Part 6 (1/2)
TipThe toughest part of taking control of your finances is getting started I recole day (a ”Money Day”) to tackle all of your financial chores at once To learnthe Foundation
Chapter5The Magic of Thinking Sal, and you will be rich and you will be rich”-Benjaality Thrift Econo your money and resources carefully If you don't spend ers and it's hard to get ahead By being frugal, you make conscious choices that'll help you live well toes, you can be frugal and still wear nice clothes, dine out on occasion, and buy new things Frugalityon everyday expenses (as opposed to big-ticket items, which you'll learnthat small amounts roundwork for sound financial habits throughout your life This chapter explains why it's iies for doing just that
TipTo coality, you have to keep your goals in oals) If you lose track of why you're ality will become a burden and you won't stick to your plan for a refresher on goals) If you lose track of why you're ality will becoality Matters Thrift is nothing new In fact, it used to be fashi+onable-you were ader the case Over the past 50 years, frugality has gained so frugal with being cheap But there's a difference: When you eat stale crackers with your soup for lunch, you're being frugal When you serve stale crackers to your guests to eat with their soup, you're being cheap You cross the line when your habits affect others, not just you
Part of the reason thrift fell fro to run a Super Bowl co careful with your n that tells you not to go into debt If you want to be thrifty, you have to advertise to yourself (see the box on Old-School Tools Old-School Tools)
Even though there aren't any big corporations to sing its praises, frugality is an i a sack lunch may only save you a buck or two each day, but when you es over months and years, they really add up
Here are a few reasons it's important to develop thrifty habits: - Quick wins As you learned in Chapter4 Chapter4, the tays to improve your cash flow are to reduce expenses and boost inco expenses offers the quickest results It takes time to find a new job or to ask for a raise, but you can start being frugal right now
- Lots of opportunities Our society idolizes big winners: million-dollar athletes, lottery winners, and Wall Street billionaires nobody celebrates the guy next door who bikes to work, grows his own food, shops at the thrift store, and gets his books frolitzy, yet it can-and does-lead to true wealth (see the box on the next page) Of course, it's also i stuff, like a home or a car (see Chapters Chapter9 Chapter9 and and Chapter10 Chapter10), but large transactions are rare (How often do you spend ?) You have ularly, like groceries
- Ss here and there really do add up over ti s decisions If you learn to comparison shop for shoes, you can use that sa, like a car Or if you learn to slash recurring azines and newspapers, you can apply this sae
Thrift is about hts the value of things
- Provides for the future
- Lets you focus your time and money on what's really important to you
- Reduces your consumption and waste
- Gives you a sense of accoality, you're developing habits that'll help you save hout your life
On The Money: Thrifty MillionairesSo wealth is all about earning reat, but research shows it's not how much you earn that matters, but how much you spendYou'll never become a millionaire if you spend every penny you earn-or spend even more and wind up in debt In their book The Millionaire Next Door The Millionaire Next Door (Pocket, 1998), Thoal is the cornerstone of wealth-building” As mentioned in the box on (Pocket, 1998), Thoal is the cornerstone of wealth-building” As h?, the three words they feel best describe al” They also found that et ”They beca expenses, and they maintain their affluent status the saet, more than half save and invest their income first, and then spend what rey on Get in the ga They kno , and shelter
- Set goals This is especially true of those who've built their wealth through frugality
- Actively plan and e their finances Wealthy A their financial futures as the rest of us
If you want to build wealth, copy the subjects of The Millionaire Next Door The Millionaire Next Door The best place to start is by being thrifty
The Power of S 50 cents a week on milk doesn't mean much if you do it just once, but over the course of the year, it adds up to 26 Taken together, many such small economies make a noticeable difference Small amounts really do matter
TipBecause you earn pre-tax dollars but spend after-tax dollars, a penny saved is actuallyon your tax bracket, you ht have to earn 111, 133, or even 150 to put 100 in your pocket So if you're in the 25 tax bracket, saving 750 a year is like giving yourself a 1,000 raise! (You'll learn ive you pie-in-the-sky examples of how much you could save, here are so to improve my cash flow and pay off over 35,000 in debt (see The Basics of Debt Reduction The Basics of Debt Reduction), Ie fro 64572 every year
- Getting rid of hly 4650 per month) and82140 per year
- Cancelling137 per year
- Going to the public library instead of shopping at bookstores, saving 39195 in the first year
- Planting a vegetable garden to growabout 300 in 2008 (see box on Pay Less for Power Pay Less for Power)
With just these few changes, I boosted my cash flow by 2,28161 per year-that's ales like these don't affect just your short-ters Here's a look at the cu the es listed above (This chart assu The Power of Co has more on the power of compound interest) has more on the power of compound interest)
Monthly
1 year
2 years
5 years
10 years