Live Simply, Be Wealthy

The Simple Life

Many of the millionaires in America live lifestyles that do not match our popular conception of "rich." There's a reason they got that way: They live simply. This means they can afford expensive cars and meals, but they don't spend all their money on them. Instead, they invest their money in stocks and bonds that can earn them money, rather than watch it fly out of their pockets.

You, too, can build wealth and reduce debt by living simply. Now, I am not suggesting that you sell all your possessions and live in the forest and eat bark. Living simply and saving money is all about asking yourself the right questions when it comes to your finances.

Where Do I Keep my Money?

Get your money into a savings account as soon as you can and then forget about it. If you have a retirement 401(k) plan, have money automatically deducted from your paycheck and put into savings. This will help stop the temptation to spend it. Mutual fund companies can also help by creating automatic regular deposits into an IRA.

What are My Major Costs?

You take a big hit each month in your necessary bills: utilities, mortgage, credit card, and auto insurance. Look at those closely to see if you can change them--your mortgage, for example. If you pay bi-weekly instead of monthly, you won't pay any greater amount, but you will wind up making an extra payment each year, and you'll be paid off seven years sooner!

What are my Everyday Costs?

Each day, you spend bits of money here and there: gasoline, a newsstand magazine, some French fries, a drink from the soda machine. It may be small change at the time, but it adds up! Simply paper-bagging it at lunch instead of going out can save you money.

How Do I Avoid Debt?

Credit cards can be really handy in a pinch, but they take away the reality of money. When you are physically handing over bills, you will find it harder to part with your hard-earned green. But when you do use a credit card, make sure you choose one that has no annual fee and that gives you something back--frequent flyer miles or rebates on something you buy a lot of, such as gasoline.

What Do I Do with the Money I've Saved?

How can you make your money work for you? Consider compound interest. If you are earning a salary, you are eligible for a Roth IRA. Money put into such an IRA historically earns an average of up to 10.6% interest each year. If you make an annual contribution of $3,000, in thirty years you could have more than $500,000. That makes for quite a nice nest egg.

What Am I Planning For?

We live in a world of instant gratification, but if we keep our eyes on our goals, we can more easily accept taking a pass on that expensive pair of shoes in favor of saving the money to take that family vacation. And we may not like to think about it, but expensive cars and homes are little comfort in the event of an emergency, while a healthy savings account can be something of an aid.

Do I Really Need This?

If the answer is no, that does not mean you shouldn't treat yourself. But simply stopping to ask yourself that question will make you more aware of where the money in your life goes, and think of where else it could be going instead.

You can still enjoy a comfortable lifestyle while saving money and building on your bank account. Just ask yourself all the right questions and answer them truthfully and wisely. To live simply, you don't have to live like Hetty Green, one of the wealthiest Americans of all time. She was worth more than 100 million dollars by the time of her death in 1916, but it wasn't just her shrewd investments that made her wealthy--the woman was so cheap, she washed only the hems of her skirts because it was cheaper than cleaning the whole dress!

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Michael G. Peterson is the Vice President of American Credit Foundation, an IRS 501 ©(3) non-profit consumer credit counseling organization that has assisted thousands of individuals and families with their financial situations through seminars, education, counseling services, and debt management plans. Visit debtguru.com for more information and free consumer resources.

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