Please welcome Jacob Lumby from CashCowCouple.com, who is (sadly) not writing about Smurfs, but instead, writing about serfs. Take it away, Jacob!
Today I’d like to offer a few lifestyle suggestions to the great readers of Frugal Portland. It’s purely a take it or leave it arrangement, so feel free to laugh at me or leave snotty comments if my comments don’t tickle your fancy.
Let me introduce myself. I’m Jacob, and yes, I’m a guy. I work as an associate instructor and full time PhD student at a State University in Texas. I’m studying financial planning. But listen, it gets better.
I’m also a frugal miser. I love a good deal. I love negotiating on Craigslist. I love buying items for dirt cheap and listing them the next day for three times the price. I love standing in line overnight to preorder eight (8) Playstation 4 game consoles just so I can sell them on Craigslist to the individuals who prefer paying a patience premium. (I just coined that term. TM)
I’m also married to a beautiful woman who does her best to keep me in balance. She’s becoming quite the penny pincher herself. Together we’re on track to spend close to $11,500 in our first year of marriage. Yes, you read that correctly.
Because we spend so little, we’ve been able to pay off $19,000 in 9 months of marriage, plus contribute almost that much in retirement accounts. We’re off to a good start, but we’ve got a long way to go.
Enough about me already. I’m writing today for you. I’d like to share a few pointers for those who are looking to follow a similar path. If you’re in debt, tired of living paycheck to paycheck, or just ready to start saving 75% of your income like we do, here are a few ideas.
1. Stop Being a Consumer
Nothing else really matters until you conquer consumerism. You’ll never be able to get ahead if you think, act, and spend like the average first world consumer.
See, we’re bombarded with advertisements and marketing campaigns as soon as we leave the womb. Year upon year you’re taught to consume. Your parents probably consumed. Your friends consume. Everyone loves to spend money and brag about it.
Not me, and not you. Turn off the popular media. Blaze your own path. It’s an easy decision for me because mandated corporate employment til 65 just isn’t going to work. If I want to reach financial freedom sooner, I have to save more. Its’ that easy. A dollar saved (especially in a tax advantaged accounts) is worth much more than a dollar spent.
2. Consider a Smaller House
We live in a 2 Bed, 2 Bath late 1980s mobile home. I paid cash for it. I do have to pay land rent and utilities, but our monthly living expenses and all utilities are usually $275-$300/month.
Compare that to many individuals that are mortgaged up to their eyeballs. It’s paycheck to paycheck just to afford the $1,200/month house payment + $200/month utilities. Don’t do that.
Don’t get my wrong, I think home ownership is good. There are tax breaks and perks. But don’t think housing is this great investment that should be maximized on a monthly basis. Housing has historically only kept pace with inflation, so you aren’t really growing your money at all.
Beyond that, you’re paying interest on that huge loan. Even though you can deduct the interest as a tax deduction (if your payments are big enough to itemize your deductions), you’re still paying much more in interest to the bank.
Consider buying only what you need for the size of your family. Save the rest and put it towards a rental home if you’re in love with real estate.
3. Cash is for Cars
If big homes are bad, new cars are infinitely worse. I learned a valuable finance lesson a few years back that I’ll never forget. It goes like this.
Never, ever, ever finance a depreciating asset. Never
If you’re wondering, a car is a depreciating asset 99.9% of the time. You buy them, you drive them, they drop in value. This is especially true of new cars. The plummet in value over the first 3 years.
If you have the money, buy a 3-5 year old car with cash. Wait for a distressed seller and pounce for much lower than book. It’s easy to do on Craigslist.
Of course I take it a step further. The wife and I share a 1996 Saturn SL1 with 125,000 miles. I paid $1,700 cash for it 4 years ago and could sell it today for $2,100 without a doubt. That’s because older cars have had the depreciation driven right out of them. And of course, I’m a good used car salesman.
4. Put Your Money to Work
There are a million other ways to save money. I write about most of them on our blog if you want to read. But once you start saving, it’s time to start making those dollar reproduce.
The absolute worst place to stick your money is in a local checking account where it earns 0.05% interest. Open up an online savings account for your short term storage needs. We use the no fee American Express high yield and it’s been really good.
For longer term goals and retirement savings, you have to consider stocks and bonds. I love Vanguard because they offer a bunch of fantastic ETFs that can be traded for FREE. Yes, free. I also recommend Motif Investing for ETFs outside of Vanguard. You can buy up to 30 stocks or ETFs for a flat $10. Use both if you like.
Once you begin investing, you need to stay on top of it all. The easiest and best way to do this is Personal Capital. It’s free service that tracks all spending and investing for you, providing details and suggestions to lower fees and improve asset allocation. Did I mention it’s free?
Now I’d like to know your thoughts on what I’ve written. Do you have suggestions? I’d love to meet you on our site, so stop in and say hello.
Author Bio: Jacob is one half of the Cash Cow Couple. He enjoys reading, writing, and challenging others to live a more intentional life.