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February 28, 2012


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I'm not a huge fan of Rule #2 as it stands. In my opinion, blanket rules like "save 10% of your income" are too simplistic to rely on for long-term savings. For someone just learning to be smart with money, it would be a shame for them to just check off the 10%-savings box and feel like they're well on their way. In my opinion, being in healthy financial shape involves reshaping your relationship with money and with material goods so that your mindset is "don't spend, unless you've thought it through" rather than "spend if you've met your rule". By having a saver mindset rather than a spender mindset, we are able to put away nearly 50% of our income without ever feeling like we're scrimping, and by investing the money we save, we've been able to increase our income so that our savings and income continue to grow at an accelerating pace.

I agree..choosing the right college major, working hard on the job, and getting promoted are the best financial moves that I've made in my life.

One lesson that has been overlooked is this.
Parents and grandparents should set a great example in the use of money where their children and grandchildren are concerned. Good habits are developed very early in life when young children are very impressionable.

I was born in 1934, in those days a common phrase was "Children are to be seen but not heard" and I quickly learned how to behave in the presence of all family elders. I kept pretty quiet as custom required but I heard and understood a lot more than adults give children credit for. I also observed firsthand how my whole extended family lived and how they were frugal and wasted very little of anything. Children are like pieces of clay, they need to be molded into good shape by a caring family, and hopefully grow up to be prudent and responsible adults that can take care of themselves when they become adults.

I just have one rule: Plan ahead.

That takes care of everything: getting into a career & building it as you go, saving for the future by spending less than you earn, manage your credit rating, and borrowing only when prudent & necessary.

10 percent is for retirement. Don't forget to budget for emergencies, as well as vacation, your next car, and home improvement/ repair or for a downpayment for a home. For those who doubt that homeownership is a waste, I'm two payments away from paying off my mortgage. Knowing that I have no mortgage at retirement (within two years) is a huge load off my shoulders. I did it in 25 years. I would highly recommend the same strategy. Don't buy a house larger than what you need either.

Congratulations - I know the feeling. There's nothing quite like getting that monkey of DEBT off your back. We celebrated when the Title to our home arrived in the mail from the lender with that wonderful stamp on it that says, "PAID IN FULL". It's nice when you are thoroughly content and happy in your home and that you know there's nobody that can ever take it away from you as long as you pay your property taxes.

I agree that it sounds like a good investing 101 book. But to FMF's point-you gotta have the money to invest and now more than ever choosing the right career and advancing your skills; is more important than ever.

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