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[fatty]

I've been wanting to do this for a while and never got around to it, but seeing these recent threads I've listed below along with a few others from the past provided the motivation for me to create this post:

• My 'buy nothing year': How one woman saved $27,000
  
  [*]What do you "waste" money on?
  
  [*]62% of Americans Have Less Than $1,000 in Savings
  
  [*]The average Near-Retirement American Household has 12k saved for its retirement

My main reason for starting this topic is to encourage other like-minded people who desire to control their destiny with advice from others, who are either living the dream or currently on that journey.

What do I mean by Financial Freedom? The answer will be different for each person, but I define it as being free from having to ‘work' for a living...living life the way I choose. I don't see myself retiring completely from earning an income, but it will be work that I look forward to waking up to each morning, and scheduling it on my terms. It's the ability to make life decisions without worrying about financial constraints.

It is not easy and to get to this point with your finances will require sacrifice. The thing to remember is the work you do at your job is earning a paycheck but it is not going to make you rich. It's the decisions you make with your time and money while not working that is going to determine if you become wealthy. How hard you are willing to work at it is going to affect the timeline to get there.

But here's the great thing. It is achievable by each and every person that took the time to click and read this thread. If you are willing to continually learn, stretch yourself outside your comfort zone and grow a little bit each day, you will obtain financial freedom.

What I (and I hope others) will do is share insights about lessons that we've learned along the way. Smart things that are working for us...and also those mistakes that we will never forget but are grateful for the learning experience.

Some of the topics we'll be tackling in this thread (specific posts regarding the subject are shown in parenthesis):

• Debt (#3)
  [*]Personal Growth and Development
  [*]Taxes
  [*]Frugalness
  [*]Leadership
  [*]Money and Financial Education
  [*]Career choices
  [*]Spending (#10 - 1/3 rule) (#40)
  [*]Giving

But you need to have a reason, a specific goal to work towards if you are willing to make this lifestyle change. In my humble opinion if the goal is just 'to get rich' you will not find true happiness. Angus Deaton, the 2015 winner of the Nobel Prize in economics, authored a study that showed that after about $75,000, income and happiness are not correlated. Here is another article that breaks that amount down per US state.

This $75,000 figure is referring to your day-to-day happiness, though. Life satisfaction is different, and that is why I want to urge you to really know why you are living the life you currently are, and what is it that you want out of it? For myself, after faith and family, I find that the ability to teach and serve others, my giving, has resulted in my life satisfaction being so high.

So please share your thoughts, advice and critiques. Ask your questions. Tell us how you are doing on your journey. I think if we all try to approach this with the willingness to learn new ideas, even if you may not agree, we will still get something meaningful out of it.

List of Gaffers who have recently become debt free:

• Maiden Voyage
• aerts1js

 

[fatty]

RESOURCES:

As time goes on I will add links to Gaf threads, book recommendations, motivational and teaching videos, podcasts, etc. from myself and others. So please share! (and add your reason why to help others) Hopefully this gets to be a pretty helpful resource.

Recommended Neogaf threads

How to Invest for Retirement Great thread with a very helpful community. I will touch on investing a bit here but mainly I will point people to this thread when they are ready to get serious.

Budgeting |OT| of budgeting is not a diet! Budgeting thread by Cyan, thank you for the recommendation Piecake.

Non-Fiction audiobook recommendations? Small thread right now but hopefully with time it will grow with many good titles. Listening to non-fiction audiobooks during your commutes is also a great way to expand your knowledge base.

Credit Cards & Finances |OT| Rewards, Cash Back, APR, & More! I put a link up to this thread reluctantly. Although I use a credit card for cash back rewards, you have to be careful because it is way more easier to spend carelessy without realizing it compared to using cash. If you are not accounting for where all of your expenses are going, and keeping to a budget that you've created, I would stay away from credit cards. Especially don't consider if you can't pay them off in full each month.​

Recommended Websites

[url]www.mrmoneymustache.com/[/URL] If you are serious about being financially free, just head over to this site. He has it all. When I first discovered this website it not only reinforced my way of thinking but provided a boost to make me want to reach my goals sooner.

[url]www.early-retirement.org[/URL] Another great place to get info from others that have the same financial mindset

[url]www.reddit.com/r/financialindependence[/URL] Thanks Wormdundee for the recommendation​

Books

The Millionaire Next Door: The Surprising Secrets of America's Wealthy by Dr. Thomas Stanley I was so inspired when I read this book. All my life I've been pretty good with money, having an aversion to paying interest and always scouring pawn shops and clearance racks for good deals on video games and movies. But this book reaffirmed some of the principles that I have chosen to live my life by, and not only that, but it brought to light that there are other crazy people like me out there.

How to win friends & influence people by Dale Carnegie This book was originally published in 1936. Over 16 million copies sold later, its lessons are still as valid today. Don't let the ‘win friends' in the title turn you off, there is a great deal of guidance to help develop interpersonal communication skills, something that is required for personal growth.

The 7 Habits of Highly Effective People: Powerful Lessons in Personal Change by Stephen R. Covey Another classic. This book helped provide perspective to different activities and their importance in my life (Covey's time management matrix). For example, many of us will perceive something that is urgent (like checking our phones every time we receive a text or off-topic call) as important when it is not. Whereas items that are important, but not urgent (like exercise), we need to plan and follow through to do them. This book teaches us how.

The 4-Hour Workweek by Tim Ferris While I am not following the path the author took, there are many great takeaways that I received that I'm trying to implement, such as finding ways to reduce or eliminate unnecessary tasks that consume our time. I really enjoyed Tim's approach to handling email. I also found the narrator to be very enjoyable.

I Will Teach You To Be Rich by Ramit Sethi Recommended by ZackieChan. I have also read this book and agree it is good. I lean on being on the more frugal side than Ramit (ex. advice on purchasing a new car where I now only buy used), but he has a lot of sound advice. He also does his own narration on the audiobook and does a great job, it is very easy to digest as a finance book.​

Videos (Motivational, for when you need that kick in the pants)

Top 10 Debt Free Screams - The Dave Ramsey Show
Question Madness ad by North Face
Prove Them Wrong
Why Do We Fall
Story of Dick & Rick Hoyt​

Videos (Educational)

Bogleheads® investment philosophy Very simple and helpful video series on investing
How The Economic Machine Works by Ray Dalio Economics 101 from one of the greatest investors of our time​

Podcasts

Radical Personal Finance
The Dave Ramsey Show
Eventual Millionaire I learned about this one from Wellington in this thread. I've only listened to a couple of episodes so far but I like what I've heard.
The Tim Ferris Show Another I just started but plan to listen to more, again I found out about this one from Wellington (the Mr. Money Mustache episode)
​

Movies

The Pursuit Of Happyness
Minimalism: a Documentary About the Important Things​

Software Tools

Every Dollar Budget App
YNAB (You Need A Budget) Another Budget App
Mint Web-based personal financial management service​

 

[fatty]

Getting to be Financially Free. To get there you either need to spend less, earn more, or a combination of the two. I know, very enlightening answer, right? But knowing what needs to be done is not the hard part, actually making it happen is where it can be tough. As mentioned in the first post, with this thread I hope to use my and other peoples’ examples to show practical ways on how this can be achieved.

First issue that I’d like to tackle is DEBT:.

8 out of 10 Americans are in debt. Today, the average household with credit card debt has balances totaling $16,748, and the average household with any kind of debt owes $134,643, including mortgages.

It doesn’t need to be this way. I feel that we are in an ‘instant gratification’ society where we are addicted to the consumerism that constantly bombards us. Many people who are struggling and living paycheck to paycheck consider luxuries to be necessities and expect to have these things now, when before their parents were saving years to acquire them.

You don't need to buy that really nice house for your very first home. My first home cost $53,000. Tiny little thing with one and a half bedrooms at 750 square feet. But it was enough, plenty enough for my wife and our first child. Don't go into debt buying more home than you need.

But what if you don't have a home and are renting, and are still struggling? Look at other areas of your life. Do you have a budget and know where all of your money is going? You might not think eating fast food here and there is much but that quickly adds up. Find out how much you really spend and do a budget. I use a simple Excel spreadsheet but there are also apps out there like YNAB and Every Dollar that make the process easier.

I remember reading a comment in this thread about Verizon offering the previous model iPhone for .99. But you need to look at how much you are paying on your monthly bill and the contract it requires. People who are struggling should not be buying these luxuries. Up until a few years ago I was using an LG Optimus T bought on sale and buying prepaid cards from T-mobile to use for my cell phone service. Only talk, no data, I would only use wi-fi for data and buy a 1000 minute card for $100 bucks and those minutes would be good for a year. I could afford the latest phone but I didn't need it, and if you don't have an emergency savings set aside you don't need these type of phones either.

Compared to the rest of the world, we have it very good here in the United States (and chances are it is the same in the country you are reading this from if not the US). I still consider this the land of opportunity. Don't fall for the massive onslaught of consumerism being shoved down our throats. Trust me, I've been there. I used to collect so many games and DVDs. Yeah, most of them were purchased on clearance or used but how many have I actually played? A very small percentage. Now I try to get only what I will play soon and never pay MSRP. And I find that I don't miss it.​

If you are finding yourself struggling with your finances ask yourself these questions?

*Are you paying for a cell phone plan that you don't need? You can easily spend less than $100 a year and get a usable phone.

*What are you spending on eating out and other entertainment out? If you're broke the answer should be zero.

*What about at-home entertainment? This can be significantly reduced. Take advantage of your local library to get free books, movies and video games. Be content with the TV and other stuff you have until you can afford more. And if you are serious about your personal growth more of your free time should be spent reading and learning, and a minimal amount consuming.

*What about clothing? Let's do a little experiment. Take everything you have in your closet and once you wear it keep it separate from all of your other clothes. After a month is over look at everything you haven't worn. Chances are you are buying too many clothes. When you actually do need new clothes go to consignment shops, Goodwills, or buy on clearance. My go-to is JC Penny, Target and Kohl's for clearance clothes. I used to work at a place that required dress clothes and ties and Kohl's 80% off clearance racks were a blessing.

*What kind of car do you drive? I made the mistake of buying two new vehicles while I was in college (one for me and a truck for my wife). Technically the one for me was a few months after graduating college. Don't buy a new car that will require car payments if you can't afford it. Luckily those vehicles I bought were lower end models but they still set me back some at the time. Now, because I have saved over the last 15 years, I can buy a new car with cash but my latest purchases was a 2008 Suziki Grand Vitara for $4,500 last year and a used 2006 Mazda 6 six years ago, both off of Craigslist. My nicest vehicles yet. Please don't get yourself in debt with these car loans. Oh yeah, remember that Mazda B2300 truck I bought for my wife back in college? We still have it. Odometer stopped working at 270,000 miles and the gas level indicator no longer functions but it is still going strong!

*Groceries, how much do you actually spend? My family of 5 averages about $700 a month on groceries. We could actually spend quite a bit less if needed but that is very comfortable for us. Whatever you think you are spending on groceries you are probably spending much more. Again, you need that budget.​

I type all this out to only try to encourage those of you who are struggling to work toward financial freedom. It is truly possible. Don't buy into the blame game of blaming a certain political party or a group of people. You truly do control your own destiny.

I grew up in a pretty rough neighborhood. By society's standards it would be considered low income (the house I grew up in later became an abandoned drug house). But I never considered my life lacking for anything. The first time I probably considered that we didn't have a lot of money was when a ‘friend’ who lived across the city came over to play and looked at my house with a disgusting gaze and said "You live here??". He wasn't my friend for long.

But my parents worked hard and I learned from them. I got married in high school and my wife worked at Wal-mart while I worked as a pizza delivery driver to pay for my college. With a couple of grants due to our income situation and the hard work from our jobs I was able to graduate college with no school debt. My grades were not good. But it was good enough to get an engineering degree.

Again, I only say these things to encourage those who are struggling because it can be done. But you need to work hard and get a financial education.

Three resources that I would recommend to help people get started if they are serious about being financially free:

1. www.mrmoneymustache.com From here you will learn many valuable ways to be more efficient with our resources and time and why not to fall into the hype of many common media myths.

2. The book The Millionaire Next Door: The Surprising Secrets of America's Wealthy by Dr. Thomas Stanley. I love this book. This will teach you about the habits of those who are truly rich and how you can emulate these habits.

3. Enroll in a Dave Ramsay Financial Peace University class. It does not matter if you are religious or not, you will learn to master your financial situation. You can go through the audio/video program but going to an actual class with other people will offer encouragement from others going through the same things you are. His book "Total Money Makeover" is recommended as well.​

And trust me, I get it. There are some people who are doing everything they can and still hitting hard times. These are the people we need to reach out and provide help.

On the flip side there are many out there who can control their situation. Our family has been a foster family for years and I couldn't tell you how many times the parents of the children we have just blow their money on crap entertainment but still claim that they have no money to take care of their children. My wife was working at a WIC office one day and many of the people that came in had an expensive cell phone. One in particular had her nails all nice and pedicured and her baby wearing expensive Nike high tops. Expensive shoes that may be worn for only a couple of months! These types of situations happened regularly, yet they still needed government assistance for food. It can be very frustrating for me at times. But that is also why I try to help and educate those who are willing to learn, especially all of my children.

I read that legal immigrants in the United States are 4 times as likely to become millionaires compared to those who are born here. Why is that? I believe that they look at their situation in the eyes of a different lens. As an opportunity instead of finding a reason why things are bad. For the most part, we control our situation.

 

[Piecake]

Great resources and info!

 

[redlegs87]

Thanks for starting a thread like this. I'm on my first baby steps towards financial stability & it feels good. I am not doing it to get rich but so I don't have to have the stress of living paycheck to paycheck hoping nothing goes wrong or I'd be homeless. Which almost happened this past January then and there I said enough is enough & re-examined what exactly I was doing with my money. I've since started saving and have just under one paychecks worth of money saved. Though I am going to start being a bit more aggressive in my savings going forward. How I am going to do that is I've been weak in the fact that I have been dining out way to much and it's just wasting my money. Any time I get the urge to grab a quick bite out and resist it I'll deposit however much said meal would have cost into my savings. I know I'll cave every now and then but I got to remain strong and just bounce back from any set backs.

*Are you paying for a cell phone plan that you don't need? Right now I am on Republic Wireless with 3 lines all 1gb each for $65 a month. Not the lowest but much better then the $150 I was paying for on T-Mobile

*What are you spending on eating out and other entertainment out? Way too much especially on the eating out part as I have stated above but I am working on it.

*What about at-home entertainment? I cut the cord for cable earlier in the year which has helped I've been reading slightly more but I've found myself on my PC for a good portion of the time. Much of that time though reading stuff about finances and other things to try and better myself.

*What about clothing? I am stocked up on clothes for now. Well I will have to buy a few shorts since it's finally not so cold out. Other then that I won't be buying much in the way of clothing for awhile.

*What kind of car do you drive? I currently don't drive but I am actively working on that. Plus once I get a comfortable 2-3 paychecks in savings built up I'll start saving up for a used car.

*Groceries, how much do you actually spend? Way too little lately since I've mostly been eating out til just recently. I am going to use this month to analyze how much we spend a month on groceries and see what needs tweaking.

 

[Skiptastic]

Subbed for future use! I feel like I'm doing a good job of saving and living frugally and staying true to a budget, but one can always do better!

 

[Original Famous Ray]

Subbed! I like the idea of this thread so here's a bump! Superb OP as well. Lots of info! I hope the thread is active as its always great to learn about saving money and all the different ways to be financially healthy.

 

[Charlatan]

One important first step is understanding where your money is going. So it's essential to have a budget. I know a lot of people have a negative reaction to budgeting but it doesn't have to be something that induces guilt or negative feelings - it can be a tool that tells you just what you're spending money on.

Once you have that understanding, you can make changes.

Making and keeping a budget is a process; it's not something you turn on, like flipping a switch. It's a gradual, continuous way to change your behavior, to better understand and control your spending. Budgeting doesn't mean you can't have any fun - it just means that when you do have fun, you know you're not blowing out money you need for something else.

I have used YNAB (linked above) for a few years; I recommend it. But there are plenty of other choices, and the specific tool you use is less important than the fact that you take control of your spending.

Good luck!

 

[Maiden Voyage]

Awesome work! My wife and I are debt-free as of December. We're currently putting about half of our income toward a house downpayment with a target date of Nov and a final payment within 4 years of getting our mortgage. This stuff works. It's not easy to change one's life. Good things happen when you watch your money.

 

[Baron Doggystyle von Woof]

I am going to post something my grandfather told me.

Follow the 1/3 rule.

1/3 goes to your rent/mortage + electricity and water
1/3 goes to living. Food, clothes, car and other expenses.
1/3 goes into your saving account.

Do you pay 1/2 for rent? You are living in a too expensive house try to go cheaper.
Do you pay 1/2 on living? Try to cut on groceries, a cheaper car or other expenses you don't really need.

I live by this rule and it works for me very well. I understand that it's not always possible for everyone. Some cities are just very expensive, but try to take this as a lead.

 

[bluethree]

Not debt free but I've made some really good progress on my debts over the past year. I only have around 6500 in student loans to go! Also I live in Japan and have a little bit of back taxes/national pension (only around 800 dollars) which means I have less than 10,000 of total debt.

I got into some nasty credit card debt due to a short period of unemployment and various circumstances (going back home for a few weeks), and I managed to completely pay that off at the beginning of the year. It took me not doing anything at all during a 3 week vacation to be able to have the money to pay it off, but it was SO worth it!

Now I'm saving up for another bank transfer back home and trying to think of little ways to cut back and save money - trying to make coffee at home instead of going out all the time, little stuff like that.

I'm lucky that there's not too much I need in the way of gaming this year and I have a pretty sizable backlog already, so I don't see myself wasting too much on that. I'll probably get a PS4 but that's it.

 

[Carn82]

I am going to post something my grandfather told me.

Follow the 1/3 rule.

1/3 goes to your rent/mortage + electricity and water
1/3 goes to living. Food, clothes, car and other expenses.
1/3 goes into your saving account.

Do you pay 1/2 for rent? You are living in a too expensive house try to go cheaper.
Do you pay 1/2 on living? Try to cut on groceries, a cheaper car or other expenses you don't really need.

I live by this rule and it works for me very well. I understand that it's not always possible for everyone. Some cities are just very expensive, but try to take this as a lead.

Good post. I don't "live" by this rule, but when I look at how I manage my income I'm pretty close to it; I actually save a bit more. It's more like 5/10 savings, 2/10 living, 2/10 mortgage etc, 1/10 for me to do with as I please. But I also budget everything and have 'targets' on my bankaccount, for buying clothes, gaming and gadgets, to going to concerts and festivals, etc. And every year I -try- to look at my running expenses and see if things can become a bit cheaper.

Oh, and yeah, if you have debts, get rid of those first. Besides my mortgage, I have none.

 

[Subway Diet]

While I am in debt, sadly, it's not an insurmountable sum. It'll take a while with my income, but I've got a plan.

Pretty simple. The idea is to keep putting as much money as I can spare into the credit card and then, assuming it won't send me overdrawn, reduce the limit on it. Just keep cutting it back by a couple hundred each month before there's time to even miss the money that I could be spending.

Making that work will be a matter of weening myself off the instant gratification. Gotten to the point where it feels like I enjoy buying things more than I do using them. Going try my best to make do with what I've got, while allowing for some very infrequent entertainment purchases.

Any other big money plans will just have to wait while I try and whittle this thing down.

 

[Usobuko]

Money grows money.

You need to invest or learn to invest. So even after you retire, you can still use this skill to get decent returns. It's a lifelong journey, the earlier you start, the better off you'll be.

 

[Busty]

A great thread, a great OP, a great resource.

Kudos, I might even send this to some non GAF people I know.

 

[RMI]

Great thread. My piece of advice is to take advantage of any tax deferred retirement savings plan your employer offers, and do it right away and as aggressively as you can manage. Don't do what I did and put it off until after you've been working for 5 years. I will never catch up to where I could be if I had just started back then.

That said, don't beat yourself up over bad financial decisions. I still make them all the time, but because I have a solid investment plan and have wiped out all of my debt except my mortgage, they doesn't hurt my future plans too badly. Most people buy things they don't need, but try and limit it as much as possible.

 

[ClosingADoor]

Getting your costs under control is one of the major things here I feel. If you can save a good bunch on your living costs, that makes so much difference. I have a cheap apartment because it was bought during the housing crisis and the loan is very cheap. Compared to people around me, I pay a laughable amount per month on it and can put the rest of the money away.

And it is important to start soon. I wish schools did more education about finances, pensions, investing, etc. Starting with even a little money at 20 makes such a difference compared to starting at 30. Starting late can cost you hundreds of thousands of dollars over time, but most people don't know how it works. I started about two years ago at 25 and lost out on so much gains compared to starting just a few years earlier already.

 

[gaiages]

Great resources, OP!

I've made good progress in taking care of my debt (that aren't student loans, but that's a long road no matter what), but I know I've been super frivolous in my expenses the last few months and it's time to tighten the belt on my budget

I downloaded Mint, and it's super helpful to help see how much exactly I'm spending on what, and where I really need to cut down. I want all my credit card debt gone before my birthday, and that's easily doable on my salary... IF I don't go willy nilly with all my money, lol.

Thanks to Mint, I've noticed only one big area where my spending is way too much... food! Of course that includes both groceries and eating out, but I can easily cut that spending in half... and my SO compensates me for half of the grocery bill, so it works out. Other than that, I spent a bit more on games this month than I meant to, but that's an exception, not a rule... this is like the first month I've spent more than like $50 on games, lol.

So I'm going to have Mint set me up a budget for both groceries and eating out, and go from there

I basically have two more 'minor' debts after the credit card, and then I'll finally be able to put more money towards my student loans. That'll be exciting!

 

[GhaleonEB]

I am going to post something my grandfather told me.

Follow the 1/3 rule.

1/3 goes to your rent/mortage + electricity and water
1/3 goes to living. Food, clothes, car and other expenses.
1/3 goes into your saving account.

Do you pay 1/2 for rent? You are living in a too expensive house try to go cheaper.
Do you pay 1/2 on living? Try to cut on groceries, a cheaper car or other expenses you don't really need.

I live by this rule and it works for me very well. I understand that it's not always possible for everyone. Some cities are just very expensive, but try to take this as a lead.

This is a good rule of thumb, and doing some quick math, is approximately what we are doing now. The mortgage is as high as it is because we are working to pay it off early - we're tracking to pay off the house in about two years, which would be 17 years early vs. the 30 year mortgage we took out.

A while back getting out from under the mortgage became important to my wife and I. It means we'll be saving a huge proportion of our income after it's done, or alternately I could find a job with ~40% lower pay and still maintain our lifestyle and current savings rate. The allure of that freedom triggered us to start paying it off quickly.

 

[zoodoo]

I am going to post something my grandfather told me.

Follow the 1/3 rule.

1/3 goes to your rent/mortage + electricity and water
1/3 goes to living. Food, clothes, car and other expenses.
1/3 goes into your saving account.

Do you pay 1/2 for rent? You are living in a too expensive house try to go cheaper.
Do you pay 1/2 on living? Try to cut on groceries, a cheaper car or other expenses you don't really need.

I live by this rule and it works for me very well. I understand that it's not always possible for everyone. Some cities are just very expensive, but try to take this as a lead.

Interesting.

By 1/3 you mean monthly salary?

 

[embalm]

Love it. Subbed.

 

[BumRush]

Great thread, as is the linked Invest for Retirement thread. EVERYONE on here should spend some time in these threads.

 

[sixteen-bit]

i gotta stop buying frivolous shit

 

[Lumination]

My current plan is to "retire" at 35. I've run it through some online calculators to determine how much I need to hold in investments to be able to live comfortably off of the interest, but I would appreciate some vetted reading material on the subject. I'll check out Mr. Money Mustache and that second link first, but are there more or is that all I'll need?

 

[Jeronimo Jones]

Nice idea and some good sources. Subbed since I enjoy reading up on financial advice and trends.

I'm early in my career and am doing better than the average American on several fronts in the OP, but not where I want to be yet.

 

[Air]

Subscribed. I'm pretty frugal, but I'm always down to learn how to save more money.

 

[tokkun]

I like my job, so I'm not super eager to retire early like many of the FIRE people. However, the financial independence part appeals to me a lot. Having enough money that you *could* quit if you wanted to - even if you don't - is the difference between doing something out of free choice and doing something out of obligation. I think that psychologically that can do a lot for your stress levels and general well-being.

I also tend to feel like moving toward more minimalism makes you happier than acquiring a lot of stuff. Happiness is an uncluttered mind. Getting rid of my car and switching to public transport / walking / Uber means I no longer have to worry about repairs or maintenance or accidents. Renting a small apartment rather than owning a house / condo means I don't have to do maintenance and it is hard for me to accumulate a lot of random junk. I no longer have much desire to overpay on collector's editions of video games when I would have to store that soundtrack CD or statue indefinitely.

 

[demosthenes]

Subbed as I try to help all of my friends with this.

I post a bunch in the retirement thread as well but I like helping others when it comes to information like this. Good OP and first few posts.

 

[Ogodei]

I am going to post something my grandfather told me.

Follow the 1/3 rule.

1/3 goes to your rent/mortage + electricity and water
1/3 goes to living. Food, clothes, car and other expenses.
1/3 goes into your saving account.

Do you pay 1/2 for rent? You are living in a too expensive house try to go cheaper.
Do you pay 1/2 on living? Try to cut on groceries, a cheaper car or other expenses you don't really need.

I live by this rule and it works for me very well. I understand that it's not always possible for everyone. Some cities are just very expensive, but try to take this as a lead.

Pre-tax or post?

For net income, i'm at 43% rent + essential utilities (although most months i come under budget for essential utilities, the rent's the vast proportion of that anyway), 22% savings, and 35% living. I usually come a bit under budget on multiple lines, though, so it's probably more like 27% and 30% most months.

 

[BumRush]

I am going to post something my grandfather told me.

Follow the 1/3 rule.

1/3 goes to your rent/mortage + electricity and water
1/3 goes to living. Food, clothes, car and other expenses.
1/3 goes into your saving account.

Do you pay 1/2 for rent? You are living in a too expensive house try to go cheaper.
Do you pay 1/2 on living? Try to cut on groceries, a cheaper car or other expenses you don't really need.

I live by this rule and it works for me very well. I understand that it's not always possible for everyone. Some cities are just very expensive, but try to take this as a lead.

Great high-level rule and one that my wife and I follow really well. We try to max out that 3rd 1/3 so that more like 40-50% goes into savings / investments.



I'd add one thing before you get to the 1/3 rule...if you have the funds, max out your 401k. Not only does it provide an incredible (and relatively thought free) source of retirement income, the fact that it lowers your taxable income feels like cheat mode. In my mind, it's the single most important investment you should be making each month.

 

[PflargBlarg]

Could be an interesting thread.

You may want to link to www.reddit.com/r/financialindependence

It's where I mostly hang out for this kind of thing. Should potentially be able to retire at 45 if all goes well.

 

[muu]

Don't forget the Credit Card thread. I don't necessarily churn CCs, but going through Chase cards and exploiting bonuses has saved me a bunch over the years. Travel isn't cheap, but when you're forced into traveling (in my case we had 3 weddings for wife's friends that we flew to) values of CC points really shine.

 

[Dragonite]

So you want to be a class traiter and join the bourgeois?

 

[ZackieChan]

Great thread. I'm finally out of credit card debt and putting money into retirement. Feels good, man.

Two things I'd add to the OP are YNAB budgeting software which has changed my budgeting life, and Ramit Sethi's I will Teach You to be Rich. Great book.

Seconding Dave Ramsey, as well, or at least his baby steps.

While I am in debt, sadly, it's not an insurmountable sum. It'll take a while with my income, but I've got a plan.

Pretty simple. The idea is to keep putting as much money as I can spare into the credit card and then, assuming it won't send me overdrawn, reduce the limit on it. Just keep cutting it back by a couple hundred each month before there's time to even miss the money that I could be spending.

Making that work will be a matter of weening myself off the instant gratification. Gotten to the point where it feels like I enjoy buying things more than I do using them. Going try my best to make do with what I've got, while allowing for some very infrequent entertainment purchases.

Any other big money plans will just have to wait while I try and whittle this thing down.

I don't quite understand - you're trying to get out of debt by putting more on your credit cards? You need to get yourself under control first. Really look inward and understand why you're spending beyond your means.

 

[SRG01]

Great resources, OP!

I've made good progress in taking care of my debt (that aren't student loans, but that's a long road no matter what), but I know I've been super frivolous in my expenses the last few months and it's time to tighten the belt on my budget

I downloaded Mint, and it's super helpful to help see how much exactly I'm spending on what, and where I really need to cut down. I want all my credit card debt gone before my birthday, and that's easily doable on my salary... IF I don't go willy nilly with all my money, lol.

Thanks to Mint, I've noticed only one big area where my spending is way too much... food! Of course that includes both groceries and eating out, but I can easily cut that spending in half... and my SO compensates me for half of the grocery bill, so it works out. Other than that, I spent a bit more on games this month than I meant to, but that's an exception, not a rule... this is like the first month I've spent more than like $50 on games, lol.

So I'm going to have Mint set me up a budget for both groceries and eating out, and go from there

I basically have two more 'minor' debts after the credit card, and then I'll finally be able to put more money towards my student loans. That'll be exciting!

I think food will be the second-highest expense for most people after rent/bills. It's not even eating out, but groceries period.

Food is exceedingly expensive these days and there's no real reason for it either...


(I use Mint as well. It's great!)


edit: My tip is delayed gratification -- I don't need the shiniest/newest things when I can make due with other things I already have. The only exception is if something's broken or if it'll improve my quality of life by a large margin.

 

[Ron Mexico]

Great thread. I'm finally out of credit card debt and putting money into retirement. Feels good, man.

Two things I'd add to the OP are YNAB budgeting software which has changed my budgeting life, and Ramit Sethi's I will Teach You to be Rich. Great book.

Seconding Dave Ramsey, as well, or at least his baby steps.



I don't quite understand - you're trying to get out of debt by putting more on your credit cards? You need to get yourself under control first. Really look inward and understand why you're spending beyond your means.

The credit card part is using the card judiciously, paying off the balance in full so as to avoid accruing interest, all the while maximizing the rewards points. Requires a fair bit of discipline but can be effective if you can strictly hold to the paying off in full each month (a concept that the cc companies are betting against your ability to maintain).

Beyond that, there's a strong sense of Dave Ramsey influence-- I've said in a number of these threads that he's a good start, as are the resources in the OP. I would still (to a fault) stress the need to customize all those plans to your unique situation and fully understand that there's not a one-size-fits-all solution, but even grasping the concepts will certainly move you (meaning anyone reading this) in the right direction.

Subscribed.

 

[Bluecondor]

My Mom gave me great advice back in 2001 when I got my first full-time job with retirement benefits. She told me to take the maximum amount that my employer matches for retirement (in my case, my employer matches $1.50 up to 8% of your salary - so 8%) BEFORE you even receive your first paycheck. This way, you never get used to having the 8% in your actual paycheck.

As a result, I have been putting away 8% and getting the additional 12% of my salary on my employer match since 2001. This definitely makes an impact in terms of saving, without even a thought of "missing" the 8% of my salary.

Great advice Mom!

 

[CrazyShady]

Subbed, great work

 

[CFMOORE!]

one piece of advice that probably comes to people more easily but I needed my asshole of a financial planner to instruct me to do, is take out a new line of credit with any card offering the longest 0% APR on balance transfers to get out from under heavy interest charges. he then said if my debts exceed the limit on that first card, three months later open another card with similar length and 0% on balance transfers to knock down the rest.

i found that to be a great tip so i've already moved about $8k from one card over, which for the time being, i will just pay the minimum on since i have 21 months of 0% APR on it.

 

[Syriel]

1) Figure out how to live comfortably while in college. Then stick with that lifestyle. Put extra money into investments. The biggest mistake I see people make is letting their spending scale with their income.

Just because you get a raise (or a bonus) doesn't mean you need to spend it.

If you are comfortable on $X income, anything above $X income is bonus money.

2) Budget for fun. Seriously. So many people forget to do this. Designate part of your income as fun money. Maybe it's $10/check. Maybe it's $50/check. Keep that in a separate account and feel free to blow it on whatever you want.

If you put every last penny into savings you're going to have it. If you have a small fun money budget, you can feel like you're ballin' even when money is otherwise tight.

3) Game the system. Look at your spending and figure out how to min/max as if you're playing a RPG. Use coupons, sign up for credit card bonuses, and deduct everything you can from your taxes.

A personal example: I pay for everything I possibly can on credit cards. By doing so, I save 2% to 5% on all purchases.

4) Learn to compare pricing on TCO (total cost of ownership). Do you need a new phone? Don't just sign up for a discounted device w/a contract or payment plan. Look at what that plan + service will cost you over two years. Compare it to the cost of paying full retail for the phone plus a cheaper service plan. Go with the better deal.

Another example is a car. Do you live in a city? Look up how much a car payment + insurance + parking + gas is going to cost each month. Now look at how much you drive. It might be cheaper to forgo owning a car and just rent a car for the weekend when you need it, or do the rideshare thing during the week. Go with the option that will be cheaper overall.

You can even drill down on that. If owning a car is a necessity, look at the age of the car and the cost of comprehensive insurance. If you're willing to gamble a bit, you might be able to save quite a bit over a year by dropping comprehensive. After a year you might have enough to cover any accident (possibly the replacement value if an older car) in savings. Now, all that extra money is going into your pockets instead of the insurance company.

5) Learn to cook. Yes, you can eat out every once in awhile, but holy shit will you save $$$ by making your own food every day.

6) Be willing to think outside the box. Google Voice = free home phone service. T-Mobile's $30 prepay plan + Google Voice = effectively unlimited calling thanks to the 5GB of data.

7) Cut the cord. Not watching TV at broadcast is the biggest change that most people can make, but there is so much content out there, it doesn't matter if you see it RIGHT NOW! My SO and I don't watch a show until at least one season is on Amazon or Netflix. Then we watch it straight through. Does this mean we're not seeing the latest episode of GoT every week? It does. Does that mean I'm not enjoying life? Not at all. We may be enjoying shows later than other people, but they're still just as enjoyable.

8) Splurge on the big things. Saving money doesn't mean never spending money. If you cut out the day-to-day waste you can both save for retirement and have enough to splurge on higher quality big ticket items (like a fancy TV or a nice vacation). No, you can't go insane, but you can afford luxuries.

 

[Makai]

Get a better job. Done.

 

[Vincent Alexander]

Great thread. I am still 70,000 in student loan debt, trying to slaughter the beast that is 22,000 at 15.5% interest. It is a savage monster, of which I spend nearly $300 a month on just paying interest. My loans altogether are about $950 a month. When I began my job, I was making less than I owed each month. I had to live a spartan lifestyle even for a spartan, and sell off belongings to pay bills. Luckily, living like this has helped me tremendously as I've been promoted at work. I've remained a big tightwad... but probably to a bad degree. I need to get slightly better at enjoying my life and buying something nice here and there.

 

[BumRush]

Great thread. I am still 70,000 in student loan debt, trying to slaughter the beast that is 22,000 at 15.5% interest. It is a savage monster, of which I spend nearly $300 a month on just paying interest. My loans altogether are about $950 a month. When I began my job, I was making less than I owed each month. I had to live a spartan lifestyle even for a spartan, and sell off belongings to pay bills. Luckily, living like this has helped me tremendously as I've been promoted at work. I've remained a big tightwad... but probably to a bad degree. I need to get slightly better at enjoying my life and buying something nice here and there.

You can't call and get that 15.5% knocked down?? Jesus.

 

[Syriel]

I had to live a spartan lifestyle even for a spartan, and sell off belongings to pay bills. Luckily, living like this has helped me tremendously as I've been promoted at work. I've remained a big tightwad... but probably to a bad degree. I need to get slightly better at enjoying my life and buying something nice here and there.

That's a great base to start from.

The advice I usually offer is that you don't want to be a tightwad/cheapskate (and never spend money), but there is nothing wrong with being frugal (only spending money intelligently).

Someone who is frugal isn't an impulse shopper, and doesn't waste money, but also doesn't stress when they drop $$$ on a new game or new gadget, because that spend has already been planned and accounted for.

 

[RumblingRosco]

My wife and I (mostly my wife to be fair) just spent weeks planning and budgeting. We now have a good estimate as to how much we'll have saved every month for the next six years. It's an insane Excel sheet we've generated, but it is super helpful.

Subscribing to this thread.

 

[BumRush]

My wife and I (mostly my wife to be fair) just spent weeks planning and budgeting. We now have a good estimate as to how much we'll have saved every month for the next six years. It's an insane Excel sheet we've generated, but it is super helpful.

Subscribing to this thread.

Build in some cushioning to your assumptions. For example, if my home insurance costs $1367 a year, I assume it's $1500 now, increasing 5% yearly. I also assume no raises and that I will never receive my bonus. It's better to err on the side of conservative.

 

[Wellington]

Awesome thread man, I am actually way more skewed in this direction and have felt out of place in the retirement thread.

My FIRE number is fairly large due to, well, living in a high COL city and having a high COL mortgage. Whatever, I'm not even living what I think is even frugally and I think I can get to FI in 10 years. I am currently working on tightening the screws a little since I'd love to get out of work ASAP. I literally fantasize about it every day.

I read MMM regularly, listen to FI podcasts, and I basically live in the FI reddit. I look forward to how this thread unfolds.

 

[AdventureRacing]

I'm 2 months I will have paid off my final piece of debt (my car). Then my GF and I both own a car, we own our flat and have no other debt whatsoever. At the moment we're saving well over 50% of our wages. We're planning on kids soon and aiming to buy a bigger house so saving as much as possible.

Our plan is to wait another 2-3 years and save around 250-300K before jumping in and buying a house with kids to follow shortly after or around the same time.

Once we have kids our plan is for both of us to work around 2-3 days a week to maximise our time together. We could work more and aim to retire early but we both enjoy working and would order it that way. Plus we like to travel a lot so we will make use of the extra money.

Overall we're in a very good spot financially. Its still good o get advice in threads like this on how to maintain that as things can change quickly.

 

[toneroni]

Great thread! Subbed for sure.

Trying to absorb some lessons here as we spend way too much on everything!

I collect lots of stuff (games/movies/toys/new tech), have a moderately pricey home (nyc) and just bought a new luxury SUV. I'm pretty good at finding deals and maximizing my dollar but we're expecting our first baby shortly so looking to buckle down more.
Was hit hard on a couple tough market plays couple years back and wasted time on a few startups that went nowhere but we're still doing ok financially.

I don't invest as much these days but am looking to make smarter plays, learn to actually save for real and let it grow.
I've been thinking of trying to gamify it like another poster said as my profession is to gamify things anyway. Good luck to all!

 

[Flo_Evans]

One thing that helped me tremendously paying off debt was a simple spreadsheet listing all loans and credit cards with the APR*balance. It's not entirely accurate but it was really helpful seeing what each debt was costing yearly and prioritizing payments.

Amazing feeling entering zeros for all credit cards.

Next I made a simple pie chart with all fixed monthly expenses. Made it really easy to see where fat needed to be cut (everywhere!)

Finally the good part I made a list of all assets and I could tell exactly where I was net worth wise.

Bad news: nowhere near financial independence
Good news: now at least headed in that direction