I’ve read your books The Automatic Millionaire and Smart Couples Finish Rich – both were worth every cent and more in financial advice.
Unlike most people, my parents taught me about money at a young age so I’ve always had a pretty good grasp on money and known how to save. Early on in college, I decided that I hated renting and would save up as much money as possible so I could buy a house after I graduated. Within a couple months of graduating from college, I bought a nice home in the suburbs and was able to put close to 20% down on it!
Now here is where you come in. After buying my house, all of a sudden I got into this ‘I need this for the house’ phase – my ultimate latte factor. A new water heater, furniture and decorations for the house, new professional clothes for my first job and pet expenses quickly added up to close to $3,000 in credit card debt. Yikes! (Luckily, I had this all on a 0% interest card so I wasn’t paying a dime in interest.)
After reading your book, I realized I had to change my spending habits FAST. So far, I’ve been able to implement the following things:
-Each month I send in an additional 1/12th of my mortgage payment to pay down the principal. I’ve figured that this will save me close to $50,000 in interest over the course of my mortgage.
-To avoid crazy spending, I rarely use my credit cards and give myself a cash allowance instead. Now that I only use cash it’s easier to understand how much spending money I have and not go over it.
-I’m also paying $200/mo towards credit card debt; this way I’ll have it all paid off right before the 0% interest is up.
-I am putting $300/mo in a money market account as an emergency fund. Ideally, I want to save up $12,000 in emergency money so I can ‘sleep well at night’. Once my credit card is paid off in June ’06 I’ll be able to add that $200 I’m currently spending in debt payment towards this goal. Then the savings will really add up fast!
-Since I work for a very small company, we do not have a 401k. Once I have my emergency money saved up, I plan to promptly open some form of an IRA and get investing! In the meantime, I’m researching some options you listed for small businesses in hopes of convincing the owner to get something similar to a 401k started for the company. I know my co-workers are with me on this one!
-I also drive a 1997 Geo Prism which I bought in high school. It’s not very glamorous, but there is no car payment for it. I think I can get at least two more years out of it before I need to buy a new one. Luckily, I get mileage reimbursement for any business related driving I do, so I’m saving that money ($50-$150/mo) towards my future car so I won’t have to take out much of a loan when I buy a new one.
-I really appreciated the Value Circle you included in Smart Couples Finish Rich. I was really having a difficult time balancing my values and spending before reading the book. But now that I’ve came to term with my real values – family/friends, security, health, making a difference and adventure – it’s really simplified my spending/decision making process. Now I can just think about whether buying/spending X conflicts with any of my values. If it does, I know not to do it!
Thanks again for all your hard work writing these books. It’s really made a difference in my life. So much so, that I’m thinking about volunteering with Jump$tart Coalition for Personal Financial Literacy to help get financial education into the schools. I’m hoping that this can be my way of making a difference in the world.
At age 23, I think I am off to a great start and hopefully in 40 years I can write to tell you how wonderful it all turned out.
P.S. I’ve found that at times it can be hard to be a conservative spender when many of my friends are shopoholics. As a result, I think I might have to give those friends your book for the holidays and get us all on the same page 🙂