You have no idea how you’ve saved my life and future. I’m a 26yr old single woman and for so long I’ve felt like I would never get out of a vicious financial cycle of debt, senseless spending and no savings. I make $65,000/year so it didn’t make sense to be struggling from month to month. I was literally house rich and cash poor. After reading The Automatic Millionaire and TAM Homeowner, I don’t even recognize my bank statements anymore! I see so much green now instead of so much red!
First I started with finding out what my latte factors were, and boy were there many: Magazines, junk food, fast food, costume jewelry and unnecessary home decorating items: $60/week = $240/month! Then I started thinking of other things I can save on and put them into action:
1. Moved from renting at $1,700/month to $1,150/month = savings of $550/month!
2. In new apartment I don’t have to pay for heat and water = savings of $75-$100/month.
3. Changed Federal withholding from 1 to 3 = savings of $100/month
4. Got rid of home phone line (I only need my cell phone) = $55/month
Total Savings: $1,045/month!!
With the first month’s savings I was able to pay off 2 credit cards and open up an Emigrant Direct savings account with an initial deposit of $100. From the 2nd month on I’ve been depositing $850/ month into the account automatically. In a year I’ll have $10,200 in there (not including the 4.5% interest earned on it!). I also started contributing 6% of my salary into my 401K automatically (the maximum my company will match 50% of is 6%) = retirement savings of $5,778/ year! With all these savings, I still don’t feel deprived of life and fun because I give myself an allowance of $150 a month to spend on absolutely anything I want (groceries, gas, etc, are not taken from this allowance. They have their own spending account). I track all my expenses on an Excel spreadsheet.
In a year I will have paid off all my debts (student loans of $2,500, personal loan of $3,720, and $3600 of my car loan). With the $10,000 in savings by next year, I will be using $6,000 as a down payment on a condo in 2007 plus additional for closing costs and fees. Even if I have a mortgage payment of $1650/month on a $200,000 condo (mortgage, interest and taxes included), I will still be able to continue saving at least $500/month and even up my allowance to $200/month! And as a homeowner, I will have huge tax breaks that I don’t have as a renter. My 5yr goal is to use equity from my first home to buy another condo and rent it out using the techniques in the Automatic Millionaire Homeowner.
With a clear plan in action and with a future bright and welcoming, life could not get any better. It’s all thanks to you David. No other financial expert has been able to make things as simple and easy for millions of people to do as you. You are an Automatic Hero, and I’m well on my way to becoming an AUTOMATIC MILLIONAIRE!