1. Mr Micawber’s famous, and oft-quoted, recipe for happiness:
“Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”
Charles Dickens, David Copperfield
Steve Martin:
How I turned One Million Dollars
into One Dollar and 67 cents.
If your outgo exceeds your income your upkeep will be your downfall.
Simply put, we take 20% off the top for savings. So if my salary is $100,000 a year (to use a round number), we budget and spend as though we made only $80,000 a year. The other $20,000 is saved. A combination of 401(k) deduction, stocks, investing on Ameritrade or put in savings towards our "rainy day" money.
Other people call the above concept "pay yourself first."
It does take discipline. For instance, when unexpected expenses crop up, you are tempted to whip out the charge card or dip into the "rainy day" fund, so you don't have to give up your luxuries, but we try to absorb the extra expense within the current pay cycle by making do with less until next payday.
Recent example was my car needed new tires - about an $800 expense. Rather than put the tires on a charge or pull from savings, I paid for them out of our checking account. Normally we like to go out to eat at least 3 times a week but for the next two weeks, we ate at home and experimented with new dishes we could make cheaply, such as broccoli and cauliflower omelettes (pretty good!) and chicken thighs in cast iron pan - finished off in the oven with garlic and mushrooms (delicious). We ended up being able to pay for the tires without having to touch any of our savings or run up a credit card. And we still put the aforementioned 20% aside.
Sometimes we can't cover expenses like that, like when the roof needed to be done (we used up much of our savings for that) but surprisingly we can absorb most "surprise expenses" that pop up without losing a beat.
We are not miserly scrooges either. We prefer to buy quality durable goods, pretty close to top of the line, as they last much longer. I get most of my clothing from LL Bean - expensive but I have sweaters and shirts from them that are 10 years old and they still look good.
However, there are many things that are cheap or free that we do take advantage of. I try to get to my public library at least twice a month and I usually come out of there with 4-6 books. I explore all the local state parks and hiking trails that are absolutely free and will kill an entire weekend afternoon with zero expenditure.
Dickens had it figured out:
Mr Micawber’s famous, and oft-quoted, recipe for happiness: “Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”
We’re farmers, we get paid once a year and most of what we make is reinvested so We have always lived on borrowed money so you live cheap. I always had my “rathole” that only I knew about, it could only be used for true emergencies and saved our butts many times.
As we became more prosperous and didn’t use it, the money has grown so much we could live on it for 2 or 3 years because I still live cheap.
Cut These Monthly Expenses & Start Saving (Investing) Your Money:
1.) Cable/Satellite: $100 to $300 Per Month Savings
2.) Gym Membership: Up To $30 Per Month
3.) Starbucks: $50 Or More Per Month
4.) Cigarettes/Vaping & Alcohol: $200 Or More Per Month
Shortly after I married, my wife suggested we start tithing. We gave it a try. I soon found I couldn't outdo God in generosity. Things stared going better for us. We didn't get rich, but we had enough to be comfortable, as well as to feed and clothe the three children that soon came along.
I'm still tithing, and living comfortably in retirement.
I established retirement accounts starting at age 22. I have always been a saver — hate debt! I have no mortgage, no car payment, no credit card debt at all. I retired in January at age 54. It IS doable, folks :)
The gov’t taxes way too much. Half your salary and then some with all the fees and other taxes. Only way I have any money was buying stocks. It will pay off my stock taxes owed from last year and any credit card debt. I hope to do better this year and finally have money going into the bank account from my paycheck instead of to the credit card companies.
Wife and I have lived this way ... this year is 25 years since we married. I splurged a bit when I was single - she was mad at me for not having more savings.
We both get an allowance each month for fun. The big debate is how much of an allowance. I only get an increase when I get a raise. It works out. I actually track the budget closer than she does because I’m trying to sock away more into higher growth opportunities. There are a few things we could do without, but we don’t do resteraunts, theater, sports venues, etc...we’re pretty much home bodies with home hobbies. Internet and access to Japanese programs has been a godsend for her.
She’s all about CDs and Savings accounts which barely keep up with inflation. She understands it, but is just too risk averse. Has to do with growing up on the edge in Japan with a single parent and 2 siblings.
We’re right at the edge of being able to claim the big $M and have 15 years to go for retirement. House was paid off 10 years back and only carry cards month to month for the free no interest loan and a better credit score. 1st kid graduates college without debt this year. 2 more years and we’ve done all our “duty” except maybe the weddings and an emergency here and there.