This is a follow-up on my previous post “Interest payment on national debt 3X annual cost of Iraq-Afghan wars.”
America is a nation in debt up to our eyeballs. The American people are weighed down with personal debt. The federal government is an even worse offender because the gargantuan national debt it has incurred — and continues to accumulate — is a burden saddled on all of us, our children, grandchildren, and
Americans yet unborn.
Managing one’s finances is not rocket science.
As in the case of losing weight, where the simple formula is “Eat fewer calories than you burn,” finance management is also simple:
Don’t spend more than you have!
Here’s how one midde-class family managed to be debt-free and accumulate 1.5 million in assets with a common-sense yet simple formula:
- Never get into debt.
- Save half of their income.
- Buy everything, including cars and home, in cash instead of on installment.
By Sloane Heller – KSHB.com – July 28, 2010
For the past 21 years, Ed Haskell, a Retired Air Force Officer and his wife Debbie Chasteen a college professor, have been saving about 50-percent of their income. On average, they bring in a combined total of $80,000.
But they don’t deprive themselves of living. They’ve traveled domestically and internationally and donated to charities.
They went to China twice – each time they actually earned money by teaching while they were abroad. Debbie set up an exchange program so she could teach in the UK. The couple even splurged on a leisurely trip to Italy.
Today, the couple is sitting on a $1.5 million portfolio and plan to retire in their mid-50’s.
Their secret? They pay everything, including their homes and cars in cash and contribute the maximum amount allowed to their retirement fund. That way, their federal and state taxes are lower and they don’t pay interest.
They didn’t buy their first house in Macon, Georgia, until they were in their mid-30’s and paid cash. Their home in Liberty cost them $200,000. Again, they paid in cash.
Instead of buying a $40,000 car, they paid $18,000.
They don’t buy every new gadget or service on the market, or eat out at restaurants 5-6 times a week.
Instead of spending $15,000 annually for private school tuition for their daughter, the family chose to live in a district with “great public schools and reasonable taxes,” said Haskell.
The family handles their own investments. The couple has no credit card or debt of any kind and hasn’t in 21 years.
Neither left school with any loan debts, instead they used scholarships, GI Bill benefits, and working part-time to cover their education expenses.
Instead of paying full price for retail items, they shop around for discounts, buy slightly used items, buy off-season and buy only what they need, not what they want.
“We didn’t spend first and “try” to save later, instead paying ourselves first by maximizing tax deductible retirement savings contributions,” said Haskell.
Haskell’s advice: live below your means. Here’s his advice:
- Maximize 401(k) and 403(b) contributions, at least up to the matching level by your employer. Also consider a Roth IRA.
- Make savings automatic – have it deducted out of your pay directly and into a bank or mutual fund account.
- Go online and comparison shop expenses like cell phone, television, internet service, insurance costs, etc.
- Write down your expenses and make a conscious effort to see if you’re getting value for your spending.
- Educate yourself about basic investment knowledge. Invest in low cost index mutual funds.
- Set realistic annual savings goals at the beginning of each year.
- You have more control over your savings than your investment returns.
- Realize that everyone can save something from their income and don’t make excuses like “If I only made more money I could then save.”
- Live in a reasonably taxed location and one with good public schools.
- Be self-sufficient. Cut and fertilize your grass. Fix small house repairs.
- Pay cash and avoid credit card debt.
See the news video of the Haskell family, here.