The
Bargainist.com recently did a post on simple steps to gaining wealth. It's a practical list, one that most people should be able to follow:
- Stop Overspending
Shopping is ok. Spending is ok. Heck, buying those super cute shoes at the mall is ok. As long as it fits in your budget. And that’s a biggie. You will never gain wealth if you are spending every penny you earn– especially if you’re spending it on things that will decrease in value, i.e. iPods, manicures, cars.
- Pay Cash for Your Car
Yes, you read that right. Pay cash for your car. If you think about it, for most people your car is your biggest investment besides your home. Hopefully your home will increase in value over the years and end up making you money. But there is a zero percent chance your car will increase in value. Let’s say you can scrape together $2000 for a car. Then for the next two years you set aside the money you would be spending on a car payment each month and use that to pay cash for another car. Slowly you will be able to upgrade into nicer cars– and they’ll be completely paid for!
- Ditch Debt
You will never build wealth when you’ve got piles of debt to pay off. Instead of putting your earnings toward increasing wealth, you’re just struggling to decrease your debt. Use a calculator like this one from CNN Money to find out how long it will take for you to pay off your debt and how much you’ll spend on interest. Having a debt-free date to look forward to will be a great motivator for paying it off.
- Buy Low
Any investor will tell you: buy low, sell high. The good news is now pretty much everything is low. Think of it as a big sale on stocks and real estate. Meet with a well-qualified financial advisor who can guide you in making smart investments and when the market bounces back your wealth will increase.
- Never Stop Saving
No matter how tight your budget gets, always continue to save money. Nothing builds wealth more than time so the more money you put away now the more money you will have down the road.
Ditch debt right now is my current goal. I owe college loans so that's the one I have to get rid of first. "Pay cash for your car" doesn't apply to me since I don't have a car, but the other things on the list, I'm learning to do now.
Are you practicing anything from this list? What are you doing to cut back on spending?
dollarish.com
Comments (5)
#1 &4 works for me :)
Most of that is common sense, however... and this is a big HOWEVER, paying cash for your car is a TERRIBLE idea. Especially in such horrible economic climate, if you have decent credit or if you get a loan for 0%, you'd be stupid NOT to borrow since you're borrowing for free. Furthermore, if you can't get zero interest loan, go to a credit union or shop around (or even do a bridge loan if you have capital reserve), instead of using all that cash.
No offense to the topic creator, but paying cash for a car is just stupid... and bad advice. Sinking such a large amount of cash into (and I had a good laugh that you'd call it an 'investment') a depreciating asset is silly. It's not an investment, it's an expense, call a spade a spade. But, feel free to throw $2k, or $30k, or $60k on a vehicle only to roll off the lot and see that cash you sunk in instantly reduced by a quarter.... smart "investing" huh?
The only reason I would see to even bother with that is if you know you'll get into a situation where you'll end up with negative equity... but that's why there's gap insurance.
I guess while I'm at it, 'buying low' is kinda silly too since you never know when things will bottom out or if they'll ever improve (like FNM, AIG, etc). If people on wallstreet are hurting... what chance do you have as a pseudo-quasi-knowledgeble day trader? probably none. Instead of buying low, I suggest people just dollar cost average and hope for the best. This way, regardless of how the market is, you're only investing a set amount without having to extend yourself. Are you going to become filthy rich this way? no... but when you fall, it's not that far from the bottom either.
#5 is always the hardest for me, cause some necessity always comes up. Be it car repairs, an unexpected bill, put more money towards debt, etc.
A piece of advice I would say is keep your bills consistent. Don't let a phone bill go higher cause you went over minutes or something like that.
And I think no matter which way you buy a car, you're still screwed. If you're getting a cheap car, I say pay in cash.
I agree with Seige_Jet.
But on the topic of buying a car, i think it would be best put to "buy what you can afford". If you have 20k in cash, don't try and buy a 25k car, but at the same time, when you decide to buy a car you can afford, don't put all cash in it when you've got a really low interest rate. Here's an example why,
Say your car loan is interest free for first 6 months or whatever, and 2% for another 2 years. If you pay in cash, you'll be short the 20k you spent. But if you took out an interest free loan instead, and stuck your cash in a 3-4% CD or savings account, you'll actually net a profit at the end of it. As long as your alternate investment return can exceed the interest on the loan payment, you're good to go. And once the high interest kicks in, just take out all that interest earning cash and pay it off. You'll still be better off.
In regards to buying low, Seige_Jet covered it pretty well. 6 months ago, people thought prices were low, and compared to the peak in 07, they were, but look at us now. we're way worse off. It's really not as easy as it seems, but opportunity is still there.
I have enough :)