Vikings make mistakes sometimes, but if they can get the big things right they can thrive. I certainly have my list of areas where I waste money! But, If one can get the big things right financially, they may set themselves up for building a high net worth over time. So it’s fine to work on cutting down the daily latte habit, but perhaps a bigger picture approach works better for your lifestyle and priorities. You could even forgive yourself for the daily latte indulgence if we get the large systems in place to set yourself up for long term success. Get these 5 things right and you will be well on your way to building a high net worth, financial freedom and ward off the enemies out to take your money:
- Automate a percentage each month to investments
Have 5%, 10%, 15% or more taken directly out of your paycheck and stashed away in a low cost index fund. Make sure to take advantage of a company match and you are laying the icing on the cake. This is what I would call the Warren Buffet advice. If one of the richest guys in the world says it’s a good idea, it probably is something to listen to. And, remember not to touch it, just watch the power of compounding interest as those dollars make more dollars. Let it grow and be part of your several strategies to build a high net worth. A shocking 56% of Americans have less than $10k saved for retirement. Yes, the market will go up and down, but when it is down you are buying shares on sale. Perhaps focus on the number of shares you accumulate vs. the dollar value of the account. Make sure to check in on those nasty high fees that erode your wealth, it’s your money so fight for it back!
- Buy Less House
Housing is the biggest single expense one usually makes in their life. If you can get by with a smaller house in a nice middle class neighborhood, you could be saving hundreds of thousands of dollars over the years. Your primary home is a home first, not an investment. It is something that is used and enjoyed. Make the best of what you have. A home is more about the family, people, friends, security, etc. Remember a bigger home means more maintenance, property tax, heating, utilities etc. And there will be the desire to fill it up with more consumer crap!
- Buy Used Cars
I recently conducted a fun exercise. I added up all the money I have spent on cars over the years and divided it by the years I have been driving. I have spent about $2,000/year, $166/month not including gas and maintenance. I can add another $200/month average in gas and maintenance. Is that a lot? It depends on how you look at it. I live in a place where one must do a lot of driving to get around. I have mainly bought used practical cars such as Hondas and Fords. If I was buying expensive new luxury cars these numbers would probably have been 3 times the amount, hampering my ability to save and invest. In another article we are going to go in depth on electric cars, and watch the gas savings pile up in investment accounts.
- Affordable Travel
Getting away, seeing another part of the world, etc. I think is so important to our health and perspective in life. But, travel can be very expensive. So find ways to travel more affordably. When I was growing up we could not afford expensive vacations, but some of my fondest memories are of the road trips through the greater South and North West, staying at budget hotels or traveling in an RV. Yes, Paris is great, but there are so many other places to see that are just as fulfilling without the high cost.
- Keep the School Debt in Check
Most of us need a degree to prepare for and acquire a job in our respective fields. But so many people are taking out huge school loans to fund a 4-5 year hiatus from the workforce. Go to a less expensive school. Work part time. Shack up with a couple roommates. Find ways to trim to expenses and not leave school in a six figure hole! No need to start your career with six figures in school debt. And the reality of the world is that most people don’t care whether one went to this school or that school, it’s checking a box for the resume and then continuing life long learning, which can be very low cost.
Bottomline: Get the big things right and then you can build the critical mass of assets needed to enjoy financial freedom and exploring other interests. There are other “big things” that can add mightily to your bottom line that we will explore in future articles, such as health care and ways to save money raising kids!