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Written by Jimmie Burroughs Email to a friend
We often hear of movie stars, entertainers and athletes who earn from 10 to 100 million dollars a year going bankrupt. Why do you suppose that happens when a secretary who earns 30 to 40 thousand a year is able to retire with more than a million dollars? It is because the secretary understands the first of our 7 Ways to Increase Your Odds by 90% of Achieving Financial Independence:
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Spend less than you earn
That certainly isn’t a new principle, nor is hard to understand, but for some reason many don’t abide by it. Probably the reason is that a lot of people want it all right now and are willing to over extend themselves in order to get it which leaves no money to save or invest.
In order to spend less than you earn it requires a good, well defined budget that is a strict guide for spending, and also factors in a portion of the income for savings and investments. A good rule of thumb is 10% for savings and investments and 10% for charity when planning your budget. Plan this first and then plan how to stretch the rest out to cover your living needs. If you are already over-extended, it might take you awhile to downsize in order to plan your future financial freedom, but it will be worth all your sacrifices.
Spend your money wisely
Here’s a good example for spending your money wisely: Most like to drive a new car. For the purpose of illustration let’s say at age 18 a person bought their first new car 50 years ago, and financed it for 5 years at 10% interest. Since there is no way of knowing the exact cost of the car they buy each year or the increase of the price of cars each year, we will take a conservative estimate and say it averages out at a cost of $2500 for each year over the 50 year period or approximately $208 per month. At 68 years of age, the age where a lot of people retire today, they would have invested $3,494,225.59 to drive a new car every 5 years. Naturally if they had invested it instead at $208 each month for 50 years, they would have $3,494,225.59 in their bank account.
Of course we need a car, so what would have been the best plan in order to have a car and also have money left over to consistently invest $208 per month? The answer is save the money to pay cash for a good used car, and avoid paying interest and payments, and instead invest your money and earn interest. Drive your cars longer and always pay cash for them. My jeep Wrangler is 12 years old and still going strong. I expect at least another 5 years of driving from it. I have spent less than $200 on repairs in the last 6 years since I’ve owned it. As I suggested above, I paid cash for it and bought it used.
The same principle goes for buying a home, although, most are unable to save the money and pay cash. Nevertheless, my dad did, and he also built his house himself. He built it when I was 9 years old and lived in it the rest of his life until he died at 76 years of age, and he never had to make a house payment all those years.
If you can’t do like my dad, neither have I, you can still save a lot of money by buying the house that you need rather than what you want. The average family of 4 today only needs a 3 bedroom house. You can find a good 3 bedroom house in a nice older neighborhood for a reasonable price, finance it for 15 years, and have a good home after 15 years, paid for as long as you live, or as long as you want to live there.
I’m not talking about sacrificing a good lifestyle for the sake of hoarding your money. The above can be managed and still live a very good lifestyle. The secret to financial freedom is not how much you earn, but how much you save consistently, which doesn’t have to be a lot; in the illustration above it was only $208 per month which is well within reach of most. However, if the above is too much for you, then it is rather doubtful if you will ever reach financial freedom unless you earn a very high income.
Save your pennies
Of course a penny is not worth much today; nevertheless, pennies still mount up to dollars. What I’m talking about is if you can save a few pennies on a can of food and $5 or $20 dollars on your grocery bill, it amounts to a lot over time. The way to do this is by paying attention to grocery ads, buying part of your groceries at a discount food store, and by collecting and using coupons.
Until about a year or so ago, I only bought things new. Someone convinced me to go to a thrift store one day and I was surprised to find some very good items. In fact I bought a brand new George Forman Grill that sells new for around $20 for $3. But the best find was a like new pair of brand name shoes that sells for $350 on the Internet which I bought for the sum of $8. The shoes looked like they were hardly ever worn. I took them and sanitized them, and they are beautiful shoes, and look brand new. I bought some levies, that looked just like the new ones you pay $50 for at the department store, and I paid only $8. I took the jeans to the laundry and had then starched and hotheaded and they look beautiful. I also bought a pair of Puma athletic shoes that sell for around $50 new for $8 that were absolutely new.
Even movie stars do it: “Drew Barrymore Wears a $25 Dress on the Red Carpet. The metallic mosaic print dress that Drew Barrymore wore on the red carpet Aug 12, 2010, was high on style, but not on price—it cost her only $25! Barrymore scored the vintage dress, which was by a brand called Janine, at a thrift store in Austin, Texas.“ InStyle.com
Here’s a good tip for finding high quality items at a thrift store. Go to a Good Will Store near an affluent neighborhood. Rich people sometimes discard high quality items to charity that are near new.
Buy your clothes at the end of the season and save as much as 75% or more. I like Belk’s Department Store, and each year, for several years, I have bought a good supply of short sleeve, name brand shirts at the end of the summer season. It works great for me because I spend winters in Florida where I can wear the shirts right away, but even if I didn’t go to Florida, I would still take advantage of the seasonal low prices.
Learn to invest your money wisely
Good investment is one of the great secrets to becoming financially free. The way to learn good investing is by reading good books on investing. Invest enough of your time to read at least 15 pages a day of a good how to invest book. For more information on finances read my article: 10 proven steps to financial freedom..
Avoid the use of credit cards, or same as cash deals
I use a credit card but I would not recommend it for most because most are not able to discipline themselves to use it wisely. There was a time when I wasn’t either. If you can pay off your credit card each month and never more than three months, then you can use a credit card wisely, otherwise it can ruin you financially.
Credit cards have a psychological hook: They entice you to spend money because it seems to be free which of course it isn’t. If you feel a credit card is necessary, then get a prepaid one; it has its own built in incentive to spend wisely and within the budget.
Same as cash deals may seem as if companies are being nice and want to help you, but don’t be deceived. The reason they are able to make such attractive offers is because they know, based on industry averages, that most will not pay their debt off in the allotted time, and they then can charge all the back interest. It can become very expensive for you and very lucrative for the company.
Give a portion of your money to charity
Andrew Carnegie, the steel magnate of the 1930s, set his goal to make as much money as possible the first half of his life, and then give it away the last half of his life. Well, he made over 400 million, and in the 30s that was a huge amount of money. He kept his word, and gave it away the last half of his life.
It was learned recently that 80-year-old Charles F. Feeney, an alumnus of Cornel University, was the anonymous donor who recently gave the college a $350 million donation to construct a new technology-based satellite campus on Roosevelt Island in New York City. Officials at The Atlantic Philanthropies, the foundation started by Feeney in 1982, confirmed to the paper last night that he was the one who made the gift for the project, which is expected to generate an extra $1.4 billion in tax revenue for the city, plus 20,000 construction jobs and as many as 30,000 new jobs once the facility is up and running. The New York Times
Why give money away? There is a good reason to give your money to good causes; it helps others to have a better life, as the example above demonstrates, and also the Bible teaches it is more blessed to give than to receive. The word “blessed” is also translated “happy”, so giving money away can make you happier than if you keep it.
People who become financially free plan to do so, and take the appropriate action to fulfill their dream. Disciplining yourself to take the right actions isn’t easy, but it is necessary if you plan to Increase Your Odds by 90% of Achieving Financial Independence.
About the author: Jimmie Burroughs is a motivational speaker and author who has been involved in teaching Christian Personal Development for more than 30 years. There are hundreds of articles to help you on this website, Website Contents , in your person growth. Be sure to take vantage of the FREE offer to get the “Personal Development” eBook while available.
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