If you're new here, this blog will give you the tools to become financially independent in 5 years on a median salary. The wiki page gives a good summary of the principles of the strategy. The key to success is to run your personal finances much like a business, thinking about assets and inventory and focusing on efficiency and value for money. Not just any business but a business that's flexible, agile, and adaptable. Conversely most consumers run their personal finances like an inflexible money-losing anti-business always in danger of losing their jobs.
Here's almost a thousand online journals from people, who are following the ERE strategy tailored to their particular situation (age, children, location, education, goals, ...). Increasing their savings from the usual 5-15% of their income to tens of thousands of dollars each year or typically 40-80% of their income, many accumulate six-figure net-worths within a few years.
Since everybody's situation is different (age, education, location, children, goals, ...) I suggest only spending a brief moment on this blog, which can be thought of as my personal journal, before looking for the crowd's wisdom for your particular situation in the forum journals.
If you enjoy the blog, also consider the book which is much better organized and more complete. You can read the first chapter for free, listen to the preamble, or see the reviews (1,2,3,4,5,6,7,8,9, A,B,C,D,E,F,G,H,I,J,K,L,M,N,O,P,Q,R,S,T,U,V,W,Z). Subscribe to the blog via email or RSS. Get updates on the facebook page, join the forums, and look for tactics on the ERE wiki. Here's a list of all the ERE blog posts.
Here’s an easy exercise. Find a calculator.
Think of the last thing, you bought. What was it? A pair of pants? A sandwich? The electric bill? A tank of gas? How much did it cost? Write that down.
Now try to think of how long ago it was since you bought the same thing before that last one e.g. if you just paid your electric bill, it was probably 30 days since you paid it the last time. If you don’t know, do an honest estimate.
Take the calculator and multiply the price with 365 and divide by the number of days you found above. That’s your annual cost. Multiply this number by 25.
Now you got to ask yourself one question. If you had that amount of money, would you spend it on a life time supply of that item? If not, then that item is too expensive and you should not buy it. See a more detailed explanation for the reasons why that is.
Conversely, suppose you get offered a life time subscription to e.g. a magazine or a membership to a club as opposed to paying annual fees. Divide the lifetime cost by 25 to compare it to the annual fee. If lifetime fee divided by 25 is lower than annual fee, and you see yourself being a life time member, go for it even if it does seem expensive.
Originally posted 2007-12-11 15:50:00.
