Chapter 10 - Curb Your Spending Desire

By Richard Valentine Reily, author of Gregory's Hero.

To be truly successful with your new savings habit you have to find tricks to keep yourself from succumbing to the temptation to spend again. The temptation is ruthless, fueled by advertising, friends and desire.

In addition to creating debt, or at this point reducing savings, spending generates baggage. Over time spending will cause lots of dust collectors, crippy crap and knickknacks to accumulate. You don’t need it.

Once you have tired of the stuff, which everyone does, it will have to be stored. Why do you think storage rental businesses are springing up all over the place? Being able to not acquire in the first place is the easiest solution to not creating debt, increasing savings and relieving yourself of excess baggage. Yet even if you have already accumulated the stuff get rid of it. If you have not used an item one full turn of the calendar you have seen each season. The item is obviously useless. Get rid of it.

My spending master sister has more yard sales than the taxing authorities approve of. She has a small house, on purpose, and when it fills up she puts the good stuff on ebay and puts the rest out for a yard sale. The yard sale clears out the house and gets some of her money back from the things they no longer use.

Has your Mother called you yet to ask if you want the stuff in the attic from your childhood? You can bet there’s a bunch of it too. Your hand print watercolors, your first shoes and your favorite stuffed toy, you get the picture. Tell her no. Tell her to get rid of it. You don’t need to cart it around until under her imposed guilt you rent a place to store the stuff. Move on, you’re an adult now.

With little things I keep it simple. If I want something new I require that it replace something I already have. The same thing I am buying. Do you want a new shirt? Which one are you giving up? When you have to place a current value on the new purchase you are less likely to make it. Even if you do decide to buy the new item, you already have a commitment to dispose of something. Your load will not get heavier.

With larger things like cars or vacations your expectations have to be different. It’s as easy to rationalize a new car as it is for an alcoholic to rationalize another drink. The old car is on its last legs, the warranty is running out and it requires a great deal of repairs. The paint used to be shinier. Sounds like a new noise coming from somewhere. Have you ever used those? Why not get a new one and be done with all the worry? You can always use the ‘the new payment is the same’ rationalization too. Why not buy a new car for the same payment?

Because the new payment is for a longer period, will for sure be a ‘few dollars’ higher and involve some additional cash from you to the dealer. A new car is almost always not a financial decision. It is almost always an emotional decision. Emotional decisions always decimate finances. Major purchases must always be based on sound financial planning. Whenever emotions come into the decision it is time to stand back, cool off and allow your sound decision making skills to prevail.

A new car will not relieve you of the worry. In no time the new car will be on its last legs, going out of warranty have fading paint and require costly repairs. A deliciously never ending cycle that is always compounded by additional debt even as your local dealer is delighted at your loyalty.

Does the car really need repairs, or are you rationalizing a new car purchase? Even if it needs repairs, how much do those repairs really cost? Did you know you can buy an extended warranty for almost any car?

Do some research and find the car you really want without any cost considerations. Be certain it has a good safety, maintenance and reliability record. Then buy it three or four years old. Let the emotional buyers take the new car depreciation and you enjoy the car when it is half or a third of the original price.

I like a big car because I am a tall person. Cramping into compact cars causes me lots of pain. But, as you probably know by now I don’t like to give my money away. So I buy three or four year old high end cars and buy an extended warranty to cover down the road repair costs. I have the nice car, and my money is still in my savings account.

I recently bought a Cadillac Deville, a few years old of course. A young guy in my office commented on how he would love to have that car. He had recently purchased a new compact car. As he ogled over the Deville I showed him that I had paid less for my car then he did for his. If you could have seen his eyes go wide you would have laughed. He is a used car customer in the future when he pays off the rapidly depreciating new compact car.

Make savings your primary financial focus and always bring yourself back to saving when the desire to spend overtakes you. Spending consumes money that could otherwise become savings. Making the saving connection before spending allows you to let your savings grow even faster.

Here are a few tricks to help in the depths of ‘desire to buy despair’.

Don’t do it now. Take a good look. Consider the purchase. But, go away without it. If you still want it in a few days go back and get it. Then it’s not an impulse purchase. Try this a few times and keep track of your decisions. How many times did you go back and get it and how many times did you simply forget about it?

Look at anything, and look a lot. Look in lots of places. Just don’t buy. Go home without it. You will be just as fulfilled, and have lots less stuff and no debt. You only need food, clothing and shelter. The rest is extra.

Require a use and a place for everything before buying. If you don’t know where you are going to put the new purchase, don’t buy it. Put it down, take one last look and go on your way. You can always go back and get it another time. In the mean time the money is still yours.

At gift giving time only buy specific gifts. Don’t buy because it’s one sale or a holiday or birthday is coming up. If you can’t deliver a gift to a specific recipient at a specific time don’t buy it; no storing. Retailers are really good at storing. Let them do it; you can always run over and get it.

Use what you have before you buy anything new. I have more clothes than I can probably wear out before I die, and I expect to live a long time. The closet is full. There is no need to buy anything new. Here is where my throw one out if I buy a new one rule comes in.

The desire to buy is powerful and supported by your family, friends and advertising. You do not have to succumb to the desire to buy when you make the decision to create wealth. Decide to save.

Chapter 9 - Saving

By Richard Valentine Reily, author of Gregory's Hero.

You remember that I lived in Steamboat Springs when I woke up financially. That day I was in some kind of beautiful place; rushing water, treeless peaks in the distance and a blue sky. Once my eyes were opened it was amazing what I began to see.

One of the first things I saw was a billboard. I suppose it had been there all along, though I had never noticed it. When your eyes are closed it’s impossible to see. Since my eyes were closed to money… well you get the idea.

Anyhow, the billboard said something very simple. So simple in fact that it appeared virtually impossible. The billboard was put there as an advertisement by the Routt County National Bank. It simply said, ‘Pay Yourself First’.

What a novel concept! Did it truly mean that I was allowed to keep some of my hard earned money and do whatever I wanted with it? Never in my life had I been able to keep anything after chasing around borrowing from Peter to pay Paul and never getting ahead of the never ending bills. Paying me first was an idea I could live with. I had been given permission to save.

We have already discussed the impossibility of reducing debt without controlling spending. Now that spending is controlled and debt is gone or severely reduced paying yourself, saving, is truly in order and the real payoff for all your hard work.

I began paying myself first even as I reached the payoff of my debt. I wanted the savings habit to take root and take place of the spending habit when my debt reduction was complete. After all if I paid off all the debt without a savings plan what in the world would I do with all that money I had been focusing on debt reduction? I don’t know you, but I know me and if I paid off all my debt without a plan for my money after that there was a real probability I could revert to my poor spending habits.

Paying yourself first is easy. Designate a small amount of money to begin saving. The amount must be small. Not too much, just a little. Say five dollars each paycheck. Are you wondering yet why I emphasize a small amount?

The object here is to create a habit. The object is not to build wealth, yet. We will get to building wealth later. We are still focused on reducing debt after all. Again, the object here is to create a habit, a new habit to replace the spending habit when debt reduction is complete. It has been said that twenty one repetitions make a habit. You only need save the same amount twenty-one times and you will be on your way.

If you commit to beginning the savings habit before the debt reduction was complete, you will come to the time when you are saving and the credit card debt is paid off. Then you can focus on savings as a primary use of your money. All the resources that have been focused on debt reduction may now be focused on building your savings.

What a wonderful day it is when you send off your last credit card payment! It has been said that it always rains at a funeral. I say it will be a bright sunny warm and happy day when you are done with the burden of debt. On the day you send in your final credit card payment your financial focus changes, from debt reduction to savings.

There are two types of savings. For simplicity I term them operating savings and capital savings. Be sure to understand the difference, it’s critical to your long term financial health and success.

First, let’s look at operating savings. This is money you put away on a regular basis that you intend to use at a future date for normal or unusual expenses. Since you are no longer paying down debt those resources can be refocused to saving for future events such as a vacation, college for the kids, new furniture, a new car, you get the idea. You have worked hard eliminating debt and you probably deserve a vacation or some gift to yourself that you pay for with money, not debt. Trust me, you’ll love the reversal.

Operating savings, however, are savings. When we get into fund accounting in the next few chapters, don’t mix up fund accounting and savings. Fund accounting is when you will prepay your planned expenses by putting aside a portion of the expense with each paycheck. Operating savings are built though disciplined, regular planned contributions to your savings account. Operating savings are only used for those expenditures that you have defined up front.

Secondly, there are capital savings. Capital savings are the most fun because capital savings are the savings that grow and grow and grow. Like operating savings, capital savings are funded regularly – with each paycheck. The difference between operating savings and capital savings is that you never spend capital savings. Did I say never? If there is any confusion here, let me repeat, the difference between operating savings and capital savings is that you never spend capital savings. Never, never, never, never…

There, I think that’s clear.

So, you might ask, what’s the purpose of capital savings? If you did ask I would first answer that that’s a great question. It’s important to understand.

Capital savings is for the creation of wealth.

Think about a business. A business takes in money from the sale of its products or services. Some of the money is spent paying the workers, the rent, the utilities and all the other expenses of running a business. A smart businessman reserves the balance, the profit, for reinvestment.

If the business makes widgets, and the widget machine cranks out enough widgets to fill only part of the markets demand, a smart business man will quickly decide that a second widget maker is required. But, widget makers are expensive to purchase so the businessman requires a great deal of money to acquire the widget maker.

Luckily he has saved his profits, keeping them within the business and the money he requires is in the bank ready to purchase his new widget maker. Because he is a smart businessman he is able to buy his new widget maker and increase his sales even further.

You may have noticed in the widget description that I did not suggest the smart businessman went to the bank to borrow the money for his new widget machine. He doesn’t have time for all the paperwork and doesn’t want to pay the interest. He has prepared for the new widget maker by planning for his business expansion.

Your capital savings work in the same manner. They can never be used for everyday expenses that you failed to plan for. Capital savings are used only to generate additional income for you.

Most people work all their lives and retire dependant on Social Security. Even if you forget all the hype about Social Security going broke in the future, today the benefits payable by Social Security do not provide a high level of security. The benefits might keep a roof over you head, or food on the table, but not much else.

Do you happen to work for a company that provides a pension plan? If so, lucky you; you are one of few. There were only about two generations who had the security of a company pension. Chances are you will not have that security.

That’s the job of your capital savings. To grow throughout your lifetime and provide you income when you chose to no longer work or are unable to work.

So the rules are clear, right? Capital savings are never ever spent. Except…

Capital savings may be used to buy a house, invest in stocks or other investments. My rule for capital savings is that they are used to earn, not spend.

When you invest in a house, even with a mortgage, you are investing in an asset. In most markets, over most time frames a house is an appreciating investment. Someday when you no longer want to work you can sell the asset, buy a less expensive home and have the balance for your expenses. You can use your capital savings for the down payment on your house, or better yet for the outright purchase of your house.

As your capital savings grow from the first small contributions you made while paying down your debt, the account will reach a balance where you will want to gain more than the simple interest a bank will pay. Generally when your savings gets to one thousand dollars you should look for another investment for your capital savings. We will discuss investments later.

Capital savings will grow and grow and grow. Capital savings are never ever spent.

Chapter 8 - Debt Reduction

By Richard Valentine Reily, author of Gregory's Hero.

Much is made of credit counseling, debt consolidation and debt reduction. Often it seems that there are more advertisements on television, radio, newspapers and billboards for debt consolidators than cars. Knowing that, be warned there is a lot of money in the industry. Your money.

I’m sure you have heard the basic rule of credit ‘anyone will lend to those who don’t need it’. These are the borrowers to which lenders attach little if any real risk. Those who don’t need credit have resources to finance themselves and often find there are advantageous reasons to borrow rather than use their own assets. Leverage is the key. We don’t need to talk about these borrowers because you probably aren’t one of them and they probably aren’t reading this book.

Credit counseling in its pure form is a good thing. We’re doing it now. The goal of credit counseling is to help you better understand how credit works, what credit is for and when and how to use credit. This is not rocket science though there are some points to keep in mind.

Above all in almost all cases credit counseling is a business. That’s right, a business. Big business; remember they can buy all those ads. You got into financial trouble because you didn’t plan well and spent poorly.

You have to figure that the business to which you might give your money to help you out of our mire will require money to operate, pay your counselor, return the owners on their investment and make a profit. Before you spend one more cent of your money make certain the organization you are ‘hiring’ to unravel your financial mess will not simply drag you deeper into it.

Everything you will need to clean up your financial life is in this book. Some people need a helping hand making big changes in their life and some hand holding along the way. If you are one, you are a customer for a credit counselor. If you insist on going forward with a credit counselor, check out their Better Business Bureau report. Research them on the Internet. Ask for references of those who they have helped. Know up front what the total cost to you will be, and what exactly will be done for you and when. You are well within your rights as a customer to do your due diligence upfront before you sign up and ask as many questions and ask for as much proof of the answers as you want.

My goal is for you to use and understand this book and avoid the credit counselor all together. After all if debt reduction is your goal there is no need to incur an additional expense to reach it. And, if you are so lucky to find someone who can truly accomplish the task of straightening out your financial mess, you will not have learned anything and will probably find yourself right back in the same place before you know it.

The decision to hire a credit counselor is one I highly caution you against, and if you insist it is the right route for you take the time to really do your homework before signing up.

Debt consolidation is also a dangerous business. Done successfully it can deliver the erroneous impression that you have resolved your financial problems. The bill collectors have stopped calling, the late notices have stopped arriving and you exhale a great sigh of relief. Usually what debt consolidation means is you have swept your spending problems under the rug and gone about your life creating new debts. Unless you experience the process of paying off your debt, you are unlikely to create new spending habits that will keep you from spending your way back into debt.

It has been statistically demonstrated that the vast majority of those who consolidate debt, weather by combining all the debt onto one credit card, taking a second mortgage or a personal loan recreate the debt problem quickly. Then they have the consolidated debt, and a new mountain of debt.

If you have taken a second mortgage you have put your house at risk for the dubious comfort of being ‘out of debt’. All you have done is put your home at risk. Don’t do it, even when the pundits and marketers insist you will save money with a lower interest rate and those interest payments are tax deductible.

Here is the ludicrous logic of debt consolidation. You bought too many sweaters, a new refrigerator, a new stereo and a computer. The bills are rolling in and you are struggling to make the payments. What is the credit card company going to do, come to your house and take your sweaters? Do you think they might arrive in the night and take your refrigerator? Probably not.

When you roll all this debt into a second mortgage on your house you have secured this unsecured debt with your home. Your home is at risk if you can’t or don’t pay the mortgage payment. For a sweater or refrigerator you have risked your home. Forget about it!

Putting your home at risk, running up new bills after consolidation and incurring the costs of consolidation are a false economy. Instead of consolidating your debt, pay it off. What a novel concept; pay off your debt.

Which brings us to debt reduction, just what you wanted to know how to do the entire time right? Debt reduction is the process of reducing your debt.

First it’s important to understand the types of debt and their relative level of importance. For the purposes of debt reduction we will focus on the riskiest and therefore highest cost debt.

Credit card debt reduction must begin with the first step of spending reduction. We covered spending reduction already and won’t revisit the subject here except to say that unless you are willing to seriously implement your spending reduction, you will have little opportunity to succeed at debt reduction. If you are unwilling to implement spending reduction save yourself the time and put this book down. The mall is more interesting.

It is virtually impossible to reduce debt concurrently with creating it. Resources that you have available for the act of debt reduction are going to come from your spending reductions.

First thing to do when working on credit card debt reduction is to understand what resources you have available for the task. Each dollar you spend, no matter what for, is one less dollar available for your debt reduction.

Define what you have available each month for credit card payments. Make a list of all the amounts you owe, to whom you owe them and the rates of interest you are paying on each. If you are lucky enough to have the option of transferring balances to lower rate accounts, this is a good place to start. Anything you can do to reduce the carrying cost of your credit card debt frees up resources to help achieve debt reduction faster.

When your transfers and list is complete put the list in the order of the most expensive interest first. Define the minimum payments required for each account. Deduct this amount from the total available for your debt reduction. The balance remaining is paid toward the most expensive card until that balance is zero.

When you pay off the most expensive card first, rather than paying the same amount to each card, you cut the amount of time necessary to pay off your total credit card balance and save interest payments in the process. If you simply continue to pay minimum balances and do not charge additional amounts to your credit cards you will pay for many years and pay four or five times the total interest.

After the first account is paid off apply the amount you have paid to that account to the second most expensive account in addition to the minimum payment you had been making to the second most expensive account.

After the second most expensive account is paid off, apply the amount you had been paying to the account, including the amount you paid to the first now paid off account to the next most expensive account including the minimum amount you had been paying to the account, and so on until all your credit card account balances are zero.

As you pay off each card, destroy the card and notify the issuer that you want the account closed. When I attempted to close my accounts I got lots of resistance from the credit card issuers who wanted me to keep the accounts open ‘at least for emergency’. Don’t fall for it, they know the statistics. Statistically you will run your debt back up even after you pay it off. Close the accounts and don’t become a statistic.

One issuer had over the years opened six credit card accounts for me under different brands. When I asked to have them closed they offered to consolidate them into one account which would carry the combined limits of all the cards. They left me with one card with an available balance of over $50,000; after all I had been a great customer. I paid all my balances, and lots of interest. I accepted the offer in a moment of weakness and cut the card up on arrival. Don’t offer yourself the temptation.

When you are done with your debt reduction, you should keep one credit card for true emergencies and traveling with a commitment that you will charge nothing that you could not pay for in cash at the moment of purchase. In addition, the commitment must include paying the balance in full at the end of each billing cycle, no matter what.

Soon enough the credit card debt will be gone. Hurray! Now get to work on the cars and the house. Use the same habits you formed paying off the credit cards. When you focus your resources on debt reduction, it is difficult to fall back into the old spending habits.

There is no good debt. Unless you are using debt to build assets such as buying a house, you are needlessly paying your hard earned money for usurious interest rates. You are too smart for that. Your money looks better in your pocket.

Chapter 7 - Debt Creation

By Richard Valentine Reily, author of Gregory's Hero.

Before we get into debt reduction itself in the next chapter let’s take a look at the root causes of debt and how you get to the place where debt reduction becomes a priority.

Remember when we discussed the ice cream truck and the piggy bank exploding, landing your financial future strewn across the landscape in a clattering mess? Oh, and don’t forget that irritably polite and well mannered boy with the neat clothes who always stopped the ice cream truck in the same spot.

Debt creation is the result of poor spending habits. That’s it. Okay, I know you can go off onto all sorts of rationalizations; my car broke down and I had to fix it; my mortgage payment was late and I had to take a cash advance to pay it; my business was failing and I had to borrow money to keep it going; that red dress was just too beautiful to pass up, and my friend got that new green one a week ago; I feel so much better when I get something new. How many more shall I write down for you? I can fill the book if you like!

Nothing changes the basic point here: debt creation is the result of poor spending habits.

All of your life you live nicely being given the things you require and lots of things you don’t require yet seem to need. You need nutritious food. Clothes, yes you need those too. Shelter is a necessity, particularly in the winter in the north, and air conditioning in Florida in the summer. And, sorry to say that is about it in the need department.

People have lived quite nicely for millennia without television in every room, playstations, CD’s, DVD’s, CdRW, DVDR’s, PC’s, baggy pants that show more underwear than they cover, $200 sneakers (that cost about $2 to make in China) $100,000 cars, even $25,000 cars for that matter, cell phones, $100 dinners out, and all the other junk and baggage that clutters up most homes and bogs down the credit card statement.

If you still don’t believe me take a ride around your neighborhood and look into the open garages. Most are stuffed floor to ceiling and wall to wall, and those that aren’t still can’t fit a car. The rare homeowner can get two cars into a two car garage. At our house the rule is that the cars must fit in the garage. Not only are the cars usually clean, warm in winter and cool in summer, there is no place to allow the accumulation of ‘stuff’. Since it can’t be accumulated, there is no reason to buy it in the first place.

Oh, by the way there is one very important non car item in the garage. The paper recycle bin. It is particularly handy for depositing the endless stream of credit card offers and transfer checks on the way in from the mailbox. Those things are not allowed in the house.

After you have finished your loop to check out the neighbor’s garages, take a drive around your area and you are certain to quickly find some brand of self storage. Even after all the useless junk and baggage is acquired the spending continues in monthly expense to store it all!

Along with poor spending habits a certain social dynamic steps in to help out very nicely with debt creation. Age.

There comes a time in most lives where Mom and Dad make it clear that it is no longer acceptable to live under their roof. Sometimes it’s friends who help make the decision by communicating it is no longer cool to live at home. As comfortable as home is, the time arrives for you to test you wings and fly free. More like fly straight into the poor house.

Mom and Dad have spent a life time acquiring things that make life comfortable. With each major acquisition that is finally paid for their spending was freed up to acquire more and more. At the same time, their income was rising. They spent more time in their jobs or fields, acquired experience and became more valuable as employees. Their earnings increased. At some point for them a critical mass was reached where they simply did not buy enough more things to consume all the new value they created for their employers and savings began to pile up for them. Usually they bought nice things for you.

Now it’s time to go out on your own. Your earnings level is probably the lowest it can be and hopefully the lowest it will ever be. Minimum wage is about what you will earn for quite a while as you either finish your education or begin your career. All the while you will have to take on the expenses of a home, transportation, clothes, furnishings, electronics and all the little things that make up a life.

What is your standard? How do you know how to set up your life? Where will you live and what sort of things will you put into your new home? You need a model.

Your parent’s home will do nicely. After all it’s all you’ve ever known. It is the only frame of reference you have acquired in your life.

You are not likely to move from the green lawn suburban familiarity to the refuse strewn desolate streets of an inner city. You are not likely to forgo the comfortable furnishings of Mom’s living room for tattered, mismatched and well used thrift store furniture. You are likely to head right on down to the department store for that new $80 button down shirt when the first real job interview comes up. Because that is what you know.

With low income and high expense how do you make it work? What bridges the gap? Why your friendly credit card company of course. Right in your mail box offer after offer lauding your wonderful luck at being chosen to receive an exclusive opportunity to get your unmarred credit score supremely messed up arrive day after day.

Now you are in possession of the perfect formula for debt creation, easy credit to fulfill unrealistic expectations compounded by low earnings. I have often said that the single most difficult financial lesson I ever learned (had to learn) was to live on my income, not my father’s.

Exactly what does that mean? It means that the most crucial financial lesson when starting out in life is defining your personal standards.

Ask the age old boring questions. Who, what, when, where and how.

Who will you live with; a roommate, alone, a significant other, a family member?

What will make you strike out on your own; you are told (or finally booted out because you won’t make the break on your own), circumstance forces you out (like going to college, your parents move away or there is a death in the family) or when you have had enough of being told what to do and when to do it (the price of living for ‘free’).

When will you make the break? When you have enough money saved up? When you turn 21, or 30, or 40?

Where will you live? In a rented room, an apartment, a mobile home, a house?

How will you make it work? Will you get a job; borrow from family, hope for the best?

My father did very well. I don’t know the numbers and with time they no longer mean anything, though the scale is similar. Get this; I am one of ten siblings. Ten, can you imagine feeding ten kids? We lived in a house in the Forest Hills section of Washington, DC, near Chevy Chase Circle. Most of the kids had their own room. There were maid’s quarters.

Dad had a new sports car every year, Mother had a new Lincoln every year, and there was regularly a new family car. At some point a motor home was acquired. By any standards, this guy must have been earning.

When I finished school and was ready to head out into the world I quickly found that I couldn’t get ahead financially. Before long I was spending a few paychecks ahead, holding bills, writing checks in anticipation of the next paycheck, running to the bank with any money I came across to cover checks that were certain to bounce.

One day I stopped. I remember that day too. I lived in Steamboat Springs, Colorado at the time and was way out in the mountains one day on a hike by myself. A large outcropping of rock over a deep gorge gave me a fine seat on a fine day to spend some quality time with my reality and that was the time and place I came to the understanding that no one had ever discussed money with me.

On that rock over that gorge on that beautiful day it came to me that my standard of living was incompatible with my earning power. That was the first day of my life that I was awake financially.

Ask yourself who, what, when, where and how now. Understand the answers before you strike out (or are forced to move out) and it is possible to avoid a major financial blunder that most people make.

No matter the source or level of your perceived standard, there are going to be times in everyone’s life when things will be great and times when things will be bad. It is not only OK, it is critical that you be willing and able to refocus resources as events seem determined to lead you away from your place of comfort.

Have you ever heard the boiled frog story? Here it is; you can put a frog in a pot in cool water and place the pot on low heat on the stove. It you will carefully turn up the heat, the frog will cook to death and never simply jump out of the pan. He is more comfortable simply cooking to death than risking jumping out of the pan to conditions he is unfamiliar with.

Most people are the same. They will cling to whatever semblance of security they find even if it fails to ever work for them, or ceases to work for them at a later date.

Define your standard by creating a financial plan. Know what you need to earn to live as you choose, save for a rainy day and save for you future. Allow your standard to change as conditions dictate and learn to anticipate short term changes to allow yourself to stay on the plan.

If you plan to live in the best area of town, drive a new Porsche every year, drink rare wines and wear designer fashion then plan your earnings to support that standard. When your earnings fail to support that standard, be prepared to move, trade down your car, learn to like beer and visit a thrift store for clothes.

Never allow debt to be the cushion for your unwillingness to alter your standards. Alter your standards and avoid creating debt.