Words of Wisdom

I blog for many reasons. Mostly it's just a way to share with you, my friends, something I've run across that I think is cool. Sometimes it's a way to bring attention to something I think could use some attention, like a local musician or a fun event. Sometimes I blog as a way to record something for the future.

Our daughter Debbie loves it when we give her words of advice. (Can you believe that?) She even lets me know when they've come in handy, or if she has a revision. Recently she told me, "Dad, practice doesn't make perfect. Perfect practice makes perfect!" She'd learned that in martial arts class.

Debbie just recently paid off her credit card. I'm so proud of her. Today I read this wonderful advice on Seth Godin's Blog called Urgent Personal Finance Advice. This is what I'm talking about, Deb...

Urgent personal finance advice
By Seth Godin

If I could only share one piece of personal finance advice to grads or to just about anyone, it would be this:

Only borrow money to pay for things that increase in value.

It's a short list: your business, your house and your education, mostly. Stocks if you're smarter than me. That's pretty much it.

If you have credit card debt, you're in big trouble. Your bank account has a huge leak in it, and it's getting worse. Hence the urgency.

If you have credit card debt, that means that every time you spend money (even cash), you're borrowing money to do so. And so, if you're going out to dinner or buying a new pair of shoes, you've just broken the single most important rule of personal finance. You're spending borrowed money on stuff that is decreasing in value.

This is an emergency. It's an emergency because every single day you wait, the problem gets worse. A lot worse.

My suggestion: Go to defcon 1, and do it immediately. Shift gears to live well below your means. That means:
No restaurants
No clothes shopping
No cable TV bill
No Starbucks

It means:
Take in a tenant in your spare bedroom
Carpool to work
Skip vacation this year

Eat brown rice and beans every night for dinner. Act like you have virtually no income.

The result? You'll save $5,000 to $20,000 a year. Send all of it to the credit card company. Do this until you're debt free, the faster the better.

There. Now you're rich. Now you get interest on your savings instead of paying the bank. Twenty years from now, this emergency action will translate into perhaps a million dollars in the bank, depending on how much you earn and how serious you are.

You can thank me then.

Thanks, Seth!


Posted by Dave    Blog Tag: Opinion