If you’re doing investing right, you’re saving a large percentage of your income every month (like 25-50%) and stuffing it into stocks, bonds, and real estate investments. At first, even with a high savings rate, your net worth will be low, and the money made by your investments will also be low, like maybe a few hundred dollars a month. However, as your net worth increases, your investments will make more ...

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Cars are incredible inventions.  They allow you to transport yourself hundreds of miles, whenever you want, in a relatively short time period.  Cars allow you to arrive at your desk job without any sweat or dirt on your face.  They also allow you to take amazing road trips and might even act as a camper on a rainy night. Cars are a depreciating asset However, don’t forget that cars are a luxury ...

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If you haven’t noticed, Americans love debt.  The average household has around $130,000 in total debt, including $50,000 in student loan debt, nearly $30,000 in auto loans, and $16,000 in credit card debt. With an average credit card interest rate of 15%, that would be $2,400 in interest per year. With a student loan interest rate of 6.8%, that would be $3,500 in interest, ...

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Money is great.  It provides security, options, and freedom.  If you work hard, practice relative deprivation, and save enough money to become financially independent, you will have reached a commendable milestone. However, financial independence means nothing if you don’t have your health.  It doesn’t matter that you have $5 million if you aren’t around to enjoy it, or if your health is so poor you can’t travel, start a business, teach a class ...

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The other day, I read a proposal about the government (taxpayers) giving newborn babies anywhere from $20,000 to $50,000 to help fund their future.  I am not going to comment on the politics of this proposal, but it did get me thinking about how to set your kids up for financial success. Give your kids a good home If your kids grow up in a safe, stable, supportive home, they are more ...

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At some point in our lives, most of us have learned to live on very little.  For example, if you’ve ever been a college student, you’ve mastered the art of living in the same house with a dozen other people, finding free meals, and using public transportation. Back in the early 2000’s, when I was a college student, I estimate that I spent about $15,000 per year on living expenses (aside ...

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Recently, we learned how lifestyle inflation can be toxic.  In case you’re wondering, there is a time and place to inflate your lifestyle.  However, you can’t just do it whenever you want.  You have to earn it.  Here’s how it works. The basics If your goal is financial independence, I recommend that you live on half your income and save the rest. This means that if you’re making around $50,000 per year, ...

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Personal finance isn’t complicated.  In fact, if you do just six things right, you will become financially successful.  Let’s keep it simple and get started. 1. Earn a decent income. If you don’t make any money, you will never get ahead financially.  Forget about winning the lottery, getting an inheritance, or expecting the government to subsidize your lifestyle.  The only way to build wealth is to work. Jobs with a decent income include computer ...

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In my post, "Use it Or Lose It," I talked about the awesome benefits of the Roth IRA.  You do have to pay taxes on the money now, but it grows tax-free, and you can withdraw the money after age 59.5 without owing any taxes.  It’s the only way to win the tax game.  It is 100% your money, forever! In comparison, money in a traditional IRA, traditional 401k, ...

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Learning to budget is scary.  After all, it means you have to say NO to unnecessary purchases and keep your eye on long-term goals at the expense of short-term pleasure.  There are a variety of ways to budget, ranging from the restrictive and somewhat impractical “envelope system” to the more vague and potentially ineffective “wing it” system.  I’d like to present a balanced approach to budgeting that ...

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