Being frugal should always be top on your list in order to be retire early.
Steps for early retirement
- Be very Frugal. Live below your means and don’t pay for anything that you don’t have to.
- Use coupons for everything.
- Ride a bike to your destination or car pool.
- Send your child/children to public school instead of private school. Major money saver here.
- Use credit cards with cash back rewards like Citibank, Chase and CapitalOne.
- Save at least 20% of every paycheck. After five paychecks you already have saved a whole paycheck without thinking about it. If 20% sounds like too much, then by all means start by 10% or even 5%.
- Learn how to get multiple streams of income. Get another job, start blogging, fix computers or cars in your spare time. Start somewhere and then that whole paycheck can become 100% saved.
- Invest for the long term in the stock market and always buy low. Try hassle free methods like investing in Mutual Funds and Exchange Traded Funds (ETF). These help you because you don’t need to buy individual stocks and they are well diversified.
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I recently had a huge problem with a home that I purchased in Orlando, Florida. About 6 months they raised my house taxes and my mortgage payments jumped by $800.00 per month. Talk about a disaster because that is enough to be another rent payment.
Now fast forward to today and when I logged into my Countrywide account to schedule the next payment, I saw a $400.00 decrease per month. I jumped for joy and called my wife immediately
After the mortgage mess houses started going up for foreclosures left and right. Then apparently the feds decided to drop house taxes and instead start charging taxes on services that are not necessary. No problems there for me since that is not my primary residence.
Countrywide pays my taxes through my escrow so I received the rebate immediately. Now I can take a breather to see my next move.
Should I sell the house or keep it until the economy sorts itself out? The economy might take close to 2-4 years to sort itself. I will weight my options then see my next step.
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This is actually the not to do list. This is the way to the dark side of becoming financially independent. If you find yourself doing any the things listed here, immediately stop yourself.
- Apply for all those cool credit cards like free miles, points and cash rewards. These are good in limited numbers like a maximum of two of these combined.
- Apply for any credit card that does not give you anything back.
- Take your credit card and max it out to buy unnecessary things for crazy luxury or to impress your friends.
- Pay your bills late and then pay late fees.
- If you have big bills, at least try to pay the minimum payment.
- Wait till a unpaid bill goes to a collection agency.
- Don’t pay your landlord or mortgage because you want to buy that sweet new current year vehicle. My friends dad told him “You can’t live in a car and if you could, how long do you think that will last?”
- Try to runaway from your taxes.
- Payday loans are for emergency funds in which you pay back high interest rates. Instead create your own emergency fund of about 6 months worth of emergency money.
- Pride, think you don’t need to budget and put away some side money. Listed as pride but it can be listed as poor thinking.
If you are guilty of any of these things, please call a financial adviser!
LoL, I had fun posting this little folly list because I am happy to report that I am no longer doing these things any more.
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Snowflaking is a more basic and simple approach to the snowball effect to debt reduction. When you think of snowballing, you think dollars a day while when you think of snowflaking, you think of pennies a day.
With this approach, even a dollar a day extra can accumulate to a large reduction in time. I would use this to pay off the higher interest debt first. Adding the snow flake effect as extra monthly principal.
You can take income from minor second income ventures as well.
Ebay.com - One approach is to sell items on ebay.
Craigslist.org - craigslist then take the extra income to apply it to snow flakes.
Survey Online - Another approach would be to take surveys online.
Yard Sale - Even old methods such as yard sales can deem valuable and effective to the cause.
You can use any of these methods to gain extra income and you should send payments immediately or as soon as your permitted to.
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One of the greatest money savers comes weekly in the form of the Sunday papers.
Every week you get these great coupons and updates on the weeks greatest deals in your area. I started this and I am able to save a few extra bucks every week.
I can save on grocery items and even electronics. I love electronics and that is my vice. I can stay semi current while still saving by being frugal on my purchases.
Never take those little silent coupons lightly as they can save you a ton in time.
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I was very fortunate to always get what I wanted when I was growing up. All I had to do was say I wanted something and sure enough I would get it. That made me into an impulsive buyer when I became an adult. I never looked for sales and therefore money just trickled out of my savings account.
I am not going to talk about looking for coupons or impulsive buying. When you work so hard to save money into a savings account you want to keep it there.
Save Money and Keep your Saved Dollars
- Create a personal budget - very important first step. The best way to save money is to trim what doesn’t need to be spent.
- Depending on your income and expenses you will know a reasonable number to set aside solely for savings. Declaring a realistic figure like $25-$50 per week or maybe even bi-weekly.The point is something is always better then nothing so don’t get discouraged if it seems like a small amount.
- The 3 Bank Account Difference - the 3 accounts all serve a distinctive purpose.
- Spending Account - this account can be a checking or savings account. This account will receive paychecks and will take the role of dealing with daily expenses. This one is okay to have an ATM card in order to withdraw money for day to day activities.
- Rainy-day/Emergency Fund Account - this will be your emergency blanket. This will cover any unforeseen emergencies. Job loss, car repairs, household repairs, house tax increases and so on.This account should have no ATM card and should be emergency use only.
- Savings Account - this account also should not have and ATM card and you will not transfer out money from this account for day to day purposes or things like groceries and so on.I use currently use Paypal’s money market account for this and I also use Sharebuilder money market account.
- Fill up Emergency Funds Account - this account should be filled up before the savings account.As a rule of thumb try to save enough to cover all of your expenses for at least the next 6 months or do like me and save enough for 10 months
- Save Money Now - when you have a nice emergency fund setup and ready only then would you start saving.Try to set an automatic transfer that occurs every two weeks or every month. Automatic transfers makes sure that you do it and you never have to worry about remembering.I picked up this from David Bach and his Automatic Millionaire book.
No worries about tracking where your money goes and wondering if you put money in.
That’s it to automatic savings and novice budgeting.
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Credit cards are great but require self restraint. It just makes it too easy at times to spend money and you don’t notice the total until the end of the year. So this is the greatest debt builder but we have a great way to combat this.
- List you credit cards in interest order.
- Determine which credit cards you will terminate because as a rule of thumb, you don’t need more then 3 credit cards ever.
- Call each credit card company in order and ask for a lower interest rate and “no fee 0% APR” transfer.
- Start transferring balances from the new adjusted higher rates to the new lower rate.
- Pay off the remaining balances on the highest credit card balances first.
- Snowball your new debt free life.
- As you pay off the debt, cancel the card on balance completion until you have 3 credit cards or less left.
- Pat yourself on the back because you just terminated you debt.
It’s that simple to do. It may take some time but this method is the best and cheapest method to remove these hurdles from your path to getting rich.
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Bank of America will be buying Countrywide Financial for $4 billion in stock. This will be both saving the country’s biggest mortgage lender and will also save the feds from having to devalue the American dollar any more then it already has.
This will help calm fears of a recession and inflation. Saving the over all economy and becoming the nation’s biggest mortgage lender and loan servicer.
If your like me and have shares in Countrywide, you will receive 0.1822 of a share in Bank of America stock in exchange for every share in Countrywide.
It is believed that this will increase earnings per share for Bank of America in 2009.
Countrywide shareholders gained 51.4 percent on Thursday due to possible reports that were then confirmed today.
Lets see what will happen now that I have to start paying Bank of America for my Mortgage.
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