Living the RICH LIFE???

1 02 2011

I remember when I was a kid, I imagined living the good life, having an enormous mansion, pimped out car and traveling the world. I was set that I would go to college and get a high paying job and be successful and not to mention be FILTHY RICH. Unfortunately, reality told me a different story.

It was my Junior year of high where I got my first lesson on money. It has been a year since I got my license and I was itching to have my own ride rather then using my dad’s car. I wanted an SUV! But my parents explained to me, “That’s too expensive”. I though $34,000 was cheap for a SUV and that my parents could afford it but I was wrong. I didn’t understand the concept of bills, expenses, insurance and money. Like the example of purchasing a car, I didn’t know about the registration cost, maintenance, tires replacements, changing oil, gas, safety checks and the others things. This is very similar to our personal wealth, we only look at our day-to-day purchases and forget the other cost of our lifestyle that we want to maintain or obtain. Money is about allocating where you want it to go and having a reserve to do what you want with it.

My philosophy on money was this: “Don’t worry about money, spend away. If you keep working you will always have more money coming in”.  That philosophy is worthless and no one should live by that standards.  It’s pretty sad on how our attitude towards money gives false hope and happiness.

This is just a few things I learned about people’s finances:

  • 1 out of every 200 homes will be foreclosed upon
  • Your mortgage be shouldn’t more then a third of income (most mortgage I’ve seen are close $3000 a month)
  • Along with a mortgage there are property taxes, home owner insurance, closing cost, interest payments and escrow.
  • The typical American household, headed by a 43-year-old, has retirement savings of $18,750.
  • The typical pre-retiree household (age 55 and up) has a retirement savings of $60,000.
  • Baby boomers between the ages of 41 and 54 have typically a retirement savings of $30,000.
  • Average life expectancy is 85 years old and retirement age is 65, which means you need enough money after retirement to survive for 20 years. (Most people work until they die or stop when medical issues forces them to retire completely)

The facts scared me. I couldn’t believe so much people weren’t financially prepared for retirement.  My psychology of money was completely wrong. So like the typically American I thought of getting a degree to further my education so I could get a higher paying job but the first thing I learned from graduating from college was this: A degree doesn’t promise you anything. Yup, you heard me. A degree does nothing for you; it’s a piece of paper saying you pass the courses needed for you major. I’m not saying a college is worthless, it’s great to have. Furthering your education teaches you to learn more things, understand your field of interest and gives you in-depth knowledge in your field. But what does it promise? I though once I graduated with a degree a job would be lined up for me and I would be rolling with riches. It doesn’t work that way. Knowledge is important but experience and standing out from your competition is far more important. Everything we hear from the so-called experts on television and magazines are giving us the same information and guess what? Most of the experts are wrong and don’t even follow their advice.

Telling ourselves that we are different from everyone else doesn’t help. Try telling that to the other billions of people who are suffering financially. The author of “I Will Teach You To Be Rich” Remit Sethi has changed my perspective on the subject of money and being rich. He said being rich is having the choice to do what you enjoying doing, money is just a small part in being rich.  Like it our not, how you manage your finances determines your lifestyle now and in the future. If you enjoy the life style you are doing by all means continue your routine habits, if not, then we need to drastically change how we think and use money.

Some of the changes that I’ve done to better handle my finances is open an Online Savings Account that offers a better interest rate and prevents me from withdrawing from my account. I fully committed in investing into my 401k at work as well took advantage of my age and opened a ROTH IRA. I’m not here to bore with financially mumbo-jumbo but it’s something you should consider. One of the biggest tips in improving your finances is using your credit card. WHAT!!! Am I crazy? Yes, I am. You use it when you have to but don’t over spend. Your credit card affects your credit score which ultimately affects the interest you pay for big ticket items. Also if you pay in full the amount of the credit card each month you basically got a free short term loan.  I learned to cut cost, save up $6000 in 6 months, cut my interest on my credit card, automated my transactions and I started investing.

Okay, I know this doesn’t sound like the good “rich” life but trust when I reach the age of retirement I can actually retire and not receive Social Security (if there is any left when I hit 65 years old) while still working a job to survive.

P.S. Please leave a comment, rate the entry and/or subscribe to my blog. I appreciate your support. Thank you!

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2 responses

2 02 2011
Jie

That’s personal finance 101 there!

2 03 2011
Living the RICH LIFE??? (via John Ulep) « HawaiiToday

[…] Living the RICH LIFE??? (via John Ulep) 1 03 2011 I remember when I was a kid, I imagined living the good life, having an enormous mansion, pimped out car and traveling the world. I was set that I would go to college and get a high paying job and be successful and not to mention be FILTHY RICH. Unfortunately, reality told me a different story. It was my Junior year of high where I got my first lesson on money. It has been a year since I got my license and I was itching to have my own ride rather … Read More […]

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