Hi, these ten principles came to mind as we were driving from Florida to our new digs in Washington State. Two are familiar from our first try, but the rest are pretty important too.
1. Budget Personal Allowances so that you don't have to accpunt for the to anyone. You can be frivolous and burn the money if you want! This is good for the marriage and also for the Economic Unit you are together.
2. Use the Two-Bucket System. I will be explaining this concept in a blog post to follow.
3. Don't hold stock in the same company you work for. Remember that old cartoon of a guy sawing off a tree limb while sitting on the limb? I think Bugs bunny and Elmer Fudd were in that. If management wants to pay you in stock options, decline and take the cash instead. What happens if your wonderful company belly flops or goes bankrupt? You lose your job, and--oh wait--you can't use your stock as a backup of funds, cuz now its value has plummeted. You're SOL, friend.
4. IRAs turn perfectly good qualified, tax advantaged dividends and long-term gains into higher-taxed regular income. Boo! I will dedicate a forthcoming post to this little-realized truth. The corollary:
5.Roth IRAs are a great way to protect already-taxed income savings from future tax on any dividends or capital gains you may have for the rest of your life. Yay! Point here is that only ROTHS will not eat away through taxation your attempt to get rich.
6. Live within your means. This means save aside money no matter what you make. Adjust your wants downward. Do without stuff. I am not kidding! So many times I've witnessed people getting welfare (even within the LDS church system) whilst they have pets, or a smoking or drinking habit, or a smartphone, and of course--cable television. These, my dear kiddos, are NOT necessities. You wanna get out of being in crappy jobs all your life? Say goodbye to the pet, the gadgets, the TV, and even the better neighborhood or the fancier car.
6a--a corollary--don't spend your capital. Leave it untouched and only spend the dividends, interest, and any gifts or bonuses you get.
7. Invest in educating yourself and your children but don't go into debt for it. If what you love to do doesn't pay well (as being a potter didn't for me), you can become a tradesperson, work part time for good pay and benefits (even unionized), and be an artist or musician on the side (I periodically had "real jobs"--researcher in a prison, ad manager for a newspaper, freelance writer. I tried to join Navy reserves but they didn't take me.) If you have children, it would be good to get them adequate schooling, but you don't have to move to the richest place in town to make that happen.
8. Avoid debt. Especially, don't leverage yourself! Leverage is a two-edged sword, you can cut yourself badly. Rent until you can pay for a home with cash, if you really think you need to own a home. I think I'll post about our many adventures in home ownership and how we are now happy renters, later.
9. There is a free lunch, but you must still work. A tree produces fruit on its own, that's your free lunch. But, you still have to care for the tree. A cow produces milk, that's free lunch, but you've got to care for the cow and milk her. Farming analogies are great!
10. Don't get into a situation where you are forced to sell your stock. Period! Keep a cash reserve of three to six month's salary.
Random other concepts here to end with: The golden goose story is a great example of how to manage money wisely (the farmer and his wife did NOT manage wisely). Do you like sales at the store? Buy stocks the same way, when they are low-priced.
STOCK represents companies. The Stock MARKET represents an auction at best, a casino at worst. A livestock auction (note the word stock in there) is you buy and sell your livestock. Prices go up and down. It's not the same as your live stock itself. If you own live stock directly, the value is in the meat or milk they represent (and maybe a little in the manure they produce). The meat or milk doesn't go up or down like the market. More on these things later.
