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Besides if everyone did this we would bankrupt the world. The US economy is based on 2/3 consumer spending so those that don't follow my advice are the reason that I make so much money. And for those I say keep doing what you are doing. You are funding my retirement and my trust fund for generation of my family for decades to come.
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First off it is important to think different about money. There is a saying that you can have money work for you and most will nod in agreement but few really understand it and even fewer actually make it work.
I didn't get to this point overnight and it took years of scrimping, saving, paying off bills and overall retreating from a very consumer oriented life style.
My salary is 60k a year and with that I save about 30k of it. My wife make 30k and saves 10k.
For years I was in the buy mode and had all the toys and was leveraged to the hilt. I HAD to work to stay afloat. I HAD to work OT to get extra money to go on vacations and do projects around the house. I felt trapped at work in that I hated my job becasue I HAD to be there to survive.
At age 40 I had finally had enough. It was time for a change.
I sold everything that I owed money on that wasn't needed. My ATV's, PWC's, travel trailer, and so on. I paid off the balance owning by working OT (and lots of it) By the end of 3 years I was out of debt for those things.
Next on the list was our car payments. I sold one car and paid off the balance with cash. The other truck I paid it down as fast as I could. In the mean time we were a one vehicle family and I decided to start riding my bicycle to work. I have been doing that for 12 years now. I do in the rain, sleet, snow, heat. The only thing that stopped me was an arm injury at work and I was off for 3 months.
I started having some "extra" money around. Rather than spend it I put it in my 401k. My wife di the same. I did lots of research on the mutual funds in our plan and found several that would give us good returns. I figured that since I had so little I would go for broke.
My research paid off and I have been making an average of 18% for the last 12 years. Even the recession was not the death notice I expected and I stuck with the plan.
When the interest rates came done I refinanced. We increased the amount of the loan and took the rest of the cash and bought a rental. My wife is a real estate wiz and has always wanted to get more property. She has a degree in business but works in mental health (go figure that one out).
The rental has been rented every month since we bought it and is now paid off. All the rent is now extra cash for us.
Then the interest rates started to drop even more and we did another refinance and got some extra money. We also went from a 30 year to a 15 year. With the extra money we bought another rental and it has been rented and is almost paid off. Soon it will be ours and will be extra money.
My wife totaled her can and instead of buying a new one we bought a used one. It is a 1985 one owner BMW with 104,000 on it. Everything runs great. We paid cash for it and it gets 30 mpg. I sitll ride my bike to work but recently we decided we needed a truck to haul all the building supplies for our house remodel. I got a 1994 GMC one owner for 5k and the only thing that needs to be fixed is the windshield wipers. It has all the bells and whistles and is 4wd. I don't drive it much and still ride my bicycle to work (12 miles one way for those interested)
With the used rigs we don't carry collision and being that I don't drive to work I get recreational only rates. I pay $60 a month for both vehicles.
Our life style is at a point where we can live off of either my salary or my wife's. Work is fun again as I go there because I want to and don't feel forced to have to work.
We pay cash for everything which has had a negative impact on my credit. Because the only loan I have is the house they somehow think that I can't manage money. Just the opposite is true of course.
Because I am over 50 I can put in 18k in my 401k this year and will be able to put in 20k next year. My wife is putting in her maximum which is 14k. My maximum has been reached for this year already and now we are maxing out our IRA's. After that is reached I will put the extra in some stocks that I use for short term emergency fundsl. Total savings this year is projected to be 44k between me and my wife.
Our total expenses for just our house is 1600 per month. Almost all of that is paid for from the rentals. Our checks are for extras and we are in the process of a huge remodel.
It has been a long hard journey to get to this point. Some ask me if was worth it. To me and my wife it was. Life is so much better now that it was when I wanted everything and had to work my butt off to get it.
My message to the younger set is not to get involved in the mass consumerism that so many fall prey to. I had one young co-worker ask me about the 401k (management sends them to me as I know so much more about it than they do). He is single and lives with his parents.
My advice to him was to work as much as he could for 5 years. Max out his 401k which would be 29k in 2 years. After that put in just $100 per paycheck and get he company matching. With an average interest rate in the stock market of 12% over 70 years he would have over 4.5 million for retirement adjusted for inflation.
Then for the remaining 3 years save up for a lage downpayment on a reasonable sized house. Most people buy way to much house and this hurts long term saving and put you in that trap of HAVING to work to make ends meet.
Once his retirement is secure and he has ownerhsip in his home then he can look to getting some "toys" but only if he pays cash or pays them off in 12 months.
This kid followed my advice and is almost done with the first 2 years of his 5 year plan. He has over 35k in his savings now and is ready to start on his home downpayemt. He will turn 22 next month. By the time he is 25 he will have a 200k house with a payment of 650 a month and will own it in 15 years. I have projected him to be a millionaire at 35.
His friend who I gave the same advice has a nice new truck, a nice new motorcycle, goes to Mexico everyyear on vacation, has 2 nice PWC's and an ATV. He rents a huge house with several friends.
He also works lots of OT to pay for all this stuff and contributes enough in his 401k ot get the company match. He is 25 and so far has very little.
My projections are modest. I will have over 5 million when I die and be able to leave my wife and kids a trust fund that will give them over 2500 per month for the rest of their lives. The fund will grow as they will not ba able to get any more that 10% of the earnings in any given year. If the fund does not make any money in a given year they will get nothing. This will assure that the fund will continue for many generations. At the current level of growth it will be worth 50 billion in less than 100 years adjusted for inflation.
And to think it was all started by a cheap a$$ guy and his wonderful wife just working 9-5 jobs and rejecting the consumerism life style.
Anyhow that is my story and my advice.
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Modifyed the following:
Our life style is NOT at a point where we can live off of either my salary or my wife's. Work is fun again as I go there because I want to and don't feel forced to have to work.
to this.
Our life style is at a point where we can live off of either my salary or my wife's. Work is fun again as I go there because I want to and don't feel forced to have to work.
This post has been edited by intotheblackhole: 19 September 2005 - 02:03 PM
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