Smart Splurges and Saves
For research on a story on personal finance decisions for 20-somethings, I've been speaking with young professionals about how they manage to meet all their financial obligations—and desires—on relatively low salaries. One of them, Ben, 29, who earns $51,000 a year as a lawyer for a nonprofit in Washington, D.C., says his approach involves skipping big-ticket items but not giving up his adventurous travels. (He asked that I not use his last name since he is sharing so much personal financial information.) Here's what he does to save money without giving up what's important to him:
To save:
• He drives a '93 Honda Accord with 200,000 miles on it. He paid it off over nine years ago.
• He pays $1,050 a month for a small studio apartment, which he splits with his girlfriend.
• He paid for his in-state law school himself with loans and now owes $60,000, which is growing at a very low interest rate.
• He invests about $200 a month in an online stock trading account, in a combination of stocks and mutual funds that he researches himself.
• He deducts $200 a month to save for retirement, and his employer will begin contributing an additional 9 percent of his salary into his retirement account after he's been at the organization for two years. (It will bump up that percentage to 10 percent if he contributes at least 3 percent a year, which he plans to do.)
• He buys used furniture he finds on craigslist or from neighbors upgrading their own places.
• He earns frequent-flier miles on his credit cards (which he pays off each month to avoid paying interest) to buy at least one of his airplane tickets each year.
• He skips the coffee shop. Instead, he buys a six-pack of bagels and a box of tea each week, which he says saves him about $95 a month.
To splurge:
• He went to Panama for 10 days in August for a little over $2,000 and to Mexico for four days in January for around $1,000.
• He spends about $600 a month in food and drink, but he has a secret tip: He eats a peanut butter and banana sandwich before meeting up with friends for dinner and drinks. Otherwise, he says, he would probably drop $30 just to fill his stomach. Instead, he goes for the cheaper appetizers or soup.
Tags: personal finance | savings | young professionals
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Buy a duplex--rent one unit, live in the other unit
Pmezhir is exactly right. I've rented from successful landlords who have consistently given me the same advice, and they own 5-20 properties--they buy the properties for the long-term and rent out, with annual rental increases. These landlords are quietly wealthy and lack for nothing.
Buy off-season (merchandisers need to clear inventory for the next season) and buy quality, not quantity. You have to pick your way through, but Loehmann's, Ross, TJMaxx and other off-season shops are possibilities. Online, try Overstock.com and the online outlets of your favorite brands/stores.
BYO (bring your own) snacks, meals, beverages (tea, coffee, juice, water) is a very good practice. Buy in bulk, cook enough for leftovers. Also, when eating out, split a main dish and an appetizer. Some restaurants let you bring your own alcohol--check in advance for corkage fees.
Buy lightly used and well-cared for items: cars, clothes... For used cars, take to a mechanic/AAA for a full-diagnostic check (usually 100-125 inspection points, including engine compression tests) for $70 - 125...this is money well spent to avoid lemons.
When practical, make your own...from food to cleaning products--search Google for recipes.
Good luck!
Forego the fashionable neighborhood
When I bought my own home four years ago, I decided to forego the "in" neighborhood for a two-unit home in a depressed neighborhood (what neighborhood isn't depressed nowadays?) I don't have children, so schools were not an issue. In trade for a prestigious neighborhood, I got a spacious solid brick home in perfect condition and an income-producing apartment. My neighbors are friendly, my commute to work is less than fifteen minutes, and now I have a ton of money to spend on the luxuries that mean the most to me.
Estate sales for furnishings and housewares and outlet malls for clothing are another way to save a bundle. I am a clothes freak and I always find amazing bargains at the Off Fifth, Saks Fifth Avenue outlet. Granted, I still spend a lot on shoes and clothes I don't really need, but I don't feel guilty about it, either.....I can also be assured that I am always getting luxury-level quality.
By the way, when I factor in the income from my rental unit into my monthly mortgage payment, I am only paying out $180.00 per month (including taxes) to live in a 1000 square foot, two bedroom apartment with full finished basement and two-car garage. I own a new car (I always have...another splurge) and I live like a rich man on less than $50,000 per year. All my friends are green with envy.....
....and speaking of green, buying vintage furnishings and housewares is a wonderful way to recycle and help the environment.
I live in Western New York, which is renowned for it's low cost of living and high level of big-city amenities. What more could I ask for?
I Agree with Kim
You have to choose what is important to you and like Tony and Ben. I love to travel as well. so Kudo's guys.
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