13 ways to live a rich life on less

[On the Road]

Bankrate.com
13 ways to live a rich life on less
Monday July 19, 6:00 am ET
Dana Dratch


Can you remember life before $100 sneakers and $5 coffee, when people actually lived on what they earned and still had a little something socked away for a rainy day? People moan and groan about why they can't make do," says Michelle Singletary, author of "Seven Money Mantras for a Richer Life." "But if you look at your lifestyle, there's almost always a way to trim and make do with less."

---snip

Her grandmother looked at potential purchases in terms of "what you could spend that money on that would put you in a position of not having to struggle," says Singletary. Like a fast-food meal out vs. allocating that money for the phone bill. "And I actually do that now myself," she says. I ask, "What are the consequences of spending this money?"


That approach, save automatically and spend selectively, is exactly what money experts and consumer advocates advise. To accomplish that, here are 13 strategies for living well on less:

1. Analyze your spending.
....
5. Buy used.
6. Pay cash.
...
10. Change your mortgage payment method.
11. Use family and community resources.
...

http://biz.yahoo.com/brn/040719/13267_1.html

[zbdent]

1. Here was something we did

in 1990, when we started looking for a house.

Took our combined take-home pay.

Determined what we would consider livable amounts to pay monthly on a house, and still pay our bills. Essentially, what we were willing to pay per month.

Broke down the costs of houses in this way:

1. Can pay for with what we're both making without sacrifice

2. Can pay for with what we're both making, but our first few years are gonna be tight.

3. Forget about it.

Found a house, luckily, in range # 1. At the high end of that range.

One of the best ideas we had. We were able to pay off the balance of the house about two years ago.

[histohoney]

2. Look

at were you spend your money too.
I love to shop at discount stores, TJMAXX, ROSS, Biglots,ect..
My sister turns up her nose at it "Oh they're dirty, croweded,ect..
Big Deal. I want school clothes for my kid that I don't worry about him getting dirty every time he walks through the door.

P.S. Keep a sharp eye out while shopping at these places. A little dirt you can wash off clothes, holes or big problems are not so easily fixed. Also make sure you are not buying an item that has been safety recalled. Otherwise great deals and sensible prices are out there for the non brand named addicted.

[On the Road]

3. I Can't Believe What I Used to Live on in My 20's

My first business job paid $11,000 per year in 1981. And that doesn't count several years on my own with primarily minimum wage jobs.

Other than keeping a budget, I actually do many of these things. I rarely go shopping without a reason. Somehow, the money still flies away. Part of it is my daughter, who lives with her mother and is used to shopping and spending more. Part of it is saving for college and retirement.

Stangely enough, I had not realized that you could simply pay your mortgage early and your interest would be reduced. I thought it required a special type of loan.

Another thing that the article doesn't mention is renting out part of your house, if you don't mind that sort of thing. If you can buy a house for an extra $10-20,000 for a basement that can be a separate apartment, and get $500/mo rent, that's an extra $6,000 a year. Tax-free if you decide to declare it. Think of the kind of nest egg that can build up -- all for much less trouble than moonlighting.

[Digit]

4. I don't mean to be a spoilsport..

Renting out your basement as a separate apartment sometimes does not work. A room or suite without kitchen facilities might be okay. Some areas might have restrictive laws which prevent these sorts of living arrangements, and all it takes is a pesky neighbor to turn you in and put you out of business. Check with your zoning laws, etc before you invest money in this. I know, I had trouble with this in the past.
Oh, and I wouldn't be suggesting that people try to hide income from the IRS if I were you.

[Frodo]

5. I disagree with both of you.

I think he was talking about choosing your new home with the possibility of renters in mind. We did that the last time (made sure the basement could support a minor conversion, had a seperate entrance, zoning, etc. - in case we couldn't make ends meet when my wife stopped working).

And taxes don't have to be that big a deal... with depreciation and other tax advantages, renting doesn't have that huge an inpact on your taxes.

HOWEVER... if you've spent much time at it, it would be hard to refer to it as "much less trouble than moonlighting". "Less work" MAYBE, but not less trouble. Being a landlord is no picnic.

[Vulture]

6. Great article

As a serial entrepreneur, I have learned how to live very cheaply for years. In fact, I've become very comfortable and good at it such that it is really my preferred way to live. I've pretty much sworn off the massive accumulation of material stuff (though not money -- I use it to start companies and fund research). Even though I live in Silicon Valley, I actually have no difficulty living on $15-20k per year, which is my real income most years -- I only take as much money as I need from the companies I start.

I am absolutely certain that most people do not need to spend even remotely as much as they do on their lives. Most just never pay attention to how much they spend on frivolous things. Given that Social Security is on its way to the grave I suppose they should be saving their money... All my money, when I actually see some liquidity, gets dumped back into capital investments.

Which does lead me to one of my serious pet peeves that Kerry is stomping all over: the income tax brackets ABSOLUTELY SUCK for entrepreneurs and small business owners, and he wants to make them even worse. Anyone like me (and I know many others here like me), gets RAPED on their Federal taxes. Even though I make very little money most years to keep my employees paid and the businesses afloat, when I finally do have an opportunity to get some liquidity from a startup, I immediately get hit with punitive tax rates. In essence, averaged over several years, I pay the very top tax bracket rates on my income but only make a modest middle-class income. That's bullshit, particularly since most of that money ends up being invested anyway (i.e. giving someone else a paycheck).

It may not be a popular notion on this board, but in practice the heavy-handed tax code is a real drag on economic growth, small business, and entrepreneurship. All that happens is that ambitious business people get punitively taxed until they finally have enough capital to structure their finances such that they can avoid the top brackets altogether. In essence, steep progressive taxation does little more than make it hard for motivated poor people (that would be me) to become rich by severely hindering the conversion of income to capital. And capital is what makes the economy go 'round.

Okay, no more ranting, but I wish the Democrats would pay attention to obvious consequences like these that anyone who actually is engaged in serious business could tell them. I'm not living large and I am the guy who makes the economy grow, and I see no compelling reason for the government to rape me come tax time when I've sacrificed so much and worked so hard so that other people can have jobs. At least once a week I say to myself, "screw this, I'm taking a regular job with a better salary", because I'd actually pay less taxes on more money.

[EconGeek]

7. I've had the same thing happen!

I've gone from paying something like %40 of my income one year, to not having to pay any taxes the next.

There's something really wrong there... And lord knows, the years that have been really lean are ones where I really could have used that money that was taken out punatively.

It provides an incentive to not have an out-of-the-ballpark success. I'm not making millions, but in some cases, I make far more money by making less so I don't trigger AMT and other punative conditions.

When for the economy, the more I make, the better for everyone-- the better for the community, etc. Even if I don't pay a higher percentage in taxes.

[amazona]

8. ronald reagan ended income averaging

As always, when you have a rip-off, look for the elephant in the picture...

Prior to the Reagan "reforms" you could indeed "income average" over several years so that if you struggled for years and finally had a nice pay-off, you could average your income and not pay such high taxes.

If you have an irregular income, you just can't ever get ahead. But I've given up hope of getting that tax break back. It isn't even on the table. Most people who make $15,000 from a small business have to give up and get parental or spousal welfare, or else they have to get a real job; self-employed health insurance alone will put you in bankruptcy. Self-employeds around here often try to do without health insurance; then when they get sick, they think they are going to pay for their cancer treatment by having spaghetti dinners -- and they find out it won't work unless they are a photogenic 9 year old. (This actually happened in my neighborhood, when a 30 something self-employed got a brain tumor.) What the small business person needs now, first and foremost, is universal health care. Without it, we can never hope to compete with large firms.

And, yeah, income averaging would be nice to have back but no one is offering it. It creates more paperwork, you see, and the no-knowings under Reagan howled that they wanted to get rid of paperwork. Me, I'd be happy to do a bit more paperwork for several thousand (or several tens of thousands) more in my pocket in a good year. Considering that in a bad year I've earned as little as $5K...