Featured customers currently enrolled in a CareOne Debt Relief Plan, share journey to become debt-free; hear how they juggle family, finances, and more.
Have you ever heard of the book, "The Millionaire Next Door?" The authors were surprised to find that the millionaires they interviewed lived and dressed quite modestly despite the amount of money they had.
Warren Buffet, one of the wealthiest people alive, has lived in the same modest home since 1958. My boss, who makes well into six figures a year, drives a Prius.
Why do I bring this up? I think we can learn quite a bit from the wealthy when it comes to priorities and money. They know where to put it, how to invest it, but more importantly, where not to spend it.
You could argue that they make a lot more than you do, and that is absolutely true. However, I believe there is a reason they make more than we do.
Because I work at a private club, many of the members are considered above middle class. Many are lawyers, doctors, and businessman. Some are considered "old money," but many are people who came from a simple life and earned every penny they have. Here are some tips they've shared.
1. Don't carry debt. For most of us paying down debt, we now see the value of this. As the author of, "Rich Dad, Poor Dad" says, carrying debt only makes the rich richer. My debt spanned years of my life that I wasted paying interest to someone instead of earning it.
2. Make your money work for you. Wealthy people tend to invest in the stock market. While this may seem scary for some, I've been doing the same with a small amount here and there, and the return has been greater than what I would have received from a bank. One member advised me to start with an exchange-traded fund (ETF) that also pays dividends, and this is where I find myself investing more of my money.
3. Don't spend money on things that don't provide a return on your investment. One member has been driving the same car for over 13 years, but at 34, he already owns one property in downtown Los Angeles that he rents out, along with his own home by the beach. He wasn't born with all this; he just knew that $40,000 toward a property would pay off more than a $40,000 vehicle.
4. Get an education. Medical degrees, law degrees, and MBAs are not earned overnight. It is not cheap and not easy, and most of the members I spoke to paid for their own education. There are times when I'll hear people talk about how "lucky" these people are, and I don't think they realize how many years and how much work it took to earn the degrees they have in order to get the salaries they make.
5. Don't use your home as an ATM. I'm not a homeowner, but I am aware that many people make the mistake of refinancing and taking equity from their home over and over again to either pay off debt or take a vacation. According to one member, if you always have a mortgage, then you'll always owe and your house is no longer the asset it should be.
6. Work, work, work. Wealthier people will be the first to tell you that hard work is most important. Great entrepreneurs such as Henry Ford, (Ford Motor Company), Dave Thomas (Wendy's Founder) and Brian Scudamore (1-800-Got-Junk) were not formally educated, but they had great ideas and worked hard to build their companies. You may not have the desire to be an entrepreneur, but hard work no matter what your profession, pays off.
7. Live within your means. One point a member wanted to get across to me is that you don't have to be a CEO to have money in the bank. Most of the older members have lived through some really meager times and never forgot what it felt like to be there. Because of this, I don't think any of them ever felt the need to keep up with the Joneses: a symptom one member believes plagues our generation of credit card holders.
Do you have any tips to share?
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Cheryl Bigos graduated from a CareOne Debt Relief Services Debt Management Plan (DMP) in 2008. She is now blogging about life as a DMP graduate in the My Journey out of Debt blog. She works as a Purchasing Manager in Los Angeles, teaches Pilates, and lives with her boyfriend of four years. Cheryl is looking forward to sharing what she has learned from her experience in the DMP and after! Look for great tips about life 'after' debt! Compensated Blogger for CareOne Debt Relief Services.
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If you've been living paycheck to paycheck and used credit cards for every day purchases, this can be a hard thing to swallow. Credit counseling programs are designed to help you get out of debt, and well, to do so, you need to stop incurring more debt
Check out this book...this guy is great!
GoDaveGo, I have looked at Dave Ramsey's website a few times, but haven't read any of his books. What I have read so far, is definitely great advice. Thanks for the tip!
Great tips! Though, the paying off your debt (mortgage specifically) can be argued in a couple of different ways. If you have a low interest rate and plan to stay in your home for the long term (4.5 percent, for example) represents very cheap money. And unless you sell your home there's no way to recover the cash you've put into your home. Just some food for thought...
Thanks Scordo. I live in California, so the market was inflated almost double during the boom and those people who refinanced, hoping their equity would just continue to grow, found out the hard way just how much they lost. Some ended up loosing their homes completely because they refinanced under bad brokers and their payments just got too high. That's what was so scary. It didn't happen to just the new home owners. Some were people with substantial equities that made bad decisions. They really did believe the market would keep growing and that they could refinance again. I think that is what the member's point was. If you refinance when your home is worth $500,000 and it's worth drops to $300,000 (this was typical in LA), and you can't make your mortgage payment, then it becomes almost impossible to refinance.
But, as you said, sometimes it can be a benefit if you are able to get a lower interest rate. Thanks for your tip!
This was a very good article, with a lot of good advice.
Although this doesn't sound like much, if you multiply $10/week by 52 weeks per year, that's $520 toward Christmas gifts. The reason she doesn't need more than this is that she almost always has money left over after her Christmas shopping.
Dave Ramsey for the win. I never gave him a dime, but his radio show and website got my family out of debt. I've since then had his starter kit sent to friends and loved ones now that we can afford to give.
One of the greatest things that I learned from my relatively poor immigrant grandparents was to know where you eat. This doesn't mean Wendy's or BK, It means if you have the ability to do so, always grow at least some of your own food. It's cheap and its healthier than any alternative. Doesn't matter how much wealth one may accumulate there is no substitute for home grown nutrition.
David, Dave Ramsey gives some great advise and glad you are now in a position to help out your friends. Thanks for the comments.
Secure, I don't have a lot of time to grow my own vegetables, but my parents often did growing up. You are right, homegrown is the best and great on your wallet! Thanks for the tip.
Great advice here. I don't think that all debt is a bad thing but it can be if you use it wrong. Good debt makes you money and bad debt costs you money. If you are using debt to buy consumer goods then that is obviously bad. If you are using it for an investment or something that makes you money then that is good debt. I can only speak for the situation in Australia, here the price of houses is rising quicker than people can save even for the deposit so if you don't take out a loan you end up paying renting and paying off someone else's mortgage. but then you want to clear your debt as quickly as you can. Just my 2 (unborrowed) cents.
Great advice. Especially the bit on living within your means, that should be a priority as it shields you from overspending, using your money properly, and maintaining a consistent saving plan.
Great tips! One warning tho- I've noticed that when a lot of people start pursuing wealth, they also start obsessing over their net worth, which can actually be pretty detrimental (penniesanddollars.com/net-worth-even-matter). While money is a great tool, keep it in perspective! Great post tho.