How to Live a Rich Modern Life Without Big Debt
My biggest regret in my adult life is that I used debt to fund my life choices after college. It is as easy as I can make it. Debt was a huge mistake.
This post was originally published on The Simple Dollar .
I used this debt to buy a nice car … which I no longer own. I used this debt to buy a lot of electronics … which I no longer own. I used this debt to buy many dinners at restaurants … which I don’t remember at all. I used this debt to buy a lot of books … which I mostly don’t own. I used this debt to delve into expensive hobbies … in which I no longer participate.
Almost all of this debt has been reduced to nothing . They just went to fund a short-term lifestyle that almost disappeared in just a few years.
Why did I allow this? It’s simple. I believed that in order to live a modern comfortable life, I needed to get into debt.
Basically, I believed in the idea that there are many things I need to have in order to lead a life that is not like “poverty,” and I need it now .
The idea itself, of course, was ridiculous. After a few years, I had very little left, apart from an aging car, an apartment full of almost unused items, and a giant pile of debt.
What happened when I figured it out? I still had a pretty good day to day, but I paid off every cent of that debt, including my mortgage, over the course of five years.
The truly sad part of this story is that I now realize that I could have gotten pretty much everything I really valued in life back then without taking a dime of extra debt. I didn’t need to have a car loan or a bunch of credit card debt to lead a really good “modern” life.
Here are a few key things I’ve found out about life that I’d love to drop into my lap, say, in mid-2002 or so. If I had understood these things then and applied them, I would probably retire right now.
Stop buying what you won’t remember in a week
This is perhaps the biggest lesson I’ve ever learned about personal finance. If you forget about this subject or experience after a few days, you shouldn’t spend money on it. If it is completely forgotten, then all the money you spent on it is mostly just lost.
The only things you should completely forget about are your most basic necessities of life: basic food, basic clothing and shelter.
The point is, people often have an unforgettable experience when they do what they like, like enjoying a delicious morning coffee with a friend, and then start repeating it and repeating it until it is not unforgettable at all. It becomes normal and completely forgettable, and when you have additional expenses that become normal and completely forgetful, you literally throw money away.
Even “special” purchases can be totally unforgettable. The first book you buy this year may be memorable, but 30th? They just throw it on your shelf.
Use credit card statements, bank statements and receipts to track them
The trick with such forgotten purchases is that you forget about them . This is the whole problem – they just disappear.
The solution to this problem is to simply dig through credit card statements, bank statements and receipts from time to time and look for such purchases. What purchases you can’t even remember or don’t even remember? Find the places where you spent that money and understand that these are quite wasteful places for you. You will not get anything lasting from your money spent there.
Avoid convenience foods
Don’t get me wrong – there is nothing wrong with going to a restaurant as long as it is an unforgettable experience . If you are going out with friends you haven’t seen for a long time, or if you are taking your beloved to a very special place, you should definitely go out to eat.
The problem arises when you go to a restaurant just to “save time” and the food and experience are completely forgotten after a few days.
Fast food almost always falls into this category, as do many chain restaurants. The food is completely forgettable, relatively expensive, unhealthy and doesn’t really save much time. If you know you will need to eat as a last resort, place a couple of sandwiches in the small refrigerator before leaving the house.
It’s the same with convenience stores and gas stations. In fact, it is always true there. Of course, during the trip, you can be very hungry or very thirsty. This is why it always makes sense to have a few snacks and an empty water bottle in your car – you can fill the bottle with water at the gas station and eat the snacks you already have instead of the expensive ones on sale.
Rent, do not buy, your living quarters
Yes, for many, the American Dream is buying their own home. The problem is that a lot of people are laying their lives on it . They hit very high mortgage payments, which give them little leeway to make other life choices in the future, and then bear all the additional costs associated with owning a home – insurance, property taxes, association fees, etc. utilities and so on.
The end result is that many homeowners find themselves cornered. They have a home that they love, but they have little money to live on or save for the future. They often “solve” this problem by incurring new debts for cars and things they need for their home.
This is a bad recipe that gets people to walk a tightrope where they have to keep their current job or they will fall down and lose everything . This is not a fun lifestyle.
A much better approach is to simply rent, not buy , and withdraw a small amount. Look at the place where you live solely in terms of what you will actually be doing there most of the time – cooking, eating, doing basic hygiene, relaxing and sleeping – and ignore corner cases such as large parties and the like. things. Don’t pay a ton of extra money every month because you might want to throw a big party there someday.
Choose a small area with the necessary cooking utensils
If you’re only focusing on your basic housing needs – space for cooking, eating, basic hygiene, resting, and sleeping – you really don’t need a lot of space for that, so don’t pay for it. The extra space means you’ll just fill it up with things you don’t really need.
The solution is to get small. Work efficiently. When you do that, you will seriously cut your housing bill without spending extra money on extra storage space for extra things you don’t need.
If I had to go back to my twenties, single or married without children, I would live in a tiny apartment. I would probably find the smallest place I can, in a relatively safe area of town, a place where there was mostly room for a bed, bathroom and some kitchen utensils (access to stove and oven, multiple cupboards, etc. counter) so that I can cook my meals at home easily. (After all, having at least a small place to prepare food at home becomes a big incentive to do so, and cooking at home is a huge savings in money.)
These things are much cheaper than renting a larger space or paying off your mortgage. You will be saving hundreds – or even thousands – per month by following this path. That money can go straight into savings so that you can really buy a bigger home someday – or to fulfill your dreams.
Focus on location
The point is, most of the extra things you might consider at home are things that you would probably do outside the home if you had easy access to other places to do it. For example, much less space is required to accommodate friends if you are already close to places to meet together.
I recommend that most people find accommodation close to their place of work and near places where they can make their social life and friendships easier, or near public transportation so that they can easily reach these places.
Thus, most of the things that you would like to do at home, you will do outside the home, which minimizes the costs necessary for the home.
Rely on other modes of transport
This does not mean that you do not need to have a car. Everyone has different situations, and for some, a car is vital. For example, if you live in a rural area, it is quite difficult to get everything to work without a machine.
However, if at all possible, your primary mode of transport should be something less expensive than a car. Your car should be a spare at best.
What other modes? Public transport. A bike. Your own feet. In many cities this is more than enough.
Why? Cars are expensive, even if they pay off. You have to pay for insurance, registration, maintenance, gas and parking. These things add up to a lot, and if you can do without them, you’ll be glad you did.
If you find yourself in a situation where you really need a car, don’t buy a new one. Buy a used late model car and drive it until it falls apart, then replace it with another used later model car. Continue the cycle. Save around $ 100 a month on your next replacement car, and you’ll always have enough cash to pay cash for a good, latest-model used car when the time is right.
Use the library for fun
Many people imagine the library as a dry place where an angry librarian tells everyone to chill around endless rows of dusty shelves filled with cryptic books. These people have not been to the library for a very long time.
Modern libraries have books for a wide variety of readers, from children to adults, from page-turning to educational books, in almost every genre of fiction and nonfiction you can imagine.
They also have racks full of DVDs (and even some Blu-rays) of movies of all kinds, from obscure documentaries to the latest blockbusters, as well as heaps of audiobooks. Many libraries also have a variety of equipment that you can rent.
The best part? These things can be borrowed for free . You don’t have to pay a cent for them.
The next time you’re tempted to rent a DVD from a kiosk, buy a book, buy a DVD, buy an audiobook, or something like that, consider a library. If they have exactly what you want, for free or something similar, why would you waste your money on it? You can get the same entertainment experience by picking up anything from the library, which you can get by purchasing this item – and spending your hard earned money – elsewhere.
Find a hobby outdoors
The outdoor hobby serves several purposes at once.
First, it forces you to go out and move, which is good for your health. You will feel better, get more energy, and avoid serious health problems.
On the other hand, most outdoor hobbies (note: not all) are not very expensive. Often they only need shoes and time (like hiking trails) or perhaps one or two pieces of equipment (like soccer).
On the other hand, most outdoor activities are inherently social. Taking part in outdoor activities in a group is really easy. A team sport on a playground or in a park is purely social. Even something like a hike can become a social event if you invite other people there.
On the other hand , many outdoor activities fuel our natural human need for collection . I enjoy collecting a lot of things that I find outdoors, many of them in the form of photographs. Our front garden also has a bunch of stones that we found. The total cost of it all? Nothing.
If you don’t know where to start, start by thinking about things that you find enjoyable on the street and just do them. Invite your friends too. This led me to start playing disc golf and geocaching (which has since become one of my favorite hobbies ).
If you need more ideas or want to find others, start by visiting your community’s parks and recreation website and Meetup.com .
Try community groups
While we’re on the subject of Meetup.com , it’s a great tool for finding organizations and groups in your community.
It is very likely that there are a number of clubs, groups and organizations in your community that you have never heard of that might interest you. The trick is to find these groups, and Meetup is perfect for that. It is free and indicates groups of all kinds that occur within a radius of where you live.
I personally found several groups through Meetup and became a regular member of two of them. None of the bands cost me a dime, and they played an invaluable role in expanding my social circle and providing an outlet for my hobbies and personal interests.
Just getting information about a group and attending one or two events does not commit you to anything related to that group. This means that you will learn more about them, and if you like them, then you have already stepped in the door.
Think about your wardrobe
Another area of concern for many is clothing. Many young professionals are expected to dress well, and this can be quite costly.
Fortunately, there is a clever solution for that too.
Have a smart wardrobe
The only thing you really need to focus on in your closet is the number of possible outfits that will fit. For example, if you simply say, “These pants only fit this shirt,” then this shirt and these pants will only represent one piece of clothing that you can wear at work. If you add another shirt, your number will only be one.
On the other hand, if you say, “These pants go well with these five shirts,” you have five potential outfits to wear to work. If you add another shirt, that number rises to six.
Let’s take it a step further – if you say “each of these five pairs of pants goes well with each of these five shirts,” then you’ve got 25 potential outfits to wear to work. Better yet, if you add another shirt, that number increases to 30.
In a smart wardrobe, almost everything is combined with almost everything else. If you have one, then the total number of clothing items you need to buy is actually relatively small. In fact, it can be quite small – six pairs of trousers, six shirts, six ties, and two jackets can create a myriad of options for clothes, all while taking up only a scrap of closet space.
There are a couple of “tricks” here. First, it requires regular washing. You can’t easily skip a “wash day,” although a “wash day” will probably only ever include one or two loadings of clothes at some time. Second, it’s best for quality clothing, so your individual items may be a little more expensive, although your overall wardrobe will be much cheaper and easier to maintain.
First look at the options used
This is such a simple rule. I can’t believe everyone doesn’t do this by default, but they don’t.
Whenever you are about to buy something, take a little time to see if it is available as a used one before paying the new price.
Looking to buy a multicooker? Don’t go to Amazon and click buy now. Instead, stop by your local thrift store – or even give them a call – and see if they have a multicooker. If so, then you’ve probably just saved $ 40.
The same story repeats itself for almost everything you want to buy, from dishes to kitchen appliances, from towels to bedroom furniture. Chances are there is something out there that is perfect for you and is available at a tough discount in your community.
The point is, you will never find it unless you look. So watch. Every time you are about to buy something, put in a little effort to find it used up. Check Craigslist . Check out Freecycle . Call your local second-hand stores or stop by.
Yes, you’ve probably pondered this for a while, but you’ll have enough hits – and you’ll save enough money – that you’ll be glad you did.
Final thoughts
Here’s the big story: All of these changes are things you can do without compromising your quality of life in the least. You still do what you want to do. You are still living the life you want to live.
You simply choose to do it wisely, so as not to burden you with an endless cycle of debt payments that keep you from working . You choose to live your life in a way that maximizes your freedom , not in a way that makes the most of your things. You choose life for unforgettable experiences, not for unforgettable experiences that simply empty your wallet.
And all of this you do without the stress of debt .
This is what I call a wonderful life. This is something I missed out on in my early professional years, and I’m incredibly glad I discovered it now.
How to Live Today’s Rich Life Without Debt “wiki useful Simple dollar