancy neighborhoods on Highway 280 that sell for WELL over a million with people making hundreds of thousands or millions a year. Go the other way to the east and you see farm land with huge acreage that probably go for several million a lot. But overall, cost of living here is low, as well is income. Go to New York City and the cost of stuff amazes me. Literally double for pretty much anything.
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Old 12-17-2009, 10:07 AM   #37
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I was talking to a buddy the other day about diversified financial approaches to life. I think ultimately we both agreed that a viable approach would be to spend the first ten years out of college focusing on amassing cash/wealth. That means living as you have (or even less so). The goal is to have at least $750k earning 10-15% by the point you're ready to change (upgrade) your lifestyle. That should provide an individual (and SO) the means to do what you wanted in the context of a comfortable lifestyle.

To your point Robert, I think it's easy to get suckered into the "I gotta have" only find it's more a "I think I wanted" and finding out ultimately the fantasy never as good as the reality.
Lifes too short. The only way to do it, work hard play hard.
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Old 12-17-2009, 10:10 AM   #38
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I think this is a great post for people to really get a grasp on what they are spending. The spreadsheet idea is something I have been preaching to people for a while to try to understand where their own cash flows and how to change bad habits.

Once you get this mastered and have a firm understanding of how to manage your finances, you can elevate yourself to understanding investing beyond this into other markets. For instance, I personally, will never pay my house off early for a multitude of reasons. If you look at the amortization table of payments, the payments that you are cutting off tend to be payments that are heavily weighted in principle and not interest. My loan is also at 4.75%, so it is unbelievably cheap. I make my payment and invest the rest in a self managed account, which is mainly emerging and foreign markets like Australia and Brazil. I make a much better return on my investment, but I have spent a lot of time understanding these markets. Plus my money is still liquid.

This is a solid plan that would get you to a point to where you could be financially independent and stop the ridiculous spending habits that most have. I spend more than I probably should, but I make sound investments that yield sustainable returns. I have a fixed amount each month that has to be invested and the rest I can spend on cars/my garage. Sometimes I have a fair amount and sometimes I have none. It is the age old “pay yourself first”.
I was going to agree with Rob's post except for the mortgage and then I saw your post with which I agree %100. I just refied to 30 years at the same rate as you for the same reasons and I had about 13 left on my old mortgage. Couldn't give up the great investment opportunities with the market over this last year. And if we do see inflation in the next 5-10 years, I can park that money the bank gave me at %4.75 into much higher yield safe investments like CDs and bonds the closer I get to retirement. I don't see CDs and bonds staying under my mortgage rate until my house is paid off so the closer I get to retirement (15 years), the more money goes towards safer investments.

I don't have a budget anymore, as at some point, you just know what you can and cannot spend, but I have all of my payments done online so I know how much of a budget for necessities I need each month and what's left over. After some automatic deposits to some investments (529, S+P, gold) and my Roth contributions, what's left over is FU money that can go to toys and a little stock market speculative money.

The best advice my parents ever gave me aside from breaking up with my first girlfriend was to max out my Fed 401K. 20 years of contributions at 41 years of age and I've got decent money there for retirement even with the market crash last year. I couldn't spend what I never saw.

Even without 401k, people can setup mutual fund, DRIP or something similar and just put $50 away each month.

Frank
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Old 12-17-2009, 10:15 AM   #39
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The best advice my parents ever gave me aside from breaking up with my first girlfriend was to max out my Fed 401K...I couldn't spend what I never saw.
Sage advice for all the youth here for sure. I can promise if you don't follow this when the opportunity presents itself, you will live to regret it (if you see that day).
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Old 12-17-2009, 10:17 AM   #40
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Kudos to Robert, both for his accomplishments and his willingness to share his design for success and happiness with others. When people find peace and happiness they want others to have it, too. I think that the instant gratification crowd doesn't understand the level of peace, security, and satisfaction that comes from being debt free and having a comfortable amount of money in the bank. It feels better than a new set of wheels and the feeling lasts longer. I hate to spend money because once I spend it I don't have it anymore.

When it comes to homes I find it interesting that 25-30 year olds expect to live in a house as nice as the one their 50+year old parents live in, yet they don't have anywhere near the income. Maybe all your income qualifies you for is a cheap little house in a marginal neighborhood. So what? Make it home on the inside. Do you NEED something with more than 1200-1500sq ft? Not unless you have two kids that are pre-teens or older that need separate bedrooms. If you can't afford the 15 year mortgage on a house, then you are buying more house than you should. It really sucks to realize that you aren't a baller yet, but you'll be happier in a couple of years when you've made a big dent in the principle and not just the interest.

On cars, I also never buy new. If you get it at 5-7 yrs old it is 60 to 70% less money, and if you pick the right car, it'll last 10 more years with regular maintenance and still look/drive nice if you take good care of it. I hear morons constantly say "I wanna car with a warranty." Then they spend $20-30k more than they should for their needs. Why do you need a warranty when an engine or tranny is $600-800 and it costs $500-600 to get it installed in most "normal" cars. That is a lot less than $20-30k, but the truth is people are just looking for an excuse to buy new cars.

I'd have had my car turboed a long time ago if I wasn't playing within my own self-imposed budgetary rules. I've got money in the bank I could spend on the car, but I'm afraid I might need it for something "real" at some point.

I'm not walking the straight and narrow like Robert, and his example has shown me a few places I really need to improve.

"A penny saved is a penny earned" -Benjamin Franklin, Poor Richard's Almanac
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