A Great Example of How to Manage Money the Right Way

I love stories of people who are doing it right -- spending less than they earn, saving for retirement, keeping out of debt, and being sure to splurge a bit.

Here's a story from Money magazine about Natalie and Greg Turner, a couple who are a great example of how to manage money the right way. Here's a summary of where they hit the mark:

• Greg, a pharmaceutical salesman, and Natalie, a software engineer, make a combined annual income of $130,000. Even though their net income affords them a comfortable lifestyle they have made saving their first priority.
• "He invests 19 percent of his paycheck, while I put 15 percent into retirement, but we also put aside about $12,000 a year into mutual funds and always have at least a year of living expenses saved up just in case of an emergency."
• The couple are modest spenders, Greg uses a company car so they only own one car between the two of them which has been paid off for a few years. They do most of their shopping at Costco and Natalie admits she has even curbed her clothing expenditures thanks to Greg's influence.
• Natalie and Greg never put more on their credit cards then they can pay off at the end of the month.
• And they still allow for at least one nice vacation a year and one other indulgence -- Pearl Jam. They make time for concerts whenever and wherever they can.
• Any extra income, including bonuses and monetary gifts from family, goes directly into an investment or savings account, and they plan to start a 529 college savings plan with the money they expect to receive from their families after the birth of their child.

Ok, so someone's going to say, "Well, if I made $130,000 a year, I'd do the same thing." No you wouldn't. Not unless you're doing it now. You can take the same steps the Turners are taking (the amounts just change) whether you make $30,000 or $130,000. The point is -- everyone can spend less than they earn and thus have a surplus that will help them save, pay off debt, etc.

Don't believe me? Check out the story of this guy and consider that spending less than you earn is the way people become wealthy.

Comments

[Miserly Bastard]

I just posted a piece on my blog that takes a very different angle than your piece. I argue that growing your income is the most important part of the wealth accumulation equation. I'd be interested in your thoughts.

[FMF]

I don't disagrre that growing your income can be a tremendous way to boost your net worth (in fact, I've posted on it), but spending less than you earn is more practical for the majority of Americans. It's not always easy to increase/grow your income, but EVERYONE can spend less than they earn and become wealthy as a result.

Said another way, you can become wealthy if you spend less than you earn -- no matter what your income (and whether or not it grows). But if you spend more than you earn (or as much as you earn), you won't get wealthy no matter what your income.

[financialreflections]

I love stories like that. I'm trying to write my own.