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June 27, 2011

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When I was in college, making $30,000 a year seemed like a fortune to me. Now that I have graduated and have worked for many years, I see how important it is to be able to manage your money. Everyone is not guaranteed a high salary of $225,000, of $100,000 or even of $50,000. Sure there was excellent ways to increase your income, and I highly suggest them, but if you cannot manage your money with $30,000, you can kiss away any ideas of instantly becoming an excellent money manager when you hit the big raise and bring home a six figure paycheck.

I am constantly amazed when I was "Til Debt Do Us Part" and people making $100,000 or more a year are heading towards $200,000 consumer debts...it's crazy. It makes me want to find a way to reach out to the younger generation to make sure they aren't as monetarily ignorant down the road...

A lot of these types of problems are caused by the way people were raised and the role models they had while they were growing up.

It's one thing to splurge now and again on some item that you really feel that you want, maybe you don't need it, it but you want it. It's all about living a lifestyle that is well within your means. An old expression that seems appropriate is, "Always cut your garment according to your cloth".

Living well within your means leads to happiness, security, and peace of mind.
Living beyond your means leads to a whole variety of problems.
Some people just never realize this, they think they deserve to live at a level that is way beyond them and don't wake up until something bad happens to them. Unfortunately it is such a deep rooted problem that most only learn when it's too late.

I wouldn't say they are out of control. OR on the edge.

I wouldn't live like that, and they could use some emergency savings, but they do have two things that most other don't.

A $225K cash flow coming in
A $300K+ nest egg.
Youth

They are heavily funding their retirement. Yes they have some debt. But they can service it. They likely drive newer safe cars. They take nice vacations.

They live. In 15 years when their kids are off and gone, they will have ample savings. Rick will be 56 and that retirement plan will be worth likely 1.7-2M assuming an 8-10% return. And they will have great memories of a nice life while their kids were little.

Yes...they are on a solid track to be multimillionaires in their 50's and yet they are "out of control"

It is refreshing to see some people realize that the present is just as important as the future.

Maybe they don't want the fat cut. Maybe the fat is what makes their world turn. Making $225K in salary means they must be doing a few things right.

Troy --

Did you miss the credit card debt and borrowing from their 401k? I think you're looking at only the positives and painting them in the best possible light.

They aren't funding retirement all that heavily - about 10%. Childcare costs aren't all that unreasonable. Right now it looks like they have at least $4k per month for clothing, household, car repairs and gas, food, medical, entertainment, utilities. While I would think they would be able save at least $1k from that, it may depend on how they have structured (or not structured) their investment properties. If they are paying management companies, cleaning, utilities, repairs, etc. out of their monthly cash flow instead of having all those expenses separated out and reported as business expenses, I can see how it could eat up a lot of their cash. Obviously, they would be smarter to get out of these properties if they could, but with two underwater investments in FL, I don't know how many options are available.

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