Since I left my Wall Street career back in mid-2008, I've been spending a decent amount of my time helping people make better saving, investing and retirement planning decisions. Today, I want to share a gigantic piece of financial advice that I find myself sharing with nearly everyone who comes to me for help:
Get your big-ticket decisions right and the rest will take care of itself.
There are three primary areas of your financial life where you can apply this concept and make a significant impact:
* Make sure you have a modest mortgage that you can easily afford (for couples, this means "afford easily on one income").
* Buy inexpensive but reliable cars and drive them for a long time (I'd say 7-9 years at a minimum).
* Pay down all debt aggressively and relentlessly.
Make these three decisions properly and you'll free up hundreds (if not thousands) of dollars per month for you and your family. Every month, forever. Which means over the course of your life, these decisions will be worth hundreds of thousands of dollars in extra wealth. Perhaps much more.
The converse is true too: making these decisions improperly will cost you hundreds of thousands of dollars in lost wealth.
The problem, of course, is that there's an entire system built around us that encourages people to overextend themselves on major life purchases.
So don't let yourself get played by the system. Readers, I want you to play your game with your big ticket decisions--not society's game or the consumerism game. Don't reach financially for major purchases. Instead, avoid them or defer them until they are no longer reaches. Get these big-ticket decisions right and you'll face a tiny fraction of the financial stress of the average person.
If you think about it, this is the 80/20 Rule applied yet again: a few really big spending decisions will drive the vast majority of your financial success. Or failure. Home, car and debt decisions are usually by miles your largest and most important key decisions. Getting them right--or fixing them if you've gotten them wrong--will make your financial life easier by light years.
Now. There's one more element to this issue that seals the deal. It has to do with discipline. And it's not what you think.
Much of the financial advice that gets shoveled onto us involves canned ideas, like bringing your lunch to work rather than buying it, or cutting out your daily $5 latte or whatever. The problem with these smallish daily decisions is that they require constant daily discipline. Therefore they're kind of hard to do, and they need to be repeated--constantly--to have any impact.
But when you buy a far less expensive home than you can afford, or rent an apartment well beneath your means, or purchase a car that costs far less than what you can afford, you create enormous, sustainable savings with a single, one-time decision.
You have to decide to cut out your daily latte every single time--and even then it only saves a few bucks. Big decisions can be made once and only once--and they pay huge, repeated financial dividends for years.
Hey, there's nothing wrong with eliminating your daily wasteful expenditures. I'm cool with that too. But I think my readers can and should aim much higher. You are all capable of driving far more significant and powerful financial results.
After all, if you get these major decisions right, the cost of a daily latte won't even matter.
Readers, what would you add? What big-ticket financial decisions have you gotten right... or wrong? Share your experiences and what you've learned!
Retail Ninja Mind Trick #6: Rationalization and Justification
The 80-Second Latte
How to Own the Consumer Products Industry--And I Mean Literally Own It
Prices, Zombies and the Advertising-Consumption Cycle
Divorce Yourself from the False Reality of Your Grocery Store
How can I support Casual Kitchen?
For those readers interested in supporting Casual Kitchen, the easiest way is to do so is to do all your shopping at Amazon.com via the links on this site. You can also link to me or subscribe to my RSS feed. Finally, consider sharing this article, or any other article you particularly enjoyed here, to Facebook, Twitter (follow me @danielckoontz!) or to bookmarking sites like reddit, digg or stumbleupon. I'm deeply grateful to my readers for their ongoing support.