Guest article, Barbara Friedberg, MBA, MS
A Veteran Investor and Money Expert Shares a Money Blueprint
I’ve walked down the path of smart money management for decades. I was blessed with parents who lived through the depression and instilled brilliant saving and investing tactics.
Yet, I understand many of you haven’t been as fortunate.
Do you feel at a loss as to how to enjoy life, and save for the future?
Are you concerned about bills, debt, and paying for the now?
Do you hate the idea of “sacrifice”?
If so, you may be surprised at how a few lifestyle hacks can net thousands of dollars.
You may download it on Amazon Kindle How to Get Rich; Without Winning the Lottery, by Friedberg. This book is a money blueprint, ideal for those without a good money mentor.
The following How To Get Rich excerpt offers a taste of an alternative spending strategy to give you more money in for your future.
Step 3: Spend Your Way To An Awesome Life
“If you think the United States has stood still,
who built the largest shopping center in the world?”
Richard M. Nixon
Shopping is intricately intertwined with modern culture. It’s part of leisure, relaxation, and entertainment. Shopping out of necessity is rare. What if I told you that it’s possible to tweak your spending a bit and build tens of thousands more dollars?
If you spend right it’s possible to boost your wealth, but if you spend foolishly your money drifts away. You don’t have to give up all luxuries to become rich. By spending strategically, you can have what matters most to you.
Have you made a big life change? Of course you have, every adult was once a child with few responsibilities or expectations. Somehow, you managed to grow up, get a job, and live on your own-all mammoth changes.
Spending smart is a new skill for many and can be learned. Approach careful spending as you would any other life choice. You need clothes, food, and someplace to live. How much you spend on those necessities directly correlates with how rich you will become.
My parents gave me an amazing gift; smart financial habits. Although I was trained since birth in wealth building, it is never too late to learn how to get rich. When I met my husband, he had never set foot in Wal-Mart, Target, Sears, or an outlet mall. He was brought up to believe that only poor people shopped at “those types of stores.” One of our first fights was in Macy’s when I suggested going to the outlet mall.
Flash forward several decades and my husband is the best shopper I know. He saw the new Mark Anthony line at Kohl’s and was impressed with the style, and distressed with the prices. He said, “I am waiting until the end of season sales for this line of clothing to go on sale”. Last week, at the summer close out, he picked up a black shirt and slacks at 90 percent off the original price. In fact, he is so astute that he has analyzed when and where to shop in order to get the greatest quality at the lowest price. In spite of his bargain shopping savvy, if you saw how well he dresses, you’d think he was a “luxury shopper.”
Buy a Mercedes for Less Than a Ford
My parents loved luxury cars: Cadillac’s and Mercedes. Although they indulged in these extravagances, they paid cash for their gently used luxury cars. They rode around in style for a bargain price. Meticulous about maintenance, they kept their cars forever which kept their transportation costs rock bottom. Mom and dad spent less on transportation than many Ford owners while indulging in their penchant for high end cars.
Not only did dad hate to waste money but he abhorred wasting time. This led him to open an office near home. He kept his commute below 15 minutes, cutting down on time and gas. These lifestyle decisions saved money, saved time, and left more money for investing and building his business.
What Are the Largest Budget Expenses?
After housing, transportation is usually one’s largest expense. By slashing transportation costs, you can increase lifetime wealth by the thousands.
Imagine this. Instead of shelling out $20,000 for a new car, and financing that purchase, you decided to save up and pay cash for a $10,000 used car. (I know it sounds crazy, but it is possible.)
But really, is saving $10,000 that difficult? Assume you’re making $40,000 per year. Save just 10% and put that savings towards your car fund. In two and a half years, you have the $10,000 for the car.
What if I told you this strategy would make you over $100,000? Would you be interested?
Here’s how it works. If you financed the $20,000 car for six years, at 5% interest, you’d pay $322 per month for six years. That’s a total of $23,184 you paid for the car.
What if you invested that $322 per month, and kept it invested for your future?
If you invested $322 per month for 6 years and kept that money invested for another 20 years. At the end of 26 years, your $23,184 total investment would be worth $111,100 (assume money is invested in a diversified portfolio of stock and bond funds earning an average 7% per year).
Is saving up for a few years to pay cash for a used car better than shelling out $322 per month for six years and at the end of the loan, all you have is a six year old car?
Learn to Be a Money Winner; Not a Money Loser
Building wealth is as much about mindset and money habits as it is about sacrifice and deprivation. How to Get Rich; Without Winning the Lottery, is a simple manual to teach you lifetime money skills.
Barbara Friedberg, MBA, MS is a former portfolio manager and university Finance instructor. In addition to How to Get Rich; Without Winning the Lottery she’s the author of Personal Finance; An Encyclopedia of Modern Money Management (ABC CLIO publishers, due January, 2015). You can find more of Friedberg’s work at Barbara Friedberg Personal Finance.com.